PROPOSAL 3
ADVISORY VOTE ON THE FREQUENCY OF
THE ADVISORY VOTE ON EXECUTIVE COMPENSATION
Advisory Vote
Our board of directors believes that say-on-pay votes should be conducted every year so that our stockholders may provide us with their direct
input on our compensation philosophy, policies, and practices, as disclosed in our proxy statement each year. Our board's determination was based upon the premise that named executive officer
compensation is evaluated, adjusted, and approved on an annual basis by our compensation committee and that the metrics that are used in determining performance-based award achievements are annual
metrics. Our compensation committee, which administers our executive compensation programs, values the opinions expressed by our stockholders in these votes and will consider the outcome of these
votes in making its decisions on executive compensation.
You
may cast your vote on your preferred voting frequency by choosing one year, two years, three years or abstain from voting when you vote in response to the resolution set forth below.
"RESOLVED,
that the option of once every one year, two years, or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting
will be determined to be the preferred frequency of the stockholders with which Red Robin Gourmet Burgers, Inc. is to hold a stockholder vote to approve, on an advisory basis, the compensation
of its named executive officers, as disclosed pursuant to the Securities and Exchange Commission's compensation disclosure rules (which disclosure shall include the Compensation Discussion and
Analysis, the Summary Compensation Table, and the other related tables and disclosure)."
The
option of one year, two years, or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting will be the
frequency for the advisory vote on executive compensation that has been recommended by stockholders. Abstentions and broker non-votes will have no effect on the outcome of this Proposal. However,
because this vote is advisory and not binding on the board of directors or the Company in any way, the board of directors may decide that it is in the best interests of our stockholders and the
Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.
Vote Required
Proposal No. 3 requires the approval of a majority of the votes cast on the proposal.
Board Recommendation
Our board of directors unanimously recommends an annual advisory vote on the compensation of our executive
officers.
62
Table of Contents
PROPOSAL 4
APPROVAL OF 2017 PERFORMANCE INCENTIVE PLAN
Introduction
Our board of directors recommends and proposes the 2017 Performance Incentive Plan (the "2017 Plan"), which was approved by our compensation
committee on February 16, 2017. We believe that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and
that incentive compensation plans like the
proposed 2017 Plan are an important attraction, retention, and motivation tool for participants in the plan.
The
compensation committee approved the 2017 Plan because it believes the Company needs to continue to adequately provide for future incentives. Approval of the 2017 Plan is central to
the compensation committee's plan to shift executive officer compensation to include more equity and less cash components and be more performance based in a manner that is compliant with Internal
Revenue Code section 162(m). In 2017, our chief executive officer and chief financial officer compensation will shift to increase the portion of compensation paid in equity and based on
performance, subject to stockholder approval of the new 2017 Plan. In February 2017, these executives received the following equity grants in the form of performance share units (PSUs), instead of
cash for that portion of the long-term incentive program, under the 2017 (subject to stockholder approval of the plan as proposed herein):
-
-
Ms. Post, our chief executive officer received a PSU grant representing 22,340 shares of the Company's common stock (at target).
-
-
Mr. Constant, our chief financial officer received a PSU grant representing 7,332 shares of the Company's common stock (at target).
Assuming
the new 2017 Plan is approved, the compensation committee contemplates this change for all executive officers beginning in 2018. See "Compensation Discussion and
Analysis2017 Compensation Program" in this proxy statement.
In
approving the 2017 Plan, the compensation committee also ensured that it was consistent with best practices, including the following plan features which are described in greater
detail below:
-
-
Adoption of best practice minimum vesting requirements.
-
-
Adoption of best practice change in control provisions.
-
-
Express prohibition of "liberal share recycling".
-
-
Specification that dividends are payable only when underlying shares vest.
We
currently maintain the Second Amended and Restated 2007 Performance Plan (the "2007 Plan") and the Employee Stock Purchase Plan (the "ESPP"). As of March 9, 2017, a total of
647,432 shares of our common stock were then subject to outstanding awards granted under the 2007 Plan, and an additional 354,732 shares of our common stock were then available for future issuance
under the 2007 Plan. As of March 9, 2017, the weighted average term for all outstanding awards under the 2007 Plan was 7.54 years, and a total of 21,504 shares of our common stock were
then available for future issuance under the ESPP. We are also seeking an increase in shares that would be available under the ESPP to 100,000. See "Proposal 5Approval of the Amended and
Restated of the Employee Stock Purchase Plan" in this proxy statement for more information about this proposal. The 2007 Plan and the ESPP are referred to collectively in this proposal as the
"Existing Plans."
The
2017 Plan provides for grant of awards of up to 619,732 shares of our common stock. The 619,732 shares is comprised of the number of shares that will be available for grant that
remain from the 2007 Plan and an additional number of new shares to equal a total of 265,000. The exact number
63
Table of Contents
of
new shares and shares available under the 2007 Plan will vary because additional awards may be made under the 2007 Plan prior to the annual meeting on May 18, 2017. However, the total number
available under the proposed 2017 Plan will not exceed 619,732 shares.
If
stockholders approve the 2017 Plan, no new awards will be granted under the 2007 Plan after the annual meeting.
Based
on our equity award plans in effect and outstanding awards at March 9, 2017, if stockholders approve the 2017 Plan, the total number of shares subject to outstanding awards
and available for future awards under the 2017 Plan and other continuing equity compensation plans would be as follows:
|
|
|
|
|
Shares subject to outstanding awards(1)
|
|
|
677,104
|
|
Shares to be available for future equity awards, including under the proposed 2017 Plan
|
|
|
590,060
|
|
Total shares
|
|
|
1,267,164
|
|
Percentage of outstanding shares(2)
|
|
|
9.85
|
%
|
-
(1)
-
Includes
the PSU awards to our chief executive officer and chief financial officer as described above, as well as options to be issued under the 2017 and other
continuing equity compensation plans to all participants, having a weighted average exercise price of $52.97.
-
(2)
-
Outstanding
shares (the denominator in this calculation) includes all common stock outstanding at March 9, 2017 and does not include issuance of unissued
shares reserved for outstanding or future awards under the existing plans and the proposed 2017 Plan.
If
stockholders do not approve the 2017 Plan, we will continue to have the authority to grant awards under the 2007 Plan. If stockholders approve the 2017 Plan, the termination of our
grant authority under the 2007 Plan will not affect awards then outstanding under that plan.
Prior
to 2016, cash incentive awards were granted and paid pursuant to the 2007 Plan. Beginning in 2016, we began awarding and paying cash incentive awards pursuant to the Cash Incentive
Plan. See "2016 Executive SummaryEmployment Agreements, Separation Related Arrangements, and Change in Control AgreementsIncentive PlansCash Incentive Plan"
above for a description of our Cash Incentive Plan. Future cash incentive awards are anticipated to be granted under the new 2017 Plan, if approved by our stockholders.
Summary Description of the 2017 Plan
The principal terms of the 2017 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2017 Plan,
which appears as Appendix A to this proxy statement.
Purpose.
The purpose of the 2017 Plan is to promote the success of the Company and to increase stockholder value by (a)
incentivizing the
officers, employees, directors, consultants, and other service providers of the Company and our affiliates to foster and build upon the continued success of the Company and to operate and manage the
business in a manner that will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain officers, employees, directors, consultants, and
other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of stock, or to receive compensation which is based upon appreciation in the
value of stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.
Administration.
Our compensation committee will administer the 2017 Plan. The compensation committee has full authority in its
discretion to
determine the officers, employees, directors,
64
Table of Contents
consultants,
and other service providers of the Company or our affiliates to whom awards will be granted and the terms and provisions of awards, subject to the provisions of the 2017 Plan. Subject to
the provisions in the 2017 Plan, the compensation committee has full and conclusive authority to (a) interpret the 2017 Plan; (b) prescribe, amend, and rescind rules and regulations
relating to the 2017 Plan; (c) determine the terms and provisions of the respective award agreements; and (d) make all other determinations necessary or advisable for the proper
administration of the 2017 Plan.
Our
board of directors may by resolution authorize one or more officers of the Company and/or the chair of the compensation committee to designate individuals to receive awards under the
2017 Plan, and to determine the type of awards and the terms and conditions and number of shares of common stock or the amount of cash subject to such awards; provided however, that any such
delegation will be subject to such parameters and restrictions consistent with the 2017 Plan.
No Repricing.
In no case (except due to an adjustment to reflect a stock split, or similar event, or any repricing that may be approved
by our
stockholders) will any adjustment be made to a stock option or stock appreciation right award under the 2017 Plan (by cancellation, surrender, or exchange) that would constitute a repricing of the per
share exercise or base price of the award.
Eligibility and Limits.
Persons eligible to receive awards under the 2017 Plan, subject to limited exceptions set forth in the 2017
Plan, include
officers, employees, directors, consultants, and other service providers of the Company or any affiliate of the Company. Currently, approximately 667 officers and employees of the Company and our
affiliates (including all of our named executive officers), and each of our non-employee directors, except for Mr. Hill, who will retire and conclude his board service on the date of our annual
meeting, are considered eligible under the 2017 Plan.
The
maximum number of shares of our common stock that may be issued or transferred pursuant to awards under the 2017 Plan is 619,732, which is comprised of that number of shares
available for additional award grant purposes under the 2007 Plan as of the date of the annual meeting and an additional number of new shares that together with shares available under the 2007 Plan
total 619,732 shares. As of March 9, 2017, 354,732 shares were available for awards under the 2007 Plan, and 647,432 shares were subject to awards then outstanding under the Existing Plans. As
noted above, no new awards will be granted under the 2007 Plan after the annual meeting if stockholders approve the 2017 Plan.
The
following other limits are also contained in the 2017 Plan:
-
-
The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the 2017 Plan is
700,000 shares.
-
-
The maximum number of shares subject to those options and stock appreciation rights that are granted under the 2017 Plan during any calendar
year to any individual other than a non-employee director is 170,000 shares.
-
-
The maximum number of shares subject to those options and stock appreciation rights that are granted under the 2017 Plan during any calendar
year to any non-employee director is the value of $250,000 in shares.
-
-
The maximum number of shares that are granted with the intent that they qualify as qualified performance-based compensation to any employee may
not exceed 150,000 shares.
-
-
The maximum aggregate dollar amount that may be paid in any calendar year to any employee with respect to performance-based compensation
payable in cash may not exceed $3,000,000.
Types of Awards.
The 2017 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in
our common
stock or unit of our common stock, as well as cash performance awards pursuant to Section 3.5 of the 2017 Plan.
65
Table of Contents
A
stock option is the right to purchase shares of our common stock at a future date at a specified price per share (the "Exercise Price"). The per share Exercise Price of an option
generally may not be less than the fair market value of a share of our common stock on the date of grant. The maximum term of an option is ten years from the date of the grant. An option may either be
an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under "Federal Income Tax Consequences of
Awards under the 2017 Plan" below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2017 Plan. Incentive stock
options may only be granted to employees of the Company or a subsidiary.
A
stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of a specified or determinable number of shares of our common stock
at the time of payment or exercise over a specified or determinable price, which may not be less than the fair market value of such shares of stock on the date of grant. Stock appreciation rights may
be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant.
The
other types of awards that may be granted under the 2017 Plan include, without limitation, grants of our common stock, grants of rights to receive our common stock in the future,
dividend equivalent rights, and cash performance awards granted consistent with "Performance-Based Awards" as described below.
Performance-Based Awards.
The compensation committee may grant awards that are intended to be performance-based awards within the
meaning of
Section 162(m) of the U.S. Internal Revenue Code ("Performance-Based Awards"). Performance-Based Awards are in addition to any of the other types of awards that may be granted under the 2017
Plan (including options and stock appreciation rights which may also qualify as performance-based awards for Section 162(m) purposes). Performance-Based Awards may be in the form of restricted
stock, performance stock, stock units, other rights, or cash performance awards.
The
vesting or payment of Performance-Based Awards (other than options or stock appreciation rights) will depend on the absolute or relative performance of the Company on a consolidated,
business unit, division, or affiliate (or business unit or division of an affiliate) basis. The compensation committee will establish the criterion or criteria and target(s) on which performance will
be measured. The compensation committee must establish criteria and targets in advance of applicable deadlines under the U.S. Internal Revenue Code and while the attainment of the performance targets
remains
substantially uncertain. The criteria that the compensation committee may use for this purpose will include one or more of the following: earnings per share; book value per share; operating cash flow;
free cash flow; cash flow from return on investments; cash available; net income (before or after taxes); revenue or revenue growth; total stockholder return; return on invested capital; return on
stockholder equity; return on assets; return on common book equity; return on gross investment; market share; economic value added; operating margin; profit margin; stock price; enterprise value;
operating income; EBIT or EBITDA; expenses or operating expenses; productivity of employees as measured by revenues, costs, or earnings per employee; working capital; improvements in capital
structure; guest retention, traffic and/or satisfaction; employee retention and/or engagement; completion of operating milestones; cost reduction goals; Company, franchise, or system same restaurant
sales; Company, franchise, or system restaurant growth in number of new restaurants; average restaurant volume growth; or any combination of the foregoing. The performance measurement period with
respect to an award will be established by the compensation committee at the time the award is granted. The compensation committee may appropriately adjust any evaluation of performance under a
performance goal to remove the effect of any one or more of the following: equity compensation expense under accounting standard ASC 718; accelerated amortization of acquired technology and
intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting
66
Table of Contents
principles
or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition
costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring or infrequent in occurrence, except where such action
would result in the loss of the otherwise available exemption of the award under Section 162(m), if applicable.
With
respect to any full-value award, the vesting of which is based solely on service with the Company (and not upon, either all or in part, the attainment of any performance measures),
with the exception of such awards to non-employee directors, the minimum period of service required for such award to vest is three years following the grant of such award, provided that such award
may vest ratably in no less than equal annual increments over such period. With respect to any full-value award that is a Performance-Based Award and issued to an individual under the 2017 Plan other
than a non-employee member of the Board of Directors, the applicable performance measurement period may not be less than one year. The compensation committee may not waive the applicable vesting
requirements for any full-value award except in the case of death, disability, and change in control.
Performance-Based
Awards may be paid in stock or cash (in either case, subject to the limits described under the heading "Eligibility and Limits" above). Before any Performance-Based
Award (other than an option or stock appreciation right) is paid, the compensation committee must certify in writing that the performance target or targets have been satisfied. The compensation
committee has discretion to determine the performance target or targets and any other restrictions or other limitations of Performance-Based Awards and may reserve discretion to reduce payments below
maximum award limits.
Acceleration of Awards; Early Termination of Awards.
Generally, and subject to limited exceptions set forth in the 2017 Plan, if any
person acquires
more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do
not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar
corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another
entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2017 Plan may become fully vested or paid, as applicable, and may
terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high
level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within
the two-year period following such change in control event. The compensation committee also has the discretion to establish other change in control provisions with respect to awards granted under the
2017 Plan. For example, subject to certain limitations, the compensation committee could provide for the acceleration of vesting or payment of an award in connection with a change in control event
that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Restrictions on Transfer.
Subject to certain exceptions contained in Section 4.2 of the 2017 Plan or the applicable award
agreement, awards
under the 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution, or pursuant to domestic relations orders, and are generally exercisable,
during the recipient's lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient's beneficiary or
representative. The compensation committee has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers
comply with applicable federal and state securities laws.
67
Table of Contents
Adjustments.
As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the
2017 Plan and
any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain
reorganizations, mergers, consolidations, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends.
No Limit on Other Authority.
Except as expressly provided with respect to the termination of the authority to grant new awards under
the 2007 Plan,
the 2017 Plan does not limit the authority of the board of directors or the compensation committee to grant awards or authorize any other compensation, with or without reference to our common stock,
under any other plan or authority.
Termination and Amendment of the 2017 Plan.
The board of directors may amend or terminate the 2017 Plan at any time without stockholder
approval;
provided, however, that the board of directors shall obtain stockholder approval for any amendment to the 2017 Plan that, except as provided under Section 5.1 of the 2017 Plan, increases the
number of shares of stock available under the 2017 Plan, materially expands the classes of individuals eligible to receive awards, materially expands the type of awards available for issuance under
the 2017 Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the award agreement explicitly provides otherwise, no such termination or amendment
may materially and adversely affect the rights of the recipient under such award without the consent of the holder of an award.
Federal Income Tax Consequences of Awards under the 2017 Plan
The U.S. federal income tax consequences of the 2017 Plan under current federal law, which is subject to change, are summarized in the following
discussion of the general tax principles applicable to the 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international
tax consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under the 2017 Plan. Furthermore, any tax
advice contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Stock Options and Stock Appreciation Rights.
With respect to nonqualified stock options, the Company is generally entitled to deduct,
and the
participant will recognize, taxable ordinary income in an amount equal to the excess of the fair market value of the shares at the time of exercise over the option exercise price. Stock appreciation
rights are taxed and deductible in substantially the same manner as nonqualified stock options.
With
respect to incentive stock options, a participant who exercises an incentive stock option will not be taxed at the time of exercise. Instead, the participant will be taxed at the
time the participant sells common stock purchased pursuant to the incentive stock option on the difference between the price the participant paid for the stock pursuant to the incentive stock option
and the amount for which the participant sells that stock. If the participant does not sell the stock prior to two years after the date the option was granted to the participant and one year after the
date the stock is transferred to the participant, then the participant will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and
the aggregate exercise price and the Company will not get a corresponding tax deduction. If the participant sells the stock at a gain prior to the expiration of such one and two year periods, the
amount by which (A) the lesser of (i) the fair market value of the stock on the date of exercise and (ii) the amount for which the stock is sold exceeds (B) the amount the
recipient paid for the stock will be taxed as ordinary income and the Company will be entitled to a corresponding tax deduction in the same amount (if the amount for which the stock is sold exceeds
the fair market value on the date of exercise, such excess amount is taxed as capital gain). If the participant sells the stock for less than the amount paid for the stock prior to the expiration of
the one and two year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive option may subject a recipient to, or increase
a recipient's liability for, the alternative minimum tax.
68
Table of Contents
Stock Awards.
A participant will not be taxed upon the grant of a stock award if such award is not transferable by the recipient and is
subject to a
"substantial risk of forfeiture," as defined in the U.S. Internal Revenue Code. However, when the shares of common stock that are subject to the stock award are transferable by the participant or are
no longer subject to a substantial risk of forfeiture, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the stock subject to the
stock award minus any amount paid for such stock, and the Company will at such time be entitled to a corresponding deduction. However, if a participant so elects at the time the participant receives a
stock award, the participant may include the fair market value (at the time of receipt) of the stock subject to the stock award, less any amount paid for such stock, in the participant's income at
that time and the Company also will be entitled to a corresponding deduction at that time.
Other Awards.
A participant will not recognize income upon the grant of a dividend equivalent right, restricted stock unit or cash
performance award.
Generally, at the time a payment receives payment under any dividend equivalent right, restricted stock unit, or cash performance award, the participant will recognize compensation taxable as ordinary
income in an amount equal to the cash or the fair market value of common stock received, and the Company will then be entitled to a corresponding deduction.
General.
Unless specified otherwise in an individual agreement between a participant and the Company, to the extent that acceleration
of an award
made under the 2017 Plan in connection with a "change in control" (as this term is used under the U.S. Internal Revenue Code) would result in compensation being paid that is not fully deductible by
the Company or one of its subsidiaries because of Section 280G of the U.S. Internal Revenue Code, such award will not accelerate to the extent or in a manner that would result in any
compensation being paid that is not fully deductible.
The
aggregate compensation in excess of $1,000,000 attributable to awards that are not "performance-based" within the meaning of Section 162(m) of the U.S. Internal Revenue Code
may not be permitted to be deducted for tax purposes by the Company in certain circumstances.
The
2017 Plan is not qualified under Section 401(a) of the U.S. Internal Revenue Code.
New Plan Benefits under the 2017 Plan
Because future awards under the 2017 Plan will be granted at the discretion of the compensation committee, the type, number, recipients, and
other terms of such awards cannot be determined at this time. Information regarding our recent practices with respect to annual and long-term incentive awards and stock-based compensation under
existing plans is presented in the "Summary Compensation Table" and "Outstanding Equity Awards at 2016 Fiscal Year-End" table contained elsewhere in this proxy statement, and in our financial
statements for the fiscal year ended December 25, 2016, in the Annual Report on Form 10-K which accompanies this proxy statement.
If
stockholders decline to approve the 2017 Plan, no awards will be granted under the 2017 Plan, but awards may continue to be granted under the 2007 Performance Incentive Plan. In
addition, there are likely insufficient shares available for grants of awards under the 2007 Plan beyond the current year to participants based upon our past practices and compensation programs.
Consequently, the Company may use additional cash or other compensation to retain, reward and incent employee performance.
Vote Required
Proposal No. 4 requires the affirmative vote of a majority of the votes cast in person or by proxy at the annual meeting.
Board Recommendation
Our board of directors unanimously recommends that you vote FOR approval of the 2017 Performance Incentive
Plan.
69
Table of Contents
PROPOSAL 5
APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
Introduction
Our Employee Stock Purchase Plan (the "ESPP") was adopted by our board of directors and approved by our stockholders in 2002. Since its original
adoption in 2002, our board of directors has effected two subsequent amendments, in August 2009 and in December 2009. Under the ESPP, eligible employees have the opportunity to acquire shares of our
common stock at a discount.
A
total of 300,000 shares of our common stock were authorized for issuance under the ESPP. As of March 9, 2017, 278,496 shares of our common stock were issued and outstanding
under the ESPP, and 21,504 shares of our common stock were available for issuance under the ESPP. On February 16, 2017, the compensation committee approved a proposal to amend and restate the
ESPP to (i) increase the number of shares of common stock authorized for issuance under the ESPP by an additional 100,000 shares, (ii) extend date after which no new offering periods may
commence by an additional ten years through July 13, 2027 and (iii) to effect certain technical revisions. We are seeking stockholder approval of the amendment and restatement of the
ESPP.
Set
forth below is a summary of the principal terms of the ESPP as proposed to be amended, and all references in this section are to the ESPP as proposed to be amended. The summary of
the provisions below is qualified in its entirety by the full text of the ESPP. A copy of the ESPP as amended and restated by the proposed amendment is attached to this proxy statement as
Appendix B.
Summary Description of the ESPP
Purpose.
The purpose of the ESPP is to assist eligible employees in acquiring a stock ownership interest in the Company, at a favorable
price and
upon favorable terms, pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code (the "Code"). The ESPP is also intended
to encourage eligible employees to remain in the employ of the Company or a subsidiary and to provide them with an additional incentive to advance the best interests of the Company.
Administration.
The compensation committee shall supervise and administer the ESPP and shall have full power and discretion to adopt,
amend, and
rescind any rules deemed desirable and appropriate for the administration of the ESPP, and to make all other determinations necessary or advisable for the administration of the ESPP.
Eligibility.
Any person who is employed by the Company or a participating subsidiary as of the first day
of any offering period (the "Grant Date") shall be eligible to participate in the ESPP during the offering period in which such Grant Date occurs; provided, however, that any person who has been
employed by the Company or a subsidiary for less than one year or whose customary employment is for twenty hours or less per week shall not be eligible to participate in the ESPP.
Maximum Purchase.
The maximum number of shares that any one participant may acquire upon exercise of his or her option with respect to
any one
offering period is 750; provided, however, that the compensation committee may establish a different individual limit in offering documents, in which case the 750 share limit shall be superseded by
the individual limit set forth in such offering documents.
Offering Periods.
The ESPP is implemented by consecutive six-month offering periods; provided, however, that the compensation committee
may declare,
as it deems appropriate and in advance of the applicable offering period, a shorter or longer offering period. Unless otherwise specified by the compensation committee in advance of the offering
period, an offering period that commences on or about July 1 will end the following December 31, and an offering period that commences on or about January 1 will end the following
June 30.
70
Table of Contents
Method of Payment of Contributions.
At the time an eligible employee files a subscription agreement with the Company to
participate in the
ESPP, he or she elects to have payroll deductions made on each payday during the offering period in an amount not exceeding 15% of the compensation such participant receives on each payday during the
offering period. The Company shall maintain on its books, or cause to be maintained by a recordkeeper, an account in the name of each eligible employee who has elected to participate in the ESPP. A
participant may not make any additional payments to his or her account. A participant may terminate his or her contributions during an offering period by filing with the Company a written withdrawal
form; provided, however, that for such withdrawal to be effective, the Company must receive the participant's withdrawal form prior to the last day of that offering period (the "Exercise Date").
Grant of Option.
On each Grant Date, each eligible employee who is a participant during that offering period shall be granted an option
to purchase a
number of shares of our common stock. The option shall be exercised on the Exercise Date. The number of shares subject to the option shall be
determined by dividing the participant's account balance as of the applicable Exercise Date by the option price, subject to the maximum number of shares provided under the heading "Maximum Purchase"
above.
The
compensation committee shall determine the option price per share at which shares of our common stock are sold in an offering period under the ESPP; provided that such option price
may not be less than the lesser of (a) 85% of the fair market value of a share of our common stock on the applicable Grant Date; and (b) 85% of the fair market value of a share of our
common stock on the applicable Exercise Date. Fair market value shall mean, as of any date and unless the compensation committee determines otherwise, the closing sales price of our common stock as
quoted on any established stock exchange or national market system on the date of determination (or the closing bid, if no sales were reported) as reported in a source the compensation committee deems
reliable.
A
person who is otherwise eligible to participate in the ESPP shall not be granted any option or other right to acquire our common stock under the ESPP to the extent (a) it would
cause the person to own stock possessing 5% or more of the total combined voting power or value of all classes of our common stock or that of any subsidiary; or (b) such option would cause the
individual to have rights to acquire stock under the ESPP (and any of our other existing compensation plans or compensation plans of our subsidiaries) that accrue at a rate that exceeds $25,000 of the
fair market value of our common stock or that of a subsidiary for each calendar year in which such right is outstanding at any time.
Exercise of Option.
Unless a participant terminates his or her participation in the ESPP by filing a withdrawal form, as discussed
above, his or her
option to acquire our common stock shall be exercised automatically on the Exercise Date for that offering period, without any further action on the participant's part, and the maximum number of whole
shares of our common stock subject to such option shall be acquired at the option price with the balance of such participant's account. Fractional shares of our common stock may not be acquired. If an
amount which exceeds the individual limit established pursuant to Section 4(b) of the ESPP or one of the limitations set forth in Section 8(c) of the ESPP remains in a participant's
account after the exercise of his or her option on the Exercise Date, such amount shall be refunded to the participant as soon as administratively practicable after such date.
Transferability.
Rights granted under the ESPP are not transferable by a participant other than by will, by the laws of descent and
distribution or
pursuant to the ESPP's beneficiary designation provisions.
Adjustments of and Changes in our Common Stock.
Should any change be made to our common stock by reason of any reclassification,
recapitalization,
stock split, or reverse stock split; any merger,
71
Table of Contents
combination,
consolidation, or other reorganization; any split-up, spin-off, or similar extraordinary dividend; any exchange of our common stock or other securities, any similar, unusual or
extraordinary corporate transaction in respect to our common stock; or any sale of substantially all of the assets of the Company as an entirety; the compensation committee may make appropriate
adjustments to the option price and number of shares of our common stock issuable under the ESPP.
Possible Early Termination of ESPP and Options.
Upon a dissolution of the Company, or any other event described in "Adjustments of and
Changes in our
Common Stock" above, that the Company does not survive, the ESPP and, if prior to the last day of an offering period, any outstanding option granted with respect to that offering period shall
terminate, subject to any provision that has been expressly made by our board of directors for the survival, substitution, assumption, exchange, or other settlement of the ESPP and options. In the
event a participant's option is terminated without a provision having been made by our board of directors for a substitution, exchange, or other settlement of the option, such participant's account
shall be paid to him or her in cash without interest.
Term of Plan; Amendment or Termination.
The ESPP shall become effective as of July 12, 2017 (the "Effective Date"). No new offering
periods
shall commence on or after the day after the tenth anniversary of the Effective Date and the ESPP shall terminate as of the later of (a) the tenth anniversary of the Effective Date; and
(b) the Exercise Date of the last offering period commenced on or prior to the day before the tenth anniversary of the Effective Date, unless sooner terminated pursuant to Section 4,
Section 18, or Section 19 of the ESPP.
Our
board of directors may, at any time, terminate or, from time to time, amend, modify or suspend the ESPP, in whole or in part, without notice. Stockholder approval for any amendment
or modification shall not be required, except to the extent required by applicable law or required under Section 423 of the Code in order to preserve the intended tax consequences of the ESPP,
or otherwise deemed necessary or advisable by our board of directors.
Tax Withholding.
The Company may deduct from a participant's account balance as of an Exercise Date, and before the exercise of the
participant's
option takes effect, the amount of any taxes which the Company reasonably determines we may be required to withhold with respect to such exercise. In such event, the maximum number of whole shares of
our common stock subject to such option shall be acquired at the option price with the balance of the participant's account.
Federal Income Tax Information
The U.S. federal income tax consequences of the ESPP under current federal law, which is subject to change, are summarized in the following
discussion of the general tax principles applicable to the ESPPP. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax
consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under the ESPP. Furthermore, any tax advice
contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Rights
to acquire shares of our common stock granted under the ESPP are intended to qualify for favorable federal income tax treatment associated with rights granted under an "employee
stock purchase plan" that qualifies under the provisions of Section 423(b) of the Code. Under these provisions, no income will be taxable to a participant until the shares acquired under the
ESPP are sold or otherwise disposed of by the participant. If shares acquired under the ESPP are disposed of within two years from the date of grant or within one year from the date of purchase,(a
transaction referred to as a "disqualifying disposition"), the participant will recognize ordinary income in the year of such disposition equal to the excess of the fair market value of the stock on
the date of purchase over the option exercise price. The amount of such ordinary income will be added to the participant's basis in
72
Table of Contents
the
shares and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. A capital gain or loss will be long-term if
the participant holds the shares for more than one year after the date the participant purchases the shares.
If
stock acquired under the ESPP is sold (or otherwise disposed of) more than two years after the date of grant and more than one year after the date of purchase, then the lesser of
(i) the excess of the sale price of the stock at the time of disposition over the option price and (ii) the excess of the fair market value of the stock as of the date the participant
entered the offering period over the option price (determined as of the date the participant entered the offering period) will be treated as ordinary income. If the sale price is less than the option
price, no ordinary income will be reported. The amount of such ordinary income will be added to the participant's basis in the shares and any additional gain or resulting loss recognized on the
disposition of the shares after such basis adjustment will be long-term capital gain or loss.
The
Company will generally be entitled to a deduction in the year of a disqualifying disposition equal to the amount of ordinary income realized by the participant as a result of such
disposition, subject to the satisfaction of any tax-reporting obligations. In all other cases, no deduction is allowed.
THE
FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE ESPP. IT DOES
NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT MAY RESIDE.
Vote Required
Proposal No. 5 requires the approval of a majority of the votes cast on the proposal.
Board Recommendation
Our board of directors unanimously recommends that you vote FOR approval of the Amended and Restated Employee Stock
Purchase Plan.
73
Table of Contents
PROPOSAL 6
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting
firm retained to perform the audit of our financial statements and our internal control over financial reporting. The audit committee selected KPMG LLP ("KPMG") as our independent auditor for
the fiscal year ending December 31, 2017. KPMG also served as our independent auditor for the 2016 fiscal year ended December 25, 2016 and the 2015 fiscal year ended December 27,
2015. Prior to that, Deloitte & Touche LLP ("D&T") served as our independent auditor. In 2016, stockholders approved the ratification of KPMG by approximately 99.96% of votes cast. The
audit committee believes the continued retention of KPMG is in the best interests of the Company and our stockholders. Representatives from KPMG are expected to be present at the annual meeting, will
have an opportunity to make a statement if they desire to do so, and will be available to respond to any questions that might arise.
Change in Auditor in 2015
With a rotation of audit engagement partner required in 2015, the audit committee decided to open the annual selection process to several other
independent registered public accounting firms. The audit committee, with the assistance of management, performed an evaluation of firms to determine the Company's independent auditor for the 2015
fiscal year. As a result of this process, the audit committee formally approved the engagement of KPMG as the Company's independent auditor for the fiscal year ending December 27, 2015.
D&T
served as our independent auditor from 1992 to March 2015. The reports of D&T on the Company's consolidated financial statements for the fiscal year ended December 28, 2014
did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company's fiscal year ended
December 28, 2014, and during the subsequent interim period preceding D&T's dismissal, there were: (i) no disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of D&T would have caused D&T to make reference to the subject matter of the
disagreements in connection with its reports, and (ii) no reportable events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K.
During
the Company's fiscal year ended December 28, 2014, and during the subsequent interim period preceding KPMG's engagement, neither the Company, nor anyone on its behalf,
consulted KPMG with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the
Company's consolidated financial statements, and neither a written report was provided to the Company nor oral advice was provided to the Company that KPMG concluded was an important factor considered
by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a disagreement (as defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Evaluation of Auditor
In approving the selection of KPMG as the Company's independent auditor for the fiscal year ending December 31, 2017, the audit committee
considered, among other factors:
-
-
Firm and engagement team experience, including in our industry;
74
Table of Contents
-
-
Audit approach and supporting tools;
-
-
General technical expertise;
-
-
Audit quality factors, including timing of procedures and engagement team workload and allocation;
-
-
Recent Public Company Oversight Board (PCAOB) inspection findings and the firms' responses thereto;
-
-
Communication and interaction with the audit committee and management;
-
-
Independence and commitment to objectivity and professional skepticism;
-
-
Prior year audit performance; and
-
-
The reasonableness and appropriateness of fees.
Based
on this evaluation, our board is requesting that our stockholders ratify KPMG's appointment for the 2017 fiscal year. We are not required to seek ratification from stockholders of
our selection of independent auditor, but are doing so as a matter of good governance. If the selection is not ratified, the audit committee will consider whether it is appropriate to select another
independent auditor. Even if the selection is ratified, the audit committee in its discretion may select a different independent auditor at any time during the year if it determines that such a change
would be in the best interests of the Company and its stockholders.
Principal Accountant Fees and Services
The following table summarizes the aggregate fees billed or to be billed by KPMG for the fiscal years ended December 25, 2016 and
December 27, 2015, respectively:
|
|
|
|
|
|
|
|
|
|
2016($)
|
|
2015($)
|
|
Audit fees
|
|
|
795,000
|
|
|
770,881
|
|
Audit-related fees
|
|
|
|
|
|
|
|
Tax fees
|
|
|
|
|
|
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
795,000
|
|
|
770,881
|
|
Audit Fees
Fees for audit services in 2016 and 2015 consisted of the audit of our annual financial statements and reports on internal controls required by
the Sarbanes-Oxley Act of 2002, reviews of our quarterly financial statements, and fees related to a review of our Franchise Disclosure Document.
Audit-Related Fees
There were no audit-related fees billed by KPMG in 2015 or 2016.
Tax Fees
There were no tax fees billed by KPMG in 2015 or 2016.
All Other Fees
There were no all other fees billed by KPMG in 2015 or 2016.
75
Table of Contents
Audit Committee's Pre-Approval Policies and Procedures
The audit committee pre-approves all audit and non-audit services to be performed by its independent auditor, and has established policies and
procedures to ensure that the
Company is in full compliance with the requirements for pre-approval set forth in the Sarbanes-Oxley Act of 2002 and the SEC rules regarding auditor independence. The policies and procedures are
detailed as to the particular service and do not delegate the audit committee's responsibility to management.
In
accordance with these policies and procedures, management submits for approval audit and non-audit services that management may wish to have the independent auditor perform during the
fiscal year, accompanied by an estimated range of fees for each service to be performed. The audit committee pre-approves or rejects the service and an accompanying range of fees for each service
desired to be performed. Management is required to seek additional audit committee pre-approval when management becomes aware that any pre-approved service will result in actual fees greater than the
fees initially approved. During the course of the year, the chair of the audit committee has the authority to pre-approve requests for services. At each subsequent audit committee meeting, the chair
of the audit committee reports any interim pre-approvals since the last meeting.
All
of the fees set forth in the Principal Accountant Fees and Services table above for fiscal year 2016 were pre-approved by the audit committee.
Vote Required
Proposal No. 6 requires the approval of a majority of the votes cast on the proposal.
Board Recommendation
Our board of directors recommends that you vote FOR ratification of the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal year ending December 31, 2017.
76
Table of Contents
ANNUAL REPORT ON FORM 10-K
We filed with the SEC an annual report on Form 10-K on February 21, 2017 for the fiscal year ended December 25, 2016. A
copy of the annual report on Form 10-K has been made available concurrently with this proxy statement to all of our stockholders entitled to notice of and to vote at the annual meeting. In
addition, you may obtain a copy of the annual report on Form 10-K, without charge, by writing to Red Robin Gourmet Burgers, Inc., Attn: Shareholder Services, 6312 South Fiddler's Green
Circle, Suite 200N, Greenwood Village, Colorado 80111.
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
Michael L. Kaplan
Secretary
|
|
|
Greenwood Village, Colorado
April [ ], 2017
|
82
Table of Contents
APPENDIX A
RED ROBIN GOURMET BURGERS, INC.
2017 PERFORMANCE INCENTIVE PLAN
SECTION 1. DEFINITIONS
1.1
Definitions.
Whenever used in the Plan, the masculine pronoun will be deemed to include the feminine, and
the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used in the Plan with the meaning thereafter ascribed:
(a) "
Affiliate
" means:
(1) Any
Subsidiary or Parent;
(2) An
entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Committee; or
(3) Any
entity in which the Company has such a significant interest that the Company determines it should be deemed an "Affiliate", as determined in the sole discretion of
the Committee.
(b) "
Award Agreement
" means any written or electronic agreement, contract, or other instrument or document as may from time
to time be approved by the Committee as evidencing an Award granted under the Plan; provided, however, that Cash Performance Awards described in Section 3.5 need not be evidenced by an Award
Agreement.
(c) "
Awards
" means, collectively, Cash Performance Awards, Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, and Other Stock-Based Awards.
-
(d)
-
"
Board of Directors
" means the board of directors of the Company.
(e) "
Cash Performance Award
" means an Award described in
Section 3.5
that is settled in cash and does not have a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock.
(f) "
Change in Control
" means, unless otherwise provided in the applicable Award Agreement:
(1) The
acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"
Person
")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% or more of either (A) the then-outstanding shares of common stock of the Company (the "
Outstanding Company Common
Stock
") or (B) the combined voting power of the then-outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the
"
Outstanding Company Voting Securities
"); provided, however, that, for purposes of this definition, the following acquisitions shall not constitute a
Change in Control; (I) any acquisition directly from the Company, (II) any acquisition by the Company, (III) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliate of the Company or a successor, or (IV) any acquisition by any entity pursuant to a transaction that complies with
Sections (3)(A)
,
(B)
and
(C)
below;
(2) A
majority of the individuals who, as of the Effective Date, serve on the Board (the "
Incumbent Board
") cease for any
reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination
was so approved, without
A-1
Table of Contents
counting
the member and his predecessor twice) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
(3) Consummation
of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a
sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a
"Business Combination"),
in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities
that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or
substantially all of the Corporation's assets directly or through one or more subsidiaries (an "
Acquiror
")) in substantially the same proportions as
their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any entity resulting from such Business Combination or an Acquiror
or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or Acquiror) beneficially owns, directly or indirectly, more than 50% of,
respectively, the then- outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity,
except to the extent that the ownership in excess of more than 50% existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors or trustees of
the entity resulting from such Business Combination or an Acquiror were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval
by the stockholders of the Company of a complete liquidation or dissolution of the Company other than in the context of a transaction that does not constitute a
Change in Control under clause (3) above.
Notwithstanding
the foregoing, with respect to any Award that is subject to Code Section 409A, "Change in Control" will mean a "change in control event" under Code Section 409A to the
extent Change in Control is either a payment or settlement event under such Award or such definition is otherwise required for the Award to satisfy the requirements of Code Section 409A;
provided, however, that the Committee may provide a different definition that complies with Code Section 409A in an applicable Award Agreement.
(g) "
Code
" means the Internal Revenue Code of 1986, as amended.
(h) "
Committee
" means, unless another committee is appointed by the Board of Directors to administer the Plan, the
Compensation Committee of the Board of Directors; provided that, if no such committee is appointed, the Board of Directors in its entirety shall constitute the Committee. The Board of Directors shall
consider the advisability of whether the members of the Committee shall consist solely of two or more members of the Board of Directors who are both "outside directors" as defined in Treas. Reg.
§ 1.162-27(e) as promulgated by the Internal Revenue Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as promulgated under the Exchange
A-2
Table of Contents
Act,
and if applicable, who satisfy the requirements of the national securities exchange or nationally recognized quotation or market system on which the Stock is then traded. Notwithstanding the
foregoing, with respect to Awards granted by an officer or officers of the Company and/or the
Chairperson of the Compensation Committee pursuant to
Section 2.3(b)
, the "Committee" as used in the Plan shall mean such officer or officers
and/or such Chairperson, unless the context would clearly indicate otherwise.
(i) "
Company
" means Red Robin Gourmet Burgers, Inc., a Delaware corporation.
(j) "
Disability
" unless otherwise defined by the Committee in the applicable Award Agreement, means either (i) the
Participant has been determined to be disabled under the Company's long-term disability plan or (ii) the Committee has determined that the Participant has a physical or mental infirmity that
impairs the Participant's ability to perform substantially his or her duties for a period of ninety (90) days in any 365-day period. If no long-term disability plan or policy was ever
maintained on behalf of the Participant, or if the determination of Disability relates to an Incentive Stock Option, Disability means that condition described in Code Section 22(e)(3), as
amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such
Disability relates.
(k) "
Exchange Act
" means the Securities Exchange Act of 1934, as amended from time to time.
(l) "
Exercise Price
" means the exercise price per share of Stock purchasable under an Option.
(m) "
Fair Market Value
" refers to the determination of the value of a share of Stock as of a date, determined as follows:
(1) if
the shares of Stock are listed on any national securities exchange or any nationally recognized quotation or market system (including, without limitation Nasdaq),
Fair Market Value shall mean the closing price of the Stock on such date or, if such date is not a trading day, on the trading day immediately preceding such date, as reported by any such exchange or
system selected by the Committee on which the shares of Stock are then traded; or
(2) if
the shares of Stock are not listed on any exchange or system on such date or on the business day immediately preceding such date, Fair Market Value shall mean the
fair market value of a share of Stock as determined by the Committee taking into account such facts and circumstances deemed to be material by the Committee to the value of the Stock in the hands of
the Participant.
Notwithstanding
the foregoing, for purposes of Paragraph (1) or (2) above, the Committee may use the closing price as of the indicated date, the average price or value as of the
indicated date or for a period certain ending on the indicated date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method
which the Committee
determines is reasonably indicative of the fair market value of the Stock; provided, however, that for purposes of granting Nonqualified Stock Options or Stock Appreciation Rights, Fair Market Value
of Stock shall be determined in accordance with the requirements of Code Section 409A, and for purposes of granting Incentive Stock Options, Fair Market Value of Stock shall be determined in
accordance with the requirements of Code Section 422.
(n) "
Incentive Stock Option
" means an incentive stock option within the meaning of Code Section 422.
(o) "
Individual Agreement
" means an employment, consulting, severance or similar written agreement between a Participant and
the Company or one of its Affiliates (but not, for clarity, an Award Agreement).
A-3
Table of Contents
(p) "
Nonqualified Stock Option
" means a stock option that is not an Incentive Stock Option.
(q) "
Option
" means a Nonqualified Stock Option or an Incentive Stock Option.
(r) "
Other Stock-Based Award
" means an Award described in
Section 3.4
that has a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock and that may be settled in cash, in
Stock or in a combination thereof. Other Stock-Based Awards may include, but are not limited to, restricted stock, restricted stock units, performance shares, grants of Stock, grants of rights to
receive Stock in the future, or dividend equivalent rights.
(s) "
Over 10% Owner
" means an individual who, at the time an Incentive Stock Option is granted to such individual, owns stock
possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Parent or Subsidiaries, determined by applying the attribution rules of Code
Section 424(d).
(t) "
Parent
" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if,
with respect to Incentive Stock Options, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations in such
chain. A Parent shall include any entity other than a corporation to the extent permissible under Code Section 424(e) or regulations and rulings thereunder.
(u) "
Participant
" means an individual who receives an Award under the Plan.
(v) "
Performance Goals
" means any one or more of the following performance goals, intended by the Committee to constitute
objective goals for purposes of Code Section 162(m), either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, or
Affiliate (or business unit or division of an Affiliate), either individually, alternatively or in combination, and measured either monthly, quarterly, annually, or over another specified period or
cumulatively or averaged over a period of months, quarters, years, or other specified period, on an absolute basis or relative to a pre-established target, to one or more previous periods' results or
to a designated comparison group, in each case as specified by the Committee in the Award:
-
(i)
-
earnings
per share;
-
(ii)
-
book
value per share;
-
(iii)
-
operating
cash flow;
-
(iv)
-
free
cash flow:
-
(iii)
-
cash
flow return on investments;
-
(iv)
-
cash
available;
-
(v)
-
net
income (before or after taxes);
-
(vi)
-
revenue
or revenue growth;
-
(vii)
-
total
shareholder return;
-
(viii)
-
return
on invested capital;
-
(ix)
-
return
on shareholder equity;
-
(x)
-
return
on assets;
A-4
Table of Contents
-
(xi)
-
return
on common book equity;
-
(xii)
-
return
on gross investment;
-
(xiii)
-
market
share;
-
(xiv)
-
economic
value added;
-
(xv)
-
operating
margin;
-
(xvi)
-
profit
margin;
-
(xvii)
-
stock
price;
-
(xviii)
-
enterprise
value;
-
(xix)
-
operating
income;
-
(xx)
-
EBIT
or EBITDA;
-
(xxi)
-
expenses
or operating expenses;
-
(xxii)
-
productivity
of employees as measured by revenues, costs, or earnings per employee;
-
(xxiii)
-
working
capital;
-
(xxiv)
-
improvements
in capital structure;
-
(xxv)
-
guest
retention, traffic, and/or satisfaction;
-
(xxvi)
-
safety;
-
(xxvii)
-
completion
of identified specific projects;
-
(xxviii)
-
market
share;
-
(xxix)
-
employee
retention and/or engagement;
-
(xxx)
-
completion
of operating milestones;
-
(xxxi)
-
cost
reduction goals;
-
(xxxii)
-
Company,
franchise, or system same restaurant sales;
-
(xxxiii)
-
Company,
franchise, or system restaurant growth in number of new restaurants;
-
(xxxiv)
-
average
restaurant volume growth; or
-
(xxxv)
-
any
combination of the foregoing.
Any
of the foregoing may be determined on a per share basis (basic or diluted) as appropriate. The Committee may appropriately adjust any evaluation of performance under a Performance Goal to remove
the effect of any one or more of the following: equity compensation expense under ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim
judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring
programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual
in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Code Section 162(m), if
applicable.
A-5
Table of Contents
(w) "
Performance Period
" means, with respect to an Award, a period of time within which the Performance Goals relating to
such Award are to be measured. The Performance Period will be established by the Committee at the time the Award is granted.
(x) "
Plan
" means the Red Robin Gourmet Burgers, Inc. 2017 Performance Incentive Plan.
(y) "
Securities Act
" means the Securities Act of 1933, as amended from time to time.
(z) "
Separation from Service
" means a termination of a Participant's employment or other service relationship with the
Company, subject to the following requirements:
(1) in
the case of a Participant who is an employee of the Company, a termination of the Participant's employment where either (A) the Participant has ceased to
perform any services for the Company and all
affiliated companies that, together with the Company, constitute the "service recipient" within the meaning of Code Section 409A (collectively, the
"Service
Recipient")
or (B) the level of bona fide services the Participant performs for the Service Recipient after a given date (whether as an employee or as an independent
contractor) permanently decreases (excluding a decrease as a result of military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if
longer, so long as the Participant retains a right to reemployment with the Service Recipient under an applicable statute or by contract) to no more than twenty percent (20%) of the average level of
bona fide services performed for the Service Recipient (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of service if the
Participant has been providing services to the Service Recipient for less than 36 months) that, in either case, constitutes a "separation from service" within the meaning of Code
Section 409A and the regulations thereunder;
(2) in
the case of a Participant who is an independent contractor engaged by the Service Recipient, a termination of the Participant's service relationship with the Service
Recipient upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for the Service Recipient if the expiration constitutes a
good-faith and complete termination of the contractual relationship that constitutes a "separation from service" within the meaning of Code Section 409A and the regulations thereunder; or
(3) in
any case, as may otherwise be permitted under Code Section 409A.
(aa) "
Stock
" means the Company's common stock.
(bb) "
Stock Appreciation Right
" means a stock appreciation right described in
Section 3.3.
(cc) "
Subsidiary
" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the
Company if, at the relevant time, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. A "Subsidiary" shall include any entity other than a corporation to the extent permissible under Code Section 424(f) or
regulations or rulings thereunder.
(dd) "
Termination of Employment
" means the termination of the employment relationship between a Participant and the Company
and its Affiliates, regardless of whether severance or similar payments are made to the Participant for any reason, including, but not limited to, a termination by resignation, discharge, death,
Disability or retirement. Further, if an entity ceases to be a Subsidiary, a Termination of Employment will be deemed to have occurred with respect to each Participant in respect of such Subsidiary
who does not continue to be eligible to receive Awards under this Plan in respect of such Participant's relationship to the Company or another Subsidiary that remains a Subsidiary after giving effect
to the event giving rise to the entity ceasing
A-6
Table of Contents
to
be a Subsidiary. The Committee will, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Employment as it affects an Award, including, but not
by way of limitation, the question of whether a leave of absence constitutes a Termination of Employment.
SECTION 2. THE PERFORMANCE INCENTIVE PLAN
2.1
Purpose of the Plan.
The purpose of this Plan is to promote the success of the Company and to increase
stockholder value by (a) incentivizing the officers, employees, directors, consultants, and other service providers of the Company and its Affiliates to foster and build upon the continued
success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain
officers, employees, directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive
compensation which is based upon appreciation in the value of Stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other
service providers.
2.2
Stock Subject to the Plan.
Subject to adjustment in accordance with
Section 5.2
, the sum of (i) 265,000 shares
of Stock plus (ii) the number of shares of Common Stock available for grant under the
Red Robin Gourmet Burgers, Inc. Second Amended and Restated 2007 Performance Incentive Plan (the "
Maximum Plan Shares
") are hereby reserved
exclusively for issuance upon exercise, settlement, or payment pursuant to Awards, all or any of which may be pursuant to any one or more Award, including without limitation, Incentive Stock Options.
Shares of Stock will not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. The shares of Stock attributable to the nonvested, unpaid,
unexercised, unconverted or otherwise unsettled portion of any Award that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or
otherwise settled in full will again be available for purposes of the Plan. The following shares, however, may not again be made available for grant in respect of Awards under this Plan:
(i) shares not issued or delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right; (ii) shares delivered to or withheld by the Company to pay the
Option or Grant Price of or the withholding taxes with respect to an Award, and (iii) shares repurchased on the open market with the proceeds from the payment of the Option Price of an
Option. Shares of Stock available for Awards under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
2.3
Administration of the Plan.
(a) The
Plan is administered by the Committee. The Committee has full authority in its discretion to determine the officers, employees, directors, consultants, and other
service providers of the Company or its Affiliates to whom Awards will be granted and the terms and provisions of Awards, subject to the provisions of the Plan. Subject to the provisions of the Plan,
the Committee has full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the
respective Award Agreements; and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). The Committee's decisions are final
and binding on all Participants.
(b) Notwithstanding
any other provision of this Plan, the Board of Directors may by resolution authorize one or more officers of the Company and/or the Chairperson of the
Compensation Committee of the Board of Directors to do one or both of the following: (1) designate individuals (other than officers or directors of the Company or any Affiliate who are
A-7
Table of Contents
subject
to Section 16 of the Exchange Act) to receive Awards under the Plan, and (2) determine the type of Awards and the terms and conditions and number of shares of Stock or the amount
of cash subject to such Awards; provided however, that any such delegation will be subject to such parameters and restrictions consistent with the Plan as the Board of Directors specifies, including,
without limitation, the total number of shares of Stock that may be granted subject to such Awards, if applicable.
(c) No
member of the Board of Directors or Committee, nor any person to whom authority is delegated under subsection (b), will be liable for any action taken or any
determination made in good faith with respect to the Plan or any Award granted under the Plan.
2.4
Eligibility and Limits.
(a) Awards
may be granted only to officers, employees, directors, consultants, and other service providers of the Company or any Affiliate of the Company; provided, however,
that (1) an Incentive Stock Option may only be granted to an employee of the Company or any Parent or Subsidiary and (2) persons who are not officers, employees, or directors of the
Company or an Affiliate of the Company may only be granted an Award under this Plan if such participation would not adversely affect the Company's eligibility to use Form S-8 to register under
the Securities Act, the offering and sale of shares issuable under the Plan by the Company, or the Company's compliance with any other applicable laws.
(b) In
the case of Incentive Stock Options, (i) the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of Stock with respect
to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and
its Parents and Subsidiaries may not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded will be treated as
Nonqualified Stock Option(s); and (ii) the maximum number of shares of Stock that may be delivered pursuant to Incentive Stock Options granted under the Plan is 700,000.
(c) The
maximum number of shares of Stock subject to any Options and Stock Appreciation Rights that may be granted under the Plan during any calendar year to any individual
other than a non-employee director is 170,000 shares. The maximum number of shares of Stock subject to any Options and Stock Appreciation Rights that may be granted under the Plan during any calendar
year to any non-employee director is 25,000 shares, and the maximum value (determined on the grant date) of Full-Value Awards (as defined in Section 3.1(h)) that may be granted under the Plan
during any calendar year to any non-employee director is $250,000.
(d) To
the extent required under Code Section 162(m) and the regulations thereunder, as applicable, for compensation to be treated as qualified performance-based
compensation, subject to adjustment in accordance with
Section 5.2
, the maximum number of shares of Stock with respect to which
(1) Options, (2) Stock Appreciation Rights, or (3) other Awards (other than Other Stock-Based Awards that are payable in cash or Cash Performance Awards), to the extent they are
granted with the intent that they qualify as qualified performance-based compensation under Code Section 162(m), may be granted during any calendar year to any employee may not exceed 150,000,
and the maximum aggregate dollar amount that may be paid in any calendar year to any employee with respect to Other Stock-Based Awards that are payable in cash and Cash Performance Awards may not
exceed $3,000,000 multiplied by the number of years in the performance period. If an Option is cancelled, the cancelled Option will continue to be counted against the maximum number of shares for
which options may be granted to an employee as described in this
Section 2.4.
If the exercise price of an Option is reduced or the base amount on
which a Stock Appreciation Right is calculated is reduced, the transaction will be treated as the cancellation of the Option or the Stock Appreciation Right, as applicable, and the grant of a new
A-8
Table of Contents
Option
or Stock Appreciation Right, as applicable. If an Option or Stock Appreciation Right is deemed to be cancelled as described in the preceding sentence, the Option or Stock Appreciation Right
that is deemed to be cancelled and the Option or Stock Appreciation Right that is deemed to be granted will both be counted against the maximum number of shares for which Options or Stock Appreciation
Rights may be granted to an employee as described in this
Section 2.4
.
SECTION 3. TERMS OF AWARDS
3.1
Terms and Conditions of All Awards.
(a) The
number of shares of Stock as to which an Award may be granted or the amount of an Award will be determined by the Committee in its sole discretion, subject to the
provisions of
Section 2.2
as to the total number of shares available for grants under the Plan and to the limits set forth in
Section 2.4
.
(b) Each
Award will be evidenced by an Award Agreement in such form and containing such terms, conditions and restrictions as the Committee determines to be appropriate,
including, without limitation, Performance Goals or other performance criteria, if any, that must be achieved as a condition to the vesting or settlement of the Award. The Committee shall establish
applicable Performance Goals, if any, before twenty-five percent (25%) of the Performance Period has elapsed, but in no event later than within ninety (90) days after the first day of the
applicable Performance Period. At the time any Performance Goals are established, whether the Performance Goals will be met must be substantially uncertain. If any Performance Goals are established as
a condition to vesting or settlement of an Award and such Performance Goal is not based solely on the increase in the Fair Market Value of the Stock, the Committee shall certify in writing that the
applicable Performance Goals were in fact satisfied before such Award is deemed to have vested or is settled, as applicable. Each Award Agreement is subject to the terms of the Plan and any provisions
contained in an Award Agreement that are inconsistent with the terms of the Plan are null and void. To the extent an Award is subject to Performance Goals and the Committee desires that the Award
constitute performance-based compensation under Code Section 162(m), the Committee will comply with all applicable requirements under Code Section 162(m), including the rules and
regulations promulgated thereunder, in granting, modifying, and settling such Award. The Committee may, but is not required
to, structure any Award so as to qualify as performance-based compensation under Code Section 162(m).
(c) The
date as of which an Award is granted will be the first date as of which the Committee (i) has approved the terms and conditions of the Award, (ii) has
determined the recipient of the Award and the number of shares, if any, covered by the Award, and (iii) has taken all such other actions necessary to complete the grant of the Award or such
later date as may be specified in the approval of such Award.
(d) Any
Award may be granted in connection with all or any portion of a previously or contemporaneously granted Award. Exercise or vesting of an Award granted in connection
with another Award may result in a pro rata surrender or cancellation of a related Award, as specified in the applicable Award Agreement.
(e) Awards
are not transferable or assignable except by will or by the laws of descent and distribution in the State in which the Participant was domiciled at the time of
the Participant's death, during the Participant's lifetime, are exercisable only by the Participant; provided that, in the event of the Disability of the Participant, the legal representative of the
Participant may exercise the Participant's Award(s). In the event of the death of the Participant, the legal representative of the Participant's estate or, if no legal representative has been
appointed within ninety (90) days of the Participant's death, the person(s) taking the Participant's Award(s) under the laws of descent and distribution in the State in which the Participant
was domiciled at the time
A-9
Table of Contents
of
the Participant's death may exercise the Participant's Award(s). Notwithstanding the above, the Committee may provide otherwise as to any Awards other than Incentive Stock Options (provided that
such transfers shall only be permitted for no consideration to the Participant).
(f) The
Committee may, in its sole discretion, modify the terms and conditions of an Award, except to the extent that such modification would materially and adversely affect
the rights of a Participant under the Award (except as otherwise permitted under the Plan or Award) or would be inconsistent with other provisions of the Plan.
(g) All
Awards granted under the Plan are subject to any clawback or recoupment policy adopted by the Board of Directors or any committee thereof.
(h) With
respect to any Full-Value Award issued to a Participant other than a non-employee member of the Board of Directors, the vesting of which is based solely on service
with the Company (and not upon, either all or in part, the attainment of any Performance Goals), the minimum period of service required for such Award to vest is three years following the grant of
such Award, provided that such Award may vest ratably in no less than equal annual increments over such period. With respect to any Full-Value Award issued to a Participant other than a non-employee
member of the Board of Directors, the terms and conditions of which provide for vesting based on Performance Goals, the applicable performance measurement period may not be less than one year. With
respect to any other Award issued to a Participant other than a non-employee member of the Board of Directors, the minimum service period required for such Award to vest is one year following the
grant of such Award. With respect to any Full-Value Award issued to a non-employee member of the Board of Directors, the minimum period of service required for such Award to vest (or the minimum
performance period for any such Award) shall be the period beginning on the date of grant and ending on the sooner of (i) the date of the next annual stockholders meeting and (ii) the
one-year anniversary of the grant date of such Award. The Committee may not waive the applicable vesting requirements for an Award except in the case of death, Disability, and Change in Control. The
term "Full-Value Award" includes Awards of restricted stock, restricted stock units, performance shares, and other similar Awards granted under this Plan, but does not include Awards pursuant to which
the Participant's ultimate remuneration is limited solely to the post-grant appreciation in the value of the shares of the Company's common stock subject to the Award (such as Options or Stock
Appreciation Rights having a per share exercise of base price, as applicable, at least equal to the fair market value of a share of the Company's common stock at the time of grant of such Award). This
provision shall supersede any contrary provision in the Plan.
3.2
Terms and Conditions of Options.
Each Option granted under the Plan must be evidenced by an Award Agreement.
At the time an Option is granted, the Committee will determine whether the Option is an Incentive Stock Option described in Code Section 422 or a Nonqualified Stock Option, and the Option must
be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option. Incentive Stock Options may only be granted to employees of the Company or any Subsidiary or Parent.
At the time any Incentive Stock Option granted under the Plan is exercised, the Company will be entitled to legend the certificates representing the shares of Stock purchased pursuant to the Option to
clearly identify them as representing shares purchased upon the exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the
earlier of the date the Plan is adopted or approved by the Company's stockholders. Neither an Option nor the shares of Stock underlying an Option may be eligible for dividends or dividend equivalents.
(a)
Option Price.
Subject to adjustment in accordance with
Section 5.1
and the other provisions of this
Section 3.2
, the Exercise Price of any Options will be as set forth in the applicable Award Agreement, but in no
event may it be less than Fair Market Value on the date
A-10
Table of Contents
the
Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price may not be less than one hundred and ten percent (110%) of
Fair Market Value on the date the Option is granted.
(b)
Option Term.
No Incentive Stock Option may be exercised after the expiration of ten (10) years from the date the
Option is granted. Further, any Incentive Stock Option granted to an Over 10% Owner may not be exercised after the expiration of five (5) years from the date the Option is granted. The term of
any Nonqualified Stock Option will be as specified in the applicable Award Agreement but may not exceed ten (10) years from the date the Option is granted; provided, however, that if the term
specified in an Award Agreement for a Nonqualified Stock Option would otherwise expire during a period when trading in Stock is prohibited by law or by the Company's insider trading policy, then the
term of the Nonqualified Stock Option will be deemed to expire on the thirtieth (30
th
) day after expiration of the applicable prohibition, notwithstanding any contrary term in the Award
Agreement.
(c)
Payment.
Payment for all shares of Stock purchased pursuant to exercise of an Option may be made in any form or manner
authorized by the Committee in the Award Agreement or by amendment thereto, including, but not limited to, and in each case subject to such procedures or restrictions as the Committee may impose:
-
(i)
-
in
cash or cash equivalents;
-
(ii)
-
by
delivery to the Company of a number of shares of Stock owned by the Participant having an aggregate Fair Market Value of not less than the product of the
Exercise Price multiplied by the number of shares the Participant intends to purchase upon exercise of the Option on the date of delivery;
-
(iii)
-
in
a cashless exercise through a third party, except if and to the extent prohibited by law as to officers and directors, including without limitation, the
Sarbanes-Oxley Act of 2002, as amended;
-
(iv)
-
notice
and third party payment in such manner as may be authorized by the Committee; or
-
(v)
-
by
having a number of shares of Stock withheld, the Fair Market Value of which as of the date of exercise is sufficient to satisfy the Exercise Price.
In
the event that the Committee allows a Participant to exercise an Award by delivering shares of Stock owned by such Participant, and unless otherwise expressly provided by the Committee, any shares
delivered which were initially acquired by the Participant from the Company (upon exercise of an Option or otherwise) must have been owned by the Participant for at least six months as of the date of
delivery. Shares of Stock used to satisfy the Exercise Price will be valued at their Fair Market Value on the date of exercise. The Company is not obligated to deliver any shares of Stock acquired
pursuant to the exercise of an Option unless and until it receives full payment of the Exercise Price therefor and any related withholding obligations under
Section 6.1
and any other conditions to
exercise or purchase, as established from time to time by the Committee, have been satisfied. Unless
otherwise expressly provided in the applicable Award Agreement, the Committee may at any time eliminate or limit a Participant's ability to pay the Exercise Price by any method other than cash payment
to the Company. The holder of an Option, as such, has none of the rights of a stockholder.
(d)
Conditions to the Exercise of an Option.
Each Option granted under the Plan is exercisable by such person or persons, at
such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the Award Agreement; provided, however, that subsequent to the grant of an Option, the
Committee, at any time before complete termination of such Option, may modify the terms of an Option to the extent not prohibited by the terms of the Plan,
A-11
Table of Contents
including,
without limitation, accelerating the time or times at which such Option may be exercised in whole or in part, and may permit the Participant or any other designated person to exercise the
Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Award Agreement to the contrary.
(e)
Termination of Incentive Stock Option.
With respect to an Incentive Stock Option, in the event of the Termination of
Employment of a Participant, the Option or portion thereof held by the Participant
which is unexercised will expire, terminate, and become unexercisable no later than of the date that is three months after the date of Termination of Employment; provided, however, that in the case of
a holder whose Termination of Employment is due to death or Disability, one year will be substituted for such three month period; provided, further that such time limits may be extended by the
Committee under the terms of the grant, in which case, the Incentive Stock Option will be a Nonqualified Stock Option if it is exercised after the time limits otherwise applicable to Incentive Stock
Options. For purposes of this Subsection (e), the Termination of Employment of a Participant will not be deemed to have occurred if the Participant is employed by another corporation (or a
parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.
(f)
Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this
Section 3.2,
any Option issued in substitution for an option
previously issued by another entity, which substitution occurs in connection with a
transaction to which Code Section 424(a) or 409A is applicable, may provide for an Exercise Price computed in accordance with such Code Section and the regulations thereunder and may contain
such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and
termination provisions) as those contained in the previously issued option being replaced thereby.
(g)
No Reload Grants.
Options may not be granted under the Plan in consideration for, and may not be conditioned upon the
delivery of, shares of Stock to the Company in payment of the Exercise Price and/or tax withholding obligation under any other Option held by a Participant.
(h)
No Repricing.
Except as provided in
Section 5.1,
without the
approval of the Company's stockholders the exercise price of an Option may not be reduced after the grant of the Option and an Option may not be cancelled or surrendered in consideration of, or in
exchange for, (i) the grant of a new Option having an Exercise Price below that of the Option that was surrendered, (ii) Stock, (iii) cash, or (iv) any other Award.
3.3
Terms and Conditions of Stock Appreciation Rights.
Each Stock Appreciation Right granted under the Plan must
be evidenced by an Award Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of
Stock at the time of payment or exercise over (2) a specified or determinable price, which may not be less than the Fair Market Value of such shares of Stock on the date of grant. A Stock
Appreciation Right granted in connection with an Option may only be exercised to the extent that the related Option has not been exercised, paid or otherwise settled. Neither a Stock Appreciation
Right nor the shares of Stock underlying a Stock Appreciation Right are eligible for dividends or dividend equivalents.
(a)
Settlement.
Upon settlement of a Stock Appreciation Right, the Company shall pay the appreciation to the Participant in,
at the discretion of the Committee, cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Award Agreement or, in the absence of such
provision, as the Committee determines.
A-12
Table of Contents
(b)
Term.
The term of any Stock Appreciation Right will be as specified in the applicable Award Agreement, but may not exceed
ten (10) years after the date the Stock Appreciation Right is granted; provided, however, that if the term specified in an Award Agreement for a Stock Appreciation Right would otherwise expire
during a period when trading in Stock is prohibited by law or the Company's insider trading policy, then the term of the Stock Appreciation Right will be deemed to expire on the thirtieth (30th) day
after expiration of the applicable prohibition, notwithstanding any contrary term in the Award Agreement.
(c)
Conditions to Exercise.
Each Stock Appreciation Right granted under the Plan is exercisable or payable at such time or
times, or upon the occurrence of such event or events, and in such amounts, as specified in the Award Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the
Committee may, at any time before complete termination of such Stock Appreciation Right, accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in
part.
(d)
No Repricing.
Except as provided in
Section 5.1,
without the
approval of the Company's stockholders, the price of a Stock Appreciation Right may not be reduced after the grant of the Stock Appreciation Right, and a Stock Appreciation Right may not be cancelled
or surrendered in consideration of, or in exchange for, (i) the grant of a new Stock Appreciation Right having a price below that of the Stock Appreciation Right that was surrendered,
(ii) Stock, (iii) cash, or (iv) any other Award.
3.4
Terms and Conditions of Other Stock-Based Awards.
An Other Stock-Based Award shall entitle the Participant
to receive one or more of (i) a specified or determinable number of shares of Stock, (ii) the value of a specified or determinable number of shares of Stock, (iii) a percentage or
multiple of the value of a specified number of shares of Stock or (iv) dividend equivalents on a specified, or a determinable number, or a percentage or multiple of a specified number, of shares of
Stock. At the time of the grant, the Committee shall determine the specified number of shares of Stock or the percentage or multiple of the specified number of shares of Stock, as applicable; and the
Performance Goals or other performance criteria, if any, applicable to the Other Stock-Based Award. The Committee may provide for an alternate percentage or multiple under certain specified
conditions.
(a)
Payment.
Payment in respect of Other Stock-Based Awards may be made by the Company in cash or shares of Stock as provided
in the applicable Award Agreement or, in the absence of such provision, as the Committee determines.
(b)
Conditions to Payment or Lapse of Restrictions.
Each Other Stock-Based Award granted under the Plan will be payable, and
restrictions on such Other Stock-Based Award will lapse, at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the applicable Award Agreement;
provided, however, that subsequent to the grant of an Other Stock-Based Award, the Committee, at any time before complete termination of such Other Stock-Based Award, may accelerate the time or times
at which such Other Stock-Based Award may be paid or such restrictions will lapse, in whole or in part. Dividends (and dividend equivalents granted with respect to shares of Stock subject to an Other
Stock-Based Award), will accrue and not be paid until, and will be paid only to the extent, the Award vests and, with respect to Other Stock-Based Awards that are subject to Performance Goals or other
performance criteria, is earned.
3.5
Terms and Conditions of Cash Performance Awards.
A Cash Performance Award will entitle the Participant to
receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of units (stated in terms of a designated or
determinable dollar amount per unit), or (ii) a percentage or multiple of a specified cash amount. At the time of the grant, the Committee shall determine the base value of each unit; the
number of units subject to a Cash Performance Award, the specified amount and the percentage or multiple of the
A-13
Table of Contents
specified
amount, as applicable; and the Performance Goals or other performance criteria, if any, applicable to the determination of the ultimate payment value of the Cash Performance Award. The
Committee may provide for an alternate base value for each unit or an alternate percentage or multiple under certain specified conditions.
(a)
Payment.
Payment in respect of Cash Performance Awards will be made by the Company in cash.
(b)
Conditions to Payment.
Each Cash Performance Award granted under the Plan will be payable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as specified by the Committee.
3.6
Treatment of Awards on Termination of Service.
Except as otherwise provided by Plan
Section 3.2(e),
any Award under
this Plan to a Participant who has experienced a Termination of Employment, Separation from Service, or
termination of some other service relationship with the Company and its Affiliates may be cancelled, accelerated, paid or continued, as provided in the applicable Award Agreement, or, as the Committee
may otherwise determine to the extent not prohibited by the Plan. The portion of any Award exercisable in the event of continuation or the amount of any payment due under a continued Award may be
adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Employment,
Separation from Service or termination of some other service relationship or such other factors as the Committee determines are relevant to its decision to continue the Award.
SECTION 4. RESTRICTIONS ON STOCK
4.1
Escrow of Shares.
Any certificates representing the shares of Stock issued under the Plan will be issued in
the Participant's name, but, if the applicable Award Agreement so provides, the shares of Stock will be held by a custodian designated by the Committee (the
"Custodian").
Each applicable Award Agreement
providing for transfer of shares of Stock to the Custodian may require a Participant to complete an
irrevocable stock power appointing the Custodian or the Custodian's designee as the attorney-in-fact for the Participant for the term specified in the applicable Award Agreement, with full power and
authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the
shares under the terms of the applicable Award Agreement. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided
in the applicable Award Agreement, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian must, as provided in the applicable Award Agreement, be
paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Award Agreement and shall then be
delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.
4.2
Restrictions on Transfer.
Except as expressly set forth in this
Section 4.2
or the applicable Award Agreement, all
Awards are non-transferable and shall not be subject in any manner to sale, transfer,
anticipation, alienation, assignment, pledge, encumbrance or charge. Any such disposition of an Award of or of the shares of Stock issued under the Plan by the Participant not made in accordance with
the Plan or the applicable Award Agreement will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Award
Agreement, and any shares so transferred will continue to be bound by the Plan and the applicable Award Agreement. Notwithstanding the general prohibition set forth above, the Committee may permit
Awards to be transferred to other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Committee establishes in writing (provided that
any transfers of Incentive Stock Options may only be made to the extent permitted under the federal tax laws governing Incentive Stock Options). Any permitted transfer will be subject to compliance
with applicable federal and state securities laws.
A-14
Table of Contents
Further, the transfer restrictions of this
Section 4.2
will not apply to:
(a) transfers
to the Corporation;
(b) the
designation of a beneficiary to receive benefits in the event of the Participant's death or, if the Participant has died, transfers to or exercise by the
Participant's beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution of the State in which the Participant was domiciled at the
time of the Participant's death;
(c) subject
to any applicable limitations on Incentive Stock Options, transfers to a family member (or former family member) pursuant to a domestic relations order if
approved or ratified by the Committee; and
(d) if
the participant has suffered a Disability, permitted transfers or exercises on behalf of the Participant by his or her legal representative.
SECTION 5. ADJUSTMENTS; ACCELERATION
5.1
Adjustments
.
(a) The
number of shares of Stock reserved for the grant of Options, Stock Appreciation Rights and Other Stock-Based Awards; the number of shares of Stock reserved for
issuance upon the exercise, settlement, vesting, grant or payment, as applicable, of each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award (if any); the Exercise Price of each
outstanding Option, the threshold price of each outstanding Stock Appreciation Right, the specified number of shares of Stock to which each outstanding Option, Stock Appreciation Right, and Other
Stock-Based Award pertains, the total number of shares of Stock that may be subject to Awards granted by one or more officers of the Company and/or the Chairperson of the Compensation Committee of the
Board of Directors, and the maximum number of shares as to which Options, Stock Appreciation Rights, and other Awards may be granted during any calendar year or other period, will be proportionately
adjusted for any nonreciprocal transaction between the Company and the holders of capital stock of the Company that causes the per share value of the shares of Stock underlying an Award to change
(e.g., a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend) (each, an "
Equity
Restructuring
").
(b) In
the event of a merger, consolidation, reorganization, extraordinary dividend, sale of substantially all of the Company's assets, other change in capital structure of
the Company, tender offer for shares of Stock, or a Change in Control of the Company that, in each case, does not constitute an Equity Restructuring, the Committee may make such adjustments with
respect to Awards and take such other action as it deems necessary or appropriate, including, without limitation, the substitution of new Awards, the assumption of Awards not originally granted under
the Plan, the adjustment of outstanding Awards, the acceleration of outstanding Awards, the removal of restrictions on outstanding Awards, and/or the termination of outstanding Awards in exchange for
the cash value determined in good faith by the Committee of the vested and/or unvested portion of the Award, all as may be provided in the applicable Award Agreement or, if not expressly addressed
therein, as the Committee subsequently may determine in its sole discretion. Any adjustment pursuant to this
Section 5.1
may provide, in the
Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Award, but except as set forth in this Section may not
otherwise diminish the then-current value of the Award.
(c) Notwithstanding
any other provision of the Plan to the contrary, in taking any action pursuant to clause (a) or (b) with respect to a Nonqualified Stock
Option or a Stock Appreciation Right, the Committee shall consider any provisions of Code Section 409A and the regulations
A-15
Table of Contents
thereunder
that are required to be followed as a condition of the Nonqualified Stock Option and the Stock Appreciation Right not being treated as the grant of a new Option or Stock Appreciation Right
or a change in the form of payment. Any adjustment described in the preceding sentence may include a substitution in whole or in part of other equity securities of the issuer and the class involved in
such Equity Restructuring in lieu of the shares of Stock that are subject to the Award.
(d) The
existence of the Plan and the Awards granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or
proceeding.
5.2
Automatic Acceleration of Awards.
Except as otherwise provided in
Section 5.3,
upon a dissolution of the Company (or
other event described in
Section 5.1
that the Company does not survive (or does not survive as a public company in respect of its Stock)), each then-outstanding Option and Stock Appreciation Right will become fully vested, each Other
Stock-Based Award then outstanding will fully vest free of restrictions, and each other Award, including, without limitation, each Cash Performance Award, granted under this Plan that is then
outstanding will become payable to the holder of such Award; provided that such acceleration provision will not apply, unless otherwise expressly provided by the Committee, with respect to any Award
to the extent that the Board of Directors or the Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Award, or the Award would
otherwise continue in accordance with its terms, in the circumstances.
5.3
Possible Acceleration of Awards.
Upon the occurrence of a Change in Control, each outstanding Option and
Stock Appreciation Right will become fully vested, each Other Stock-Based Award then outstanding will fully vest free of restrictions, and each other Award, including, without limitation, each Cash
Performance Award, granted under this Plan that is then outstanding will vest and become payable to the holder of such Award. However, with respect to a Participant who is designated on the payroll
records of the Company as a Tier 1 or Tier 2 executive or above (or comparable designation) or executive officer on the date of the Change in Control, no Award will vest solely on
account of such Change in Control unless such Participant's employment with the Company (and its Subsidiaries) is
terminated without "cause" (as defined in such Participant's Individual Agreement or the applicable Award Agreement) within the two-year period immediately following the consummation of such Change in
Control.
5.4
Early Termination of Awards.
Any Award that has been accelerated as required or contemplated by
Section 5.2
or
Section 5.3
(or would have been so accelerated but for
Section 5.5
,
Section 5.6
, or
Section 5.7
) will terminate upon the related event referred to in
Section 5.2
or
Section 5.3,
as
applicable, subject to any provision that has been expressly made by the Committee, through a plan of reorganization or
otherwise, for the survival, substitution, assumption, exchange or other continuation or settlement of such Award; provided that, in the case of Options and Stock Appreciation Rights that will not
survive, be substituted for, assumed, exchanged, or otherwise continued or settled in the transaction, the holder of such Award will be given reasonable advance notice of the impending termination and
a reasonable opportunity to exercise his or her outstanding Options and Stock Appreciation Rights in accordance with their terms before the termination of such Awards (except that in no case will more
than ten (10) days' notice of accelerated vesting and the impending termination be required and any acceleration may be made contingent upon the actual occurrence of the event).
A-16
Table of Contents
5.5
Other Acceleration Rules.
Any acceleration of Awards pursuant to this
SECTION 5.
must comply with all applicable
legal requirements and, if necessary to accomplish the purposes of the acceleration or if the
circumstances require, may be deemed by the Committee to occur a limited period of time (not greater than thirty (30) days) before the event. Without limiting the generality of the foregoing,
the Committee may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an Award if an event giving rise to acceleration does not occur.
Notwithstanding any other provision of the Plan to the contrary, the Committee may override the provisions of
Section 5.2
,
Section 5.3
,
Section 5.4
and/or
Section 5.6
by express provision in an Award Agreement (provided that that the Committee may not, under the authority provided
in this
Section 5.5
, provide for the acceleration of vesting of an Award in the absence of a Change in Control or an event described in
Section 5.1
). In addition, the Committee may accord any Participant the right to refuse any acceleration, whether pursuant to the Award Agreement
or otherwise, in such circumstances as the Committee may approve. The portion of any Incentive Stock Option accelerated pursuant to
Section 5.3
or any other action permitted hereunder shall remain exercisable as an Incentive Stock Option only to the extent the applicable $100,000 limitation on Incentive Stock Options is not exceeded. To the
extent exceeded, the accelerated portion of the Option will be treated as a Nonqualified Stock Option.
5.6
Possible Rescission of Acceleration.
If the vesting of an Award has been accelerated expressly in
anticipation of an event or upon stockholder approval of an event and the Committee later determines that the event will not occur, the Committee shall rescind the effect of the acceleration as to any
then outstanding and unexercised or otherwise unvested Awards.
5.7
Golden Parachute Limitation.
Notwithstanding anything else contained in this
SECTION 5.
to the contrary, in no event
may an Award be accelerated under this Plan to an extent or in a manner that would result in any
compensation being paid that is not fully deductible by the Company or one of its Subsidiaries for federal income tax purposes because of Code Section 280G, nor may any payment made under the
Plan be accelerated to the extent any portion of such accelerated payment would result in the payment of compensation that is not deductible by the Company or one of its Subsidiaries because of Code
Section 280G. If a Participant would be entitled to benefits or payments under the Plan that, together with payments under any other plan or program, would constitute "parachute payments" as
defined in Code Section 280G, then any such parachute payments will be reduced or modified on a pro rata basis so that the Company and its Subsidiaries are not denied federal income tax
deductions for such payments because of Code Section 280G. Notwithstanding the foregoing, if a Participant is a party to an Individual Agreement with the Company or one of its Subsidiaries, or
is a participant in a severance program sponsored by the Company or one of its Subsidiaries, that contains express provisions regarding Code Section 280G and/or Code Section 4999 (or any
similar successor provision), the Code Section 280G and/or Code Section 4999 provisions of such Individual Agreement will control as to any Awards held by that Participant.
SECTION 6. GENERAL PROVISIONS
6.1
Withholding.
The Company shall deduct from all cash distributions under the Plan any taxes required to be
withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Award, the Company may
require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the issuance or transfer of any such shares or the
vesting of such Award. A Participant may satisfy the withholding obligation in cash, cash equivalents, or if and to the extent the applicable Award Agreement or Committee procedure so provides, a
Participant may elect to have the number of shares of Stock he or she is to receive reduced by, or tender back to the Company, the number of whole shares of Stock that, when multiplied by the Fair
Market Value of the shares of Stock, is sufficient to satisfy federal, state and local, if any,
A-17
Table of Contents
withholding
obligation arising from exercise or payment of an Award. The Company may, with the Committee's approval, accept one or more promissory notes from a Participant in connection with taxes
required to be withheld upon the vesting or payment of any Award under the Plan; provided that any such note will be subject to terms and conditions established by the Committee and applicable legal
requirements.
6.2
Awards to Non-U.S. Employees.
The Committee has the power and authority to determine which Affiliates will
be covered by this Plan and which employees outside the United States of America will be eligible to participate in the Plan. The Committee may adopt, amend or rescind rules, procedures or sub-plans
relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures, and practices. Without limiting the generality of the foregoing, the
Committee is specifically authorized to adopt rules, procedures, and sub-plans with provisions that limit or modify rights on death, disability or retirement, or on Separation from Service or
Termination of Employment; available methods of exercise or settlement of an Award; payment of income, social insurance contributions and payroll taxes; the withholding procedures and handling of any
stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.
6.3
Compliance with Code
.
(a)
Code Section 422.
All Incentive Stock Options to be granted under the Plan are intended to comply
with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted under the Plan must be construed in such a manner as to effectuate that intent.
(b)
Code Section 409A.
Except to the extent provided otherwise by the Committee, Awards under the Plan
are intended to satisfy the requirements of Code Section 409A (and the Treasury Department guidance and regulations issued thereunder) so as to avoid the imposition of any additional taxes or
penalties under Code Section 409A. If the Committee determines that an Award, Award Agreement, payment, distribution, deferral election, transaction or any other action or arrangement
contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to any additional taxes or other penalties under Code Section 409A, then unless the
Committee provides otherwise, such Award, Award Agreement, payment, distribution, deferral election, transaction or other action or arrangement will not be given effect to the extent it causes such
result and the related provisions of the Plan and/or Award Agreement will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Code Section 409A to the
extent determined appropriate by the Committee, in each case without the consent of or notice to the Participant. Notwithstanding anything in the Plan, an Award Agreement, or any other agreement
(written or oral) to the contrary, if a Participant is a "specified employee" (within the meaning of Code Section 409A) on the date of his or her Separation from Service, any payments made with
respect to such Separation from Service under any Award will be delayed to the extent necessary to comply with Code Section 409A(a)(2)(B)(i), and such payments or benefits will be paid or
distributed to the Participant during the five-day period commencing on the earlier of: (i) the expiration of the six-month period measured from the date of the Participant's Separation from
Service, and (ii) the date of the Participant's death. Upon the expiration of the applicable six-month period under Code Section 409A(a)(2)(B)(i), all payments so deferred will be paid
to the Participant (or the Participant's estate, in the event of the Participant's death) in a lump sum payment. Any remaining payments and benefits due under an Award will be paid as otherwise
provided in an Award.
6.4
Right to Terminate Employment or Service.
Nothing contained in this Plan or any Award Agreement confers upon
any Participant any right to continue in the employment or other service of the Company
or any of its Subsidiaries, constitutes a contract or agreement of employment or other service, or affects in any way an employee's status as an employee at will, nor may the Plan or any
A-18
Table of Contents
Award
Agreement be construed so as to interfere in any way with the right of the Company and its Subsidiaries to change a person's compensation or other benefits, or to terminate his or her employment
or other service, with or without cause; provided that nothing in this
Section 6.4
is intended to adversely affect any express independent right
of such person under any Individual Agreement.
6.5
Non-Alienation of Benefits.
Other than as provided in the Plan, no benefit under the Plan may be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so is void. No such benefit may, prior to receipt by the Participant, be in any
manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant.
6.6
Restrictions on Delivery and Sale of Shares; Legends.
Each Award is subject to the condition that if at any
time the Committee, in its discretion, determines that the listing, registration or qualification of the shares covered by such Award upon any securities exchange or under any state or federal law is
necessary or desirable as a condition of or in connection with the granting of such Award or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Award may
be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act or any applicable state
securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Awards then outstanding, the Committee may require, as a condition of exercise of any Option or as a
condition to any other delivery of Stock pursuant to an Award, that the Participant or other recipient of an Award represent, in writing, that the shares received pursuant to the Award are being
acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company has received an
opinion of counsel that such disposition is exempt from such requirement under the Securities Act and any applicable state securities laws. The Company may include on certificates representing shares
delivered pursuant to an Award such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, deems
appropriate.
6.7
Listing and Legal Compliance.
The Committee may suspend the exercise or payment of any Award if it
determines that securities exchange listing or registration or qualification under any securities laws or compliance with any other law is required in connection therewith and has not been completed
on terms acceptable to the Committee.
6.8
Termination and Amendment of the Plan.
The Board of Directors at any time may amend or terminate the Plan
without stockholder approval; provided, however, that the Board of Directors shall obtain stockholder approval for any amendment to the Plan that, except as provided under
Section 5.1
of the Plan,
increases the number of shares of Stock available under the Plan, materially expands the classes of individuals eligible
to receive Awards, materially expands the type of Awards available for issuance under the Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the
Award Agreement explicitly provides otherwise, no such termination or amendment may materially and adversely affect the rights of the Participant under such Award without the consent of the holder of
an Award.
6.9
Stockholder Approval.
The Company shall submit the Plan to the stockholders of the Company for their
approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors. If such approval is not obtained, any Award granted under the Plan will be void.
6.10
Choice of Law.
The laws of the State of Delaware will govern the Plan, to the extent not preempted by
federal law, without reference to the principles of conflict of laws.
6.11
Effective Date of Plan; Term of Plan.
The Plan will become effective as of the date the Plan is approved by
the stockholders (the "
Effective Date
") pursuant to
Section 6.9
, regardless of the date the Plan
is signed. No Award may be granted more than ten (10) years after the date the Plan was approved by the Company's stockholders.
A-19
Table of Contents
APPENDIX B
RED ROBIN GOURMET BURGERS, INC.
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Red Robin Gourmet Burgers, Inc. Amended and Restated Employee Stock Purchase Plan (the
"
Plan
").
1. PURPOSE
The purpose of this Plan is to assist Eligible Employees in acquiring a stock ownership interest in the Corporation, at a favorable price and upon favorable
terms, pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code. This Plan is also intended to encourage Eligible Employees to remain
in the employ of the Corporation (or a Subsidiary which may be designated by the Committee as "Participating Subsidiary") and to provide them with an additional incentive to advance the best interests
of the Corporation.
2. DEFINITIONS
Capitalized terms used herein which are not otherwise defined shall have the following meanings.
"
Account
" means the bookkeeping account maintained by the Corporation, or by a recordkeeper on behalf of the Corporation, for a
Participant pursuant to Section 7(a).
"
Board
" means the Board of Directors of the Corporation.
"
Code
" means the Internal Revenue Code of 1986, as amended from time to time.
"
Commission
" means the United States Securities and Exchange Commission.
"
Committee
" means the committee appointed by the Board to administer this Plan pursuant to Section 12.
"
Common Stock
" means the Common Stock, par value $0.001 per share, of the Corporation, and such other securities or property as may become
the subject of Options pursuant to an adjustment made under Section 17.
"
Company
" means, collectively, the Corporation, its Parent and its Subsidiaries (if any).
"
Compensation
" means an Eligible Employee's regular gross pay for a 40-hour week. Compensation includes any amounts contributed as salary
reduction contributions to a plan qualifying under Section 401(k), 125 or 129 of the Code. Any other form of remuneration is excluded from Compensation, including (but not limited to) the
following: overtime payments, commissions, prizes, awards, relocation or housing allowances, stock option exercises, stock appreciation rights, restricted stock exercises, performance awards, auto
allowances, tuition reimbursement and other forms of imputed income, bonuses, incentive compensation, special payments, fees and allowances. Notwithstanding the foregoing, Compensation shall not
include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Company.
"
Contributions
" means all bookkeeping amounts credited to the Account of a Participant pursuant to Section 7(a).
"
Corporation
" means Red Robin Gourmet Burgers, Inc., a Delaware corporation, and its successors.
"
Effective Date
" means
July 12, 2017
.
"
Eligible Employee
" means any employee of the Corporation or of any Subsidiary which has been designated in writing by the Committee as a
"Participating Subsidiary" (including any Subsidiaries
B-1
Table of Contents
which
have become such after the date that this Plan is approved by the stockholders of the Corporation). Notwithstanding the foregoing, "Eligible Employee" shall not include any
employee:
-
(a)
-
who
has been employed by the Corporation or a Subsidiary for less than one year; or
-
(b)
-
whose
customary employment is for 20 hours or less per week.
"
Exchange Act
" means the Securities Exchange Act of 1934, as amended from time to time.
"
Exercise Date
" means, with respect to an Offering Period, the last day of that Offering Period.
"
Fair Market Value
" means, as of any date and unless the Committee determines otherwise, the value of Common Stock determined as
follows:
-
(a)
-
if
the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, NASDAQ Global
Select Market, the NASDAQ Global Market or the NASDAQ Capital Market of The NASDAQ Stock Market, then Fair Market Value shall be the closing sales price for the Common Stock as quoted on such exchange
or system on the date of determination (or the closing bid, if no sales were reported), as reported in a source the Committee deems reliable;
-
(b)
-
if
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, then Fair Market Value shall be the mean between the
high bid and low asked prices for the Common Stock on the date of determination (or if no bids and asks were reported on that date, as applicable, on the last trading day that bids and asks for the
Common Stock were reported), as reported in a source the Committee deems reliable; or;
-
(c)
-
in
the absence of an established market for the Common Stock, the Fair Market Value of the Common Stock shall be determined in good faith by the Committee.
"
Grant Date
" means the first day of each Offering Period, as determined by the Committee and announced to potential Eligible Employees.
"
Offering Period
" means the six-consecutive month period commencing on each Grant Date; provided, however, that the Committee may declare,
as it deems appropriate and in advance of the applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period;
provided further that the Grant Date for an Offering Period may not occur on or before the Exercise Date for the immediately preceding Offering Period.
"
Option
" means the stock option to acquire Shares granted to a Participant pursuant to Section 8.
"
Option Price
" means the per share exercise price of an Option as determined in accordance with Section 8(b).
"
Parent
" means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation in which each
corporation (other than the Corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
"
Participant
" means an Eligible Employee who has elected to participate in this Plan and who has filed a valid and effective Subscription
Agreement to make Contributions pursuant to Section 6.
"
Plan
" means this Red Robin Gourmet Burgers, Inc. Amended and Restated Employee Stock Purchase Plan, as amended from time to time.
"
Rule 16b-3
" means Rule 16b-3 as promulgated by the Commission under Section 16 of the Exchange Act, as amended from
time to time.
"
Share
" means a share of Common Stock.
B-2
Table of Contents
"
Subscription Agreement
" means the written agreement filed by an Eligible Employee with the Corporation pursuant to Section 6 to
participate in this Plan.
"
Subsidiary
" means any corporation (other than the Corporation) in an unbroken chain of corporations (beginning with the Corporation) in
which each corporation (other than the last corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the
chain.
3. ELIGIBILITY
Any person employed as an Eligible Employee as of a Grant Date shall be eligible to participate in this Plan during the Offering Period in which such Grant Date
occurs, subject to the Eligible Employee satisfying the requirements of Section 6.
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
-
(a)
-
Subject
to the provisions of Section 17, the capital stock that may be delivered under this Plan will be shares of the Corporation's authorized but unissued
Common Stock and any shares of Common Stock held as treasury shares. The maximum number of Shares that may be delivered pursuant to Options granted under this Plan is 100,000 Shares, subject to
adjustments pursuant to Section 17 (the "
Plan Limit
").
In
the event that all of the Shares made available under this Plan are subscribed prior to the expiration of this Plan, this Plan shall terminate at the end of that Offering Period and the Shares
available shall be allocated for purchase by Participants in that Offering Period on a pro-rata basis determined with respect to Participants' Account balances.
-
(b)
-
The
maximum number of Shares that any one individual may acquire upon exercise of his or her Option with respect to any one Offering Period is 750, subject to
adjustments pursuant to Section 17 (the "
Individual Limit
"); provided, however, that the Committee may establish a different Individual Limit in
offering documents, in which case the 750 Share limit shall be superseded by the Individual Limit set forth in such offering documents. The Individual Limit shall be proportionately adjusted for any
Offering Period of less than six months, and may, at the discretion of the Committee, be proportionately increased for any Offering Period of greater than six months.
5. OFFERING PERIODS
During the term of this Plan, the Corporation will offer Options to purchase Shares in each Offering Period to all Participants in that Offering Period. Unless
otherwise specified by the Committee in
advance of the Offering Period, an Offering Period that commences on or about July 1 will end the following December 31 and an Offering Period that commences on or about January 1
will end the following June 30. Each Option shall become effective on the Grant Date. The term of each Option shall be the duration of the related Offering Period and shall end on the Exercise
Date. The first Offering Period shall commence as of a date determined by the Board or Committee, but no earlier than the Effective Date. Offering Periods shall continue until this Plan is terminated
in accordance with Section 18 or 19, or, if earlier, until no Shares remain available for Options pursuant to Section 4.
6. PARTICIPATION
-
(a)
-
An
Eligible Employee may become a participant in this Plan by completing a Subscription Agreement on a form approved by and in a manner prescribed by the Committee
(or its delegate). To become effective, a Subscription Agreement must be signed by the Eligible Person and filed with the Corporation at the time specified by the Committee, but in all cases
B-3
Table of Contents
prior
to the start of the Offering Period with respect to which it is to become effective, and must set forth a whole percentage (or, if the Committee so provides, a stated amount) of the Eligible
Employee's Compensation to be credited to the Participant's Account as Contributions each pay period.
-
(b)
-
Notwithstanding
the foregoing, a Participant's Contribution election shall be subject to the following limitations:
(i) the
5% ownership and the $25,000 annual purchase limitations set forth in Section 8(c);
(ii) a
Participant may not elect to contribute more than 15% of his or her Compensation
each pay period
as Plan
Contributions; and
(iii) such
other limits, rules, or procedures as the Committee may prescribe.
-
(c)
-
Subscription
Agreements shall contain the Eligible Employee's authorization and consent to the Corporation's withholding from his or her Compensation the amount of
his or her Contributions. An Eligible Employee's Subscription Agreement, and his or her participation election and withholding consent therein, shall remain valid for all Offering Periods until
(i) the Eligible Employee's participation terminates pursuant to the terms hereof, (ii) the Eligible Employee files a new Subscription Agreement that becomes effective, or
(iii) the Committee requires that a new Subscription Agreement be executed and filed with the Corporation.
7. METHOD OF PAYMENT OF CONTRIBUTIONS
-
(a)
-
The
Corporation shall maintain on its books, or cause to be maintained by a recordkeeper, an Account in the name of each Participant. The percentage of Compensation
elected to be applied as Contributions by a Participant shall be deducted from such Participant's Compensation on each payday during the period for payroll deductions set forth below and such payroll
deductions shall be credited to that Participant's Account as soon as administratively practicable after such date. A Participant may not make any additional payments to his or her Account. A
Participant's Account shall be reduced by any amounts used to pay the Option Price of Shares acquired, or by any other amounts distributed pursuant to the terms hereof.
-
(b)
-
Subject
to such other rules as the Committee may adopt, payroll deductions with respect to an Offering Period shall commence as of the first pay date which coincides
with or immediately follows the applicable Grant Date and shall end on the last pay date which coincides with or immediately precedes the applicable Exercise Date, unless sooner terminated by the
Participant as provided in this Section 7 or until his or her participation terminates pursuant to Section 11.
-
(c)
-
A
Participant may terminate his or her Contributions during an Offering Period (and receive a distribution of the balance of his or her Account in accordance with
Section 11) by completing and filing with the Corporation, in such form and on such terms as the Committee (or its delegate) may prescribe, a written withdrawal form signed by the Participant.
Such termination shall be effective as soon as administratively practicable after its receipt by the Corporation. A withdrawal election pursuant to this Section 7(c) with respect to an Offering
Period shall only be effective, however, if it is received by the Corporation prior to the Exercise Date of that Offering Period (or such earlier deadline that the Committee may reasonably require to
process the withdrawal prior to the applicable Exercise Date). Partial withdrawals of Accounts, and other modifications or suspensions of Subscription Agreements, except as provided in
Section 7(e) or 7(f), are not permitted.
B-4
Table of Contents
-
(d)
-
During
leaves of absence approved by the Corporation and meeting the requirements of Regulation Section 1.421-1(h)(2) under the Code, a Participant may
continue participation in this Plan by cash payments to the Corporation on his or her normal paydays equal to the reduction in his or her Plan Contributions caused by his or her leave.
-
(e)
-
A
Participant may discontinue, increase, or decrease the level of his or her Contributions (within Plan limits) by completing and filing with the Corporation, on
such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. Subject to any other timing requirements that the Committee may impose, an
election pursuant to this Section 7(e) shall be effective with the first Offering Period that commences after the Corporation's receipt of such election.
-
(f)
-
A
Participant may discontinue (but not increase or otherwise decrease) the level of his or her Contributions, by filing with the Corporation, on such terms as the
Committee (or its delegate) may prescribe, a new Subscription Agreement that indicates such election. Unless otherwise provided by the Committee, an election pursuant to this Section 7(f) shall
be effective no earlier than the first payroll period that starts after the Corporation's receipt of such election.
8. GRANT OF OPTION
-
(a)
-
On
each Grant Date, each Eligible Employee who is a participant during that Offering Period shall be granted an Option to purchase a number of Shares. The Option
shall be exercised on the Exercise Date. The number of Shares subject to the Option shall be determined by dividing the Participant's Account balance as of the applicable Exercise Date by the Option
Price, subject to the maximum determined pursuant to Section 4(b).
-
(b)
-
The
Committee shall determine the Option Price per Share of the Shares subject to an Option for an Offering Period; provided that such Option Price may not be less
than the lesser of: (i) 85% of the Fair Market Value of a Share on the applicable Grant Date; and (ii) 85% of the Fair Market Value of a Share on the applicable Exercise Date.
-
(c)
-
Notwithstanding
anything else contained herein, a person who is otherwise an Eligible Employee shall not be granted any Option (or any Option granted shall be
subject to compliance with the following limitations) or other right to purchase Shares under this Plan to the extent:
(i) it
would, if exercised, cause the person to own "stock" (as such term is defined for purposes of Section 423(b)(3) of the Code) possessing 5% or more of the total
combined voting power or value of all classes of stock of the Corporation, or of any Parent, or of any Subsidiary; or
(ii) such
Option would cause such individual to have rights to purchase stock under this Plan (and any other plan of the Corporation, any Parent, or any Subsidiary which is
qualified under Section 423 of the Code) that accrue at a rate that exceeds $25,000 of the fair market value of the stock of the Corporation, of any Parent, or of any Subsidiary (determined at
the time the right to purchase such
Stock is granted, before giving effect to any discounted purchase price under any such plan) for each calendar year in which such right is outstanding at any time.
For
purposes of the foregoing, a right to purchase stock accrues when it first become exercisable during the calendar year. In determining whether the stock ownership of an Eligible Employee equals or
exceeds the 5% limit set forth above, the rules of Section 424(d) of the Code (relating to attribution of stock ownership) shall apply, and stock which the
B-5
Table of Contents
9. EXERCISE OF OPTION
Unless a Participant's Plan participation is terminated as provided in Section 11, his or her Option for the purchase of Shares shall be exercised
automatically on the Exercise Date for that Offering Period, without any further action on the Participant's part, and the maximum number of whole Shares subject to such Option (subject to the
Individual Limit set forth in Section 4(b) and the limitations contained in Section 8(c)) shall be purchased at the Option Price with the balance of such Participant's Account.
If
any amount which is not sufficient to purchase a whole Share remains in a Participant's Account after the exercise of his or her Option on the Exercise Date: (i) such amount
shall be credited to such Participant's Account for the next Offering Period, if he or she is then a Participant; or (ii) if such Participant is not a Participant in the next Offering Period,
or if the Committee so elects, such amount shall be refunded to such Participant as soon as administratively practicable after such date. If the Share limit of Section 4(a) is reached, any
amount that remains in a Participant's Account after the exercise of his or her Option on the Exercise Date to purchase the number of Shares that he or she is allocated shall be refunded to the
Participant as soon as administratively practicable after such date.
If
an amount which exceeds the Individual Limit established pursuant to Section 4(b) or one of the limitations set forth in Section 8(c) remains in a Participant's Account
after the exercise of his or her
Option on the Exercise Date, such amount shall be refunded to the Participant as soon as administratively practicable after such date.
10. DELIVERY
As soon as administratively practicable after the Exercise Date, the Corporation shall deliver to each Participant a certificate representing the Shares purchased
upon exercise of his or her Option. The Corporation may make available an alternative arrangement for delivery of Shares to a recordkeeping service. The Committee (or its delegate), in its discretion,
may either require or permit Participants to elect that such certificates representing the Shares purchased or to be purchased under the Plan be delivered to such recordkeeping service. In the event
the Corporation is required to obtain from any commission or agency authority to issue any such certificate, the Corporation will seek to obtain such authority. If the Corporation is unable to obtain
from any such commission or agency authority which counsel for the Corporation deems necessary for the lawful issuance of any such certificate, or if for any other reason the Corporation cannot issue
or deliver Shares and satisfy Section 21, the Corporation shall be relieved from liability to any Participant except that the Corporation shall return to each Participant the amount of the
balance credited to his or her Account.
11. TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS
-
(a)
-
Except
as provided in the next paragraph, if a Participant ceases to be an Eligible Employee for any reason, or if the Participant elects to terminate Contributions
pursuant to Section 7(c), at any time prior to the last day of an Offering Period in which he or she participates, such Participant's Account shall be paid to him or her or in cash (or, in the
event of the Participant's death, to the person or persons entitled thereto under Section 13 in cash), and such Participant's Option and participation in the Plan shall be automatically
terminated. If a Participant (i) ceases to be an Eligible Employee during an Offering Period but remains an employee of the Company through the Exercise Date, or (ii) during an Offering
Period commences a sick leave, military leave, or other leave of absence approved by the Company, and the leave meets the requirements of Treasury Regulation Section 1.421-1(h)(2) and the
B-6
Table of Contents
Participant
is an employee of the Company or on such leave as of the applicable Exercise Date, such Participant's Contributions shall cease (subject to Section 7(d)), and the Contributions
previously credited to the Participant's Account for that Offering Period shall be used to exercise the Participant's Option as of the applicable Exercise Date in accordance with Section 9
(unless the Participant makes a timely election to terminate Contributions in accordance with Section 7(c), in which case such Participant's Account shall be paid to him or her in cash in
accordance with the foregoing paragraph).
-
(b)
-
A
Participant's termination from Plan participation precludes the Participant from again participating in this Plan during that Offering Period. However, such
termination shall not have any effect upon his or her ability to participate in any succeeding Offering Period, provided that the applicable eligibility and participation requirements are again then
met. A Participant's termination from Plan participation shall be deemed to be a revocation of that Participant's Subscription Agreement and such Participant must file a new Subscription
Agreement to resume Plan participation in any succeeding Offering Period.
-
(c)
-
For
purposes of this Plan, if a Participating Subsidiary ceases to be a Subsidiary, each person employed by that Subsidiary shall be deemed to have terminated
employment for purposes of this Plan and shall no longer be an Eligible Employee, unless the person continues as an Eligible Employee in respect of another Company entity.
12. ADMINISTRATION
-
(a)
-
The
Board shall appoint the Committee, which shall be composed of not less than two members of the Board. The Board may, at any time, increase or decrease the number
of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the
Committee, whether caused by removal, resignation, or otherwise. The Board may also, at any time, assume the administration of this Plan, in which case references to the "Committee" shall be deemed to
be references to the Board.
-
(b)
-
The
Committee shall supervise and administer this Plan and shall have full power and discretion to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of this Plan and not inconsistent with the terms of this Plan, and to make all other determinations necessary or advisable for the administration of this Plan. The
Committee shall act by majority vote or by unanimous written consent. No member of the Committee shall be entitled to act on or decide any matter relating solely to himself or herself or solely to any
of his or her rights or benefits under this Plan. The Committee shall have full power and discretionary authority to construe and interpret the terms and conditions of this Plan, which construction or
interpretation shall be final and binding on all parties including the Company, Participants and beneficiaries. The Committee may delegate ministerial non-discretionary functions to third parties,
including individuals who are officers or employees of the Corporation.
-
(c)
-
Subject
only to compliance with the express provisions hereof, the Board and Committee may act in their absolute discretion in matters within their authority related
to this Plan. Any action taken by, or inaction of, the Corporation, any Participating Subsidiary, the Board or the Committee relating or pursuant to this Plan shall be within the absolute discretion
of that entity or body and will be conclusive and binding upon all persons. In making any determination or in taking or not taking any action under this Plan, the Board or Committee, as the case may
be, may obtain and may rely on the advice of experts, including professional advisors to the Corporation. No member of the Board or Committee, or officer or agent of
B-7
Table of Contents
the
Company, shall be liable for any action, omission or decision under the Plan taken, made or omitted in good faith.
13. DESIGNATION OF BENEFICIARY
-
(a)
-
A
Participant may file, on a form and in a manner prescribed by the Committee (or its delegate), a written designation of a beneficiary who is to receive any Shares
or cash from such Participant's Account under this Plan in the event of such Participant's death. If a Participant's death occurs subsequent to the end of an Offering Period but prior to the delivery
to him or her of any Shares deliverable under the terms of this Plan, (i) such Shares and any remaining balance of such Participant's Account shall be paid to such beneficiary (or such other
person as set forth in Section 13(b)) as soon as administratively practicable after the Corporation receives notice of such Participant's death and (ii) any outstanding unexercised
Option shall terminate. If a Participant's death occurs at any other time, the balance of such Participant's Account shall be paid to such beneficiary (or such other person as set forth in
Section 13(b)) in cash as soon as administratively practicable after the Corporation receives notice of such Participant's death and such Participant's Option shall terminate. The Committee may
rely on the last designation of a beneficiary filed by a Participant in accordance with this Plan.
-
(b)
-
Beneficiary
designations may be changed by the Participant at any time on forms provided and in the manner prescribed by the Committee (or its delegate). If a
Participant dies with no validly designated beneficiary under this Plan who is living at the time of such Participant's death, the Corporation shall deliver all Shares and/or cash payable pursuant to
the terms hereof to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed, the Corporation, in its discretion, may deliver such
Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Corporation, then to such other person as the
Corporation may designate.
14. TRANSFERABILITY
Neither Contributions credited to a Participant's Account nor any Option or rights with respect to the exercise of any Option or right to receive Shares under
this Plan may be anticipated, alienated, encumbered, assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in
Section 13) by the Participant. Any such attempt at anticipation, alienation, encumbrance, assignment, transfer, pledge or other disposition shall be without effect and all amounts shall be
paid and all Shares shall be delivered in accordance with the provisions of this Plan. Amounts payable or Shares deliverable pursuant to this Plan shall be paid or delivered only to the Participant
or, in the event of the Participant's death, to the Participant's beneficiary pursuant to Section 13.
15. USE OF FUNDS; INTEREST
All Contributions received or held by the Corporation under this Plan will be included in the general assets of the Corporation and may be used for any corporate
purpose. Notwithstanding anything else contained herein to the contrary, no interest will be paid to any Participant or credited to his or her Account under this Plan (in respect of Account balances,
refunds of Account balances, or otherwise).
B-8
Table of Contents
16. REPORTS
Statements shall be provided to Participants as soon as administratively practicable following each Exercise Date. Each Participant's statement shall set forth,
as of such Exercise Date, that Participant's Account balance immediately prior to the exercise of his or her Option, the Option Price, the number of whole Shares purchased and his or her remaining
Account balance, if any.
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK
Upon or in contemplation of any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), or reverse stock split,
any merger, combination, consolidation, or other reorganization, any split-up, spin-off, or similar extraordinary dividend distribution in respect of the Common Stock (whether in the form of
securities or property), any exchange of Common Stock or other securities of the Corporation, any similar, unusual or extraordinary corporate transaction in respect of the Common Stock, or any sale of
substantially all the assets of the Corporation as an entirety occurs; the Committee shall, in such manner, to such extent (if any), and at such time as it deems appropriate and equitable in the
circumstances:
-
(a)
-
proportionately
adjust any or all of (i) the number and type of Shares or the number and type of other securities that thereafter may be made the subject of
Options (including the specific maxima and numbers of Shares set forth elsewhere in this Plan), (ii) the number, amount and type of Shares (or other securities or property) subject to any or
all outstanding Options, (iii) the Option Price of any or all outstanding Options, or (iv) the securities, cash or other property deliverable upon exercise of any outstanding Options; or
-
(b)
-
make
provision for a cash payment or for the substitution or exchange of any or all outstanding Options for cash, securities or property to be delivered to the
holders of any or all outstanding Options based upon the distribution or consideration payable to holders of the Common Stock upon or in respect of such event.
The
Committee may adopt such valuation methodologies for outstanding Options as it deems reasonable in the event of a cash or property settlement and, without limitation on other
methodologies, may base such settlement solely upon the excess (if any) of the amount payable upon or in respect of such event over the exercise or strike price of the Option.
In
any of such events, the Committee may take such action sufficiently prior to such event to the extent that the Committee deems the action necessary to permit the Participant to
realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is or will be available to stockholders generally.
18. POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS
Upon a dissolution of the Corporation, or any other event described in Section 17 that the Corporation does not survive, the Plan and, if prior to the last
day of an Offering Period, any outstanding Option granted with respect to that Offering Period shall terminate, subject to any provision that has been expressly made by the Board for the survival,
substitution, assumption, exchange or other settlement of the Plan and Options. In the event a Participant's Option is terminated pursuant to this Section 18 without a provision having been
made by the Board for a substitution, exchange or other settlement of the Option, such Participant's Account shall be paid to him or her in cash without interest.
19. TERM OF PLAN; AMENDMENT OR TERMINATION
-
(a)
-
This
Plan shall be effective as of the Effective Date. No new Offering Periods shall commence on or after the day before the tenth anniversary of the Effective Date
and this Plan shall
B-9
Table of Contents
terminate
as of the later of (i) the tenth anniversary of the Effective Date and (ii) the Exercise Date of the last Offering Period commenced on or prior to the day before the tenth
anniversary of the Effective Date, unless sooner terminated pursuant to Section 4, Section 18, or this Section 19.
-
(b)
-
The
Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part, without notice (including, without limitation,
the limits of Sections 4(b) and 6(b)(ii)). Stockholder approval for any amendment or modification shall not be required, except to the extent required by applicable law or required under
Section 423 of the Code in order to preserve the intended tax consequences of this Plan, or otherwise deemed necessary or advisable by the Board. No Options may be granted during any suspension
of this Plan or after the termination of this Plan, but the Committee will retain jurisdiction as to Options then outstanding in accordance with the terms of this Plan. No amendment, modification, or
termination pursuant to this Section 19(b) shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of such
Participant or obligations of the Corporation under any Option granted under this Plan prior to the effective date of such change. Changes contemplated by Section 17 or Section 18 shall
not be deemed to constitute changes or amendments requiring Participant consent. Notwithstanding the foregoing, the Committee shall have the right to designate from time to time the Subsidiaries whose
employees may be eligible to participate in this Plan and such designation shall not constitute an amendment to this Plan requiring stockholder approval.
20. NOTICES
All notices or other communications by a Participant to the Corporation contemplated by this Plan shall be deemed to have been duly given when received in the
form and manner specified by the Committee (or its delegate) at the location, or by the person, designated by the Committee (or its delegate) for that purpose.
21. CONDITIONS UPON ISSUANCE OF SHARES
This Plan, the granting of Options under this Plan and the offer, issuance and delivery of Shares are subject to compliance with all applicable federal and state
laws, rules and regulations (including but not limited to state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation and as a condition precedent
to the exercise of his or her Option, provide such assurances and representations to the Corporation as the Committee may deem necessary or desirable to assure compliance with all applicable legal and
accounting requirements.
22. PLAN CONSTRUCTION
-
(a)
-
It
is the intent of the Corporation that transactions involving Options under this Plan in the case of Participants who are or may be subject to the prohibitions of
Section 16 of the Exchange Act satisfy the requirements for applicable exemptions under Rule 16 promulgated by the Commission under Section 16 of the Exchange Act so that such
persons (unless they otherwise agree) will be entitled to the exemptive relief of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act in respect of those
transactions and will not be subject to avoidable liability thereunder.
-
(b)
-
This
Plan and Options are intended to qualify under Section 423 of the Code.
B-10
Table of Contents
-
(c)
-
If
any provision of this Plan or of any Option would otherwise frustrate or conflict with the intents expressed above, that provision to the extent possible shall be
interpreted so as to avoid such conflict. If the conflict remains irreconcilable, the Committee may disregard the provision if it concludes that to do so furthers the interest of the Corporation and
is consistent with the purposes of this Plan as to such persons in the circumstances.
23. EMPLOYEES' RIGHTS
-
(a)
-
Nothing
in this Plan (or in any other documents related to this Plan) will confer upon any Eligible Employee or Participant any right to continue in the employ or
other service of the Company, constitute any contract or agreement of employment or other service or effect an employee's status as an employee at will, or shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to terminate his or her employment or other service with or without cause. Nothing contained in this Section 23(a),
however, is intended to adversely affect any express independent right of any such person under a separate employment or service contract other than a Subscription Agreement.
-
(b)
-
No
Participant or other person will have any right, title or interest in any fund or in any specific asset (including Shares) of the Company by reason of any Option
hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be
construed to create, a trust of any kind or a fiduciary relationship between the Company and any Participant or other person. To the extent that a Participant or other person acquires a right to
receive payment pursuant to this Plan, such right will be no greater than the right of any unsecured general creditor of the Corporation. No special or separate reserve, fund or deposit will be made
to assure any such payment.
-
(c)
-
A
Participant will not be entitled to any privilege of stock ownership as to any Shares not actually delivered to and held of record by the Participant. No
adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
24. MISCELLANEOUS
-
(a)
-
This
Plan, the Options, and related documents shall be governed by, and construed in accordance with, the laws of the State of Delaware. If any provision shall be
held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
-
(b)
-
Captions
and headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any
way material or relevant to the construction of interpretation of this Plan or any provision hereof.
-
(c)
-
The
adoption of this Plan shall not affect any other Company compensation or incentive plans in effect. Nothing in this Plan will limit or be deemed to limit the
authority of the Board or Committee (i) to establish any other forms of incentives or compensation for employees of the Company (with or without reference to the Common Stock), or
(ii) to grant or assume options (outside the scope of and in addition to those contemplated by this Plan) in connection with any proper corporate purpose, with respect to each of (i) and
(ii), to the extent consistent with any other plan or authority.
-
(d)
-
Benefits
received by a Participant under an Option granted pursuant to this Plan shall not be deemed a part of the Participant's compensation for purposes of the
determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the
B-11
Table of Contents
25. EFFECTIVE DATE
Notwithstanding anything else contained herein to the contrary, the effectiveness of this Plan is subject to the approval of this Plan by the stockholders of the
Corporation within twelve months after the Effective Date. Notwithstanding anything else contained herein to the contrary, no Shares shall be issued or delivered under this Plan until such stockholder
approval is obtained and, if such stockholder approval is not obtained within such twelve month period of time, all Contributions credited to a Participant's Account hereunder shall be refunded to
such Participant (without interest) as soon as practicable after the end of such twelve month period.
26. TAX WITHHOLDING
Notwithstanding anything else contained in this Plan herein to the contrary, the Company may deduct from a Participant's Account balance as of an Exercise Date,
before the exercise of the Participant's Option is given effect on such date, the amount of any taxes which the Company reasonably determines it may be required to withhold with respect to such
exercise. In such event, the maximum number of whole Shares subject to such Option (subject to the other limits set forth in this Plan) shall be purchased at the Option Price with the balance of the
Participant's Account (after reduction for the tax withholding amount).
Should
the Company for any reason be unable, or elect not to, satisfy its tax withholding obligations in the manner described in the preceding paragraph with respect to a Participant's
exercise of an Option, or should the Company reasonably determine that it has a tax withholding obligation with respect to a disposition of Shares acquired pursuant to the exercise of an Option prior
to satisfaction of the holding period requirements of Section 423 of the Code, the Company shall have the right at its option to (i) require the Participant to pay or provide for payment
of the amount of any taxes which the Company reasonably determines that it is required to withhold with respect to such event or (ii) deduct from any amount otherwise payable to or for the
account of the Participant the amount of any taxes which the Company reasonably determines that it is required to withhold with respect to such event.
27. NOTICE OF SALE
Any person who has acquired Shares under this Plan shall give prompt written notice to the Corporation of any sale or other transfer of the Shares if such sale or
transfer occurs (i) within the two-year period after the Grant Date of the Offering Period with respect to which such Shares were acquired, or (ii) within the twelve month period after
the Exercise Date of the Offering Period with respect to which such Shares were acquired.
B-12
ANNUAL MEETING OF STOCKHOLDERS OF RED ROBIN GOURMET BURGERS, INC. May 18, 2017 NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS: The Notice of Meeting, Proxy Statement, F orm of Proxy Card, and 2016 Annual Report on Form 10-K are available at http://www.redrobin.com/eproxy Please sign, date, and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 4, 5, AND 6. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1 YEAR FREQUENCY FOR PROPOSAL 3. PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE X 1. The election of nine (9) directors for one-year terms: FOR AGAINST ABSTAIN (a) Rob e rt B. Aiken (b) Cambria W. Dunaway (c) Kalen F. Holmes (d) Ric ha rd J. Howell (e) Glenn B. Kaufman (f) Steven K. Lumpkin (g) Pattye L. Moore (h) Stuart I. Oran (i) Denny Marie Post 2 . Approval, on an advisory basis, of the Companys executive compensation. 3. Approval, on an advisory basis, of the frequency of holding an advisory vote on executive compensation. The Board of Directors recommends you vote for a 1 Year frequency. 1 Year 2 Years 3 Years Abstain 4. Approval of 2017 Performance Incentive Plan. 5. Approval of Amended and Restated Employee Stock Purchase Plan. 6. Ratification of the appointment of KPMG LLP as the Companys independent auditors for the fiscal year ending December 31, 2017. 7 . Such other business as may properly come before the meeting or any adjournment thereof. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee, or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, BUT NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 4, 5, AND 6, AND 1 YEAR FREQUENCY FOR PROPOSAL 3. SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCOR-DANCE WITH THE STOCKHOLDERS SPECIFICATIONS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS TO THE UNDERSIGNED. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RED ROBIN GOURMET BURGERS, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING. The undersigned hereby acknowledges receipt of the notice of annual meeting of stockholders, proxy statement, and 2016 annual report on Form 10-K.