CalPERS Seeks Independent Directors At Lone Star Steakhouse and Saloon; System Believes Transactions With Company's CEO Raise Conflicts of Interest.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--June 5, 2000

The California Public Employees' Retirement System (CalPERS) is calling on shareowners of Lone Star Steakhouse & Saloon to pressure the Kansas-based restaurant chain to improve its corporate governance practices.

In a letter sent to fellow Lone Star shareowners, CalPERS called on shareowners to vote for its shareholder proposal, item No. 4 on the proxy statement, that would require Lone Star's Board of Directors to be composed of a majority of independent directors.

CalPERS' push for greater independence at Lone Star is the result of the Board's extraordinary history of ratifying transactions with Lone Star Chairman and CEO Jamie Coulter and the company's dismal stock performance.

"Lone Star's board has clearly demonstrated a lack of accountability by approving numerous transactions directly benefiting both board members and the Chairman, Mr. Coulter," said James E. Burton, Chief Executive Officer for CalPERS.

The repricing of stock options by Lone Star's Board topped CalPERS list of poor board transactions.

Since April 1997, Lone Star's Board of Directors has authorized the repricing or replacement of underwater stock options four times covering a total of 14.5 million shares. Many, if not all, of these actions directly benefited Coulter and other top management. In January 2000, Lone Star repriced options for nearly 5 million shares, of which more than half was repriced for Coulter.

"The potential dilutive effect of all these actions on Lone Star's stock is unacceptable given the stock price's miserable five year performance. It is obvious that this board needs a clear message to act and think independently, not just as a rubber stamp for management," said Burton.

Earlier this year, CalPERS named Lone Star to its Focus List of financial underperformers. According to Lone Star's May 1 proxy statement, $100 invested in Lone Star common shares on January 1995 would have been worth approximately $47 five years later. The same investment would have appreciated to more than $316 in the Standard & Poor's Midcap 400 Index and nearly $250 in the Restaurant 500 Peer Group.

CalPERS also points to a number of other practices approved by Lone Star's Board which directly benefited Coulter, raising further questions about conflicts of interest, the board's fiduciary duty to shareowners, and the board's ability to act independently. These included:

      --  $10.5 million paid to Coulter in 1998 for the purchase of
        Coulter Enterprises;

      --  A salary increase for Coulter from $300,000 to $750,000 in
        December 1999, while the total return for the stock in 1999
        was a negative 2.9 percent; and

      --  Reimbursement of nearly $900,000 in 1998 to Coulter
        Enterprises for the use of an airplane and pilot services.

Proxy Monitor and Institutional Shareholder Services, proxy advisory services to investors, have both publicly supported CalPERS shareholder proposal at Lone Star.

CalPERS has posted its letter to Lone Star shareowners and its shareholder proposal on CalPERS Shareowner Forum at www.calpers-governacne.org. The System owns more than 389,400 shares of Loan Star common stock.

CalPERS is the nation's largest public pension fund with assets totaling more than $175 billion. The System provides retirement and health benefits to more than 1 million state and local public employees and their families.