UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a)
of the Securities Exchange Act of 1934
Filed by the
Registrant
x
Filed by a Party
other than the Registrant
¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to §240.14a-12
SHAKE
SHACK INC.
(Exact name of registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate
box):
x
No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it is determined):
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or
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(1) Amount Previously Paid:
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April
27, 2017
To Our Stockholders:
You are cordially invited
to attend the 2017 Annual Meeting of Stockholders of Shake Shack Inc. at the offices of Proskauer Rose LLP, Eleven Times Square,
New York, New York 10036, on June 12, 2017, at 9:00 a.m. local time.
The matters expected
to be acted upon at the meeting are described in detail in the accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement.
Your vote is important.
Please cast your vote as soon as possible over the Internet, by telephone, or by completing and returning the enclosed proxy card
in the postage-prepaid envelope so that your shares are represented. Your vote will mean that you are represented at the Annual
Meeting regardless of whether or not you attend in person. Returning the proxy does not deprive you of your right to attend the
meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely
/s/ Randy Garutti
Randy Garutti
Chief Executive Officer
SHAKE SHACK INC.
24 UNION SQUARE EAST, 5
TH
FLOOR
NEW YORK, NEW YORK 10003
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN
that the 2017 Annual Meeting of Stockholders of Shake Shack Inc. will be held at the offices of Proskauer Rose LLP, Eleven Times
Square, New York, New York 10036, on June 12, 2017, at 9:00 a.m. local time, for the following purposes:
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1.
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To elect the three directors named in the Proxy Statement as Class
II directors of Shake Shack Inc., each to serve for three years and until his successor has been elected and qualified, or until
his earlier death, resignation or removal.
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2.
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To ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending December 27, 2017.
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3.
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To transact such other business as may properly come before the meeting
or any adjournment or postponement hereof. The foregoing items of business are more fully described in the Proxy Statement accompanying
this Notice.
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Beginning on or about
April 27, 2017, we will send to our stockholders a Notice of Internet Availability of Proxy Materials with instructions on how
to access our proxy materials over the Internet and how to vote. If you did not receive such Notice, you may elect to receive future
notices, proxy materials and annual reports electronically through the Internet by following the instructions in this Proxy Statement.
Only stockholders of record at the close of business on April 17, 2017 are entitled to notice of, and to vote at, the meeting or
any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Ron Palmese
Ron Palmese
Senior Vice President, General Counsel
and Corporate Secretary
New York, New York
April 27, 2017
Whether or not you expect to attend
the meeting, please vote via the Internet, by telephone, or complete, date, sign and promptly return a proxy card so that your
shares may be represented at the meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 12, 2017: THIS PROXY STATEMENT AND THE ANNUAL REPORT ARE AVAILABLE
AT
WWW.PROXYVOTE.COM
AND
INVESTOR.SHAKESHACK.COM
.
SHAKE SHACK INC.
Proxy Statement
For the Annual Meeting of
Stockholders To Be Held on June 12, 2017
TABLE OF CONTENTS
SHAKE SHACK INC.
24 UNION SQUARE EAST, 5
TH
FLOOR
NEW YORK, NEW YORK 10003
PROXY STATEMENT
The
Meeting
The Board of Directors
(the “
Board of Directors
” or the “
Board
”) of Shake Shack Inc., a Delaware corporation (“
Shake
Shack
” or the “
Company
”), is soliciting proxies for use at the 2017 Annual Meeting of Stockholders
(the “
Annual Meeting
”) to be held at the offices of Proskauer Rose LLP, Eleven Times Square, New York, New York,
10036, on June 12, 2017, at 9:00 a.m. local time. The Notice of Internet Availability of Proxy Materials was first furnished to
stockholders on or about April 27, 2017. Electronic copies of this Proxy Statement and the Annual Report for the year ended December
28, 2016 are available at
www.proxyvote.com
and
investor.shakeshack.com
.
Voting Rights, Quorum and Required Vote
Only holders of record
of our common stock at the close of business on April 17, 2017 (the “
Record Date
”) will be entitled to vote
at the Annual Meeting. At the close of business on the Record Date, we had 25,692,335 shares of Class A common stock outstanding
and entitled to vote and 10,929,492 shares of Class B common stock outstanding and entitled to vote. Holders of the Company’s
Class A common stock and Class B common stock are entitled to one vote for each share held as of the Record Date. A quorum is required
for our stockholders to conduct business at the Annual Meeting. The holders of a majority in voting power of all issued and outstanding
stock entitled to vote at the Annual Meeting, present in person or represented by proxy, will constitute a quorum for the transaction
of business. Abstentions and “broker non-votes” (described below) will be counted in determining whether there is a
quorum.
For Proposal No. 1-Election
of Directors, directors will be elected by a plurality of the votes of the shares of common stock cast at the Annual Meeting, which
means that the three nominees receiving the highest number of “for” votes will be elected. Withheld votes and broker
non-votes (as defined below) will have no effect on Proposal No. 1.
Proposal No. 2-Ratification
of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of the holders of a majority in
voting power of the stock entitled to vote at the Annual Meeting, present in person or represented by proxy. Abstentions will count
the same as votes against Proposal No. 2. Broker non-votes will have no effect on Proposal No. 2.
Voting Your Shares
If you are a registered
holder, meaning that you hold our stock directly (not through a bank, broker or other nominee), you may vote in person at the Annual
Meeting, by telephone or electronically through the Internet by following the instructions included on your Notice of Internet
Availability of Proxy Materials or proxy card, or by completing, dating, signing and promptly returning your proxy card. All signed,
returned proxies that are not revoked will be voted in accordance with the instructions contained therein. Signed proxies that
give no instructions as to how they should be voted on a particular proposal at the Annual Meeting will be counted as votes “for”
such proposal or in the case of the election of the Class II directors, as a vote “for” election of each of the nominees
presented by the Board.
If your shares are
held through a bank, broker or other nominee, you are considered the beneficial owner of those shares. You may be able to vote
by telephone or electronically through the Internet in accordance with the voting instructions provided by that nominee. You may
also vote by completing, dating, signing and promptly returning the voting instruction form sent by that nominee. You must obtain
a legal proxy from the nominee that holds your shares if you wish to vote in person at the Annual Meeting. If you do not provide
voting instructions to your broker in advance of the Annual Meeting, New York Stock Exchange rules grant your broker discretionary
authority to vote on “routine” proposals. Where a proposal is not “routine,” a broker who has received
no instructions from its clients does not have discretion to vote its clients’ uninstructed shares on that proposal, and
the unvoted shares are referred to as “broker non-votes.” For the Annual Meeting, Proposal No. 1 is not considered
a “routine” proposal, and Proposal No. 2 is considered a “routine” proposal.
In the event that sufficient
votes in favor of the proposals are not received by the date of the Annual Meeting, the Chairman of the Annual Meeting may adjourn
the Annual Meeting to permit further solicitations of proxies.
The telephone and Internet
voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their voting instructions
and to confirm that stockholders’ instructions have been recorded properly. Stockholders voting via the telephone or Internet
should understand that there may be costs associated with telephonic or electronic access, such as usage charges from telephone
companies and Internet access providers, which must be borne by the stockholder.
Expenses of Solicitation
The expenses of any
solicitation of proxies to be voted at the Annual Meeting will be paid by the Company. Following the original mailing of the proxies
and other soliciting materials, the Company and its directors, officers or employees (for no additional compensation) may also
solicit proxies in person, by telephone or email. Following the original mailing of the proxies and other soliciting materials,
the Company will request that banks, brokers and other nominees forward copies of the proxy and other soliciting materials to persons
for whom they hold shares of common stock and request authority for the exercise of proxies. We will reimburse banks, brokers and
other nominees for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.
Revocability of Proxies
Any person submitting
a proxy has the power to revoke it prior to the Annual Meeting or at the Annual Meeting prior to the vote. A proxy may be revoked
by a writing delivered to the Company stating that the proxy is revoked, by a subsequent proxy that is submitted via telephone
or Internet no later than 11:59 p.m. (New York City time) on June 11, 2017, by a subsequent proxy that is signed by the person
who signed the earlier proxy and is delivered before or at the Annual Meeting, or by attendance at the Annual Meeting and voting
in person. If you are a beneficial owner and wish to change any of your previously provided voting instructions, you must contact
your bank, broker or other nominee directly.
Delivery of Documents to Stockholders
Sharing an Address
We have adopted a procedure
approved by the Securities and Exchange Commission (“
SEC
”) called “householding” under which multiple
stockholders who share the same address will receive only one copy of the Annual Report, Proxy Statement, or Notice of Internet
Availability of Proxy Materials, as applicable, unless we receive contrary instructions from one or more of the stockholders. If
you wish to opt out of householding and receive multiple copies of the proxy materials at the same address, you may do so by notifying
us by telephone at (844) 742-2504, by email at investor@shakeshack.com, or by mail
at Shake Shack Inc. at
24 Union Square East, 5
th
Floor, New York, New York 10003, and we will promptly deliver the requested materials. You
also may request additional copies of the proxy materials by notifying us by telephone or in writing at the same telephone number,
email address, or address. If you are currently receiving multiple copies of the proxy materials and wish to receive only one copy
at the same address, then please notify us by telephone or in writing at the same telephone number, email address, or address.
Stockholders with shares registered in the name of a brokerage firm or bank may contact their brokerage firm or bank to request
information about householding.
Electronic Delivery
of Proxy Materials to Stockholders
Beginning on or about
April 27, 2017, we mailed or e-mailed to our stockholders a Notice of Internet Availability of Proxy Materials with instructions
on how to access our proxy materials over the Internet and how to vote. If you received such Notice and would prefer to receive
paper copies of the proxy materials, or if you received paper copies of the proxy materials and would prefer to receive a notice
for future annual meetings, you may notify us by telephone, email or mail at the telephone number, email address and mailing address
provided above.
Our Structure and Certain Defined Terms
Shake Shack was formed for the purpose of
facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and
its subsidiaries (“
SSE Holdings
”). Shake Shack is a holding company with no direct operations and our principal
asset is our equity interest in SSE Holdings. We have a majority economic interest in, the sole voting interest in, and control
the management of, SSE Holdings.
As used in this Proxy
Statement, unless the context otherwise requires:
“
IPO
”
refers to the Company’s initial public offering, which closed on February 4, 2015.
“
LLC Interests
”
refers to the single class of common membership interests of SSE Holdings.
“
Voting Group
”
refers collectively to (i) Daniel Meyer, (ii) the Daniel H. Meyer Investment Trust (the “
Investment Trust
”),
(iii) the Daniel H. Meyer 2012 Gift Trust U/A/D 10/31/12 (the “
Gift Trust
”), of which Mr. Meyer’s spouse
is a trustee and beneficiary, and (iv) Gramercy Tavern Corp., which is controlled by Mr. Meyer, which we refer to as “
GT
,”
which, together with Mr. Meyer, the Investment Trust and the Gift Trust, we refer to collectively as the “
Meyer Group
,”),
(v) certain affiliates of Leonard Green & Partners, L.P., which we refer to as “
LGP
,” and (vi) certain other
owners of SSE Holdings at the time of the IPO who are parties to the Stockholders Agreement, as amended, as described in “Certain
Relationships and Related Party Transactions—The IPO and Other Organizational Transactions—Stockholders Agreement”
in this Proxy Statement. Until June 20, 2016, the Voting Group held Class A common stock and Class B common stock representing
in the aggregate a majority of the combined voting power of our common stock.
Explanatory Note
We are an “emerging
growth company” under applicable federal securities laws, and therefore are permitted to take advantage of certain reduced
public company reporting requirements. As an emerging growth company, we provide in this Proxy Statement the scaled disclosure
permitted under the Jumpstart Our Business Startups Act of 2012, including the compensation disclosures required of a “smaller
reporting company,” as that term is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended
(the “
Exchange Act
”). In addition, as an emerging growth company, we are not
required to conduct votes
seeking approval, on an advisory basis, of the compensation of our Named Executive Officers or the frequency with which such votes
must be conducted. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal
year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year following the
fifth anniversary of the completion of our initial public offering; (iii) the date on which we have issued more than $1 billion
in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer
under the rules of the SEC.
Proposal
No. 1-Election of Directors
The Company’s
Board of Directors is presently comprised of eight members who are divided into three classes designated as Class I, Class II and
Class III. One class of directors is elected by the stockholders at each annual meeting to serve a three-year term. Class I directors
consist of Daniel Meyer, Jeff Flug and Evan Guillemin; Class II directors consist of Randy Garutti, Joshua Silverman and Jonathan
D. Sokoloff; and Class III directors consist of Jenna Lyons and Robert Vivian.
Class II directors
standing for re-election at the Annual Meeting are Randy Garutti, Joshua Silverman and Jonathan D. Sokoloff. Class III directors
will stand for re-election at the 2018 annual meeting of stockholders and Class I directors will stand for re-election at the 2019
annual meeting of stockholders.
Each of the nominees
for election to Class II is currently a director of the Company. If elected at the Annual Meeting, each of the nominees would serve
for three years and until his successor is duly elected and qualified, or until such director’s earlier death, resignation
or removal. If any of the nominees is unable to serve or for good cause will not serve (a contingency which the Board does not
expect to occur), the proxies will be voted for a substitute nominee chosen by the present Board. In such situation and in any
other situation in which a nominee will not serve, the present Board may also (i) reduce the size of the Board or (ii) maintain
the size of the Board and the stockholders may vote for a substitute nominee chosen by the present Board to fill the vacancy or
vote for just the remaining nominee or nominees, leaving a vacancy or vacancies that may be filled at a later date by the Board.
The names of the nominees
for election as Class II directors at the Annual Meeting and of the incumbent Class I and Class III directors, and certain information
about them, including their ages as of the Record Date, are included below.
Director Nominees
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Class
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Age
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Position
|
Year
Appointed
|
Term
Expiration
|
Expiration
of Term
for which
Nominated
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Randy Garutti
|
II
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42
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Chief Executive Officer and Director
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2015
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2017
|
2020
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Joshua Silverman
(1)(2)
|
II
|
48
|
Director
|
2016
|
2017
|
2020
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Jonathan D. Sokoloff
(3)
|
II
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59
|
Director
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2015
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2017
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2020
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Continuing
Directors
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Jenna Lyons
(4)
|
III
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48
|
Director
|
2015
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2018
|
-
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Robert Vivian
(5)
|
III
|
58
|
Director
|
2015
|
2018
|
-
|
Daniel Meyer
(6)
|
I
|
59
|
Chairman of the Board of Directors
|
2016
|
2019
|
-
|
Jeff Flug
(7)
|
I
|
54
|
Director
|
2016
|
2019
|
-
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Evan Guillemin
(8)
|
I
|
50
|
Director
|
2016
|
2019
|
-
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(1)
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Member of the Audit Committee.
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(2)
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Mr. Silverman was elected to serve as a director by the Board of Directors effective November 1,
2016. Mr. Silverman was designated to serve as a Class II director until the Annual Meeting.
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(3)
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Member of the Compensation Committee
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(4)
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Member of the Nominating and Corporate Governance Committee and Compensation Committee.
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(5)
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Chairperson of the Audit Committee and member of the Compensation Committee.
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(6)
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Chairman of the Board and member of the Nominating and Corporate Governance Committee.
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(7)
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Chairperson of the Nominating and Corporate Governance Committee and member of the Audit Committee.
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(8)
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Chairperson of the Compensation Committee and member of the Audit Committee.
|
Nominees for Election as Class II Directors
Randy Garutti
has served as Shake Shack’s Chief Executive Officer and on the Board of Directors since April 2012. Prior to becoming
Chief Executive Officer, Mr. Garutti served as Chief Operating Officer of SSE Holdings since January 2010. Prior to leading Shake
Shack, Mr. Garutti was the Director of Operations for Union Square Hospitality Group, LLC (“
USHG
”), of which
Mr. Meyer is the Chief Executive Officer and Chairman, overseeing the operations for all its restaurants. In addition, Mr. Garutti
served as General Manager of Union Square Cafe and Tabla, both of which won numerous accolades in the hospitality industry. Mr.
Garutti graduated from Cornell University’s School of Hotel Administration in 1997. Mr. Garutti is currently a member of
the board of directors of the Columbus Avenue Business Improvement District, a not-for-profit organization. Mr. Garutti brings
to his service on our Board of Directors his experience in the leadership, development and growth of our business, and his particular
knowledge and broad experience in the hospitality business.
Joshua Silverman
has served on the Board of Directors of Shake Shack since November 2016. Mr. Silverman has served as Executive in Residence for
Greylock Partners, a venture capital firm, since October 2015. He previously held this position from October 2010 through June
2011. From June 2011 to December 2015, Mr. Silverman served as President of Consumer Products and Services at American Express.
Prior to joining American Express, Mr. Silverman served as CEO of Skype from February 2008 until September 2010. From July 2006
until March 2008, Mr. Silverman served as CEO of Shopping.com, an eBay company, and, from December 2003 until June 2006, Mr. Silverman
served as Managing Director of Markplaats.nl & eBay NL, a Dutch subsidiary of eBay. Mr. Silverman is the co-founder of Evite,
Inc., and served as its CEO from December 1998 until its sale in May 2001. Mr. Silverman received his B.A. in Public Policy from
Brown University in 1991 and his M.B.A. from Stanford University Graduate School of Business in 1997. Mr. Silverman currently serves
on the board of directors of Etsy Inc., as well as the following not-for-profit organizations: ScriptEd.org, which equips students
in under-resourced schools with both fundamental coding skills and professional experiences, Lincoln Center Theater, Clubbed Thumb
Theater, and Stanford Graduate School of Business. He also served on the Consumer Advisory Board of the Consumer Financial Protection
Bureau from 2012 to 2015. Mr. Silverman was selected to our Board of Directors because he possesses particular knowledge and experience
in strategic planning and leadership of complex organizations.
Jonathan D. Sokoloff
has
served on the Board of Directors of Shake Shack since December 2012. Mr. Sokoloff is currently a Managing Partner with LGP, which
he joined in 1990. Before joining LGP, he was a Managing Director in Investment Banking at Drexel Burnham Lambert since 1985. Mr.
Sokoloff serves as a member of the board of directors of the parent holding companies of Advantage Solutions, BJ’s Wholesale
Club and Jetro Cash & Carry and serves as a member of the board of directors of The Container Store, USHG, Whole Foods,
J.Crew, Jo-Ann Stores, Signet Jewelers Limited, The Pure Group and Top Shop/Top Man Limited. He is a trustee of his alma mater,
Williams College, as well as a trustee of the Los Angeles County Museum of Art and a director of the Melanoma Research Alliance.
Mr. Sokoloff brings to his service on our Board of Directors particular knowledge and experience in finance, and his broad-based
experience in the leadership of retail businesses and the board practices of other major corporations.
Continuing Directors
Daniel Meyer
has
served as the Chairman of the Board of Directors of Shake Shack since January 2010. Mr. Meyer is the founder and Chief Executive
Officer of USHG, which owns and operates the following restaurants: Union Square Cafe, Gramercy Tavern, Blue Smoke, Jazz Standard,
The Modern, Maialino, Untitled, North End Grill, Marta and Daily Provisions; an event services business, Union Square Events; and
a learning and consulting business, Hospitality Quotient. The restaurants have earned 28 James Beard Awards among them. Mr. Meyer
co-authored the best-selling
Union Square Cafe Cookbook
and authored the New York Times bestseller
Setting
the Table: The Transforming Power of Hospitality in Business
. Mr. Meyer is currently a member of the board of directors of
The Container Store, Olo and Tender Greens as well as the following not-for-profit organizations: Share Our Strength, Madison Square
Park Conservancy and the Irving Harris Foundation. Mr. Meyer previously served as a member of the board of directors of Sotheby’s
from 2011 to 2015 and OpenTable from 2000 through 2014, as well as the following not-for-profit organizations: City Harvest, New
Yorkers for Parks, Union Square Partnership and NYC & Co. Mr. Meyer brings to his service on our Board of Directors a deep
understanding of our business derived from his leadership role in our founding and our subsequent growth, and his long career in
hospitality, and a particular knowledge and experience in strategic planning and leadership of complex organizations, hospitality
businesses and board practices of other major corporations.
Jeff Flug
has
served on the Board of Directors of Shake Shack since January 2010. Mr. Flug has over 25 years of leadership and management experience
primarily in the financial industry, as well as in the non-profit sector. After graduating from the University of Massachusetts/Amherst
in 1984, with a B.B.A. in Accounting,
summa cum laude
, Mr. Flug began his career as an accountant at PricewaterhouseCoopers
where he attained his C.P.A. in 1986. Mr. Flug attended Columbia Business School, where he received his M.B.A. in Finance in 1988.
In 1988, Mr. Flug joined Goldman, Sachs & Co., and ultimately served as a Managing Director and Head of Fixed Income Financial
Futures and Options Sales. In 2000, Mr. Flug became the Head of North America Fixed Income Institutional Sales for JPMorgan Chase
& Co. In 2006, Mr. Flug served as CEO and Executive Director for Millennium Promise, a not-for-profit organization whose mission
is to end extreme poverty and malaria in Africa. Mr. Flug served as USHG’s Chief Financial Officer and Chief Operating Officer
from December 2009 until January 2011, and as USHG’s President from January 2011 until his retirement from the company in
June 2015. Mr. Flug currently serves as a board member of Pennant Park Investment Corporation. Mr. Flug previously served as a
member of the board of directors of Sears Hometown & Outlet Stores and the Mountain School of Milton Academy, both from 2012
until 2015. Mr. Flug brings to his service on our Board of Directors a broad base of financial experience and particular knowledge
and experience in strategic planning and leadership of complex organizations.
Evan Guillemin
has served on the Board of Directors of Shake Shack since April 2013. Mr. Guillemin joined Select Equity Group (“
SEG
”)
in April 2004 as the firm’s Chief Financial Officer and has managed the firm’s finance and operations groups. He is
now a Senior Analyst/Associate Portfolio Manager with the firm, focusing on private company investments, as well as public company
analysis. Mr. Guillemin is a member of the firm’s Management Committee. Prior to joining the firm, he was Chief Financial
Officer and then Chief Operating Officer of Delia’s Inc., a publicly-traded retailing company. He also served as Director
of Acquisitions at Primedia, and he was a founding editor of SDC Publishing, a financial publishing division of the Thomson Corp.
Mr. Guillemin currently serves on the board of directors of Mesa Labs Inc., where he chairs the audit committee and sits on the
compensation committee. He also serves on the advisory board of several start-up and non-profit organizations. Mr. Guillemin received
a B.A. from Yale University and an M.B.A. with distinction from Harvard Business School. Mr. Guillemin brings to his service on
our Board of Directors a broad base of business and financial experience and particular knowledge and
experience in strategic planning and leadership of complex organizations.
Jenna Lyons
has
served on the Board of Directors of Shake Shack since December 2014. Ms. Lyons served as the President, Executive Creative Director
of J.Crew Group, Inc. from July 2010 until her resignation from the company in April 2017, and before that served as Executive
Creative Director since April 2010. Prior to that, she was Creative Director since 2007 and, before that, was Senior Vice President
of Women’s Design since 2005. Ms. Lyons joined J.Crew Group, Inc. in 1990 as an Assistant Designer and has held a variety
of positions within J.Crew Group, Inc., including Designer from 1994 to 1995, Design Director from 1996 to 1998, Senior Design
Director in 1999, and Vice President of Women’s Design from 1999 to 2005. Ms. Lyons is currently a member of the board of
directors of the Council of Fashion Designers of America, a not-for-profit organization. Ms. Lyons brings to her service on our
Board of Directors deep knowledge and experience in leadership of complex organizations and retail businesses.
Robert Vivian
has
served on the Board of Directors of Shake Shack since June 2010. Mr. Vivian served as the Co-Chief Executive Officer of P.F. Chang’s
China Bistro from January 2009 until his retirement from the company in December 2011. Prior to that time, he served as P.F. Chang’s
President from December 2000 through January 2009 and as its Chief Financial Officer from 1996 through December 2000. Mr. Vivian
is currently a member of the board of directors of Cheddar’s. Mr. Vivian previously served as a director of P.F. Chang’s
China Bistro from January 2009 through April 2011. Before joining P.F. Chang’s, Mr. Vivian served in a variety of positions
with Brinker International, Inc. Mr. Vivian brings to his service on our Board of Directors a breadth of financial and operational
leadership experience in the hospitality business and board practices of other major corporations.
The Board of Directors recommends a vote FOR the election of each of the nominated directors.
|
CORPORATE
GOVERNANCE
Composition of our Board of Directors
In accordance with
our amended and restated certificate of incorporation and the amended and restated bylaws, our Board of Directors consists of eight
members and is divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors
to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual
meeting following election. The authorized number of directors may be changed by resolution of the Board of Directors. Vacancies
on the Board of Directors can be filled by resolution of the Board of Directors. Daniel Meyer serves as the Chairman of our Board
of Directors. We believe the following directors are independent as required by the rules of the New York Stock Exchange: Jeff
Flug, Evan Guillemin, Jenna Lyons, Joshua Silverman, Jonathan D. Sokoloff and Robert Vivian. Daniel Meyer, Jeff Flug and Evan Guillemin
are the Class I directors and their terms will expire in 2019. Randy Garutti, Joshua Silverman and Jonathan D. Sokoloff are the
Class II directors and their terms will expire in 2017. Jenna Lyons and Robert Vivian are the Class III directors and their terms
will expire in 2018. The division of our Board of Directors into three classes with staggered three-year terms may delay or prevent
a change of our management or a change in control.
Pursuant to the Stockholders
Agreement, described under “Certain Relationships and Related Party Transactions—The IPO and Other Organizational Transactions—Stockholders
Agreement,” certain members of the Voting Group are entitled to designate individuals to be included in the slate of nominees
recommended by our Board of Directors, for election to our Board of Directors at each annual or special meeting at which directors
are to be elected, as follows:
|
·
|
so long as the Meyer Group owns in the aggregate (i) at least 50% of the total outstanding shares
of our Class A common stock and Class B common stock that it owned immediately following the IPO, it will be entitled to nominate
a number of individuals that, if elected, will result in there being five directors on the Board of Directors who are deemed to
have been designated by the Meyer Group, (ii) less than 50%, but at least 25%, of the total outstanding shares of our Class A common
stock and Class B common stock that it owned immediately following the IPO, it will be entitled to nominate a number of individuals
that, if elected, will result in there being four directors on the Board of Directors who are deemed to have been designated by
the Meyer Group, (iii) less than 25%, but at least 10%, of the total outstanding shares of our Class A common stock and Class B
common stock that it owned immediately following the IPO, it will be entitled to nominate a number of individuals that, if elected,
will result in there being two directors on the Board of Directors who are deemed to have been designated by the Meyer Group, and
(iv) less than 10%, but at least 5%, of the total outstanding shares of our Class A common stock and Class B common stock that
it owned immediately following the IPO, it will be entitled to nominate a number of individuals that, if elected, will result in
there being one director on the Board of Directors who is deemed to have been designated by the Meyer Group; and
|
|
·
|
so long as LGP owns, in the aggregate, at least 50% of the total outstanding shares of Class A
common stock and Class B common stock that it owned immediately following the IPO, it will be entitled to nominate a number of
individuals that, if elected, will result in there being one director on the Board of Directors who is deemed to have been designated
by LGP.
|
As of the Record Date,
each of the Meyer Group and LGP owns at least 50% of the total outstanding shares of our Class A common stock and Class B common
stock that it owned immediately following the IPO.
SEG was entitled to nominate
one director on the Board of Directors who is deemed to have been designated by SEG, so long as SEG owns, in the aggregate, at
least 50% of the total outstanding shares of Class A common stock and Class B common stock that it owned immediately following
the IPO, but as of the Record Date SEG’s ownership is below the 50% level.
For purposes of the
Stockholders Agreement, the Meyer Group has designated Mr. Meyer, Mr. Garutti, Mr. Flug, Ms. Lyons and Mr. Vivian; and LGP has
designated Mr. Sokoloff. Each of the Meyer Group and LGP may only designate an individual or individuals to the extent their respective
designee(s) is up for election at an annual meeting. Pursuant to the Stockholders Agreement, the members of the Voting Group, which
as of the Record Date collectively hold 41.3% of the combined voting power of the Company, have agreed to vote their shares for
Mr. Garutti, as nominated by the Meyer Group, and Mr. Sokoloff, as nominated by LGP.
Controlled Company Status
Pursuant to the Stockholders
Agreement, the Voting Group, which collectively held Class A common stock and Class B common stock representing a majority of the
combined voting power of our total common stock outstanding, agreed, among other things, to vote their shares of Class A common
stock and Class B common stock in favor of the election of the nominees of certain members of the Voting Group to our Board of
Directors and committees upon their nomination by the Nominating and Corporate Governance Committee. As a result, we were a “controlled
company” under the New York Stock Exchange corporate governance standards.
However, we no longer
are a “controlled company” because the Voting Group collectively holds Class A common stock and Class B common stock
representing less than a majority of the combined voting power of our total common stock outstanding. As such, subject to certain
transition period rules provided by the New York Stock Exchange, we may no longer rely on any of the “controlled company”
exemptions. Except with respect to the composition of our Nominating and Corporate Governance Committee, for which we are relying
on a transition period rule, we are in compliance with the New York Stock Exchange corporate governance standards that apply to
a company that is not a “controlled company.”
Leadership Structure of the Board of
Directors
The positions of Chairman
of the Board and Chief Executive Officer are presently separated. We believe this arrangement, at this time, allows our Chief Executive
Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board of Directors in its fundamental
role of providing advice to and independent oversight of management. Our bylaws and corporate governance guidelines, which do not
require that our Chairman and Chief Executive Officer positions be separate, allow our Board to determine the board leadership
structure that is appropriate for us at any given point in time, taking into account the dynamic demands of our business, our senior
executive personnel, and other factors.
Presiding Director
The
Board of Directors has created the position of presiding director (“
Presiding Directo
r”) to serve as the lead
non-management director of the Board. Each independent director serving on the Board
shall take turn serving
as the Presiding Director on a rotating basis. The Presiding Director position will be rotated among the independent directors,
in alphabetical order of last name, effective the first day of each calendar quarter.
The
Presiding Director has the power and authority to do the following: (1) to preside at all meetings of non-management directors
when they meet in executive session without management participation; (2) to set agendas, priorities and procedures for meetings
of non-management directors meeting in executive session without management participation; (3) to generally assist the Chairman
of the Board; (4) to add agenda items to the established agenda for meetings of the Board; (5) to request access to the Company’s
management, employees and its independent advisers for purposes of discharging his or her duties and responsibilities as a director;
and (6) to retain independent outside financial, legal or other advisors at any time, at the expense of the Company, on behalf
of the Board or any committee or subcommittee of the Board.
Communications by Stockholders and Other
Interested Parties with the Board of Directors
Stockholders and other interested
parties may contact an individual director, the Presiding Director, the Board as a group, or a specified Board committee or group,
including the non-management directors as a group, by sending regular mail to Board of Directors, Shake Shack Inc., 24 Union
Square East, 5th Floor, New York, NY 10003, Attention: Corporate Secretary, or by email at investor.shakeshack.com.
Each
communication should specify the applicable addressee or addressees to be contacted, as well as the general topic of the communication.
The Company initially will receive and process communications before forwarding them to the addressee. The Company also may refer
communications to other departments at the Company. The Company generally will not forward to the directors a communication that
is primarily commercial in nature, relates to an improper or irrelevant topic, or requests general information regarding the Company.
Board Committees
Our Board of Directors
has three standing committees: an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee.
Each of these Committees reports to the Board of Directors as they deem appropriate, and as the Board of Directors may request.
The composition, duties and responsibilities of these Committees are described below. In the future, our Board of Directors may
establish other committees, as it deems appropriate, to assist it with its responsibilities.
Pursuant to the terms
of the Stockholders Agreement, the Meyer Group currently has the right to designate fifty percent (50%) of the members of each
committee of the Board of Directors because it has the right to designate at least four individuals for nomination to the Board
of Directors. If the Meyer Group has the right to designate between one and three individuals for nomination to the Board of Directors,
the Meyer Group will have the ability to designate at least one-third, but in no event fewer than one, of the members of each committee
of the Board of Directors.
Audit Committee
The Audit Committee
operates under a written charter adopted by the Board of Directors. The charter contains a detailed description of the scope of
the Audit Committee’s responsibilities and how they will be carried out. The Audit Committee’s charter is available
on our website at
investor.shakeshack.com
, under “Governance Documents.” The primary responsibilities of the
Audit
Committee are to (i)
assist the Board of Directors in fulfilling its oversight and monitoring responsibility of reviewing the financial information
that will be provided to stockholders; (ii) appoint, compensate, retain, evaluate, terminate and oversee our independent registered
public accounting firm; (iii) discuss with our independent registered public accounting firm their independence from management;
(iv) review with our independent registered public accounting firm the scope and results of their audit; (v) approve all audit
and permissible non-audit services to be performed by our independent registered public accounting firm; (vi) oversee the financial
reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial
statements that we file with the SEC; (vii) review and monitor our accounting principles, accounting policies, financial and accounting
controls and compliance with legal and regulatory requirements; and (viii) establish procedures for the confidential anonymous
submission of concerns regarding questionable accounting, internal controls or auditing matters.
Our Audit Committee
consists of Robert Vivian, Jeff Flug, Evan Guillemin and Josh Silverman, with Mr. Vivian serving as chair. As required by Rule
10A-3 of the Exchange Act and the New York Stock Exchange rules, each of Messrs. Vivian, Flug, Guillemin and Silverman meet the
definition of “independent director” for purposes of serving on an audit committee. In addition, the Board of Directors
has determined that each of Messrs. Vivian and Silverman qualifies as an “audit committee financial expert,” as such
term is defined in Item 407(d)(5) of Regulation S-K.
Nominating and Corporate Governance
Committee
The Nominating and
Corporate Governance Committee operates under a written charter adopted by the Board of Directors. The charter contains a detailed
description of the scope of the Nominating and Corporate Governance Committee’s responsibilities and how they will be carried
out. The Nominating and Corporate Governance Committee’s charter is available on our website at
investor.shakeshack.com
,
under “Governance Documents.” The primary responsibilities of the Nominating and Corporate Governance Committee are
to (i) identify individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board
of Directors and in accordance with the terms of the Stockholders Agreement; (ii) develop and recommend to our Board of Directors
a set of corporate governance guidelines and principles; and (iii) oversee the evaluation of the Board of Directors.
Our Nominating and
Corporate Governance Committee consists of Jeff Flug, Jenna Lyons and Daniel Meyer, with Mr. Flug serving as chair. As we no longer
rely on the “controlled company” exemption from the requirement that we do not need to have a Nominating and Corporate
Governance Committee composed entirely of independent directors, Mr. Meyer will resign from, and Mr. Silverman will be appointed
to, the Nominating and Corporate Governance Committee, at the Company’s next occurring quarterly meeting of the Board of
Directors. Mr. Meyer’s resignation, and Mr. Silverman’s appointment, will occur within the allowable transition period
provided by the New York Stock Exchange. Mr. Silverman was recommended to the Nominating and Corporate Governance Committee for
appointment to the Board by Mr. Garutti.
Compensation Committee
The Compensation Committee
operates under a written charter adopted by the Board of Directors. The charter contains a detailed description of the scope of
the Compensation Committee’s responsibilities and how they will be carried out. The Compensation Committee’s charter
is available on our website at
investor.shakeshack.com
, under “Governance Documents.” The primary responsibilities
of the Compensation Committee are to (i) review and approve the corporate goals and objectives with respect to the compensation
of the Chief Executive Officer, evaluate the performance of the Chief Executive Officer in light of these goals and objectives,
and determine the compensation of the Chief
Executive Officer based
upon that evaluation; (ii) review and set or make recommendations to the Board of Directors regarding the compensation of other
executive officers; (iii) review and make recommendations to the Board of Directors regarding director compensation; (iv) review
and approve or make recommendations to the Board of Directors regarding the Company’s incentive compensation and equity-based
plan and arrangements; and (v) retain and obtain advice from compensation consultants.
Our Compensation Committee
consists of Evan Guillemin, Jenna Lyons, Jonathan D. Sokoloff and Robert Vivian, with Mr. Guillemin serving as chair. As required
by the New York Stock Exchange rules, each of Messrs. Guillemin, Sokoloff and Vivian and Ms. Lyons meets the definition of “independent
director” for purposes of serving on a Compensation Committee.
Risk Oversight
Our Board of Directors
is responsible for overseeing our risk management process. Our Board of Directors focuses on our general risk management strategy
and the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our Board
of Directors is also apprised of particular risk management matters in connection with its general oversight and approval of corporate
matters and significant transactions.
Our Board of Directors
does not have a standing risk management committee, but rather we administer this oversight function directly through our Board
of Directors as a whole. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure,
our Audit Committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to
monitor and control these exposures, and our Compensation Committee assesses and monitors whether any of our compensation policies
and programs has the potential to encourage unnecessary risk-taking. In addition, our Audit Committee oversees the performance
of our internal audit function and considers and approves or disapproves any related-party transactions.
Our management is responsible
for day-to-day risk management. This oversight includes identifying, evaluating, and addressing potential risks that may exist
at the enterprise, strategic, financial, operational, compliance and reporting levels.
Risk Considerations in our Compensation
Program
We conducted an assessment
of our compensation policies and practices for our employees and concluded that these policies and practices are not reasonably
likely to have a material adverse effect on our Company. The Company’s compensation programs and policies mitigate risk by
combining performance-based, long-term compensation elements with payouts that are highly correlated to the value delivered to
stockholders. The combination of performance measures for annual bonuses and the equity compensation programs for executive officers,
as well as the multi-year vesting schedules for equity awards encourage employees to maintain both a short- and long-term view
with respect to Company performance.
Code of Ethics
We have adopted a written
Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted
a current copy of the code on our website,
investor.shakeshack.com
. In addition, we intend to post on our website all disclosures
that are required by law or the New York Stock Exchange listing standards concerning any amendments to, or waivers from, any provision
of the code.
Director Recommendations
The Nominating and
Corporate Governance Committee, in recommending director candidates, and the Board, in nominating director candidates, will evaluate
candidates in accordance with the qualification standards set forth in our Corporate Governance Guidelines. In addition, the Nominating
and Corporate Governance Committee and the Board may also consider the additional selection criteria listed in the Corporate Governance
Guidelines. These qualification standards and additional selection criteria are summarized below.
Director Qualification Standards
The Nominating and
Corporate Governance Committee, in recommending director candidates for election to the Board, and the Board, in nominating director
candidates, will consider candidates who have a high level of personal and professional integrity, strong ethics and values and
the ability to make mature business judgments.
Additional Selection Criteria
In evaluating director
candidates, the Nominating and Corporate Governance Committee and the Board may also consider the following criteria as well as
any other factor that they deem to be relevant:
|
·
|
The candidate’s experience in corporate management, such as serving as an officer or former
officer of a publicly held company;
|
|
·
|
The candidate’s experience as a board member of another publicly held company;
|
|
·
|
The candidate’s experience as an executive of a publicly held retail restaurant company;
|
|
·
|
The candidate’s professional and academic experience relevant to the Company’s industry;
|
|
·
|
The candidate’s diversity (race, ethnicity, gender, geography, sexual orientation, age, nationality,
religious beliefs, socio-economic status, physical and/or mental capabilities);
|
|
·
|
The strength of the candidate’s leadership skills;
|
|
·
|
The candidate’s experience in finance and accounting and/or executive compensation practices;
|
|
·
|
The candidate’s experience in successfully scaled technology business(es);
|
|
·
|
Whether the candidate has the time required for preparation, participation and attendance at Board
meetings and committee meetings, if applicable; and
|
|
·
|
An understanding of the values of Daniel Meyer’s vision of “Enlightened Hospitality”:
caring for each other, one’s guests, one’s community, one’s suppliers and one’s investors.
|
In addition, the Board
considers whether there are potential conflicts of interest with the candidate’s other personal and professional pursuits.
The Board also monitors
the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the
necessary tools to perform its oversight function effectively in light of the Company’s business and structure.
Diversity
The Company values
diversity on a Company-wide basis and seeks to achieve a mix of Board members that represent a diversity of background and experience,
including with respect to age, gender, race, ethnicity, and occupation. Although the Board does not establish specific goals with
respect to diversity, the Board’s overall diversity is a significant consideration in the director nomination process. The
Company’s Corporate Governance Guidelines provide that our Nominating and Corporate Governance Committee is to take into
account the overall diversity of the Board when identifying possible nominees for director. The Nominating and Corporate Governance
Committee implements that policy, and assesses its effectiveness, by examining the diversity of all the directors on the Board
when it selects nominees for directors. The diversity of directors is one of the factors that the Nominating and Corporate Governance
committee considers, along with the other selection criteria described above. The Nominating and Corporate Governance Committee
assesses the effectiveness of its efforts at pursuing diversity through its periodic evaluation of the Board’s composition.
The Nominating and
Corporate Governance Committee will consider director candidates recommended by stockholders in the same manner it considers other
candidates, but it has no obligation to recommend such candidates. A stockholder that wants to recommend a candidate for election
to the Board of Directors should send a recommendation in writing to Shake Shack Inc., c/o Corporate Secretary, 24 Union Square
East, 5th Floor, New York, New York, 10003. Such recommendation should describe the candidate’s qualifications and other
relevant biographical information and provide confirmation of the candidate’s consent to serve as director.
Stockholders may also
nominate directors at the annual meeting by adhering to the advance notice procedure described under “Stockholder Proposals”
elsewhere in this Proxy Statement.
Compensation Committee Interlocks and
Insider Participation
None of our executive
officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any
entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.
Family Relationships
There are no family
relationships among any of our directors or executive officers.
Director Compensation
Prior to the IPO, none
of our directors received compensation as a director.
In connection with
the IPO, we approved and implemented a non-employee director compensation policy that awarded each non-employee director with an
option to purchase shares of our Class A common stock in consideration for his or her service on our Board of Directors.
On May 19, 2016, the
day immediately following the annual meeting of stockholders for fiscal 2016, the Board of Directors approved and implemented an
amended non-employee director compensation policy that awarded each non-employee director with a combination of cash (50%) and
certain equity-based compensation (50%) in consideration for his or her service on our Board of Directors as described below: (A)
cash compensation equal to (1) $25,000 for each director affiliated with or who had any employment or service relationship with
any significant stockholder or affiliate thereof (with a “significant stockholder” being any “person” or
related “group” of “persons” (as used in Sections 13(d) of
the Exchange Act) that,
as of such date, held 10% or more of the total combined voting power of all classes of common stock of Shake Shack), payable in
four equal installments following such non-employee director’s attendance at each of the Company’s quarterly Board
meetings; (2) $37,500 for each non-affiliate director, payable in four equal installments following such non-employee director’s
attendance at each of the Company’s quarterly Board meetings, and (3) for the chairperson of each committee of the Board
of Directors, an additional $5,000, payable in four equal installments following such non-employee director’s attendance
at each of the Company’s quarterly Board meetings; and (B) an option to purchase shares of our Class A common stock (1) with
an aggregate grant date fair value of $25,000, if an affiliate director, on such day, (2) with an aggregate grant date fair value
of $37,500, if a non-affiliate director, on such day, and (3) with an aggregate grant date fair value of $5,000, if the chairperson
of a committee of the Board of Directors, on such day.
The terms of each such
annual equity award described above is set forth in a written award agreement between the applicable non-employee director and
us, which provides for vesting after one year of continued service as a director, subject to acceleration upon a change of control.
For fiscal 2017, the
Board of Directors has approved and implemented a further amendment to the non-employee director compensation policy to award each
non-employee director with a combination of cash (50%) and restricted stock units (50%), rather than options, with the same total
aggregate grant date fair value as in fiscal 2016. Fiscal 2017 awards will be granted as of the date of the Annual Meeting.
The non-employee director
compensation policy may be further amended, modified or terminated by our Board of Directors at any time in its sole discretion.
In addition to the
non-employee director compensation policy, in connection with the IPO, we adopted a director stock ownership policy encouraging
non-employee directors to hold shares of our Class A common stock and/or LLC Interests with a value equal to or in excess of the
fair value of the non-qualified stock option or other equity award that the non-employee director received as an annual equity
award on or following the most recent annual meeting.
The following table
set forth the compensation for each of our non-employee directors in fiscal 2016. The awards below were made in accordance with
the above compensation amounts.
Name
|
|
Fees earned or paid in cash ($)
(1)
|
|
|
Option Awards ($)
(2)(3)
|
|
|
Total ($)
|
|
Daniel Meyer
|
|
$
|
26,353
|
|
|
$
|
32,609
|
|
|
$
|
58,962
|
|
Jeff Flug
|
|
$
|
44,800
|
|
|
$
|
55,433
|
|
|
$
|
93,705
|
|
Evan Guillemin
|
|
$
|
26,353
|
|
|
$
|
32,609
|
|
|
$
|
58,962
|
|
Jenna Lyons
|
|
$
|
39,529
|
|
|
$
|
48,905
|
|
|
$
|
88,434
|
|
Joshua Silverman
|
|
$
|
9,375
|
|
|
$
|
18,758
|
|
|
$
|
28,133
|
|
Jonathan D. Sokoloff
|
|
$
|
26,353
|
|
|
$
|
32,609
|
|
|
$
|
58,962
|
|
Robert Vivian
|
|
$
|
44,800
|
|
|
$
|
55,433
|
|
|
$
|
93,705
|
|
|
(1)
|
In fiscal 2016, each non-employee director (other than Mr.
Silverman, who was appointed to the Board November 6, 2016, and therefore received pro-rated compensation for fiscal 2016) was
awarded adjusted cash compensation in consideration for his or her time of service between January 29, 2016 (the one-year anniversary
of each non-employee director’s 2015 award) and May 19, 2016 (the 2016 award date).
|
|
(2)
|
In fiscal 2016, each non-employee director (other than Mr.
Silverman, who was appointed to the Board November 6, 2016, and therefore received pro-rated compensation for fiscal 2016) was
awarded adjusted equity compensation in
|
consideration
for his or her time of service between January 29, 2016 (the one-year anniversary of each non-employee director’s 2015 award)
and May 19, 2016 (the 2016 award date).
|
(3)
|
In fiscal 2016, none of our non-employee directors held any
restricted stock or other unvested stock awards. At December 28, 2016, the following non-employee directors held stock options
as follows: Mr. Meyer – 8,251 vested stock options and 2,003 unvested stock options; Mr. Flug – 0 vested
stock options and 3,405 unvested stock options; Mr. Guillemin – 8,251 vested stock options and 2,003 unvested stock
options; Ms. Lyons - 12,376 vested stock options and 3,004 unvested stock options; Mr. Sokoloff – 8,251 vested stock options
and 2,003 unvested stock options; Mr. Silverman - 0 vested stock options and 1,108 unvested stock options; and Mr. Vivian
– 14,026 vested stock options and 3,405 unvested stock options.
|
Board and Annual Meetings
During fiscal 2016,
the Board of Directors held four meetings, the Nominating and Corporate Governance Committee held four meetings, the Audit Committee
held eight meetings, and the Compensation Committee held four meetings. Each of our directors attended all meetings of the Board
of Directors and meetings held by any of the Committees of the Board on which such director served.
The Company’s
directors are encouraged to attend our Annual Meeting, but we do not currently have a policy relating to directors’ attendance
at these meetings. All of the Company’s directors at the time of the Company’s annual meeting for fiscal 2015 attended
such meeting.
Proposal
No. 2-Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee
of the Board of Directors has selected Ernst & Young LLP (“
EY
”) to be the Company’s independent registered
public accounting firm for the fiscal year ending December 27, 2017, and recommends that the stockholders vote for ratification
of such appointment. EY has been engaged as our independent registered public accounting firm since September 9, 2014. As a matter
of good corporate governance, the Audit Committee has requested the Board of Directors to submit the selection of EY as the Company’s
independent registered public accounting firm for 2017 to stockholders for ratification. In the event of a negative vote on such
ratification, the Audit Committee will reconsider its selection. We expect representatives of EY to be present at the Annual Meeting.
They will have the opportunity to make a statement at the Annual Meeting if they desire to do so, and will be available to respond
to appropriate questions.
Audit and Related Fees
The following table
sets forth the aggregate fees billed for various professional services rendered by EY:
|
|
2016
|
|
|
2015
|
|
Audit Fees
(1)
|
|
$
|
928,723
|
|
|
$
|
1,267,470
|
|
Audit Related Fees
(2)
|
|
|
-
|
|
|
$
|
3,000
|
|
Tax Fees
(3)
|
|
|
-
|
|
|
$
|
60,000
|
|
All Other Fees
(4)
|
|
|
-
|
|
|
$
|
2,172
|
|
Total Fees
|
|
$
|
928,723
|
|
|
$
|
1,332,642
|
|
|
(1)
|
Consists of fees for professional services rendered for the audits of the Company’s consolidated
financial statements included in its Annual Reports on Form 10-K and Registration Statements on Form S-1 for fiscal years 2016,
2015, 2014, 2013 and 2012, and for the review of the Company’s interim condensed consolidated financial statements included
in its Quarterly Reports on Form 10-Q for fiscal year 2016. Additionally, consists of fees for assurance and related services related
to the Company’s initial public offering and secondary offering, both in fiscal 2015, as well as various consultation matters.
|
|
(2)
|
Consists of fees for agreed upon procedures required for certain of our leases.
|
|
(3)
|
Consists of tax consulting fees.
|
|
(4)
|
Consists of a software licensing fee for a technical accounting research tool.
|
Pre-Approval Policy
The Audit Committee’s
policy is to pre-approve all audit and permissible non-audit services provided by EY. These services may include audit services,
audit-related services, tax services and all other services. Proposed services may either be pre-approved without consideration
of specific case-by-case services by the Audit Committee or require the specific pre-approval of the Audit Committee. Unless a
type of service has received general pre-approval, it will require specific pre-approval if it is to be provided by EY. Any proposed
services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval.
Pre-approval fee levels
or budgeted amounts for all services to be provided by EY are established annually by the Audit Committee. Any proposed services
exceeding these levels or amounts require
specific pre-approval
by the Audit Committee. For each fiscal year, the Audit Committee may determine the appropriate ratio between the total amount
of fees for audit, audit-related and tax services, and the total amount of fees for services classified as all other services.
The Audit Committee
may delegate either type of approval authority to one or more of its members. The member to whom such authority is delegated must
report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee
has designated the Chief Financial Officer to monitor the performance of all services provided by EY and to determine whether such
services are in compliance with this policy. The Chief Financial Officer will report to the Audit Committee on a periodic basis
the results of its monitoring. Both the Chief Financial Officer and management will immediately report to the chairperson of the
Audit Committee any breach of this policy that comes to the attention of the Chief Financial Officer or any member of management.
All of the services
listed in the above table were approved by the Audit Committee.
The Board of Directors
recommends a vote FOR the ratification of the appointment of
Ernst & Young LLP.
|
Security
Ownership of Certain Beneficial Owners and Management
The following table
shows information about the beneficial ownership of our Class A common stock and Class B common stock, as of the Record Date, for:
|
·
|
each person known by us to beneficially own more than 5% of our outstanding Class A common stock or Class B common stock;
|
|
·
|
each of our directors and Named Executive Officers; and
|
|
·
|
all of our directors and executive officers as a group.
|
The number of shares
beneficially owned by each stockholder is determined under rules promulgated by the SEC under which beneficial ownership includes
any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of
shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject
to options, or other rights held by such person that are currently exercisable or will become exercisable within 60 days of
the Record Date, are considered outstanding, although these shares are not considered outstanding for purposes of computing the
percentage ownership of any other person. However, in computing the number of shares of Class A common stock beneficially owned
by an individual or entity, we do not include LLC Interests, which are exchangeable into Class A common stock, held by such individual
or entity because the voting rights represented by the LLC Interests are reflected in the shares of Class B common stock reported
for such individual or entity. Unless otherwise indicated, the address of all listed stockholders is c/o Shake Shack Inc.,
24 Union Square East, 5
th
Floor, New York, NY 10003. Each of the stockholders listed has sole voting and investment
power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws
where applicable.
|
|
Shares of Class A Common
Stock Beneficially Owned
|
|
Shares of Class B Common
Stock Beneficially Owned
|
|
Combined
Voting
|
|
Name of beneficial owner
|
|
Number
|
|
|
Percentage
|
|
|
Number
|
|
|
Percentage
|
|
|
Power
(1)
|
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Meyer
(2)(3)
|
|
|
1,250,572
|
|
|
|
4.9
|
%
|
|
|
4,551,320
|
|
|
|
41.6
|
%
|
|
|
15.8
|
%
|
Randy Garutti
(2)(4)
|
|
|
280,137
|
|
|
|
1.1
|
%
|
|
|
765,023
|
|
|
|
7.0
|
%
|
|
|
2.9
|
%
|
Jeff Uttz
(2)
|
|
|
10,956
|
|
|
|
*
|
|
|
|
171,579
|
|
|
|
1.6
|
%
|
|
|
*
|
|
Peggy Rubenzer
(5)
|
|
|
58,608
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Jeff Flug
(2)(6)
|
|
|
191,645
|
|
|
|
*
|
|
|
|
722,574
|
|
|
|
6.6
|
%
|
|
|
2.5
|
%
|
Evan Guillemin
(7)
|
|
|
10,254
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Jenna Lyons
(8)
|
|
|
25,380
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
Joshua Silverman
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Jonathan D. Sokoloff
(2)(9)(10)
|
|
|
2,133,234
|
|
|
|
8.3
|
%
|
|
|
2,671,904
|
|
|
|
24.4
|
%
|
|
|
13.1
|
%
|
Robert Vivian
(2)(11)
|
|
|
44,931
|
|
|
|
*
|
|
|
|
50,851
|
|
|
|
*
|
|
|
|
*
|
|
All directors and executive officers as a group (ten persons)
|
|
|
4,021,167
|
|
|
|
15.7
|
%
|
|
|
8,761,672
|
|
|
|
80.2
|
%
|
|
|
34.9
|
%
|
Other 5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Green Equity Investors VI, L.P., Green Equity Investors Side VI, L.P., and LGP Malted Coinvest LLC
(2)(9)
|
|
|
2,122,980
|
|
|
|
8.3
|
%
|
|
|
2,671,904
|
|
|
|
24.4
|
%
|
|
|
13.1
|
%
|
Morgan Stanley Investment Management Inc.
(12)
|
|
|
3,095,493
|
|
|
|
12.0
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
8.5
|
%
|
The Vanguard Group
(13)
|
|
|
1,395,743
|
|
|
|
5.4
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
3.8
|
%
|
Gilder, Gagnon, Howe & Co. LLC
(14)
|
|
|
1,952,311
|
|
|
|
7.6
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
5.3
|
%
|
* Represents beneficial ownership of
less than 1%.
|
(1)
|
Includes the voting power of each owner based on the voting power held through both the owner’s
Class A common stock and Class B common stock. Represents percentage of voting power of the Class A common stock and Class B common
stock of Shake Shack voting together as a single class.
|
|
(2)
|
As discussed in “Certain Relationships and Related Party Transactions—The IPO and Other
Organizational Transactions—Stockholders Agreement,” the members of the Voting Group entered into a Stockholders Agreement
with us, pursuant to which the Voting Group has agreed to vote their shares of Class A common stock and Class B common stock in
favor of the election of the nominees of certain members of the Voting Group to our Board of Directors and committees upon their
nomination by the Nominating and Corporate Governance Committee of our Board of Directors.
|
|
(3)
|
Includes (i) 1,240,318 shares of Class A common stock held by the Investment Trust, of which Mr.
Meyer is the grantor, trustee and beneficiary, (ii) 8,251 shares of Class A common stock that Mr. Meyer currently has the right
to acquire through the exercise of stock options, (iii) 2,003 shares of Class A common stock that Mr. Meyer will have the right
to acquire within 60 days of the Record Date through the exercise of stock options, (iv) 590,921 shares of Class B common stock
held by the Gift Trust, of which Mr. Meyer’s spouse is a trustee and beneficiary, and (v) 2,690,263 shares of Class B common
stock held by GT. Mr. Meyer disclaims beneficial ownership of all of the shares held by the Gift Trust. Mr. Meyer may be deemed
to share voting and investment power with respect to the shares of the Company’s Class A common stock and Class B common
stock held by GT.
|
|
(4)
|
Includes (i) 274,000 shares of Class A common stock that Mr. Garutti currently has the right to
acquire through the exercise of stock options, (ii) 3,037 shares of Class A common stock that Mr. Garutti will have the right to
receive within 60 days of the Record Date through the vesting of restricted stock units issued to Mr. Garutti in connection with
the Company’s 2015 incentive award plan, and (iii) 55,972 shares of Class B common stock held by The Randall J. Garutti 2014
GST Trust, of which Mr. Garutti’s spouse is a trustee and beneficiary. Mr. Garutti disclaims beneficial ownership of all
of the shares held by The Randall J. Garutti 2014 GST Trust.
|
|
(5)
|
Includes (i) 42,400 shares of Class A common stock that Ms. Rubenzer currently has the right to
acquire through the exercise of stock options and (ii) 1,207 shares of Class A common stock that Ms. Rubenzer will have the right
to receive within 60 days of the Record Date through the vesting of restricted stock units issued to Ms. Rubezner in connection
with the Company’s 2015 incentive award plan.
|
|
(6)
|
Includes (i) 3,405 shares of Class A common stock that Mr. Flug will have the right to acquire
within 60 days of the Record Date through the exercise of stock options and (ii) 722,574 shares of Class B common stock held by
the Flug 2015 GS Trust dated December 29, 2015, of which Mr. Flug’s spouse is the trustee and beneficiary. Mr. Flug disclaims
beneficial ownership of all of the shares held by the Flug 2015 GS Trust dated December 29, 2015.
|
|
(7)
|
Includes (i) 8,251 shares of Class A common stock that Mr. Guillemin currently has the right to
acquire through the exercise of stock options and (ii) 2,003 shares of Class A common stock that Mr. Guillemin will have the right
to acquire within 60 days of the Record Date through the exercise of stock options.
|
|
(8)
|
Includes (i) 12,376 shares of Class A common stock that Ms. Lyons currently has the right to acquire
through the exercise of stock options, and (ii) 3,004 shares of Class A common stock that Ms. Lyons will have the right to acquire
within 60 days of the Record Date through the exercise of stock options.
|
|
(9)
|
Voting and investment power with respect to the shares of the Company’s common stock held
by Green Equity Investors VI, L.P., a Delaware limited partnership (“
GEI VI
”), Green Equity Investors Side VI,
L.P., a Delaware limited partnership (“
GEI Side VI
”) and LGP Malted Coinvest LLC, a Delaware limited liability
company (“
Malted
”), may be deemed to be shared by certain affiliated entities. GEI Capital VI, LLC (“
GEIC
”),
is the general partner of GEI VI and GEI Side VI. Green VI Holdings, LLC (“
Holdings
”) is a limited partner of
GEI VI and GEI Side VI. Leonard Green & Partners, L.P. (“
LGP
”) is the management company of GEI VI, GEI
Side VI, and Holdings. Peridot Coinvest Manager LLC (“
Peridot
”), an affiliate of LGP, is the manager of Malted.
Each of GEI VI, GEI Side VI, Holdings, Malted, LGP, and Peridot disclaims such shared beneficial ownership of the Company’s
Class A common stock and Class B common stock. Jonathan D. Sokoloff either directly (whether through ownership interest or positions
with LGP or Peridot) or indirectly, through one or more intermediaries, may also be deemed to share voting and investment power
with respect to such shares, and he disclaims beneficial ownership of such shares. Each of the
|
partners of
LGP, including Mr. Jonathan D. Sokoloff, either directly (whether through ownership interest or position) or indirectly, through
one or more intermediaries, may be deemed to control GEIC, LGP, and Peridot. As such, these individuals may be deemed to have shared
voting and investment power with respect to all shares beneficially owned by GEI VI, GEI Side VI, Holdings, Malted, LGP, and Peridot.
Each of these individuals each disclaim beneficial ownership of the securities held by GEI VI, GEI Side VI, Holdings, Malted, LGP,
and Peridot, except to the extent of their respective pecuniary interest therein. Each of the foregoing entity’s and individual’s
address (other than the Company) is c/o Leonard Green & Partners, L.P., 11111 Santa Monica Boulevard, Suite 2000, Los Angeles,
California 90025
GEI VI is the
direct owner of 387,079 shares of Class A common stock and 2,485,837 shares of Class B common stock. GEI Side VI is the direct
owner of 1,712,272 shares of Class A common stock. Malted is the direct owner of 23,629 shares of Class A common stock and 186,067
shares of Class B common stock.
|
(10)
|
Includes (i) 8,251 shares of Class A common stock that Mr. Sokoloff currently has the right to
acquire through the exercise of stock options and (ii) 2,003 shares of Class A common stock that Mr. Sokoloff will have the right
to acquire within 60 days of the Record Date through the exercise of stock options.
|
|
(11)
|
Includes (i) 14,026 shares of Class A common stock that Mr. Vivian currently has the right to acquire
through the exercise of stock options and (ii) 3,405 shares of Class A common stock that Mr. Vivian will have the right to acquire
within 60 days of the Record Date through the exercise of stock options.
|
|
(12)
|
Based on a Schedule 13G filed by Morgan Stanley Investment Management Inc. on February 10, 2017.
According to the Schedule 13G, Morgan Stanley Investment Management Inc. has sole voting power and shared dispositive power over
the reported shares of Class A common stock.
|
|
(13)
|
Based on a Schedule 13G filed by The Vanguard Group on February 13, 2017. According to the Schedule
13G, The Vanguard Group has sole voting power, shared voting power, sole dispositive power and shared dispositive power over 30,583
shares, 894 shares, 1,364,772 shares and 30,971 shares of Class A common stock, respectively.
|
|
(14)
|
Based on a Schedule 13G filed by Gilder, Gagnon, Howe & Co. LLC on February 14, 2017. According
to the Schedule 13G, Gilder, Gagnon, Howe & Co. LLC has sole voting power, sole dispositive power and shared dispositive power
over 44,094, 44,094 and 1,908,217 shares of Class A common stock, respectively.
|
Executive
Officers
The following set forth information regarding
the executive officers of the Company as of the Record Date:
Name
|
|
Age
|
|
Position
|
Randy Garutti
|
|
42
|
|
Chief Executive Officer and Director
|
Zachary Koff
|
|
37
|
|
Chief Operating Officer
|
Peggy Rubenzer
|
|
53
|
|
Senior Vice President, People Resources
|
Randy Garutti
- please see “Proposal No. 1—Election of Directors—Nominees for Election as Class I Directors” for Mr.
Garutti’s biography.
Zachary Koff
has
served as our Chief Operating Officer since January 2017. Prior to becoming Chief Operating Officer, Mr. Koff served as Senior
Vice President, Operations since March 2015, Vice President, Operations since April 2012, and Director of Operations since February
2010. Prior to joining Shake Shack, Mr. Koff spent 8 years working in operations for Bravo Brio Restaurant Group. Mr. Koff
graduated from Cornell University’s School of Hotel Administration in 2002 with a Bachelor’s Degree in Hospitality
Administration.
Peggy Rubenzer
has
served as our Senior Vice President, People Resources since March 2015. Prior to becoming Senior Vice President, People Resources,
Ms. Rubenzer served as Vice President, People Resources since February 2014, and Director of Training since December 2011. Ms. Rubenzer
has over 24 years of human resources and training expertise. As Senior Vice President, People Resources, Ms. Rubenzer leads
the company’s training, leadership development and human resources functions and supports the success of the teams through training,
tools and resources. Prior to joining us in December 2011, Ms. Rubenzer spent 10 years at P.F. Chang’s China Bistro in
VP roles in both HR and Training. During her tenure at P.F. Chang’s, Ms. Rubenzer was instrumental in growing the full and
quick service concepts unit count from 82 to 360, supporting a head count of 30,000 employees. Prior to that, Ms. Rubenzer
spent 10 years at Southwest Airlines, during which time she oversaw the recruiting and human resources functions for the Midwest
region supporting the operation in 15 cities, as well as the company’s growth and expansion to the North East.
Executive
Compensation
Our named executive officers (“
Named
Executive Officers
”) for the year ended December 28, 2016 are:
|
·
|
Randy Garutti, our Chief Executive Officer;
|
|
·
|
Jeff Uttz, our former Chief Financial Officer; and
|
|
·
|
Peggy Rubenzer, our Senior Vice President, People Resources
|
Elements of Compensation
The compensation arrangement
for each Named Executive Officer is intended to encourage performance and to align the Named Executive Officers’ interests
with those of our stockholders. In setting compensation for our Named Executive Officers, the Compensation Committee takes into
account the relative amount of compensation that is delivered on a current and long-term basis and in the form of cash and equity.
The combination of performance measures for annual bonuses and the equity compensation programs for executive officers, as well
as the multi-year vesting schedules for equity awards encourage employees to maintain both a short-term and a long-term view with
respect to Company performance.
The elements of our compensation program
are:
|
·
|
Fixed compensation – base salary;
|
|
·
|
Variable cash compensation – annual performance-based cash bonuses;
|
|
·
|
Long-term equity incentives – stock options or performance based equity awards; and
|
|
·
|
Broad-based benefit programs – health and welfare benefits and retirement benefits.
|
Base Salary
The Named Executive
Officers receive a base salary to compensate them for services rendered to our Company. The base salary payable to each Named Executive
Officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, roles
and responsibilities.
Annual Performance-Based
Bonus
The Named Executive
Officers are entitled to receive annual performance-based cash bonuses, the amount of which is based on satisfaction of Company
objectives that are established by the Board of Directors or the Compensation Committee. The annual bonuses are intended to encourage
the Named Executive Officers to promote the growth of the Company’s business.
Equity Awards
The Named Executive
Officers are eligible to receive equity awards under our 2015 Incentive Award Plan (as amended, “
2015 Plan
”).
Awards under the 2015 Plan are intended to align the interests of the Named Executive Officers with those of our stockholders and
to create a link between executive pay and the long-term performance of our common stock.
Employee Benefits
The Named Executive
Officers, like our other employees, participate in health and welfare benefit plans, subject to satisfying eligibility requirements.
We believe the benefits described above are necessary and appropriate to provide a competitive compensation package to our Named
Executive Officers.
Summary Compensation
Table
The following table
sets forth the total compensation that was paid to or earned by the Named Executive Officers for the 2015 and 2016 fiscal years.
Name and
Principal
Position
|
|
Year
|
|
Salary
($)
|
|
|
Stock Awards
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Randy Garutti
|
|
2016
|
|
$
|
500,000
|
|
|
$
|
351,821
|
|
|
|
–
|
|
|
$
|
368,750
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
1,220,571
|
|
Chief Executive Officer
|
|
2015
|
|
$
|
400,000
|
|
|
|
–
|
|
|
$
|
5,884,150
|
|
|
$
|
395,000
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
6,679,150
|
|
Jeff Uttz
|
|
2016
|
|
$
|
350,000
|
|
|
$
|
175,911
|
|
|
|
–
|
|
|
$
|
180,688
|
|
|
|
|
|
|
|
|
|
|
$
|
706,599
|
|
Former Chief Financial Officer
|
|
2015
|
|
$
|
330,000
|
|
|
|
–
|
|
|
$
|
2,963,550
|
|
|
$
|
228,112
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
3,521,662
|
|
Peggy Rubenzer Senior VP, People Resources
|
|
2016
|
|
$
|
235,591
|
|
|
$
|
139,826
|
|
|
|
–
|
|
|
$
|
84,433
|
|
|
|
–
|
|
|
|
–
|
|
|
$
|
459,850
|
|
|
(1)
|
The amounts in this column represent the aggregate grant date fair value of the performance stock
units granted to our Named Executive Officers in fiscal 2016, based upon the probable outcome of performance conditions, which
is 112.0% of the performance stock units’ target performance goals, and computed in accordance with FASB ASC Topic 718. The
assumptions used in determining such amounts are described in Note 13 to our audited consolidated financial statements included
in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016. For fiscal 2016, if the highest level of performance
conditions is achieved, then the grant date fair value of the performance stock units would be $374,693, $187,346 and $148,916
for Mr. Garutti, Mr. Uttz and Ms. Rubenzer, respectively.
|
|
(2)
|
The amounts in this column represent the aggregate grant date fair value of stock option awards
granted to Messrs. Garutti and Uttz in fiscal 2015, computed in accordance with FASB ASC Topic 718. The assumptions used in determining
such amounts are described in Note 13 to our audited consolidated financial statements included in our Annual Report on Form 10-K
for the fiscal year ended December 28, 2016.
|
Narrative to Summary Compensation Table
Agreements with Named Executive Officers
We entered into employment
agreements with (i) Messrs. Garutti and Uttz, effective as of January 30, 2015, the date of the consummation of the IPO, and
(ii) Ms. Rubenzer, effective as of May 5, 2016. Additionally, in connection with Mr. Uttz’s resignation, effective March
13, 2017, we entered into a
transition services agreement
with Mr. Uttz that superseded some of the terms of Mr. Uttz’s employment agreement. The material terms of such agreements
are summarized below.
Employment Term
and Position
The term of employment
of (i) each of Messrs. Garutti and Uttz is through January 30, 2018 and (ii) Ms. Rubenzer is through May 5, 2019, subject to automatic
one-year extensions unless either party provides written notice of non-extension within 90 days of the expiration of the then-current
term. During their respective terms of employment, Mr. Garutti will serve as Chief Executive Officer of Shake Shack, SSE Holdings
and all of its affiliates, Mr. Uttz will serve as Chief Financial Officer of Shake Shack, SSE Holdings and all of its affiliates,
and Ms. Rubenzer will serve as Senior Vice President, People Resources of Shake Shack, SSE Holdings and all of its affiliates.
Further, Mr. Garutti will be appointed to our Board of Directors and will be proposed for re-election during his term of employment.
Mr. Uttz resigned as Chief Financial Officer
of Shake Shack and SSE Holdings, effective March 13, 2017.
Base Salary, Annual
Bonus and Equity Compensation
Pursuant to their employment
agreements, Messrs. Garutti and Uttz were entitled to base salaries in fiscal 2015 of $400,000 and $330,000, respectively, which
were increased for fiscal 2016 to $500,000 and $350,000, respectively. Pursuant to her employment agreement, Ms. Rubenzer was entitled
to a base salary in fiscal 2016 of $235,591.
In addition, pursuant
to their employment agreements, Messrs. Garutti and Uttz and Ms. Rubenzer are eligible to receive annual performance-based cash
bonuses upon the attainment of company performance goals established by our Compensation Committee. The amount of the annual performance-based
cash bonus that may be received by Messrs. Garutti and Uttz and upon attainment of target performance for any fiscal year will
be 50% of base salary, 35% of base salary, and 30% of base salary, respectively, and the maximum amount of the annual performance-based
cash bonus that may be received by Messrs. Garutti and Uttz and Ms. Rubenzer for any fiscal year will be 100% of base salary, 70%
of base salary, and 40% of base salary, respectively.
Under the employment
agreements, Messrs. Garutti and Uttz and Ms. Rubenzer also will be eligible for annual equity awards, the form and terms of which
will be determined by our Compensation Committee in its discretion.
Severance
Mr. Garutti and
Ms. Rubenzer
The employment agreement
for Mr. Garutti and Ms. Rubenzer provides for severance upon a termination by us without cause or by Mr. Garutti or Ms. Rubenzer
for good reason, in each case, subject to the execution and non-revocation of a waiver and release of claims by Mr. Garutti or
Ms. Rubenzer, as applicable.
Upon such a termination,
Mr. Garutti or Ms. Rubenzer, as applicable, is entitled to severance consisting of (a) continued base salary through the first
anniversary of the termination of his or her employment, (b) a prorated annual cash bonus for the year of termination based on
actual individual and company performance, (c) accelerated vesting of a prorated portion of the annual equity awards that would
have vested at the end of the year of termination absent such termination, such portion to be based
on the number of full
fiscal months elapsed during such fiscal year, and (d) reimbursement of COBRA premiums such that the cost of coverage is equal
to the cost for then current employees for a period of up to 12 months.
For purposes of the
employment agreements, the company will have “cause” to terminate Mr. Garutti’s or Ms. Rubenzer’s employment
upon (a) his or her willful misconduct, gross negligence or act of dishonesty with regard to the company or any of its affiliates,
which in either case, results in or could reasonably be expected to result in material harm to the company or such affiliate, (b)
his or her willful and continued failure to attempt to perform his or her duties with the company or any of its affiliates (other
than any such failure resulting from disability), which failure is not remedied within 30 days after receiving written notice thereof,
(c) his or her conviction of (or his or her plea of guilty or nolo contendere to) any felony involving moral turpitude (other than
traffic related offenses or as a result of vicarious liability), or (d) his or her material breach of any material provision of
the employment agreement, which breach is not remedied within 10 days after receiving written notice thereof.
For purposes of the
employment agreements, each of Mr. Garutti and Ms. Rubenzer will have “good reason” to terminate his or her employment
after the occurrence, without his or her consent, of (a) any material adverse change in base salary, position, duties, responsibilities,
authority, title or reporting obligations, or the assignment of duties that are materially inconsistent with his position, (b)
a relocation of principal business location by more than 50 miles from its then current location, or (c) any other material breach
by the company of the employment agreement or any other agreement with him or her. However, no termination for good reason will
be effective unless (i) Messrs. Garutti or Uttz or Ms. Rubenzer, as applicable, provides the company with at least 30 days prior
written notice of his or her intent to resign for good reason (which notice must be provided within 60 days following the occurrence
of the event(s) purported to constitute good reason); (ii) the company has not remedied the alleged violation(s) within the 30-day
period; and (iii) Messrs. Garutti or Uttz’s or Ms. Rubenzer’s resignation, as applicable, becomes effective no later
than 30 days after the Company has either failed to cure such event or indicated that it will not cure such event.
Mr. Uttz
The transition services agreement for Mr.
Uttz provided that Mr. Uttz will be entitled to (a) all accrued, but unused vacation pay through his effective resignation date,
(b) 100% of his annual performance-based cash bonus for fiscal 2016, (c) accelerated vesting of one-third of the performance stock
units granted on April 26, 2016, (d) reimbursement by the company through June 30, 2017 of a portion of any COBRA premiums equal
to the amount the company pays for the premiums of other executive level employees, and (e) transition services payments equal
to Mr. Uttz’s weekly rate of pay of $7,067.31 for each week (whether full or prorated) following the effective resignation
date through June 30, 2017.
Restrictive Covenants
Pursuant to their respective
employment agreements, Mr. Garutti and Ms. Rubenzer are subject to certain non-competition and non-solicitation restrictions during
employment and for a 12-month period after termination of employment. During the restricted period, Mr. Garutti and Ms. Rubenzer
may not compete, directly or indirectly, with the Company in the business of developing, managing, and/or operating of (a) “better
burger” restaurants, (b) “quick service” or “fast food” restaurants with an emphasis on hamburgers,
or (c) “fast casual” restaurants. No severance payments or benefits described above shall be paid following the first
date that Mr. Garutti or Ms. Rubenzer, as applicable, violates his or her restrictive covenants; provided that, if employment is
terminated by the company without cause or by Mr. Garutti or Ms. Rubenzer for good reason, Mr. Garutti or Ms. Rubenzer, as applicable,
may compete
in the “fast casual”
restaurant business during the restricted period without violating his or her employment agreement but he or she will not receive
any severance after the date he begins to compete in the “fast casual” restaurant business.
Pursuant to his transition services agreement,
Mr. Uttz has waived and released the company from any and all claims, and he has agreed that, if he competes with the Company in
the business of developing, managing, and/or operating of (a) “better burger” restaurants, (b) “quick service”
or “fast food” restaurants with an emphasis on hamburgers, or (c) “fast casual” restaurants prior to June
30, 2017, he will not receive any unpaid portion of the transition services payment.
Bonuses
In fiscal 2016, each
of our Named Executive Officers was eligible to earn an annual performance-based cash bonus from the company. This 2016 bonus for
each of our Named Executive Officers consisted of two components: 50% was based upon the achievement of company total revenue targets
and 50% was based upon the achievement of company adjusted EBITDA. Mr. Garutti was eligible to receive a target bonus in the amount
of 50% of his annual base salary, Mr. Uttz was eligible to receive a target bonus in the amount of 35% of his annual base salary,
and Ms. Rubenzer was eligible to receive a target bonus in the amount of 30% of her annual base salary upon the achievement of
the applicable objectives. In fiscal 2016, our company’s total revenue was 109.7% of the target amount of $244,662,550 and
our adjusted EBITDA was 110.2% of the target amount of $47,431,591, resulting in a payment to Mr. Garutti of 147.5% of his
target bonus, to Mr. Uttz of 147.5% of his target bonus and to Ms. Rubenzer of 143.4% of her target bonus. The actual
amounts of the performance-based cash bonuses paid to each Named Executive Officer for fiscal 2016 performance are set forth above
in the Summary Compensation Table in the column entitled “Non-Equity Incentive Plan Compensation.”
For purposes of the annual performance-based
cash bonus, the company defines adjusted EBITDA as excluding equity-based compensation expense, deferred rent expense, losses on
the disposal of property and equipment, as well as certain non-recurring items that we don't believe directly reflect our core
operations and may not be indicative of our recurring business operations. EBITDA is defined as net income before net interest,
income tax expense and depreciation and amortization expense.
Equity-Based Compensation
We adopted the 2015
Incentive Award Plan in order to facilitate the grant of cash and equity incentives to directors, employees (including our Named
Executive Officers) and consultants of our Company and certain of its affiliates and to enable our Company and certain of its affiliates
to obtain and retain services of these individuals, which is essential to our long-term success.
On April 26, 2016,
the Company granted performance stock units (“
PSUs
”) under the 2015 Incentive Award Plan to our Named Executive
Officers. The PSUs are payable in restricted stock units (“
RSUs
”) only to the extent the Company achieves the
total revenue and adjusted EBITDA performance goals, which are further described below, for fiscal 2016. Any RSUs that are issued
will vest, subject to the Named Executive Officer’s continued employment with the Company, ratably over a three-year period
commencing on the first anniversary of the date the PSUs were granted. Issued RSUs may vest sooner for a Named Executive Officer’s
death or disability.
The PSUs have two equally-weighted performance
goals: total revenue and adjusted EBITDA. For purposes of the PSUs, (a) total revenue means revenue, inclusive of revenue from
Company-owned operations and licensing revenue from international and domestic licensed operations and (b) adjusted EBITDA means
net income before (i) interest, (ii) taxes, (iii) depreciation and (iv) amortization,
excluding certain non-cash and other items not considered in
the Company’s evaluation of ongoing performance, including equity-based compensation expense, non-cash deferred rent charges,
and certain non-recurring charges.
The amount of RSUs issued to a Named Executive
Officer is a percentage, ranging from zero to 125%, of the Named Executive Officer’s RSU target and is based on the Company’s
achievement of each performance goal’s target, which ranges from 95% to 110% (or greater) achievement for the total revenue
goal and 95% to 125% (or greater) achievement for the adjusted EBITDA goal.
In March 2017, our Compensation Committee
certified that the Company’s total revenue was 109.7% of the target amount of $244,662,550 and our adjusted EBITDA was 109.3%
of the target amount of $45,940,835. Accordingly, Mr. Garutti, Mr. Uttz and Ms. Rubenzer received 9,113 RSUs, 1,518 RSUs and 3,621
RSUs, respectively, subject to the vesting schedule described above.
Stock Ownership Policy
In addition, in connection
with the IPO, we adopted an executive stock ownership policy requiring Mr. Garutti, as of January 15, 2020, to hold shares of our
Class A common stock or LLC Interests with a value equal to two times his annual base salary. Securities that qualify in determining
whether Mr. Garutti has satisfied the shareholding requirements include (i) issued and outstanding shares of Class A common stock
held beneficially or of record, (ii) issued and outstanding LLC Interests held beneficially or of record, (iii) issued and outstanding
shares of Class A common stock or LLC Interests held by a qualifying trust (i.e., a trust created for the benefit of the executive
officer, his spouse or members of his immediate family), (iv) issued and outstanding shares of Class A common stock or LLC Interests
held by a 401(k) or other qualified pension or profit-sharing plan for the benefit of the executive officer, and (v) shares of
Class A common stock underlying vested Shake Shack time-based stock options and restricted stock units deliverable upon exercise
or settlement in full, less tax withholdings and, in the case of stock options, a number of shares of Class A common stock with
a value equal to the exercise price thereof.
The stock ownership policy also applied
to Mr. Uttz prior to his resignation.
Retirement Plans
USHG currently sponsors
a 401(k) retirement savings plan (the “
401(k) plan
”), in which the Company’s employees, including our
Named Executive Officers, may participate, subject to satisfying eligibility requirements. The Internal Revenue Code allows eligible
employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k)
plan. The Company does not currently match contributions made under the 401(k) plan by our Named Executive Officers and other highly
compensated employees. We believe that providing a vehicle for tax-deferred retirement savings though the 401(k) plan adds to the
overall desirability of our executive compensation package and further incentivizes our employees, including our Named Executive
Officers, in accordance with our compensation policies.
Employee Benefits
All of our full-time
employees, including our Named Executive Officers, are eligible to participate in health and welfare plans maintained by the Company,
including:
|
·
|
medical, dental and vision benefits;
|
|
·
|
medical and dependent care flexible spending accounts; and
|
|
·
|
short-term and long-term disability insurance.
|
Our Named Executive
Officers participate in these plans on the same basis as other eligible employees. We do not maintain any supplemental health and
welfare plans for our Named Executive Officers. We believe the benefits described above are necessary and appropriate to provide
a competitive compensation package to our Named Executive Officers.
No Tax Gross-Ups
We do not make gross-up
payments to cover our Named Executive Officers’ personal income taxes or excise taxes that may pertain to any of the compensation
or perquisites paid or provided by our Company.
Special Bonus Agreements
In March 2011, Mr.
Garutti entered into a Special Bonus Agreement (as amended, the “
Special Bonus Agreement
”) with USHG with respect
to Mr. Garutti’s services to SSE Holdings. This Special Bonus Agreement provides for the payment of a special bonus in the
amount of $2,450,000 by USHG to Mr. Garutti in the event of a change in control or an initial public offering of SSE Holdings prior
to March 11, 2018, which will be payable to him in March 2018. On October 30, 2014, USHG, Mr. Garutti and SSE Holdings entered
into an Assignment and Assumption Agreement, pursuant to which USHG assigned this obligation to SSE Holdings. The Special Bonus
Agreement contains restrictive covenants prohibiting Mr. Garutti from competing with us and from soliciting any of our or of USHG’s
employees or contractors for one year following his termination of employment. The restrictive covenants also prohibit the unauthorized
use of confidential information. As a result of the IPO, the $2,450,000 payment will be made to Mr. Garutti pursuant to the Special
Bonus Agreement in March 2018.
Outstanding Equity Awards at 2016 Fiscal
Year-End
The following table
sets forth certain information with respect to outstanding equity awards of our Named Executive Officers as of December 28, 2016.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
|
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Equity incentive
plan awards:
Number of
unearned shares,
units or other
rights that have
not vested (#)
(2)
|
|
|
|
Equity incentive
plan awards:
Market or payout
value of unearned
shares, units or
other rights that
have not vested ($)
|
|
Randy Garutti
|
|
|
137,000
|
|
|
|
548,000
|
|
|
$
|
21.00
|
|
|
1/29/2025
|
|
|
7,800
|
|
|
$
|
287,274
|
|
Jeff Uttz
|
|
|
69,000
|
|
|
|
276,000
|
(3)
|
|
$
|
21.00
|
|
|
1/29/2025
|
|
|
3,900
|
(4)
|
|
$
|
143,637
|
|
Peggy Rubenzer
|
|
|
21,200
|
|
|
|
84,800
|
|
|
$
|
21.00
|
|
|
1/29/2025
|
|
|
3,100
|
|
|
$
|
114,173
|
|
|
(1)
|
These options vest in four equal installments on each of January 29, 2017, January 29, 2018, January
29, 2019 and January 29, 2020, subject to each of Messrs. Garutti’s and Uttz’s and Ms. Rubenzer’s continued employment
with us on each such vesting date.
|
|
(2)
|
Represents shares underlying unearned PSU awards as of December 28, 2016 assuming achievement of 100% of the PSUs’ target
performance goals. On March 13, 2017, our Compensation Committee certified achievement of the performance goals, and Mr. Garutti,
Mr. Uttz and Ms. Rubenzer earned 9,113 RSUs, 1,518 RSUs and 3,621 RSUs. See “Narrative to Summary Compensation Table—Equity-Based
Compensation” for a description of the PSU awards.
|
|
(3)
|
In connection with Mr. Uttz’s resignation from the Company, he forfeited 100% of the unexercisable options.
|
|
(4)
|
In connection with Mr. Uttz’s resignation from the Company, he forfeited two-thirds of the shares underlying unearned
PSU awards he was entitled to.
|
Equity Compensation Plan Information Table
The following table sets forth our shares
authorized for issuance under our equity compensation plans as of December 28, 2016.
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
|
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
(c)
|
|
Equity compensation
plans approved by security holders
|
|
|
2,426,322
|
|
|
$
|
21.10
|
|
|
|
3,278,970
|
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
2,426,322
|
|
|
$
|
21.10
|
|
|
|
3,278,970
|
|
Certain
Relationships and Related Party Transactions
Agreements with USHG Subsidiaries
Daniel Meyer, our Chairman of the Board of Directors, serves
as USHG’s Chief Executive Officer. We and subsidiaries of USHG are parties to a Management Services Agreement and a Master
License Agreement, each as described below.
Management
Services Agreement with USHG, LLC
On October 16, 2009,
we entered into a Management Services Agreement with USHG, LLC, a subsidiary of USHG (the “
Management Company
”),
pursuant to which the Management Company has provided management services to SSE Holdings, including executive leadership, strategic
development, real estate, financial, legal, administrative, operations and human resources services. In exchange for such management
services, we paid a monthly fee to the Management Company based on our sales for the relevant period. In addition, we agreed to
indemnify the Management Company to the fullest extent permitted by law from and against all losses arising from its performance
under the Management Services Agreement.
We entered into the
Amended and Restated Management Services Agreement with the Management Company, effective January 2015, pursuant to which the Management
Company provides reduced management services to SSE Holdings comprised of executive leadership from Mr. Meyer and other members
of USHG’s senior management; menu innovation advisory services by Mr. Meyer; strategic development advisory services by Mr.
Meyer; leadership development services; and limited human resources services. In addition, we are no longer obligated to pay management
fees to the Management Company in connection with any services. The initial term of the Amended and Restated Management Services
Agreement is through December 31, 2019, with renewal periods. We have also agreed to indemnify the Management Company to the fullest
extent permitted by law from and against all losses arising from its performance under the Amended and Restated Management Services
Agreement.
Master
License Agreement with Union Square Events
In fiscal 2011, we
entered into a Master License Agreement (as amended, the “
MLA
”) with Hudson Yards Sports and Entertainment LLC
(doing business as Union Square Events) (“
USE
”), a subsidiary of USHG, to operate Shake Shack branded limited
menu concession stands in sports and entertainment venues within the United States. The agreement expires on December 31,
2027 and includes five consecutive five-year renewal options at USE’s option. As consideration for these rights, USE pays
us a license fee based on a percentage of net food sales (as defined in the MLA). USE also pays us a percentage of profits on sales
of branded beverages (as defined in the MLA). For the fiscal year ended December 28, 2016, Union Square Events paid $309,000 in
license fees pursuant to the MLA.
Madison Square Park Conservancy
Mr. Meyer serves as
a director of the Madison Square Park Conservancy (“
MSP Conservancy
”), with which we have a license agreement
and pay license fees to operate our Madison Square Park Shack. Amounts paid to Madison Square Park Conservancy as rent amounted
to $1,062,000 for fiscal 2016. Total amounts due to the MSP Conservancy as of December 28, 2016 were $1,000.
Share Our Strength
Mr. Meyer serves as
a director of Share Our Strength, for which Shake Shack holds the “Great American Shake Sale” every year
during the month of May to raise money and awareness for childhood
hunger. During the Great American
Shake Sale, we encourage guests to donate money to Share Our Strength’s No Kid Hungry campaign in exchange for a coupon for
a free cake-themed shake. All of the guest donations we collect go directly to Share Our Strength. We raised a total of $587,000
in fiscal 2016, and the proceeds were remitted to Share Our Strength. We incurred costs of approximately $117,000 for fiscal 2016
representing the cost of the free shakes redeemed.
Mobo Systems, Inc.
Mr. Meyer serves as a director of Mobo Systems,
Inc. (also known as “
Olo
”), a platform we use in connection with our mobile ordering application. No amounts
were paid to Olo for fiscal 2016.
The IPO and Other Organizational Transactions
In connection with
the IPO, we engaged in transactions with certain of our directors, executive officers and other persons and entities which are
or became holders of more than 5% of our Class A common stock or Class B common stock upon the consummation of the IPO and other
transactions completed in connection with the IPO (collectively, the “
Organizational Transactions
”), including
entry into the SSE Holdings LLC Agreement, the Stockholders Agreement, the Tax Receivable Agreement, and the Registration Rights
Agreement, each of which is discussed below.
SSE Holdings LLC Agreement
We operate our business
through SSE Holdings and its subsidiaries. We and the owners of SSE Holdings at the time of the IPO entered into SSE Holdings’
third amended and restated limited liability company agreement (as amended, the “
SSE Holdings LLC Agreement
”),
effective February 4, 2015. The operations of SSE Holdings, and the rights and obligations of the holders of LLC Interests, are
set forth in the SSE Holdings LLC Agreement.
The SSE Holdings LLC
Agreement provides the owners of SSE Holdings following the IPO with the right to have their LLC Interests redeemed for, at our
election, either newly-issued shares of our Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted
average market price of one share of Class A common stock for each LLC Interest redeemed (subject to customary adjustments, including
for stock splits, stock dividends and reclassifications).
The share settlement
will be the default payment unless and until a majority of the members of our Board of Directors who do not hold any LLC Interests
elect cash settlement. In the event of cash settlement, we would issue new shares of Class A common stock and use the proceeds
from the sale of these newly-issued shares of Class A common stock to fund the cash settlement which, in effect, limits the amount
of the cash payment to the redeeming member. If we decide to make a cash payment, an owner of SSE Holdings has the option to rescind
its redemption request within a specified time period.
Upon the effective
date of redemption, the redeeming member will surrender its LLC Interests to SSE Holdings for cancellation. Concurrently, we will
contribute either cash or shares of Class A common stock to SSE Holdings, which will then distribute such cash or shares of Class
A common stock to the redeeming owner of SSE Holdings to complete the redemption. In addition, SSE Holdings will issue to us an
amount of newly-issued LLC Interests equal to the number of LLC Interests redeemed from the owner of SSE Holdings.
In the event of a redemption
request by an owner of SSE Holdings, we may, alternatively and at our option, effect a direct exchange of cash or our Class A common
stock for such LLC Interests with such owner of SSE Holdings in lieu of a redemption.
Whether by redemption
or exchange, we are obligated to ensure that at all times the number of LLC Interests that we own equals the number of shares of
Class A common stock issued by us (subject to certain exceptions for treasury shares and shares underlying certain convertible
or exchangeable securities).
In fiscal 2016, redemptions were effected
for the following directors, executive officers and beneficial owners of more than 5% of our Class A common stock or Class B common
stock (and immediately family members of the foregoing) on the following dates, in the following amounts:
Redeeming Owners of SSE Holdings
|
Effective Dates of Redemption
|
Shares of Class A Common
Stock Issued upon Redemption
|
Randy Garutti
1
|
March 9, 2016
|
10,000
|
|
April 5, 2016
|
10,000
|
|
April 27, 2016
|
10,000
|
|
June 7, 2016
|
10,000
|
|
July 6, 2016
|
10,000
|
|
August 2, 2016
|
10,000
|
|
September 23, 2016
|
10,000
|
|
October 25, 2016
|
10,000
|
|
December 27, 2016
|
10,000
|
Union Square Hospitality Group, LLC
2
|
November 30, 2016
|
95,238
|
Jeff Flug/Gulf Five LLC
|
January 14, 2016
|
150,000
|
|
May 18, 2016
|
300,000
|
|
August 2, 2016
|
214,822
|
Robert Vivian
|
December 14, 2016
|
7,500
|
LGP Malted Coinvest LLC
3
|
March 9, 2016
|
6,560
|
|
March 14, 2016
|
6,560
|
|
March 30, 2016
|
32,800
|
|
May 18, 2016
|
21,867
|
|
June 3, 2016
|
10,933
|
|
August 1, 2016
|
21,867
|
|
August 26, 2016
|
21,867
|
|
October 28, 2016
|
21,867
|
Green Equity Investors VI, L.P.
3
|
March 9, 2016
|
87,640
|
|
March 14, 2016
|
87,640
|
|
March 30, 2016
|
438,198
|
|
May 18, 2016
|
292,131
|
|
June 3, 2016
|
146,067
|
|
August 1, 2016
|
292,131
|
|
August 26, 2016
|
292,131
|
|
October 28, 2016
|
292,131
|
SEG Partners, LP
|
May 2, 2016
|
100,000
|
|
May 25, 2016
|
55,000
|
SEG Partners II, L.P.
|
May 2, 2016
|
400,000
|
|
May 25, 2016
|
140,000
|
|
(1)
|
All redemptions effected for Mr. Garutti were done so pursuant to Rule 10b5-1 insider trading plans, adopted on December 16,
2015 and, upon its expiration, August 23, 2016.
|
|
(2)
|
Daniel Meyer may be deemed to share voting and investment power with respect to the shares of the Company’s Class A common
stock and Class B common stock held by USHG.
|
|
(3)
|
Each of the partners of LGP, including Mr. Jonathan D. Sokoloff, may be deemed to have voting and investment power with respect
to the shares of the Company’s Class A common stock and Class B common stock held by LGP Malted Coinvest LLC and Green Equity
Investors VI, L.P. Each of these individuals disclaims beneficial ownership of such shares.
|
Stockholders Agreement
We entered into the
stockholders agreement (as amended, the “
Stockholders Agreement
”) with each member of the Voting Group, effective
February 4, 2015. USHG, of which Mr. Meyer serves as Chief Executive Officer, is a party to the Stockholders Agreement.
The Stockholders Agreement,
as further described below, contains specific rights, obligations and agreements of these parties as owners of our Class A common
stock and Class B common stock.
Voting Agreement
.
Under the Stockholders Agreement, the members of the Voting Group agree to take all necessary action, including casting all votes
to which such members are entitled to cast at any annual or special meeting of stockholders, so as to ensure that the composition
of our Board of Directors and its committees complies with the provisions of the Stockholders Agreement related to the composition
of our Board of Directors and its committees.
In addition, the members
of the Voting Group agree to vote their shares of Class A common stock and Class B common stock in favor of the election
of the nominees of certain members of the Voting Group to our Board of Directors and committees upon their nomination by the nominating
and corporate governance committee of our Board of Directors.
Meyer Group Approvals
.
Under the Stockholders Agreement, the actions listed below by us or any of our subsidiaries require the approval of the Meyer Group
for so long as the Meyer Group collectively owns at least 10% of the total shares of Class A common stock and Class B common stock
owned by it immediately following the consummation of the IPO. The actions include:
|
·
|
change in control transactions;
|
|
·
|
the sale, lease or exchange of all or a substantial amount of the property and assets of Shake Shack, SSE Holdings or any of
SSE Holdings’ subsidiaries, taken as a whole;
|
|
·
|
initiating any liquidation, dissolution, bankruptcy or other insolvency proceeding involving Shake Shack, SSE Holdings or any
of their respective subsidiaries;
|
|
·
|
terminating the employment of our Chief Executive Officer or hiring a new Chief Executive Officer;
|
|
·
|
any authorization or issuance of equity securities of Shake Shack or its subsidiaries other than (i) pursuant to any equity
incentive plans or arrangements approved by our Board of Directors or (ii) upon an exchange of shares of Class B common stock together
with SSE Holdings Units for shares of Class A common stock;
|
|
·
|
increasing or decreasing the size of our Board of Directors;
and
|
|
·
|
any amendment or amendments to the organizational documents of Shake Shack or SSE Holdings.
|
Tax Receivable
Agreement
We entered into the
tax receivable agreement (the “
TRA
”), effective February 4, 2015, with the owners of SSE Holdings at the time
of the IPO. The TRA provides for the payment by us to such persons of 85% of the amount of tax benefits, if any, that we actually
realize, or in some circumstances are deemed to realize, as a result of (i) increases in our share of the tax basis in the net
assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments
made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “
TRA Payments
”).
The TRA Payments are not conditioned upon any continued ownership interest in either SSE Holdings or us by any owner of SSE Holdings
following the IPO. The rights of each owner of SSE Holdings following the IPO under the TRA are assignable to transferees of its
LLC Interests (other than Shake Shack as transferee pursuant to subsequent redemptions (or exchanges) of the transferred LLC Interests).
We expect to benefit from the remaining 15% of tax benefits, if any, that we may actually realize.
There were no amounts
paid under the Tax Receivable Agreement in fiscal 2016. On February 3, 2017, $1,470,936 was paid under the Tax Receivable Agreement
for amounts due related to the 2015 tax year to the owners of SSE Holdings through all or part of fiscal 2015, including its directors,
executive officers and beneficial owners of more than 5% of our Class A common stock or Class B common stock (and immediately family
members of the foregoing).
Registration
Rights Agreement
We entered into the
registration rights agreement (as amended, the “
Registration Rights Agreement
”), effective February 4, 2015,
with the owners of SSE Holdings at the time of the IPO. The Registration Rights Agreement provides such owners certain registration
rights whereby they can require us to register under the Securities Act of 1933, as amended (the “
Securities Act
”),
shares of Class A common stock issuable to them upon redemption or exchange, at our election, of their LLC Interests, and certain
affiliates of former indirect members of SSE Holdings can require us to register under the Securities Act the shares of Class A
common stock issued to them in connection with the Organizational Transactions. The Registration Rights Agreement also provides
for piggyback registration rights for the owners of SSE Holdings prior to the IPO.
On October 8, 2015, we filed a registration
statement on Form S-1 (the “
S-1 Resale Shelf
”) to register the sale of up to 26,160,694 shares of our Class
A common stock from time to time by certain affiliates of former indirect members of SSE Holdings and those owners of SSE Holdings
as of the date of the S-1 Resale Shelf, including the following directors, executive officers and beneficial owners of more than
5% of our Class A common stock or Class B common stock (and immediately family members of the foregoing): Randy Garutti (Chief
Executive Officer), Jeff Uttz (then Chief Financial Officer), Daniel Meyer (and other members of the Meyer Group) (Chairman of
the Board), Jeff Flug (and his affiliates) (director), Robert Vivian (director), Jon Sokoloff (director), LGP Malted Coinvest LLC,
Green Equity Investors VI, L.P., Green Equity Investors Side VI, L.P., SEG Partners, L.P., SEG Partners II, L.P., and SEG Partners
Offshore Master Fund Ltd. The S-1 Resale Shelf was declared effective by the SEC on November 12, 2015.
On March 10, 2016, we filed a post-effective
amendment to the S-1 Resale Shelf to convert it to a registration statement on Form S-3 (the “
S-3 Resale Shelf
”).
The S-3 Resale Shelf was declared effective by the SEC on March 22, 2016.
Indemnification Agreements
Our bylaws provide
that we will indemnify our directors and officers to the fullest extent permitted by the General Corporation Law of the State of
Delaware (the “
DGCL
”), subject to certain exceptions contained in our bylaws. In addition, our certificate of
incorporation, provides that our directors will not be liable for monetary damages for breach of fiduciary duty.
We entered into indemnification
agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and
directors with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted
under the DGCL, subject to certain exceptions contained in those agreements. There is no pending litigation or proceeding naming
any of our directors or officers to which indemnification is being sought, and we are not aware of any pending litigation that
may result in claims for indemnification by any director or officer.
Policies and Procedures for Related Person
Transactions
Our Board of Directors
recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper
valuation (or the perception thereof). Our Board of Directors adopted a written policy on transactions with related persons that
is in conformity with the requirements for issuers listed on the New York Stock Exchange. Under the policy:
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any Related Person Transaction (as defined below), and any material amendment or modification to
a Related Person Transaction, must be reviewed and approved or ratified by the Audit Committee, which is composed solely of independent
directors who are disinterested, or by the disinterested members of the Board of Directors; and
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any employment relationship or transaction involving an executive officer and any related compensation
must be approved by the Compensation Committee or recommended by the Compensation Committee to the Board of Directors for its approval.
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A Related Person Transaction
is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we
were, are or will be a participant and the amount involved exceeds $120,000 in any one fiscal year, and in which any Related Person
(as defined below) had, has or will have a direct or indirect material interest. Further, if a Related Person enters into transactions,
arrangements or relationships in which we were, are or will be a participant and the aggregate amount involved in such transactions,
arrangements or relationships exceeds $120,000 in any one fiscal year, and in which any Related Person had, has or will have a
direct or indirect material interest, each of such transactions, arrangements or relationships, in conformity with SEC rules, shall
be deemed to be a Related Person Transaction for purposes of this policy.
A Related Person is
each of the following: (i) any person who has served as a director or executive officer since the beginning of our last completed
fiscal year; (ii) any nominee for director at the Annual Meeting; (iii) any person who beneficially owns more than 5% of our outstanding
Class A common stock or Class B common stock; and (iv) any immediate family member, or other person (other than a tenant or employee),
sharing the household of any person identified in part (i), (ii) or (iii).
Identification
of Related Party Transactions
Our Legal department,
in consultation with our Accounting/Finance team, is primarily responsible for developing and implementing processes and procedures
to obtain information regarding
related persons with
respect to potential Related Person Transactions and then determining, based on the facts and circumstances, whether the potential
Related Person Transactions do, in fact, constitute a Related Person Transaction. In addition, any potential Related Person Transaction
that is proposed to be entered into by us must be reported to our General Counsel by both the related person and the person at
the Company responsible for such potential Related Person Transaction.
Audit Committee Pre-Approval
If the Company’s
Legal department determines that a transaction or relationship is a Related Person Transaction, then each such transaction will
be presented to the Audit Committee of the Board of Directors. The Audit Committee will (i) review the relevant facts and circumstances
of each Related Person Transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s
length dealings with an unrelated third party and the extent of the Related Person’s interest in the transaction, (ii) take
into account the conflicts of interest and corporate opportunity provisions of our Code of Business Conduct and Ethics, and (iii)
either approve, ratify or disapprove the Related Person Transaction. If advance committee approval of a Related Person Transaction
requiring the Audit Committee’s approval is not feasible, then the transaction may be preliminarily entered into by management
upon prior approval of the transaction by the chairperson of the Audit Committee, subject to ratification of the transaction by
the Audit Committee at the Audit Committee’s next regularly scheduled meeting.
Management will update
the Audit Committee as to any material changes to any approved or ratified Related Person Transaction and shall provide a status
report at least annually at a regularly scheduled meeting of the Audit Committee of all then current Related Person Transactions.
No director may participate
in approval of a Related Person Transaction for which he or she is a related person.
Disclosure
All Related Person
Transactions are to be disclosed in the Company’s applicable filings as required by the Securities Act and the Exchange Act,
and related rules. Furthermore, any Related Person Transaction must be disclosed to the full Board of Directors.
Other Agreements
Management must assure
that all Related Person Transactions are not in violation of and are approved in accordance with any requirements of the Company’s
financing or other material agreements.
Audit
Committee Report
The following Report
of the Audit Committee of the Board of Directors of Shake Shack Inc. (the “
Company
”) does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any future filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), except to the extent we
specifically incorporate this Report by reference.
Management has the
primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements
and for the public reporting process. Ernst & Young LLP (“
EY
”), the Company’s independent registered
public accounting firm, is responsible for expressing opinions on the conformity of the Company’s audited financial statements
with generally accepted accounting principles.
The Audit Committee
has reviewed and discussed with management and EY the Company’s audited consolidated financial statements for the fiscal
year ended December 28, 2016 and Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The Audit Committee
also has discussed with EY the matters required to be discussed by the Public Company Accounting Oversight Board (“
PCAOB
”)
Auditing Standard No. 1301, “Communication with Audit Committees.”
The Audit Committee
also received the written disclosures and the letter from EY that are required by applicable requirements of the PCAOB regarding
EY’s communications with the Audit Committee concerning independence, and has discussed with EY its independence. The Audit
Committee also considered whether EY’s provision of non-audit services to the Company is compatible with maintaining EY’s
independence. This discussion and disclosure informed the Audit Committee of EY’s independence and assisted the Audit Committee
in evaluating that independence. On the basis of the foregoing, the Audit Committee concluded that EY is independent from the Company,
its affiliates and management.
Based upon its review
of the Company’s audited financial statements and the discussions noted above, the Audit Committee recommended to the Board
of Directors that our audited consolidated financial statements for the fiscal year ended December 28, 2016 be included in the
Company’s Annual Report on Form 10-K for such fiscal year for filing with the SEC.
This report has been
furnished by the members of the Audit Committee.
THE AUDIT COMMITTEE
Robert Vivian, Chair
Jeff Flug
Evan Guillemin
Joshua Silverman
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the
Exchange Act and SEC rules require our directors, executive officers and persons who own more than 10% of any class of our common
stock to file reports of their ownership and changes in ownership of our common stock with the SEC. Based solely on our review
of the reports filed with the SEC and written representations from such reporting persons, we determined that all Section 16 reports
were timely filed in fiscal 2016 by our directors, executive officers and beneficial owners of more than 10% of any class of our
common stock, with the following exceptions: (1) Jeff Flug and Gulf Five LLC collectively filed 3 late reports that reported, in
the aggregate, 3 transactions on an untimely basis, (2) David A. Swinghamer and the David A. Swinghamer GRAT collectively filed
11 late reports that reported, in the aggregate, 15 transactions on an untimely basis, (3) ACG Shack LLC filed 1 late report that
reported 1 transaction on an untimely basis, (4) Richard D. Coraine and the Richard D. Coraine 2012 Family Trust UA DTD 12/31/12
collectively filed 2 late reports that reported, in the aggregate, 4 transactions on an untimely basis, (5) Laura Sloate filed
2 late reports that reported, in the aggregate, 2 transactions on an untimely basis, and (6) Green Equity Investors VI, LP and
LGP Malted Coinvest LLC collectively filed 2 reports that reported, in the aggregate, 2 transactions on an untimely basis.
Stockholder
Proposals
Stockholder proposals
pursuant to SEC Rule 14a-8 for inclusion in the Company’s proxy statement and form of proxy relating to the Company’s
2018 annual meeting of stockholders to be held in 2018 must be received by the Company at the principal executive offices of the
Company no later than the close of business on December 28, 2017. Stockholders wishing to make a director nomination or bring a
proposal before the annual meeting to be held in 2018 (but not include it in the Company’s proxy materials) must provide
written notice of such proposal to the Secretary of the Company at the principal executive offices of the Company not later than
the close of business on March 14, 2018 and not earlier than the close of business on February 12, 2018, assuming the Company does
not change the date of the 2018 annual meeting of stockholders by more than 30 days before or 70 days after the anniversary of
the 2017 Annual Meeting. Any matter so submitted must comply with the other provisions of the Company’s amended and restated
bylaws and be submitted in writing to the Secretary at the principal executive offices of the Company.
Other
Business
The Board does not
presently intend to bring any other business before the Annual Meeting, and, to the knowledge of the Board, no matters are to be
brought before the Annual Meeting except as specified in the Notice of the Annual Meeting. As to any business that may properly
come before the Annual Meeting, however, it is intended that proxies will be voted in respect thereof in accordance with the judgment
of the persons voting such proxies.
Whether or not you
expect to attend the meeting, please complete, date, sign and promptly return a proxy card, or vote via the Internet or by telephone,
so that your shares may be represented at the meeting.
Where
You Can Find More Information
The Company files annual,
quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. We make available free
of charge on or through our Internet website,
investor.shakeshack.com
, our reports and other information filed with or furnished
to the SEC and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC’s Internet website,
www.sec.gov
, also contains reports, proxy statements and other information about issuers, like us, who file electronically
with the SEC.
WE WILL PROVIDE,
WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY STOCKHOLDER, A COPY OF OUR 2016 ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES REQUIRED TO BE FILED WITH THE SEC PURSUANT TO RULE 13a-1. STOCKHOLDERS SHOULD
DIRECT SUCH REQUESTS TO THE COMPANY’S SECRETARY AT 24 UNION SQUARE EAST, 5TH FLOOR, NEW YORK, NEW YORK, 10003, OR BY EMAIL
AT INVESTOR@SHAKESHACK.COM.
SHAKE SHACK INC.
24 Union Square East, 5
th
Floor New York, New York 10003
VOTE BY INTERNET – www.proxyvote.com
Use the Internet
to transmit your voting instructions and for electronic delivery of information up until 11:59 PM Eastern Time the day before
the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you
would like to reduce the cost incurred by our company in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE BY PHONE – 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions until 11:59 PM Eastern Time the day before the cut-off date or meeting date. Have your proxy card in
hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in
the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
DETACH AND RETURN
THIS PORTION ONLY
SHAKE SHACK INC.
The Board of Directors recommends you vote “
FOR
” all of
the nominees listed:
1. Election of Directors Nominees:
Terms expiring at the 2020 Annual
Meeting of Stockholders:
For Withhold
01) Randy Garutti 02) Joshua Silverman 03) Jonathan
D. Sokoloff
The Board of Directors recommends you vote “
FOR
” the following proposal:
For Against Abstain 2. Ratification of Ernst & Young LLP as the Company’s Independent
Registered Public Accounting Firm
For
address changes and/or comments, please check this box and write them on the back where indicated.
Yes No
Please indicate if you plan to attend this meeting.
Note:
Proxies are authorized
to vote in their discretion with respect to other matters which may come before the meeting or any adjournment or postponement
thereof. Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) (SIGN WITHIN
BOX) Date
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting
The Annual Report and Notice and Proxy Statement
are available at
www.proxyvote.com
.
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SHAKE
SHACK INC. ANNUAL MEETING OF STOCKHOLDERS - JUNE 12, 2017 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Randy
Garutti (Chief Executive Officer) and Zachary Koff (Chief Operating Officer), or either of them, each with the power of substitution,
are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess
if personally present, at the Annual Meeting of Stockholders of Shake Shack Inc. to be held at the offices of Proskauer Rose LLP,
Eleven Times Square, New York, New York, 10036 on June 12, 2017 at 9:00 AM local time or at any adjournment or postponement thereof.
The undersigned hereby acknowledges receipt of the Notice of the 2017 Annual Meeting of Stockholders and the accompanying Proxy
Statement and revokes any proxy heretofore given with respect to such meeting.
This proxy, when properly executed, will be
voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’
recommendations.
Address Changes/Comments:
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side)
Continued
and to be signed on reverse side
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