Brinker International (EAT)

Stock Ownership Guidelines

        We have stock ownership guidelines for our Board of Directors and our senior vice presidents and above, including the named executive officers. Stock ownership aligns these officers and directors with shareholders and promotes good corporate citizenship. These guidelines were first adopted in fiscal 2007.

        The guidelines for our senior vice presidents and above define stock ownership to include any shares currently owned; vested, in the money stock options (which are converted for this purpose to share equivalents based on the "in the money" value of the stock option); unvested restricted stock or restricted stock units; and one-third of any unvested performance shares. We include one-third of the unvested performance shares, because on average, it is expected that at least one-third of the shares will vest over multiple performance cycles. Thus, by counting these shares towards their ownership guideline, we limit the need for them to purchase shares in the open market to meet the guideline.

        The guidelines for our Board of Directors define stock ownership to include any shares currently owned; vested, in the money stock options (which are converted for this purpose to share equivalents based on the "in the money" value of the stock option); and unvested restricted stock or restricted stock units. The guideline was established by taking a multiple of base salary (annual retainer in the case of the Board) which was used to calculate a fixed share amount by position. The guidelines are as follows:

Stock Ownership Guidelines

        Ownership is reviewed annually by the Board of Directors. Officers subject to the guidelines have five years to accumulate the necessary shares. The five year period is measured one of two ways. If an officer was a senior vice president on the date the program went into effect, and therefore subject to the guideline, the five year period began on July 1, 2006. Otherwise, the five year period begins on the date the officer is promoted to senior vice president. If, however, such officer was not previously an employee of the company, then the officer will be provided six years to meet the guideline. Should any of these officers be below the guideline after being in the program for five years (or six, as applicable), they will receive half of any short-term incentives in shares until the guideline is met. Approximately 24% of the current senior vice presidents and above, and 80% of the named executive officers, already meet the guideline. Directors have four years to accumulate the necessary shares. Currently 100% of the current directors meet the guideline. No officer or director is permitted to hedge the economic ownership of their guideline.

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Stock Ownership Guidelines

        Ownership is reviewed annually by the Board of Directors. Officers subject to the guidelines have five years to accumulate the necessary shares. Should any of these officers be below the guideline after being in the program for five years, they will receive half of any short-term incentives in shares until the guideline is met. Approximately 25% of the current senior vice presidents and above, and 80% of the named executive officers, already meet the guideline. Directors have four years to accumulate the necessary shares. Currently 89% of the current directors meet the guideline. No officer or director is permitted to hedge the economic ownership of their guideline.

Retirement Benefits

Savings Plans

        Our 401(k) Savings Plan ("Plan I") and Deferred Income Plan ("Deferred Plan") are designed to provide the Company's team members with a competitive tax-deferred long-term savings vehicle. Plan I is a qualified 401(k) plan and the Deferred Plan is a non-qualified deferred compensation plan.

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Plan I

        All of our team members, including those who may be classified as highly compensated by the IRS, who have attained the age of twenty-one and completed both one year and one thousand hours of service with the Company are eligible to participate in Plan I. We will match 100% of each participant's contribution for the first 3% of the participant's base salary and bonus and 50% for the next 2% of the participant's salary and bonus. All Company contributions vest immediately.

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Deferred Plan

        The Deferred Plan is a non-qualified deferred compensation plan for all of our officers, including the named executive officers. Deferred Plan participants elect the percentage of their salary and bonus, not to exceed 50%, they wish to defer into their Deferred Plan account. Deferrals are not eligible for investment options, but earn a flat rate of interest which is compounded monthly. The interest rate is set to the prime rate on the first business day each November. We do not match any deferrals under the Deferred Plan. Plan liabilities are notionally funded through Corporate Owned Life Insurance policies held within a Rabbi Trust. Trust assets are subject to the claims of the Company's creditors.

Medical Benefits

        Select officers, including the named executive officers, are eligible to receive retiree medical insurance from us if they meet our definition of retirement (described below in the paragraph of the section entitled "Retirement Definitions and Payouts"). This fully insured policy is paid for by both the retiree and the Company. Participants are eligible to receive this coverage until age 65.

Retirement Definitions and Payouts

        As mentioned previously the Committee and the Company undertook a review of our retirement programs during fiscal 2007. Beginning in fiscal 2008, a revised retirement definition was adopted. Early retirement is defined as age plus years of service equal 70, with a minimum age of 55. Normal retirement is defined as age plus years of service equal 70, with a minimum age of 60, or age 65 (regardless of service). This definition is applied to all of our equity programs, our retiree medical program, and our Profit Sharing Plan. Listed below are our programs and their treatment under early and normal retirement:

Health and Welfare Benefits

        All of our salaried team members are eligible for health and welfare benefits, including the named executive officers. Our salaried team members also receive term life insurance, short-term disability, and long-term disability. The level of company-provided coverage for the senior vice presidents and above, including the named executive officers, is at a higher rate than other employees for some company-provided benefits. We have provided detailed information in the chart below for the named executive officers.

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Stock Ownership Guidelines

        Ownership is reviewed annually by the Board of Directors. Officers subject to the guidelines have five years to accumulate the necessary shares. Any of these officers below the guideline after being in the program for five years will receive half of any short-term incentives in shares until the guideline is met. Approximately 40% of the current senior vice presidents and above, and 100% of the named executive officers, already meet the guideline. Directors have four years to accumulate the necessary shares. Currently 100% of the current directors meet the guideline. No officer or director is permitted to hedge the economic ownership of their guideline.

Retirement Benefits

Savings Plans

        Our 401(k) Savings Plan ("Plan I") and Deferred Income Plan ("Deferred Plan") are designed to provide the Company's employees with a competitive tax-deferred long-term savings vehicle. Plan I is a qualified 401(k) plan and the Deferred Plan is a non-qualified deferred compensation plan.

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Plan I

        All of our employees, including employees who may be classified as highly compensated employees by the IRS, who have attained the age of twenty-one and completed both one year and one thousand hours of service with the Company are eligible to participate in Plan I. We will match 100% of each participant's contribution for the first 3% of the participant's base salary and bonus and 50% for the next 2% of the participant's salary and bonus. All Company contributions vest immediately.

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Deferred Plan

        The Deferred Plan is a non-qualified deferred compensation plan for all of our officers, including the named executive officers. Deferred Plan participants elect the percentage of their salary, not to exceed 50%, they wish to defer into their Deferred Plan account. Deferrals are not eligible for investment options, but earn a flat rate of interest which is compounded monthly. The interest rate is set to the prime rate on the first business day each November. We do not match any deferrals under the Deferred Plan. Plan liabilities are notionally funded through Corporate Owned Life Insurance policies held within a Rabbi Trust. Trust assets are subject to the claims of the Company's creditors. As part of our retirement study, which is detailed below under the section entitled "Retirement Definitions and Payouts," a change was made to the Deferred Plan to allow participants to defer up to 50% of both base salary and bonus. This change will take effect in January 2008.

Medical Benefits

        Select officers, including the named executive officers, are eligible to receive retiree medical insurance from us if they are at least 50 years old and have ten years of service with us when they retire. Participants are eligible to receive this coverage until age 65. This fully insured policy is paid for by both the retiree and the Company. Eligibility for retiree medical benefits was changed for fiscal 2008 to reflect our new retirement definition which we describe below in the third paragraph of the section entitled "Retirement Definitions and Payouts."

Retirement Definitions and Payouts

        Previously, our retirement rules were centered around our equity provisions. Previous grants stated that retirement was either 20 years of service, age 55 with 10 years of service, or age 65. If one of these provisions was met, vesting was accelerated and the individual had three years within which to exercise upon retirement. This provision was applicable to any employee who had stock option grants. Additionally, if the individual was a senior vice president or above and age 50 with at least 10 years of service at the time they left the Company, their options would continue to vest and they would have three years to exercise from the date of vesting. Senior vice presidents and above could also retain their unvested restricted stock if they met the age 50 with 10 years of service provision; the restricted stock would vest in accordance with the original grant terms. Any other participant in the restricted stock program forfeited their unvested stock upon separating from the Company.

        Over the past few years, the Committee and the Company have been working together to ensure our compensation programs reward performance but also consider retention. To that end at the beginning of fiscal 2006, our equity plan retirement provisions were modified to include a new definition of retirement stating that the participant must meet the rule of 70 (age plus years of service equal 70). If a participant qualifies, upon leaving the Company, options will continue to vest and the individual will have anywhere from twelve months to thirty-six months to exercise depending on their level. All the named executive officers have thirty-six months to exercise after vesting. Additionally, any unvested restricted stock/restricted stock units will vest in accordance with the original terms.

        During fiscal 2007, the Committee determined it would be in the best interest of the Company, shareholders, and employees to have a universal definition of retirement that could be applied regardless of the program. Therefore, beginning in fiscal 2008, a new, revised retirement definition has been adopted. Early retirement is defined as age plus years of service equal 70, with a minimum age of 55. Normal retirement is defined as age plus years of service equal 70, with a minimum age of 60, or age 65 (regardless of service). This definition will be applied to all of our equity programs, our retiree medical program, and our Profit Sharing Plan.

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        Additionally, this retirement study highlighted that Brinker did not have a tool that would effectively tie officers to the Company for their career while allowing them to accumulate long-term wealth. Career equity, a new long-term incentive program, will be added in fiscal 2008 to fill the gap. Restricted stock units will be granted annually that vest upon the officer's retirement. This new program allows the Company to provide an incentive for key talent to remain throughout their careers while further tying them to the performance of the Company.

Health and Welfare Benefits

        All of our salaried employees are eligible for health and welfare benefits, including the named executive officers. Our salaried employees also receive term life insurance, short-term disability, and long-term disability. The level of company-provided coverage for the senior vice presidents and above, including the named executive officers, is at a higher rate than other employees for some company-provided benefits. We have provided detailed information in the chart below for the named executive officers.

Stock Ownership Guidelines

For the upcoming fiscal year, the Board of Directors approved stock ownership guidelines for the Board of Directors and our senior leadership. Stock ownership aligns our senior leaders with shareholders. The guidelines define stock ownership to include any shares currently owned by the senior officer or a director; vested, in the money stock options; unvested restricted stock or restricted stock units; and a portion of any unvested performance shares (applies to senior officers only). A multiple of salary is used to calculate a fixed share amount by position. The senior officers are required to maintain this level of ownership during their tenure with the Company. Similarly, directors are required to hold a fixed number of shares, based on a multiple of their retainer, until their retirement from the Board of Directors. Ownership will be reviewed annually by the Board of Directors. Senior officers have five years to accumulate the necessary shares. Any senior officer below the guideline at the end of five years will receive half of any short term incentives and stock proceeds in shares until the guideline is met. Approximately 50% of the current senior officers meet the guideline. Directors have four years to accumulate the necessary shares. Approximately 75% of the current directors meet the guideline.

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