CAKE Cheesecake Factory Inc

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION​

Washington, D.C. 20549

SCHEDULE 14A​

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.  )

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Soliciting Material under §240.14a-12

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The Cheesecake Factory Incorporated

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April 15, 2021

Dear Stockholder:

First and foremost, I would like to take this opportunity to address the risks and uncertainties continuing to impact our business and communities as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic, which was declared a National Public Health Emergency on March 13, 2020. While navigating through this crisis, we have had to take decisive action and make some difficult decisions. With the health and well-being of our staff members and guests remaining our highest priority, we have and will continue to follow the guidance of the Centers for Disease Control and Prevention and our local health departments. Although we have experienced significant disruptions to our business as a result of the pandemic, we believe, with 43 years of history as a guide, that we will overcome these near-term challenges and be even better positioned for the long-term.

It is within this context and background that we cordially invite you to virtually attend The Cheesecake Factory Incorporated, a Delaware corporation (the “Company” and “we,” “us” or “our”), annual meeting of stockholders on Thursday, May 27, 2021 at 10:00 a.m., Pacific Daylight Time (“Annual Meeting”). Due to the COVID-19 pandemic and related governmental orders, we are holding a virtual-only meeting. Stockholders can attend the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/CAKE2021 by using the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials. The matters to be acted upon at the Annual Meeting are described in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.

Pursuant to rules adopted by the Securities and Exchange Commission, we are providing you access to our proxy materials over the Internet. This method allows us to deliver the proxy materials to you more quickly, lowers our costs and helps to conserve natural resources. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (“Notice of Availability”) to our stockholders who have not asked us to provide proxy materials in printed form. All stockholders receiving the Notice of Availability can request a printed set of proxy materials. All stockholders can access the proxy materials at www.proxyvote.com, irrespective of whether they receive the Notice of Availability or a printed copy of the proxy materials. Instructions on how to access the proxy materials online or request a printed copy may be found in the Notice of Availability and in the attached Proxy Statement. In addition, stockholders may request proxy materials in printed form by mail or electronically by email on an ongoing basis.

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the virtual Annual Meeting via the Internet, we urge you to vote and submit your proxy online, by telephone or by mail (see below for instructions) in order to ensure the presence of a quorum. If you attend the virtual Annual Meeting, you will have the right to revoke your proxy and vote your shares via the Internet. If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares. Additionally, if you hold your shares through an account with a brokerage firm, bank or other nominee, you may not vote these shares online at the virtual Annual Meeting unless you obtain a “legal proxy” from the organization that holds your shares, giving you the right to vote the shares at the virtual Annual Meeting.

Sincerely,

/s/ David Overton
Chairman of the Board and Chief Executive Officer

 

 

 

THE CHEESECAKE FACTORY INCORPORATED​

26901 Malibu Hills Road
Calabasas Hills, California 91301

 

 

TABLE OF CONTENTS

 

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THE CHEESECAKE FACTORY INCORPORATED

 

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cumulative voting rights and will not be entitled to appraisal or similar dissenters’ rights in connection with the proposals to be voted on at the Annual Meeting.

The representation of a majority of the shares entitled to vote at the Annual Meeting, present in person (including via the virtual Annual Meeting) or represented by proxy will represent a quorum for the transaction of business. Shares of common stock or Series A preferred stock represented by a properly signed and returned proxy will be treated as present at the Annual Meeting for purposes of determining a quorum, regardless of whether the proxy is marked as casting a vote or abstaining or constitutes a broker non-vote.

The holder of the Series A preferred stock has agreed to vote in favor of each of the nominees in Proposal 1 and in favor of Proposals 2 and 3. The holder of Series A preferred stock is not entitled to vote on Proposal 4. Additionally, David Overton, our Chief Executive Officer and Chairman of the Board, and his affiliated parties have agreed to vote in favor of Proposal 4. Mr. Overton and his affiliated parties will have the right to vote shares equal to 6.3% of the total outstanding voting power entitled to vote on Proposal Four. Shares held by Roark are not included in this calculation because they will not be entitled to vote on Proposal Four. Please see the section entitled “The Board and Corporate Governance—Series A Director—Voting and Support Agreements” in this Proxy Statement for additional information.

For Proposal 1, our Bylaws provide that, in the election of directors, nominees shall be elected by a plurality of the votes cast by the holders of shares of common stock and Series A preferred stock, voting together as a single class (and on an as-converted basis, in the case of the Series A preferred stock, subject to the Ownership Limitation), present in person (including via the virtual Annual Meeting) or represented by proxy at the Annual Meeting; provided, that each nominee has agreed that if elected, he or she will submit an irrevocable resignation for consideration by the Board promptly following an uncontested election if he or she fails to receive a majority of votes cast. An uncontested election (such as the election held at this Annual Meeting) means that the number of nominees for director does not exceed the number of directors to be elected at that meeting. A majority of votes cast means that the number of shares cast “FOR” a nominee’s election exceeds the number of votes cast “AGAINST” that nominee. Abstentions and broker non-votes are not considered a vote cast and, therefore, will have no effect on the outcome of the vote other than to reduce the number of affirmative votes required to elect a nominee. “Broker non-votes” are shares of stock held in record name by brokers or nominees for which instructions have not been received from the beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary voting power under applicable rules or the instrument under which it serves in such capacity.

Proposals 2 and 3 require the approval of a majority of the shares of common stock and Series A preferred stock, voting together as a single class (and on an as-converted basis, in the case of the Series A preferred stock, subject to the Ownership Limitation), present in person (including via the virtual Annual Meeting) or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions as to these proposals will count as shares present and entitled to vote on the proposals and, accordingly, will count as votes “AGAINST” the proposal. Broker non-votes are not considered present and entitled to vote on the proposal and will have no effect on the outcome of the vote for the proposal, other than to reduce the number of affirmative votes required to approve the proposal. The ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2021 (Proposal 2) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected on Proposal 2.

Proposal 4 requires the approval of a majority of the shares of common stock, present in person (including via the virtual Annual Meeting) or represented by proxy at the Annual Meeting and entitled to vote on such proposal. In accordance with applicable rules of Nasdaq, the holder of our Series A preferred stock is not entitled to vote such shares on this proposal. Abstentions as to this proposal will count as shares present and entitled to vote on the proposal and, accordingly, will count as votes “AGAINST” the proposal. Broker non-votes are not considered present and entitled to vote on the proposal and will have no effect on the outcome of the vote for the proposal, other than to reduce the number of affirmative votes required to approve the proposal.

How to Vote at the Virtual Annual Meeting

If you are the record holder of your stock as of the Record Date, you may submit a proxy by executing and returning the enclosed proxy card(s) in the provided postage-paid envelope. You may also attend the

 

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virtual Annual Meeting and vote your shares at www.virtualshareholdermeeting.com/CAKE2021 during the Annual Meeting. You will need the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

If a bank, broker or other nominee is the record holder of your stock on the Record Date, you will be able to vote by following the instructions on the voting instruction form or notice that you receive from your bank, broker or other nominee. If a bank, broker or other nominee is the record holder of your stock on the Record Date you must obtain and submit a legal proxy from your broker or other nominee as the record holder and a letter from your broker or other nominee showing that you were the beneficial owner of your shares on the Record Date.

Proxies

Proxies delivered pursuant to this solicitation are revocable prior to their exercise and at the stockholder’s option by (i) attending and voting at the virtual Annual Meeting, as described above (although attending the virtual Annual Meeting via the Internet itself will not revoke a proxy), or (ii) filing a written notice with Scarlett May, our Secretary, revoking the proxy, or (iii) submitting another duly executed proxy bearing a later date. Unless previously revoked, all proxies representing shares entitled to vote delivered pursuant to this solicitation will be voted at the Annual Meeting by the named attorneys-in-fact and agents, to the extent authorized, in accordance with the directions contained therein.

If no directions are given, the shares represented by such proxies will be voted:

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FOR the election of the Board’s nominees for director: Mses. Edie A. Ames and Janice L. Meyer and Messrs. Alexander L. Cappello, Jerome I. Kransdorf, Laurence B. Mindel, David Overton, David B. Pittaway and Herbert Simon;

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FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2021, ending December 28, 2021;

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FOR approval of, on a non-binding, advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the SEC; and

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FOR the approval of, pursuant to Nasdaq Listing Rule 5635, the issuance of shares of common stock in excess of the applicable ownership limitation upon conversion of the outstanding shares of Series A preferred stock.

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The named proxy holders may vote in their discretion upon such other matters as may properly come before the Annual Meeting, including any motion made for adjournment or postponement (including for purposes of soliciting additional votes).

How do I attend the Virtual Annual Meeting?

The live audio webcast of the Annual Meeting will begin promptly at 10:00 a.m. Pacific Daylight Time on May 27, 2021. Online access to the audio webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for our stockholders to log in and test their devices’ audio system. We encourage our stockholders to access the meeting in advance of the designated start time. If you encounter any difficulties accessing the webcast, please call the technical support number that will be posted on the Virtual Shareholder Meeting log in page.

To attend the Annual Meeting, stockholders will need to log-in to www.virtualshareholdermeeting.com/​CAKE2021 using the 16-digit control number on the proxy card or voting instruction form.

Can I submit questions prior to or at the Virtual Annual Meeting?

Stockholders may submit questions in writing in advance or during the Annual Meeting at the following website: www.virtualshareholdermeeting.com/CAKE2021. Stockholders will need the 16-digit control number which appears on their proxy card (printed in the box and marked by the arrow) and the instructions that accompanied their proxy materials. As part of the Annual Meeting, we will hold a live Q&A session, during which we will answer questions pertinent to the Company and the meeting matters, as time permits.

 

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Solicitation

We pay for the cost of preparing, assembling and mailing the Notice of Internet Availability, the Notice of Annual Meeting and Proxy Statement and the cost of this solicitation. Our directors, officers and other staff members may solicit proxies, without additional remuneration, in person or by telephone, facsimile or email transmission. Banks, brokerage houses and other custodians, nominees or fiduciaries will be asked to forward soliciting material to their principals and to obtain authorization for the execution of proxies, and we will reimburse them for their reasonable out-of-pocket expenses incurred in that regard.

 

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ITEMS TO BE VOTED ON

PROPOSAL ONE
Election of Directors

General.   Our Bylaws provide for a board of directors consisting of no less than five and no more than thirteen members. The exact number within this range is determined by resolution of the Board. The Board currently has set the number of directors at nine, including the Series A Director, who is subject to election only by the holder of Series A preferred stock and is not a nominee pursuant to this proposal. Please see the section entitled “Our Board of Director Nominees” in this Proxy Statement for additional information regarding the Series A Director.

Nominees.   Our Director nominees exhibit diverse backgrounds, experience, skills, tenure and perspectives that uniquely contribute to the success of our business.

(1)

Mr. Ginsberg will be subject to election only by the Series A preferred stock.

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The Corporate Governance and Nominating Committee of the Board (“Governance Committee”) recommended the nomination, which the Board approved, of the following individuals for re-election to the Board for a term that will expire at the 2022 annual meeting of stockholders or until their respective successors shall be elected and duly qualified: Edie A. Ames; Alexander L. Cappello; Jerome I. Kransdorf; Janice L. Meyer; Laurence B. Mindel; David Overton; David B. Pittaway; and Herbert Simon. All nominees are current directors of the Company. For biographical information regarding the director nominees, please see the section entitled “Our Board of Director Nominees” in this Proxy Statement.

Unless a stockholder specifies otherwise, the shares represented by each returned proxy will be voted FOR the election of Mses. Edie A. Ames and Janice L. Meyer, and Messrs. Alexander L. Cappello, Jerome I. Kransdorf, Laurence B. Mindel, David Overton, David B. Pittaway and Herbert Simon.

In the event any of the nominees becomes unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders will vote the proxies for any substitute nominee designated by the Board to fill the vacancy

Required Vote.   Our Bylaws provide that, in the election of directors, nominees shall be elected by a plurality of the votes cast by the holders of shares of common stock and the holder of Series A preferred stock, voting together as a single class (and on an as-converted basis, in the case of the Series A preferred

 

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stock, subject to the Ownership Limitation), present in person (including via the virtual Annual Meeting) or represented by proxy at the Annual Meeting; provided that each nominee must agree that, in an uncontested election, if elected, he or she will submit an irrevocable resignation for consideration by the Board promptly following the election if he or she fails to receive a majority of votes cast. Each of the nominees included in this proposal has so agreed. An uncontested election (such as the election held at this Annual Meeting) means that the number of nominees for director does not exceed the number of directors to be elected at that meeting. A majority of votes cast means that the number of shares cast “FOR” a nominee’s election exceeds the number of votes cast “AGAINST” that nominee. Abstentions and broker non-votes are not considered a vote cast and, therefore, will have no effect on the outcome of the vote other than to reduce the number of affirmative votes required to elect a nominee. “Broker non-votes” are shares of stock held in record name by brokers or nominees for which instructions have not been received from the beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary voting power under applicable rules or the instrument under which it serves in such capacity.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EDIE A. AMES,
ALEXANDER L. CAPPELLO, JEROME I. KRANSDORF, LAURENCE B. MINDEL, JANICE L. MEYER, DAVID OVERTON, DAVID B. PITTAWAY AND HERBERT SIMON TO THE BOARD.

 

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Required Vote.   The ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2021 requires the affirmative vote of a majority of the shares of common stock and Series A preferred stock, voting together as a single class (and on an as-converted basis, in the case of the Series A preferred stock, subject to the Ownership Limitation), present in person (including via the virtual Annual Meeting) or by proxy and entitled to vote on the proposal at the Annual Meeting. Abstentions will be included in the number of shares present and entitled to vote on this Proposal 2 and will have the effect of a vote “AGAINST” Proposal 2. Broker non-votes will not be considered as present and entitled to vote on this Proposal 2. Therefore, a broker non-vote will not be counted and will have no effect on this Proposal 2 other than to reduce the number of affirmative votes required to approve this proposal. This Proposal 2 is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected on Proposal 2.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF KPMG AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2021.

 

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stock is equal to the quotient obtained by dividing (i) the sum of  (A) the Liquidation Preference, plus (B) all accrued but unpaid dividends to the extent not already included in the Liquidation Preference, by (ii) the conversion price in effect immediately before the close of business on the conversion date, which price was initially $22.23. The conversion price is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events. The conversion price is also subject to adjustment for certain antidilutive offerings occurring before April 20, 2021. Pursuant to the Certificate of Designations, unless and until approval of our stockholders is obtained as contemplated by Nasdaq Listing Rule 5635, no holder of Series A preferred stock may convert shares of Series A preferred stock through either an optional or a mandatory conversion into shares of our common stock if and solely to the extent that such conversion would result in such holder beneficially owning more than the Ownership Limitation. We have the right to settle any conversion at the request of a holder of Series A preferred stock in cash. Assuming all shares of Series A preferred stock were converted into shares of our common stock on March 15, 2021, the holder of Series A preferred stock would be entitled to receive 9,603,456 million shares of our common stock.

Subject to certain conditions, we may, at our option, require conversion of all of the outstanding shares of Series A preferred stock to common stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding the date we notify the holder of Series A preferred stock of the election to convert, the closing price of the common stock is at least 200% of the conversion price. We will not exercise our right to mandatorily convert all outstanding shares of Series A preferred stock unless certain liquidity conditions with regard to the shares of common stock to be issued upon such conversion are satisfied.

We may redeem any or all of the Series A preferred stock for an amount equal to (i) 120% of the Liquidation Preference thereof at any time following the fifth anniversary but prior to the sixth anniversary of the date of the Subscription Agreement and (ii) 100% of the Liquidation Preference at any time on or following the sixth anniversary of the date of the Subscription Agreement, in each case, by delivering notice of redemption to such holders; provided, that such holders have the right to convert the Series A preferred stock immediately prior to and in lieu of such redemption. To the extent such holder elects to convert the Series A preferred stock in lieu of such redemption and the number of shares of common stock issuable upon such conversion would exceed 19.9% of the outstanding shares of common stock, and approval of this proposal has not been obtained as of such date, any portion in excess of such limit will remain outstanding as Series A preferred stock.

The holder of Series A preferred stock generally will be entitled to vote with the holders of the shares of our common stock on all matters submitted for a vote of holders of shares of common stock (voting together with the holders of shares of common stock as one class) on an as-converted basis, subject to the Ownership Limitation. Additionally, certain matters will require the approval of the majority of the outstanding shares of Series A preferred stock, voting as a separate class, including (i) the authorization, creation, increase in the authorized amount of, or issuance of any class or series of senior or parity equity securities or any security convertible into, or exchangeable or exercisable for, shares of senior or parity equity securities, (ii) amendments, modifications or repeal of any provision of our Certificate of Incorporation or of the Certificate of Designations that would adversely affect the rights, preferences or voting powers of the Series A preferred stock, (iii) certain business combinations and binding or statutory share exchanges or reclassifications involving the Series A preferred stock unless such events do not adversely affect the rights, preferences or voting powers of the Series A preferred stock and (iv) certain transactions with affiliates.

If we undergo a Change of Control (as defined in the Certificate of Designations), we will redeem, subject to conversion rights of the holder of the Series A preferred stock, all of our then-outstanding shares of Series A preferred stock for cash consideration equal to the greater of  (i) the Liquidation Preference plus accumulated and unpaid dividends and (ii) the amount that such holder of Series A preferred stock would have been entitled to receive at such time if the Series A preferred stock were converted into common stock.

Interests of Related Parties.   Certain of our affiliates have interests in this Proposal 4 that may be different from, or in addition to, the interests of our stockholders generally. Roark is the sole owner of our Series A preferred stock and has an interest in the approval of this Proposal 4, which will allow it to convert its shares of the Series A preferred stock to shares of our common stock and have the right to vote all of its shares of the Series A preferred stock. Additionally, our director Paul D. Ginsberg is the President of Roark Capital Group, an affiliate of Roark, and was designated by Roark as a director on our Board.

 

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On April 20, 2020, David Overton, our Chief Executive Officer and Chairman of the Board, and his affiliated parties entered into an Acknowledgement and Support Agreement (the “Support Agreement”) with Roark. Pursuant to the Support Agreement, Mr. Overton and his affiliated parties have agreed to vote all of their respective shares at the Annual Meeting to approve, among other things, the issuance of common stock in connection with Roark’s conversion of Series A preferred stock. Mr. Overton and his affiliated parties will have the right to vote shares equal to 6.3% of the total outstanding voting power entitled to vote on Proposal Four. Shares held by Roark are not included in this calculation because they will not be entitled to vote on Proposal Four. Please see the section entitled “The Board and Corporate Governance—Series A Director—Voting and Support Agreements” in this Proxy Statement for additional information.

Effects if this Proposal 4 is Approved.   If stockholders approve this Proposal 4, the Ownership Limitation will be eliminated and, as a result (i) we will be permitted to issue shares of common stock upon the conversion of Series A preferred stock, and (ii) the holder of Series A preferred stock will be entitled to vote its shares of Series A preferred stock, in each case without regard to the Ownership Limitation. The issuance of common stock upon the conversion of the Series A preferred stock will result in dilution to our stockholders, and would afford our stockholders a smaller percentage interest in our voting power, liquidation value and aggregate book value. The sale or any resale of the common stock issued upon conversion of the Series A preferred stock could cause the market price of our common stock to decline.

Effects if this Proposal 4 is Not Approved.   If stockholders do not approve this Proposal 4, the Ownership Limitation will remain in effect and, as a result (i) we will not be permitted to issue shares of common stock upon the conversion of Series A preferred stock, (ii) the number of votes that may be cast by the holder of Series A preferred stock will be limited so that the Ownership Limitation is not exceeded, and (iii) if the Ownership Limitation is reached, we will be required to pay converting holders, in lieu of delivery of shares of common stock in excess of the Ownership Limitation, the cash value of such shares.

Required Vote.   The approval, pursuant to Nasdaq Listing Rule 5635, of the issuance of shares of common stock in excess of the Ownership Limitation upon conversion of the outstanding shares of our Series A preferred stock requires the affirmative vote of a majority of the shares of common stock present in person (including via the virtual Annual Meeting) or by proxy and entitled to vote on the proposal at the Annual Meeting. In accordance with applicable rules of Nasdaq, the holder of the 200,000 shares of our Series A preferred stock is not entitled to vote such shares on this proposal. Abstentions will be included in the number of shares present and entitled to vote on this Proposal 4 and will have the same effect as a vote “AGAINST” Proposal 4. Broker non-votes will not be considered as present and entitled to vote on this Proposal 4. Therefore, a broker non-vote will not be counted and will have no effect on this Proposal 4 other than to reduce the number of affirmative votes required to approve this proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL, PURSUANT TO NASDAQ LISTING RULE 5635, OF THE ISSUANCE OF SHARES OF COMMON STOCK IN EXCESS OF THE OWNERSHIP LIMITATION UPON CONVERSION OF THE OUTSTANDING SHARES OF OUR SERIES A PREFERRED STOCK.

 

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FORWARD-LOOKING STATEMENTS

Certain information included in this Proxy Statement, including the sections entitled “Corporate Social Responsibility” ​(also referred to as “CSR”) and “Compensation Discussion and Analysis” ​(also referred to as “CD&A”) set forth below, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements include, without limitation, statements regarding corporate social responsibility in this Proxy Statement and in our CSR report, the effects of the COVID-19 pandemic on our financial condition and our results of operations, including our expectations with respect to our ability to reopen and keep open our restaurants, financial guidance and projections and statements with respect to the acquisition of North Italia and Fox Restaurant Concepts LLC (“FRC”) and expectations regarding accelerated and diversified revenue growth as a result of the acquisition of North Italia and FRC, as well as expectations of our future financial condition, results of operations, sales, cash flows, plans, targets, goals, objectives, performance, growth potential, competitive position and business, and statements regarding our ability to: leverage our competitive strengths, including investing in or acquiring new restaurant concepts and expanding The Cheesecake Factory® brand to other retail opportunities; deliver comparable sales growth; provide a differentiated experience to customers; outperform the casual dining industry and increase our market share; leverage sales increases and manage flow through; manage cost pressures, including increasing wage rates, insurance costs and legal expenses, and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualified management and other staff; manage risks associated with the magnitude and complexity of regulations in the jurisdictions where our restaurants are located; increase stockholder value; find suitable sites and manage increasing construction costs; profitably expand our concepts domestically and in Canada, and work with our licensees to expand our concept internationally; support the growth of North Italia and other FRC restaurants; operate Social Monk Asian Kitchen and Grand Lux Cafe; and utilize our capital effectively. These forward-looking statements may be affected by various factors including: the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of our restaurants, international licensee restaurants and our bakery operations; demonstrations, political unrest, potential damage to or closure of our restaurants and potential reputational damage to us or any of our brands; economic, public health and political conditions that impact consumer confidence and spending, including the impact of the COVID-19 pandemic and other health epidemics or pandemics on the global economy; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the FRC concepts, Social Monk Asian Kitchen and other concepts; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; changes in laws impacting our business, including laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premises dining; increases in minimum wages and benefit costs; the economic health of our landlords and other tenants in retail centers in which our restaurants are located, and our ability to successfully manage our lease arrangements with landlords; unanticipated costs that may arise in connection with a return to normal course of business, including potential negative impacts from furlough actions; the economic health of suppliers, licensees, vendors and other third parties providing goods or services to us; the timing of the resumption of our new unit development; compliance with debt covenants; strategic capital allocation decisions including any share repurchases or dividends; the ability to achieve projected financial results; economic and political conditions that impact consumer confidence and spending; impact of tax reform legislation; adverse weather conditions in regions in which our restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the risk, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in our filings with the SEC. Such forward-looking statements include all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar expressions. These statements are based on our current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements. Forward-looking statements speak only as of the dates on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in our latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC, which are available at www.sec.gov.

 

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THE BOARD AND CORPORATE GOVERNANCE

Director Nominations Process

The Board has adopted “Policies and Procedures Regarding Board of Director Candidates” ​(the “Nominations Policy”), which describes the process by which candidates are selected for possible inclusion in the Board’s recommended slate of director nominees. Our Nominations Policy expresses the Board’s commitment to actively seek highly-qualified candidates possessing diversity of gender and ethnicity to include in the pool from which nominees are chosen. The Nominations Policy is available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.” The Board also considers stockholder guidelines, developments in state laws, and Nasdaq listing standards with respect to board diversity. The Governance Committee administers the Nominations Policy and is responsible for identifying candidates for nomination or appointment to the Board. To fulfill this function, the Governance Committee reviews, at least annually, the size and composition of the Board and its committees, including the number of directors eligible for election at the annual meeting of stockholders. The Governance Committee may solicit recommendations for nominees from directors, members of management or others. In addition, the Governance Committee will consider recommendations of a stockholder of record or beneficial owner that complies with the Nominations Policy.

Minimum Qualifications.   The Nominations Policy contains the following minimum qualifications for candidates for nomination to the Board:

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Pursuant to our Bylaws, each candidate nominated by a stockholder must consent in writing to be named in our proxy statement as a nominee and to serve as a director of the Company if elected.

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Pursuant to our Bylaws, each candidate must agree that if elected he or she will submit an irrevocable resignation to our Company’s Secretary promptly following his or her election or reelection that will be effective upon (i) such director’s failure to receive a “majority vote” for reelection in any “uncontested election” ​(as those terms are defined in our Bylaws) at which he or she is subject to reelection; and (ii) acceptance of that resignation by the Board in accordance with the Bylaws and any policies and procedures adopted by the Board for such purposes.

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Each candidate shall be an individual who has demonstrated integrity and ethics in his or her personal and professional life and has established a record of professional accomplishment in his or her chosen field.

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Each candidate shall be prepared to represent the best interests of all of our stockholders and not just one particular constituency.

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Each candidate must be prepared to participate fully in Board activities, including (with respect to non-employee candidates) active membership on Board committee(s) if appointed as a committee member, and not have other personal or professional commitments that would, in the Governance Committee’s sole judgment, interfere with or limit his or her ability to do so.

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Criteria for Evaluating Candidates; Diversity.   As described in the Nominations Policy, our Board believes director diversity enhances dialogue in the boardroom, contributing to thorough analysis of proposals and informed decision-making. The Governance Committee seeks to further develop the diverse characteristics of the Board with the goal of enhancing the Board’s ability to adequately perform its responsibilities and adhere to good corporate governance practices.

In evaluating nominations, the Governance Committee will take into consideration the overall composition of the Board, the balance of different capabilities and overall diversity in its broadest sense including in the areas of personal and professional experiences, age, gender, ethnicity, geography, financial and managerial and operational knowledge; variety of opinions and perspectives; and other differentiating characteristics.

In addition, the Governance Committee is committed to actively seeking highly qualified candidates who reflect diversity of gender and ethnicity to include in the pool from which Board nominees are chosen, including candidates from non-executive corporate positions and non-traditional environments.

 

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The Governance Committee will periodically review and assess the effectiveness of the practices used in considering potential director candidates. Following this review, the Governance Committee will present any recommendation for changes of the policy or protocols to the Board.

The Governance Committee will consider the following criteria, among other factors, in evaluating candidates for nomination in light of the size and composition of the Board and its committees:

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Satisfaction of the minimum qualifications established by the Governance Committee.

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Education and other training.

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Relevant personal and professional background, including financial, managerial and operational skills and knowledge and experience in both corporate and non-traditional environments, such as government, academia and non-profit organizations.

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Whether the candidate would qualify as an “independent” director as defined by Nasdaq’s listing standards.

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The candidate’s reputation for judgment and honesty.

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The existence of any of the relationships described in Item 407(e)(4) of Regulation S-K (“Compensation Committee Interlocks and Insider Participation”).

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The number and identity of any other boards of directors of which the candidate is a member.

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Other professional and personal commitments that could affect the candidate’s ability to serve.

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Stockholder Recommendations to the Governance Committee for Nomination of Directors.   The Nominations Policy provides that the Governance Committee will consider recommendations for nominations submitted by stockholders of record or beneficial owners. In order to give the Governance Committee enough time to evaluate a recommended candidate, the recommendation must be received by our Secretary at our principal executive offices no later than the 120th day before the date that our proxy statement was released to stockholders in connection with the previous year’s annual meeting of stockholders. With respect to the 2022 annual meeting of stockholders, recommendations must be received on or before December 17, 2021. The stockholder’s recommendation must include all of the following:

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The stockholder’s name, address and telephone number.

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The recommended candidate’s name, address and telephone number.

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The written consent of the recommended candidate to be named in our proxy statement and to serve as a director if nominated, elected or appointed, and qualified to serve.

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A description of all arrangements or understandings in connection with such recommendation between the stockholder and the recommended candidate or between the stockholder and any other person or persons (including their names).

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A description of any business, familial or other financial or personal relationship between the stockholder and the recommended candidate.

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Information regarding the recommended candidate as to each of the criteria identified above for evaluating recommendations.

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Evaluation of Candidates.   All qualified candidates identified through the process outlined above, including incumbents, will be evaluated based on the same criteria. If, based on the initial evaluation, a new candidate continues to be of interest, the Chair of the Governance Committee will interview the candidate and communicate his or her evaluation to the other committee members and the Chairman of the Board. Other members of the Governance Committee and senior management will conduct subsequent interviews. Ultimately, background and reference checks will be conducted, and the Governance Committee will meet to finalize its list of recommended candidates for consideration by the full Board. If an incumbent is nominated, the interview process may be abbreviated at the discretion of the Chair of the Governance Committee. If the Chair of the Governance Committee is being considered for re-nomination, the other Governance Committee members may appoint another member of the Governance Committee to head the review process for the Chair’s reconsideration.

 

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Future Revisions to the Nominations Policy.   The Governance Committee’s Nominations Policy is intended to provide a flexible set of guidelines for the effective functioning of the director nominations process. The Governance Committee intends to review this policy and procedure at least annually and anticipates that modifications will be necessary from time to time as our needs and circumstances evolve, and to conform with changes in applicable legal or listing standards.

Series A Director.   Please see “—Series A Director” below for information regarding the right of the initial holder of the Series A preferred stock to designate a director for election to the Board.

General Nomination Right of All Stockholders.   Stockholders may nominate one or more persons for election as a director of the Company at an annual meeting of stockholders if the stockholder complies with the advance notice, information and consent provisions contained in our Bylaws. Stockholder nominations for the election of directors may be made only by a stockholder of record on both the date of giving notice and on the record date for such meeting by giving timely written notice to our Secretary at our principal executive offices. Such notice must be received by the Secretary no less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. If notice or prior public disclosure of the date of the annual meeting is given or made to the stockholders for a meeting date that is not within 30 days before or after the anniversary of the immediately preceding annual meeting of stockholders, notice by the stockholder will be timely if received not later than the close of business on the tenth day following the day on which such notice was mailed or such public disclosure was made, whichever is first, or no less than 90 days nor more than 120 days prior to the annual meeting. For further information on the timely nomination of a person for election as a director of the Company at the 2022 annual meeting of stockholders, see “Stockholder Proposals for the 2022 Annual Meeting of Stockholders.”

In the event we increase the number of directors to be elected and we make no public announcement at least 100 days prior to the first anniversary of the preceding year’s annual meeting that names all of the nominees for director or specifies the size of the increased Board, a stockholder’s notice will be considered timely, but only with respect to nominees for any new positions created by the increase, if the notice is delivered to, or mailed and received at, our principal executive offices (addressed to our Secretary) not later than ten days following the day on which we make the public announcement. In the case of a special meeting of stockholders called for the purpose of electing directors, notice will be timely if the stockholder provides written notice to our Secretary not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or such public disclosure of the meeting date was made, whichever first occurs, or no less than 90 or more than 120 days prior to the meeting. The stockholder’s notice must include all of the information required by our Bylaws. If the stockholder provides a statement that the stockholder intends to deliver a proxy statement and form of proxy, the nomination may not be brought before the meeting unless the stockholder has delivered a proxy statement and form of proxy to a sufficient number of holders of a percentage of our voting shares to elect the nominee or nominees proposed by the stockholder.

The foregoing summary is not a complete description of the provisions of our Bylaws pertaining to stockholder nominations and proxies. Stockholders may obtain, without charge, a copy of our Bylaws upon written request to our Secretary at our principal executive offices. Our Bylaws are also available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.”

Qualifications of Current Directors and Director Nominees.   The Governance Committee of the Board evaluates the qualifications of our director nominees prior to each annual meeting of stockholders. As part of this evaluation process, the Governance Committee reviews the current composition of the Board and assesses whether the qualifications of each director continue to meet the Governance Committee’s requirements for Board service. The following is a description of the particular experience, qualifications, attributes and skills that led the Governance Committee to recommend, and the Board to nominate, each person listed below as a director of the Company.

Our Board of Director Nominees

The Governance Committee recommended, and our Board nominated, eight of our current directors for re-election at the Annual Meeting to serve a one-year term expiring at the 2022 annual meeting of

 

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stockholders or until their respective successors shall be elected and qualified. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the eight nominees named in Proposal 1 to this Proxy Statement.

Paul D. Ginsberg is a current director who was designated by Roark pursuant to the Certificate of Designations for the Series A preferred stock. At the Annual Meeting, the holder of Series A preferred stock will vote separately, as a class, on the election of Mr. Ginsberg. The holders of common stock do not vote on the election of Mr. Ginsberg. If Mr. Ginsberg unexpectedly becomes unavailable before election, or we are notified that a substitute nominee has been selected, votes will be cast pursuant to the authority granted by the proxies from the holder of the Series A preferred stock for the person who may be designated as a substitute nominee. Please see “—Series A Director” below for more information.

David Overton
Director since 1992

David Overton, age 75, has served as our Chairman of the Board and Chief Executive Officer since our incorporation in 1992. He co-founded the Company with his parents, Evelyn and Oscar Overton. Mr. Overton created the namesake concept and opened the first The Cheesecake Factory restaurant in 1978 in Beverly Hills, California. He has grown The Cheesecake Factory® into an international brand and created three other concepts, Grand Lux Cafe®, RockSugar Southeast Asian Kitchen® and Social Monk®. Under Mr. Overton’s leadership, the Company recently acquired the North Italia brand and the balance of Fox Restaurant Concepts. Among Mr. Overton’s many professional honors, he has received the International Foodservice Manufacturers Association “Silver Plate Award,” recognizing the most outstanding and innovative talent in foodservice operations; the “Executive of the Year Award” from Restaurants & Institutions Magazine; the “MenuMasters Hall of Fame Award” and “Golden Chain Award” from Nation’s Restaurant News, for his outstanding contributions to menu design and foodservice research and development; the “Entrepreneur of the Year” in the Food Services category for the Los Angeles region by Ernst & Young, for his demonstrated excellence and extraordinary success in innovation, performance and personal commitment to The Cheesecake Factory and the communities our restaurants serve; and the “Leadership Roundtable-Industry Leadership Award.” Mr. Overton is also one of the founding members and directors of The Cheesecake Factory Oscar and Evelyn Overton Charitable Foundation (the “Foundation”), a 501(c)(3) qualified, non-profit charitable organization which raises funds for a variety of worthy causes and provides a means for our approximately 42,500 staff members to perform charitable work in their communities.

When evaluating Mr. Overton’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Overton’s essential leadership role with us, his unique perspective and understanding of our mission, vision and values, the extent and depth of his knowledge and experience related to us and our concepts and the importance of Mr. Overton’s strategic vision.

Edie A. Ames
Director since 2016

Edie A. Ames, age 54, brings over 33 years of restaurant industry experience across the casual dining, fast-casual and fine dining segments. Ms. Ames currently serves as CEO of Tastes on the Fly Airport Restaurant Group, a San Francisco-based company. Previously, she held numerous leadership roles, including Chief Executive Officer of The Pie Hole, a Los Angeles based fast casual dining restaurant, President of The Counter and BUILT® Custom Burgers, Executive Vice President of Wolfgang Puck Catering, Chief Operating Officer of both Real Mex Restaurants and Del Frisco’s Restaurant Group, and President of Morton’s Restaurant Group. Earlier in her career she spent 11 years at California Pizza Kitchen, Inc. where she held positions of increasing responsibility.

When evaluating Ms. Ames’ qualifications for Board service, the Governance Committee and the Board considered Ms. Ames’ more than 33 years of restaurant industry experience, including operational experience, domestic and international licensing and franchise experience, numerous leadership roles with a variety of restaurant concepts across the casual dining, fast-casual and fine dining segments and her current status as an “independent director” under Nasdaq rules.

 

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Alexander L. Cappello
Director since 2008

Alexander L. Cappello, age 65, has led several public and private companies over the past 46 years, including Cappello Global, LLC, a global investment bank, whose principals have transacted business in over 50 countries. He is also lead director of Virco Manufacturing Corporation (Nasdaq), Nano Financial Holdings, The Agnew Companies and Caldera Medical Corp, and an advisor to the board of Gusmer Enterprises. Mr. Cappello is a director of RAND Corporation’s Center for Middle East Public Policy, the Center for Global Risk and Security, and the RAND-Russia Forum. Mr. Cappello is a former Chairman of Intelligent Energy, PLC (London), Inter-Tel (Nasdaq), and Geothermal Resources Intl. (AMEX), and a former director of California Republic Bank.

When evaluating Mr. Cappello’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Cappello’s extensive executive management and financial background, international business experience, international management and marketing experience, prior service as Lead Director of our Company, service as the Chair of our Compensation Committee and member of our Audit Committee, designation by our Board as an “audit committee financial expert,” former service on the boards of other public companies, including another restaurant company, corporate governance expertise and his current status as an “independent director” under Nasdaq rules.

Paul D. Ginsberg
Director since 2020

Paul D. Ginsberg, age 58, is the President of Roark Capital Group, having joined the firm in 2014. Prior to joining Roark, he was a partner, Co-Head of the Global Mergers & Acquisitions Group and a member of the Management Committee and Partnership Committee at Paul, Weiss, Rifkind, Wharton & Garrison LLP, an international law firm, which he joined in 1987 immediately upon graduating from law school. Mr. Ginsberg received his B.A., with honors in his major, magna cum laude, Phi Beta Kappa, from Union College and his J.D. from The University of Chicago Law School.

Mr. Ginsberg was appointed to the Board as the Series A Director (as defined below) pursuant to the Subscription Agreement described below. When evaluating Mr. Ginsberg’s qualifications for Board service, the Governance Committee and the Board considered his extensive legal and investment experience and his perspective as a significant investor in our Company.

Jerome L. Kransdorf
Director since 1997

Jerome I. Kransdorf, age 82, has more than 47 years of investment management experience. Mr. Kransdorf retired in 2014 as President of JaK Direct, a division of Muriel Siebert & Co., Inc. where he worked from 2001 to 2014. From 1997 to 2001, Mr. Kransdorf served as Senior Vice President of J. & W. Seligman & Co. Incorporated, an investment advisory firm. From 1959 to 1997, he was employed in investment and senior management positions at Wertheim & Co. and its successor companies. Mr. Kransdorf serves as our Lead Director.

When evaluating Mr. Kransdorf’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Kransdorf’s more than 47 years’ of investment management experience, his depth of knowledge and experience specific to us, his current service as Lead Director, Chair of the Governance Committee and member of the Audit Committee and Compensation Committee and his current status as an “independent director” under Nasdaq rules.

Janice L. Meyer
Director since 2020

Janice L. Meyer, age 61, brings over 26 years of restaurant investment experience. She is currently Co-Founder and Managing Partner of Rellevant Partners, a private equity firm. Prior to founding Rellevant, Ms. Meyer was a Managing Director and Senior Restaurant Analyst in the Equity Research Department of Donaldson Lufkin & Jenrette, which was acquired by Credit Suisse Group AG (NYSE) in 2000. She was also

 

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a Managing Director in the investment banking division of Morgan Stanley (NYSE). She was formerly a Director of Chopt Creative Salad Co. (now known as Founders Table Restaurant Group), a fast-casual restaurant group, and is currently a Director of Tillster, Inc., a food ordering and delivery technology company. She is also a trustee of the Windward School in New York.

When evaluating Ms. Meyer’s qualifications for Board service, the Governance Committee and the Board considered Ms. Meyer’s more than 26 years’ experience in the restaurant industry, extensive restaurant specific financial background, experience as a restaurant stock analyst and her current status as an “independent director” under Nasdaq rules.

Laurence B. Mindel
Director since 2012

Laurence B. Mindel, age 83, has more than 51 years of experience as a restaurant creator, developer and operator and is currently the Managing Partner of Poggio Trattoria, an award-winning Italian restaurant, and Copita Tequileria Y Comida, a “modern” Mexican restaurant, both located in Sausalito and Convivo, a “nomad Italian” restaurant in Santa Barbara, California. In 1970, he co-founded Spectrum Foods whose restaurant portfolio included, among others, California-based restaurants Ciao, Prego, MacArthur Park, Guaymas and Harry’s Bar. Following the acquisition of Spectrum Foods by Saga Corp. (NYSE) in 1984, Mr. Mindel served as President of Saga’s restaurant group where he directed the operations of more than 200 restaurants with combined revenue of over $375 million. When Saga was acquired in 1986, Mr. Mindel founded Il Fornaio, a restaurant and bakery company which became public in 1997 (Nasdaq) and was subsequently taken private in 2001. His professional honors include Nation’s Restaurant News “Golden Chain” award, International Foodservice Manufacturers Association “Gold Plate” award, Food Arts Magazine “Silver Spoon” award, Leadership Roundtable Conference award for Distinguished & Exemplary Leadership in the Food Service Industry and, in 1998, he was inducted into the California Restaurant Association’s Hall of Fame. In 1985, Mr. Mindel became the first American and the first person of non-Italian descent to be awarded the Caterina de Medici Medal from the Italian government, recognizing excellence in the preservation of Italian heritage outside of Italy.

When evaluating Mr. Mindel’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Mindel’s more than 51 years’ experience in the restaurant industry, both as a concept creator and an operator, his experience guiding a publicly-traded restaurant company, his current service as a member of the Compensation Committee and Governance Committee, his prior service as a member of the Compensation Committee and his current status as an “independent director” under Nasdaq rules.

David B. Pittaway
Director since 2009

David B. Pittaway, age 69, is Vice Chairman, Senior Managing Director, Senior Vice President and Secretary of Castle Harlan, Inc., a private equity firm. He has been with Castle Harlan since 1987. Mr. Pittaway also has served as Vice Chairman and Senior Managing Director of Branford Castle, Inc., an investment company, since October 1986. From 1987 to 1998, Mr. Pittaway was Vice President, Chief Financial Officer and a director of Branford Chain, Inc., a marine wholesale company, where he is now a director and Vice Chairman. Previously, Mr. Pittaway was Vice President of Strategic Planning and Assistant to the President of Donaldson, Lufkin & Jenrette, Inc., an investment banking firm. Mr. Pittaway is a member of the boards of Shelf Drilling, Inc., and the Dystrophic Epidermolysis Bullosa Research Association of America. He was formerly a director of Bravo Brio Restaurant Group, Morton’s Restaurant Group, McCormick & Schmick’s Seafood Restaurants, and Dave & Busters, Inc. In addition, he is a director and co-founder of the Armed Forces Reserve Family Assistance Fund.

When evaluating Mr. Pittaway’s qualifications for continuation of his Board service, the Governance Committee and the Board considered his extensive financial and industry experience, including his service on audit committees of other public restaurant companies, his legal background and familiarity with SEC rules and regulations related to public companies, his service as a member (and now Chair) of our Audit Committee, his designation by our Board as an “audit committee financial expert” and his current status as an “independent director” under Nasdaq rules.

 

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Herbert Simon
Director since 2011

Herbert Simon, age 86, is the Chairman Emeritus of the board of Indianapolis-based Simon Property Group, Inc., a member of the S&P 500 and the largest U.S.A. publicly-traded real estate investment trust. Mr. Simon has served on its board since 1993. Throughout his career, Mr. Simon has maintained a leadership position within the retail property industry by developing high profile retail facilities, including, but not limited to, The Forum Shops at Caesars, Roosevelt Field in Long Island, and The Fashion Centre at Pentagon City. Additional diversified business interests beyond real estate include ownership of a National Basketball Association’s franchise, the Indiana Pacers. Mr. Simon also served as the former Chairman of the National Basketball Association’s Board of Governors and continues to serve as a member of such board. Mr. Simon also is the owner of the Indiana Fever, a Women’s National Basketball Association franchise. He is also active in numerous community and civic organizations.

When evaluating Mr. Simon’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Simon’s considerable domestic and international commercial real estate experience, including his tenure with Simon Property Group, Inc., a publicly-held real estate investment trust of which he is Chairman Emeritus and a member of the board of directors, his service as a member of the Compensation Committee and the Governance Committee, and his current status as an “independent director” under Nasdaq rules.

Except as set forth above, each nominee has been engaged in his or her principal occupation described above during the past five years. There are no family relationships between any of our directors or executive officers as defined under SEC rules.

Series A Director

As disclosed in our current report on Form 8-K filed with the SEC on April 20, 2020, on that date we entered into a Subscription Agreement (the “Subscription Agreement”) with RC Cake Holdings LLC (the “Roark”), an affiliate of Roark Capital Group, pursuant to which we sold 200,000 shares (the “Purchased Shares”) of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A preferred stock”), to Roark for an aggregate purchase price of  $200 million.

In connection with this transaction, the Board increased the size of the Board to nine members and appointed Paul D. Ginsberg to the Board.

Pursuant to the terms of the Subscription Agreement, for so long as Roark has record and beneficial ownership of 25% of the Purchased Shares issued to it under the Subscription Agreement, Roark has the right to designate one member to the Board (the “Series A Director”). If Roark ceases to have such designation right, for so long as Roark has record and beneficial ownership of shares of our common stock issued upon conversion of the Purchased Shares (the “Conversion Shares”) that constitute at least 5% of the outstanding common stock, Roark will have the right to nominate one person for election to the Board. So long as Roark has the right to designate the Series A Director, the Series A Director will be designated by the holder of the Purchased Shares at each annual meeting of our stockholders, except that the initial Series A Director is Mr. Ginsberg.

Series A Director Compensation

As a non-employee director, Mr. Ginsberg participates in our non-employee director compensation program. Mr. Ginsberg is not subject to our stock ownership guidelines for directors.

Voting and Support Agreements

Under the Subscription Agreement, for so long as Roark has the right to designate or nominate one person for election to the Board, Roark has agreed to vote all of the Purchased Shares, the Conversion Shares or any other shares of common stock (i) in favor of each director nominated or recommended by the Board for election at any such meeting, and against the removal of any director who has been elected following nomination or recommendation by the Board, (ii) against any stockholder nomination for director that is not

 

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approved and recommended by the Board for election at any such meeting, (iii) in favor of our “say-on-pay” proposal and any proposal by us relating to equity compensation that has been approved by the Board or the Compensation Committee of the Board (or any successor committee, however denominated) and (iv) in favor of our proposal for ratification of the appointment of our independent registered public accounting firm.

Under the Support Agreement with Roark, David Overton and his affiliated parties have agreed to vote all of their respective shares at the Annual Meeting to approve, among other things, the issuance of common stock in connection with Roark’s conversion of Series A preferred stock.

Director Independence

The Board has determined each of the following directors to be an “independent director” as defined under Nasdaq rules: Edie A. Ames; Alexander L. Cappello; Paul D. Ginsberg; Jerome I. Kransdorf; Janice L. Meyer; Laurence B. Mindel; David B. Pittaway; and Herbert Simon. In this Proxy Statement, each of these eight directors is referred to individually as an “Independent Director” and they are referred to collectively as the “Independent Directors.”

Board Leadership Structure and Lead Director

Our Chief Executive Officer, David Overton, also serves as Chairman of our Board. Mr. Overton, who founded the Company along with his parents, Oscar and Evelyn Overton, was the driving force behind the creation and opening of The Cheesecake Factory restaurant concept and has served in a combined role as Chief Executive Officer and Chairman since 1992. We believe this leadership structure enables Mr. Overton to function as the critical link between the Board and the operating organization. It also streamlines communications with and among the Board on key topics such as our strategic objectives, long-term planning and enterprise risk management.

In addition to Mr. Overton’s leadership on the Board, we determined that the appointment of an independent, lead director (“Lead Director”) would be appropriate in order to establish another layer of Board oversight, share certain responsibilities with, and facilitate communication between, our Chairman and our Independent Directors, and continue to follow best practices in corporate governance. To this end, the Board adopted a policy regarding the appointment of a Lead Director—one Independent Director who is selected annually by the Independent Directors. Mr. Kransdorf currently serves as Lead Director.

The Lead Director presides at executive sessions of the Independent Directors, serves as principal liaison between the Independent Directors and the Chairman, works with the Chairman to set and approve the schedule and agenda for meetings of our Board and its committees, directs the retention of advisors and consultants who report directly to the Board, serves as liaison for consultation and communication with stockholders, oversees the annual evaluation of our Board and its committees and evaluates, in cooperation with the Compensation Committee and all members of the Board, the Chief Executive Officer’s performance. For information on our Board leadership, including the role of our Chairman and Lead Director, please see the section below entitled “Corporate Governance Principles and Guidelines; Corporate Governance Materials Available on Our Website.”

 

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Role of the Board in Risk Oversight

While the Audit Committee monitors risks related to our financial statements, the Board has determined that oversight of Company-wide risk should remain with the full Board due to the strategic nature of enterprise risk management and the Board’s desire to receive feedback from a broad spectrum of disciplines regarding management’s plans with respect thereto. The Board meets periodically with our management to review the effectiveness of processes for identifying and managing significant risks, including cyber security risk. The Board also reviews with management the strategic objectives that may be affected by identified risks, the level of appropriate risk tolerance, our plans for monitoring, mitigating and controlling risk, the effectiveness of such plans and our disclosure of risk.

Meeting Attendance

During fiscal 2020, the Board held 23 meetings and the Independent Directors held two executive sessions without management present. Meetings include both in-person and telephonic meetings. For information regarding committee composition and number of committee meetings held during fiscal 2020, please see the section below entitled “Committees of the Board of Directors.” All of our directors attended at least 90% of the aggregate number of meetings of the Board and the committees on which he or she served while they were on the Board in fiscal 2020.

Our Board members are encouraged to attend our annual meeting of stockholders and all of our directors were present virtually at the 2020 annual meeting.

Committees of the Board of Directors

The Board has three standing committees: the Audit Committee, the Compensation Committee and the Governance Committee. Committee membership as of the date of this Proxy Statement is as follows:

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Designated by the Board as an “audit committee financial expert.”

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Mr. Kransdorf ceased being a member of the Audit Committee effective May 27, 2020.

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The Board determined that each member of the committees of the Board in service for all of fiscal 2020 met the independence requirements applicable to those committees under SEC and Nasdaq rules. The Governance Committee recommends committee membership and chair assignments to the Board, which the Board considers when making committee membership and committee chair assignments at its meeting generally held in conjunction with each annual meeting of stockholders. Changes to committee assignments are also made from time to time during the course of the year, as deemed appropriate by the Board. The role of each committee is described below.

Audit Committee.   The Audit Committee operates pursuant to a written charter and is primarily responsible for monitoring the quality and integrity of our financial statements and internal controls over

 

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financial reporting; our compliance with legal and regulatory requirements; our independent registered accounting firm’s qualifications and independence; and the performance of our internal audit function and independent registered accounting firm. The Audit Committee provides an avenue of communication among our independent registered accounting firm, management, the internal audit function and the Board and issues the report of the Audit Committee required by the SEC to be included in this Proxy Statement. Our Vice President of Internal Audit reports directly to the Audit Committee and is responsible for conducting comprehensive audits of our internal financial controls and the operational effectiveness of related activities and systems.

The Audit Committee conducts an annual performance evaluation of its composition, compliance procedures, financial oversight responsibilities and other matters. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered accounting firm engaged to issue an audit report or perform other audit, review or attest services. The Audit Committee pre-approves the audit work, as well as all non-audit work, to be performed by our external auditors after considering its permissibility under SEC rules and its impact on our independent registered accounting firm’s independence. The Audit Committee also reviews material written communications our independent registered accounting firm may provide to management and discusses any concerns with the auditors and management.

Our Audit Committee also has oversight over the recoupment of any bonus awards paid to our executive officers if we were required by applicable law or applicable accounting or auditing principles to restate our financial statements to correct an accounting error in any interim or annual financial statement filed with the SEC as a result of material noncompliance with applicable financial reporting requirements and the bonus was directly based on such financial statements.

Pursuant to its charter, the Audit Committee reviews our policies and procedures relating to conflicts of interest and approves any proposed “related party transaction.” For this purpose, “related party transaction” means a transaction between the Company and a related person that is required to be disclosed pursuant to Item 404 of Regulation S-K adopted by the SEC. For a discussion of our policies with respect thereto, see “Policies Regarding Review, Approval or Ratification of Transactions with Related Persons” in this Proxy Statement. The Audit Committee conducts an annual evaluation of its charter.

Compensation Committee.   The Compensation Committee operates pursuant to a written charter. The Compensation Committee is responsible for determining the compensation of our Chief Executive Officer and all of our other executive officers. The Compensation Committee reviews and approves all employment, retention and severance agreements for executive officers and causes to be prepared the report of the Compensation Committee required by the SEC to be included in this Proxy Statement. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any compensation advisor retained by the Compensation Committee. The Compensation Committee also makes recommendations to the Board concerning non-employee director compensation.

The Compensation Committee regularly reviews and discusses with management the Company’s compensation policies to assess any risks reasonably likely to have a material adverse effect on the Company. The Compensation Committee is also tasked with overseeing or making recommendations to the Board with respect to: (i) stock ownership guidelines for executive officers and monitoring compliance therewith; (ii) policies governing “insider” trading, hedging and pledging of Company stock and reviewing compliance therewith; and (iii) any clawback policies. The Compensation Committee also advises the Board on management proposals to stockholders on executive compensation matters, including advisory votes on executive compensation and frequency of such votes, and proposals received from stockholders on executive compensation matters. The Compensation Committee is charged with reviewing the results of such votes and considering any implications in connection with the Compensation Committee’s ongoing determinations and recommendations regarding the Company’s executive compensation policies and practice.

The Compensation Committee approves and administers our incentive compensation programs, including our long-term equity and short-term bonus incentive plans. The Compensation Committee makes recommendations to the Board with respect to incentive and equity compensation plan structure and periodically reviews and makes recommendations concerning existing or new executive compensation, performance incentives, employee benefits, stock plans and management perquisites. The Compensation

 

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Committee authorizes and approves all grants of equity compensation to our employees under our equity compensation plan. See “Oversight of Named Executive Officer Compensation” for additional information regarding our process for determining executive compensation, including the role of Frederic W. Cook & Co., Inc., the Compensation Committee’s independent compensation consultant, and the Chief Executive Officer. The Compensation Committee conducts an annual evaluation of its charter.

Governance Committee.   The Governance Committee operates pursuant to a written charter. The Governance Committee is responsible for evaluating issues and developments related to corporate governance and making recommendations to the Board with respect to corporate governance standards, corporate governance proposals from stockholders and the establishment and composition of committees of the Board. The Governance Committee is responsible for overseeing and recommending programs and activities for the continuing education of directors. The Governance Committee also identifies potential candidates for nomination or appointment as directors and makes recommendations to the Board concerning nominees to be presented for stockholder approval and to fill any vacancies. The Governance Committee assists the Chief Executive Officer in succession planning for key executive positions. The Governance Committee conducts an annual evaluation of its charter.

Committee Charters.   All of our committee charters are available on our website. For information on where to access these documents, please see the section entitled “Corporate Governance Principles and Guidelines; Corporate Governance Materials Available on Our Website.”

Designation of Audit Committee Financial Experts

With the assistance of our outside legal counsel, the Board has determined that David B. Pittaway and Alexander L. Cappello are each an “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K adopted by the SEC.

Corporate Governance Principles and Guidelines; Corporate Governance Materials
Available on Our Website

Our Board is committed to ethical business practices and believes that good corporate governance is important to ensure that we are managed for the long-term benefit of our stockholders. In the spirit of this commitment, the Board has adopted a “Summary of Corporate Governance Principles and Guidelines” (“Corporate Governance Guidelines”) which includes, among other topics, the size and operations of our Board and its committees, independence of directors, selection and responsibilities of our Lead Director, Board membership criteria, service by our directors on boards of other publicly-traded companies, director and executive officer stock ownership guidelines and our policy on communicating concerns to our Board.

Our Corporate Governance Guidelines, as well as other corporate governance information listed below, are available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance”:

•

Bylaws

​

•

Code of Ethics for Executive Officers, Senior Financial Officers and Directors

​

•

Code of Ethics and Code of Business Conduct

​

•

Committee Charters (Audit Committee, Compensation Committee and Governance Committee)

​

•

Policies and Procedures Regarding Board of Director Candidates

​

Throughout this Proxy Statement, we may refer to various documents that are available on our website. The contents posted on, or accessible through, our website are not incorporated by reference into this Proxy Statement or any of our filings with the SEC and may be revised by us (in whole or in part) at any time and from time to time.

Stockholder Engagement

We appreciate the relationships we have been able to foster with our stockholders and value their input. Members of our senior leadership team regularly engage in meaningful dialogue with our stockholders

 

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throughout the year on topics including business initiatives and results, strategy and capital allocation; and environment, social and governance initiatives. On occasion, members of the Board participate in these engagements with stockholders. In addition, we have developed an ongoing practice of discussing important governance issues with our stockholders in an effort to continuously improve our governance processes and communication. These engagements routinely cover corporate governance, executive compensation, environmental and social programs and goals and other topics that may be important to us or our stockholders at the time. We generally hold these discussions during the fall but may request engagement at other times if warranted. We share feedback we receive with other members of our senior leadership team and board of directors for consideration and discussion.

Stockholder Communications with the Board

Our Corporate Governance Guidelines described above include the policy our Board has adopted for stockholders and employees who wish to communicate any concern directly to the Board. Please refer to Section VI of our Corporate Governance Guidelines at investors.thecheesecakefactory.com for a description of this process.

Corporate Social Responsibility

For us, the term “Corporate Social Responsibility” or “CSR” informs how we operate in relation to our people and communities, natural environment and our supply chain. We evaluate our business and how we operate our corporate-owned restaurants in an effort to identify, create and implement meaningful and sustained change and are pleased to share the progress we have made. However, the COVID-19 pandemic has had an unprecedented impact on our business and the restaurant industry as a whole, and the ongoing effects of this pandemic on our CSR initiatives are unknown at this time. While we continue to navigate the unprecedented challenges and impacts presented by the pandemic, we have not backed away from our CSR goals and we will continue to report on our progress and efforts as we emerge from this crisis.

In 2020 we released our inaugural CSR report which details programs and initiatives across our operations with respect to our staff, our sourcing, our environmental impact, our support for the communities where we operate, and our corporate governance. The report appendix contains both a corporate materiality assessment as well as matrixes for several leading environmental, social and governance frameworks. Our CSR report is available on our website at https://www.thecheesecakefactory.com/assets/pdf/2019-CSR-Report-The-Cheesecake-Factory.pdf. The contents posted on, or accessible through, our website are not incorporated by reference into this Proxy Statement or any of our filings with the SEC and may be revised by us (in whole or in part) at any time and from time to time. A selection of our CSR progress and highlights over the last year is provided below.

People and Communities

•

In recognition of the unprecedented harm caused by the COVID-19 pandemic on the lives of restaurant employees, in 2020 we and the Foundation made it a priority to assist restaurant employees most impacted by the pandemic. To this end, we created a Staff Member COVID-19 Assistance Fund from which our staff members who were most impacted by COVID-19 received one-time grants up to $500. We, the Foundation, our generous staff members and vendor partners contributed $2.6 million to this program. In addition, the Foundation contributed $50,000 to the Children of Restaurant Employees (CORE), a 501(c)(3) qualified, non-profit charitable organization dedicated to helping food and beverage service families impacted by crisis.

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•

In appreciation for their essential role in responding to the pandemic, we donated more than 20,000 meals to hospitals, frontline healthcare workers and non-profit agencies in our community.

​

•

The Foundation’s signature program, “Give Back,” was temporarily halted in early Spring 2020 due to challenges related to the COVID-19 pandemic. This program encourages our staff to identify non-profit charitable organizations (excluding political or religious groups) that they find personally meaningful, and to organize team volunteer outings benefitting these organizations. The Foundation provides team shirts and a financial contribution to the benefiting organizations. The Foundation plans to resume this program when circumstances allow.

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•

Each Thanksgiving Day, for 18 years, the Foundation has sponsored Thanksgiving Day Feasts across the country for the underprivileged. Typically, our staff and their friends and family who volunteer in support of this effort, prepare and serve freshly roasted turkey with all the trimmings and The Cheesecake Factory’s legendary pumpkin cheesecake to thousands of low-income adults and children at Salvation Army locations around the United States. Unfortunately, due to challenges related to the COVID-19 pandemic, the Foundation was unable to sponsor the typical event in 2020. The Foundation looks forward to recommencing this tradition when circumstances allow.

​

•

The Foundation’s June fundraiser, the Annual Invitational Charity Golf Tournament & Auction, did not take place in 2020 due to challenges related to the COVID-19 pandemic. Typically, this invitational event invites The Cheesecake Factory vendors, associates and corporate staff members to join together and raise much needed funds. Over the past 18 years this annual event has supported more than $3.7 million in contributions from the Foundation to the City of Hope Comprehensive Cancer Center, a leading bio-medical research and treatment center for cancer, diabetes and other life-threatening diseases located in Southern California. The Foundation looks forward to recommencing this tradition when circumstances allow.

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Every September, which is nationally recognized as Hunger Action Month, we invite all staff to participate in our Peanut Butter Drive. Our staff members collect jars of peanut butter (a favorite staple of food banks) and monetary donations during the month to donate to their local Feeding America food banks. Nationwide in fiscal 2019, our staff members collected approximately 250,000 pounds of peanut butter for donation to Feeding America’s annual campaign. Due to challenges related to the COVID-19 pandemic, our efforts to collect peanut butter were significantly hampered in 2020. We look forward to again achieving our historic level of donation when circumstances allow.

​

•

In fiscal 2020, we donated over $480,000 to Feeding America through sales of our Pineapple Upside-Down Cheesecake and Chocolate Caramelicious Cheesecake Made with Snickers® as well as a special promotion on July 30, 2020, National Cheesecake Day, when we donated $1 from the sale of any flavor of cheesecake. In total, we have contributed over $5.3 million to Feeding America over the past twelve years.

​

•

The Cheesecake Factory and Grand Lux Cafe restaurants participate in a food donation program which redirects surplus food away from landfills to local food banks and non-profit organizations. Since the program’s inception in 2007, we have donated more than 5.8 million pounds of food, including approximately 620,000 pounds in fiscal 2020.

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•

In fiscal 2020 our North Italia® brand committed to contribute 2% of all gift card sales from November 1, 2020 through October 31, 2021 to FoodCorps, a non-profit organization described in Section 501(c)(3) of the Internal Revenue Code whose charitable purpose is to connect kids to healthy food in school so they can lead healthier lives and reach their full potential, with a minimum guaranteed contribution of  $100,000. In fiscal 2020 we contributed $50,000 toward this commitment.

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•

Our restaurants participate in a gift card donation program, providing gift cards to local schools and charities for fundraisers and auctions. This program was suspended during 2020 due to challenges related to the COVID-19 pandemic.

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Our Environment

•

Eight of our restaurants are LEED certified and our training facility located at our corporate headquarters in Calabasas, California, is LEED Platinum certified. LEED, or Leadership in Energy and Environmental Design, is the most widely used green building rating system in the world. LEED provides a framework that expresses how efficiently a building is designed and operated, evaluating water efficiency, energy and atmosphere, materials and resources, indoor environmental quality and sustainability. Platinum is the highest certification status offered by LEED.

​

•

We have implemented food waste and organic diversion programs in 65 of our restaurants, which, combined with our recycling and food donation programs, helped us divert approximately 18% of our waste stream away from landfills in 2020.

​

•

We mandate the use of 100% recycled material, including 20% post-consumer content, in our paper napkins and paper towels.

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•

Our West Coast bakery maintains a recycling program, which includes scrap metals, organic waste and paper, plastic and corrugated cardboard waste.

​

Our Supply Chain.   We are committed to promoting environmental and social responsibility in our supply chain. Our efforts and accomplishments in this regard, including what we are doing to improve animal welfare in our supply chain, our efforts to reduce the use of antibiotics in our supply chain and our expectations with respect to treatment of workers in our supply chain, are described in our CSR report.

Compensation Committee Interlocks and Insider Participation

During fiscal 2020, Messrs. Jerome I. Kransdorf, Laurence B. Mindel and Herbert Simon served on the Compensation Committee, with Mr. Alexander L. Cappello serving as its Chair. During fiscal 2020, no member of the Compensation Committee was an officer or employee of ours, a former officer of ours or of our subsidiaries or had a relationship requiring disclosure by us under Item 404 of Regulation S-K. None of our executive officers served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board or the Compensation Committee during fiscal 2020.

Director Compensation

The Compensation Committee is responsible for periodically reviewing compensation payable to its non-employee directors for service on the Board or its designated committees and making recommendations to the Board concerning such compensation. In doing so, the Compensation Committee considers recommendations by Frederic W. Cook & Co., Inc. (“FW Cook”), its independent compensation consultant, which were informed by competitive analysis conducted by them as well as other factors, including, without limitation, each director’s responsibilities. The analysis conducted by FW Cook considers non-employee director compensation practices at the same peer companies used for the Compensation Committee’s evaluation of executive compensation and addresses prevalent market practices for non-employee director compensation. The Compensation Committee intends to set director compensation levels at or near the market median relative to non-employee directors at companies of comparable size, industry and scope of operations in order to ensure directors are paid competitively for their time commitment and responsibilities. Providing a competitive compensation package is important because it enables us to attract and retain highly qualified non-employee directors who are critical to our long-term success. The Board reviews recommendations by the Compensation Committee and ultimately approves the non-employee director compensation program.

In response to the effects of the COVID-19 pandemic, effective April 1, 2020 through September 14, 2020, the Compensation Committee approved a 20% reduction in the annual cash retainer fees paid to non-employee directors for service on the Board. This reduction was made to align with a corresponding 20% reduction in the 2020 base salaries for Named Executive Officers and similar reductions in pay for other of our employees.

The FW Cook analysis conducted for fiscal 2020 affirmed that our director compensation program continues to be aligned with best practices as follows:

•

Annual fees.   No separate meeting fees are provided for Board meeting attendance.

​

•

Deferred Compensation Plan.   Board members are eligible to participate in our Executive Savings Plan, a nonqualified deferred compensation plan, by contributing all or a portion of their director fees and equity awards in the form of stock units to the plan. We do not match Board member contributions. See “Executive Compensation-Retirement Plans-Nonqualified Deferred Compensation” for more information.

​

•

Minimal Perquisites.   Each Independent Director is entitled to reimbursement for reasonable out-of-pocket expenses incurred in connection with travel to and from, and attendance at, meetings of the Board or its committees and related activities, including director education courses and materials. Independent Directors also receive dining privileges at our restaurants.

​

•

Stock Ownership Guidelines.   Pursuant to our stock ownership guidelines our Independent Directors (other than the Series A Director) are required to acquire (and thereafter maintain ownership of) a

​

 

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minimum number of shares of our common stock with a fair market value equal to four times the then applicable annual base cash retainer ($360,000 as of the end of fiscal 2020). Existing directors have until the end of 2021 to meet the guideline, while newly appointed directors are required to meet the guideline within three years of being appointed. For purposes of this policy, ownership includes any shares owned by a director or his or her immediate family members or held by him or her as part of a tax or estate plan in which the director retains beneficial ownership and unvested restricted stock or restricted stock units. The value of shares held is calculated annually. In the event acquiring shares would result in a violation of our Special Trading Policy and Procedures, the director is required to comply with the guidelines as soon as reasonably feasible. In addition, the stock ownership guidelines require each director who acquires shares of our common stock through the exercise of a stock option to retain 33% of the shares so acquired (net of tax obligations resulting from such exercise) for at least nine months following such exercise, unless the individual ceases to be a member of our board of directors. The Series A Director is not subject to our stock ownership guidelines. All of our Independent Directors (other than the Series A Director) were either in compliance with the guidelines as of March 15, 2021 or have more time to achieve the required ownership level.

•

Prohibitions on Hedging and Pledging.   Members of our Board and our officers and staff members are prohibited from trading in any interest or position relating to the future price of our securities, such as a put, call or short sale, or using our stock as collateral for margin loans.

​

The following table sets forth information regarding the non-employee director compensation program during fiscal 2020. Any member of the Board who is also an employee (for example, Mr. Overton) does not receive additional compensation for service on the Board or its committees.

(1)

All fees and cash payments are payable in equal monthly installments, as earned, following the end of each calendar month.

​

(2)

In response to the impacts of COVID-19 on our business the Board elected to take a 20% reduction in the annual fee effective April 1, 2020 to September 14, 2020.

​

(3)

The Board authorized an annual cash payment of  $115,000, annually, to each Independent Director in lieu of a compensatory equity award. Our directors are subject to our stock ownership guidelines. See “Director Compensation—Stock Ownership Guidelines” above.

​

As of fiscal 2020, directors may take the annual cash payment in lieu of equity grant equal to $115,000 shown above in either cash or fully-vested common shares or stock units, at their election. Any Independent Director (other than the Series A Director) who has not acquired a sufficient number of shares of Company stock to satisfy the Company’s stock ownership guidelines by the end of 2021 (or in the case of a new director, within three years of their appointment) will no longer be eligible to receive the cash payment in lieu of equity and will receive their annual equity award in fully-vested common shares having a value equal to $115,000 until he or she satisfies such guidelines.

The following table sets forth certain information regarding the compensation earned by each non-employee who served on our Board in fiscal 2020. Mr. Overton, as our employee, is not a non-employee and is not paid additional compensation for his services on our Board.

 

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(1)

All or a portion of these fees were paid into a nonqualified deferred compensation plan account administered under The Cheesecake Factory Incorporated Executive Savings Plan. See “Director Compensation-Deferred Compensation Plan” above.

​

(2)

Reflects a 20% reduction of the annual fee for the period of April 1, 2020 to September 14, 2020, which the Board elected to take in response to the impacts of the COVID-19 pandemic on our business.

​

(3)

Amounts reflect the full grant-date fair value of an award of 5,283 fully vested restricted share units granted to Ms. Meyer during 2020 computed in accordance with ASC Topic 718. See Note 18 of the Notes to Consolidated Financial Statements in our Annual Report for information regarding the valuation of equity awards.

​

Indemnification of Officers and Directors

As permitted by the Delaware General Corporation Law, our Certificate of Incorporation limits the personal liability of our directors for monetary damages for breach of fiduciary duty of care as a director. Liability is not eliminated for (a) any breach of the director’s duty of loyalty to us or our stockholders, (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) unlawful payment of dividends or stock purchases or redemptions pursuant to Section 174 of the Delaware General Corporation Law, and/or (d) any transaction from which the director derived an improper personal benefit. Our Certificate of Incorporation also provides that we shall indemnify and advance indemnification expenses on behalf of all directors and officers of ours to the fullest extent permitted by Delaware law. Article VIII of our Bylaws also requires us, subject to certain limitations, to indemnify directors and officers and advance expenses. The indemnification and advancement of expenses provisions of Article VIII are not exclusive of any other rights of indemnification or advancement of expenses.

We also entered into indemnification agreements with all of our directors and Named Executive Officers. Each indemnification agreement requires us to indemnify and hold harmless the director or Named Executive Officer to the fullest extent authorized by the laws of the State of Delaware. Each indemnification agreement also requires us, subject to specific terms and conditions, to advance expenses to the director or officer. Each indemnification agreement also sets forth various procedures and definitions with respect to indemnification and advancement of expenses. We also are obligated to maintain directors’ and officers’ liability insurance. With specified exceptions, we are not obligated to provide indemnification or advance expenses with respect to actions initiated by the director or officer or to indemnify the director or officer in connection with proceedings by us to enforce non-compete or non-disclosure agreements. To the extent the provisions of the indemnification agreements exceed the indemnification permitted by applicable law, such provisions may be unenforceable or may be limited to the extent they are found by a court of competent jurisdiction to be contrary to public policy.

Policies Regarding Review, Approval or Ratification of Transactions with Related
Persons

In accordance with its charter, our Audit Committee reviews and approves any proposed transactions with a “related person.” Any related person transaction will be disclosed in the applicable filing as required by

 

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the rules promulgated by the SEC. For purposes of these procedures, “related person” and “transaction” have the meanings as defined in Item 404 of Regulation S-K.

As described above, on April 20, 2020, we entered into the Subscription Agreement with Roark pursuant to which we sold the Purchased Shares to Roark for $200 million, and Roark has the right to designate or nominate one director. In connection with this transaction, the Board appointed Paul D. Ginsberg to the Board. Mr. Ginsberg is the President of Roark Capital Group, an affiliate of Roark.

Pursuant to the Subscription Agreement, subject to certain customary exceptions, Roark is prohibited from, among other things, (i) acquiring securities, assets or indebtedness of the Company, (ii) effecting a tender offer, merger or acquisition of the Company and (iii) soliciting proxies or seeking a director/​management change in the Company until the later of  (x) three years after the date of the Subscription Agreement and (y) such time as Roark holds record and beneficial ownership of Conversion Shares that constitute less than 5% of the outstanding Common Stock.

Roark received certain information rights under the Subscription Agreement, including the right to receive audited and unaudited consolidated financial statements of the Company. For so long as Roark has record and beneficial ownership of Conversion Shares that constitute at least 5% of the outstanding Common Stock, Roark will also have the reasonable right to consult from time to time with the officers of the Company regarding operating and financial matters of the Company.

So long as Roark has the right to designate or nominate a director to the Board of Directors, Roark may not enter into any hedging transactions to the extent directors of the Company are prohibited from entering into such hedging transactions pursuant to a policy applicable to all directors of the Company.

In connection with the closing under the Subscription Agreement, the Company paid a commitment fee to Roark equal to 1% of the aggregate purchase price for the Purchased Shares.

On April 20, 2020, the Company and Roark also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company granted Roark certain registration rights. Under the Registration Rights Agreement, the Company is required to use its reasonable best efforts to cause the registration of the Conversion Shares.

As described above, for so long as Roark has the right to designate or nominate one person for election to the Board, Roark has agreed to vote all of the Purchased Shares, Conversion Shares or any other shares of Common Stock as set forth in the Subscription Agreement.

We had no other reportable transactions with related persons required to be disclosed under Item 404 of Regulation S-K since the beginning of fiscal 2020.

Policies Regarding Hedging, Short Sales, Publicly Traded Derivatives, Margin Accounts
and Pledges.

The Board believes that ownership of the Company’s stock by the Company’s Board members, executive officers, and other staff members promotes alignment of interest with stockholders. The Board recognizes that transactions that are designed to hedge, establish downside price protection or otherwise offset declines in the market value of the Company’s stock owned by such persons can disrupt this alignment, undermine stock ownership guidelines and encourage imprudent risk-taking. The Board also recognizes that pledging the Company’s stock as collateral for indebtedness can be adverse to the interests of the Company’s stockholders because it creates the risk of unplanned and forced sales that could adversely impact the value of the Company’s stock. For these reasons, we have a policy prohibiting our Board members, executive officers and all other employees from engaging in short-term or speculative transactions in Company securities, including short sales and other forms of hedging (e.g., zero-cost collars and forward sale contracts), and trading in puts, calls or other derivative securities of the Company (other than stock purchases and sales in the listing market). In addition, no Board member or employee may hold the Company’s securities in a margin account or pledge such securities as collateral for a loan.

 

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NON-GAAP FINANCIAL MEASURES

In addition to the results determined in accordance with generally accepted accounting principles (“GAAP”), this Proxy Statement includes certain non-GAAP financial measures that exclude the impact of items we do not consider indicative of our ongoing operations. We believe these adjusted measures provide additional information to facilitate the comparison of our past and present financial results. We utilize results that both include and exclude the identified items in evaluating business performance. Our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses or generate income similar to the adjusted items. Non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of performance prepared in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

A reconciliation of the non-GAAP financial measures used in this Proxy Statement to the closest GAAP financial measure is included in Appendix A which is attached to this proxy statement.

 

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•

Increased borrowings under our revolving credit facility;

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•

Raised additional equity capital; and

​

•

Suspended the dividend on our common stock and share repurchases.

​

We also took a number of steps to address the impacts of the pandemic on our staff and guests, which included:

•

Obtained adequate personal protective equipment for our staff and required the use of face masks by our restaurant teams regardless of jurisdictional requirements in an effort to keep our teams and customers safe;

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•

Instituted a special paid time off program with the goal of ensuring that hourly staff and managers could afford to take adequate time off from work to care for their health;

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•

Retained our restaurant management teams which we believe enabled us to adapt quickly to a mandated off-premise only operating model and reopen indoor dining rooms safely when permitted; and

​

•

When the closure of our dining rooms in March necessitated the furloughing of approximately 41,000 hourly staff members, the Company funded a variety of support programs in an effort to provide them with stability, including a complimentary daily meal, continuation of insurance benefits during the furlough and contributions to a COVID assistance fund that, together with donations from the Foundation, our generous staff members and vendor partners, provided $2.6 million in financial grants during fiscal 2020 to staff members in need.

​

In late April 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms across our concepts the second week of May. However, restrictions on the type of permitted operating model and occupancy capacity continued to change and increase throughout fiscal 2020, impacting many of our markets during the fourth quarter of fiscal 2020 with the surge in COVID-19 cases.

Revenues for fiscal 2020 decreased 20.1% to $1,983.2 million, primarily due to a decline in comparable restaurant sales, reflecting the impact of the COVID-19 pandemic, partially offset by additional revenue related to our acquisition of North Italia and FRC and new restaurant openings. The revenue decline and cost pressure associated with the COVID-19 pandemic impacted our cash flow generation and drove a net loss of  $253.4 million, or $6.32 per diluted common share in fiscal 2020. Adjusted net loss for fiscal 2020 was $74.9 million, or $1.49 per share, and fiscal 2020 adjusted EBITDAR was $186.8 million. Our operational and financial decisions throughout the COVID-19 pandemic enabled us to return to positive operating cash flow in the second half of fiscal 2020 and exit the year in a solid financial position with total available liquidity of approximately $250 million, including a cash balance of approximately $154 million.

Financial and Operating Highlights.   Despite the significant challenges we faced in 2020 as a result of the COVID-19 pandemic, we were able to accomplish a number significant financial and operational achievements, including:

•

Financial performance exceeded projections — In March and April of 2020 (after the COVID-19 pandemic was declared a National Public Health Emergency), we prepared updated financial projections (including sales, adjusted EBITDAR and ending cash balance) in connection with an amendment to the Company’s revolving credit facility and in connection with the Company entering into the Subscription Agreement with Roark. Our actual financial performance exceeded all three metrics under both sets of projections.

​

•

COVID-19 Response — We quickly adapted our business to cope with challenges related to the COVID-19 pandemic. This required us to restore liquidity, develop new operating models, implement new technologies and to take a number of other measures to optimize our business during the pandemic. These measures included: stabilized working capital, secured additional liquidity and developed appropriate support cost structure; right sized corporate general and administrative expenses to ensure positive cash flow while maintaining a sufficient workforce for appropriate restaurant and corporate support; completed review of all corporate/field projects and identified a

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limited number of essential projects as appropriate for 2021 planning; developed and implemented multiple restaurant operating models including off-premise only to comply with capacity restrictions, reopened for full-service dining as state/local jurisdictions permitted and implemented appropriate safety guidelines for staff and guests; rolled out a number of restaurant technology solutions to support re-opening of restaurants and dining rooms including front desk remote greeter, text paging, contactless payment, interactive voice response and online reservations.

•

FRC and North Italia: Supported Growth, Ongoing Management and Optimization — Finalized new unit growth pipeline for 2020-2021; included North Italia in the quarterly reforecast process for financial planning; supported North Italia supply chain needs; transitioned FRC payroll and benefits to our corporate platforms.

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•

Environmental, Social and Governance (“ESG”) — Determined the reporting framework to be used to report our ESG metrics; developed sustainability update; published ESG report.

​

2020 Annual Incentive/2018-2020 Long-Term Incentive Plan Outcomes.   When evaluating Bonuses payable to our Named Executive Officers under our fiscal 2020 Performance Incentive Plan, the Compensation Committee took into account the fact that the Company’s actual financial performance (with respect to sales, adjusted EBITDAR and ending cash balances) exceeded projections prepared in March and April of 2020 (after the COVID-19 pandemic was declared a National Public Health Emergency). These projections were prepared in connection with an amendment to the Company’s revolving credit facility and in connection with the Company entering into the Subscription Agreement with Roark. The Compensation Committee also considered the extraordinary efforts by management, including our Named Executive Officers, to support our business during the pandemic crisis, which included the following: stabilizing working capital, securing additional liquidity and developing appropriate support cost structure; developing and implementing multiple restaurant operating models including off-premise only to comply with capacity restrictions, and implemented appropriate safety guidelines for staff and guests; rolling out a number of restaurant technology solutions to support re-opening of restaurants and dining rooms including front desk remote greeter, text paging, contactless payment, interactive voice response and online reservations; and, transitioning FRC payroll and benefits to our corporate platforms. For all of these reasons, the Committee determined it would be appropriate to approve an upward adjustment pursuant to the terms of the fiscal 2020 Performance Incentive Plan for an additional 10% of the applicable target Bonus. Without this adjustment, payouts under our incentive plans were as follows for 2020:

 

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(1)

As a result of the financial impact the COVID-19 pandemic had on our business, the Company did not achieve the applicable adjusted EBITDAR objective ($474.7 million), or the minimum required adjusted EBITDAR level ($403.5 million) for any payout of the adjusted EBITDAR portion of the plan.

​

(2)

In consideration of the Company exceeding its post-pandemic financial projections, due to management’s extraordinary efforts and achievements in managing through the crisis, the Compensation Committee determined it would be appropriate to approve an upward adjustment pursuant to the terms of the fiscal 2020 Performance Incentive Plan for an additional 10% Bonus (which is in addition to the payout shown under “Results” above). See “Executive Summary—2020 Annual Incentive/2018-2020 Long-Term Incentive Plan Outcomes” above.

​

2020 Compensation Program Changes and Other Pay Actions.   Our fiscal 2020 executive compensation program was approved prior to the COVID-19 pandemic to reflect our business strategy at that time. However, in light of the sudden and severe challenges we faced as a result of the COVID-19 pandemic, during fiscal 2020 we also made certain changes to our executive compensation program to better align management’s focus with the immediate needs of the business.

 

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Emphasis on Performance-Based Compensation and Pay Delivery.   For fiscal 2020, on average, 68% of the target direct compensation of our Named Executive Officers, other than our Chief Executive Officer, was performance-based. Mr. Overton continues to have a proportionately greater percentage (85%) of performance-based compensation as compared to other Named Executive Officers because we believe he has a greater ability to influence both short-term and long-term performance.

The following charts show each element of the target total direct compensation (comprised of base salary, target bonus and grant date fair value of equity awards) for our Chief Executive Officer and other Named Executive Officers (on average) for fiscal 2020 (equity awards are depicted at grant date fair value).

Alignment of Company Performance and Pay Delivery

Consistent with our pay-for-performance philosophy, 85% of our CEO’s target total direct compensation is at-risk and aligned with our actual performance. The table below demonstrates such alignment, showing

 

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that “actual” pay for the CEO in each of the past three years has been lower than the “targeted” amounts, which is consistent with our total stockholder return performance over the same period. “Target” pay consists of annual salary, target bonus and grant date value of equity awards granted during fiscal 2020. “Actual” pay is calculated by annual salary, actual bonus paid for fiscal 2020 performance and equity value granted during fiscal 2020 based on our stock price as of 12/31/2020.

(1)

Actual pay includes base salary, actual bonus paid for performance during the year shown, the intrinsic value of stock options as of 12/31/20, the intrinsic value of earned performance shares as of 12/31/20 for 2018 grants (which was $0), and the intrinsic value of target performance shares as of 12/31/20 for 2019 and 2020 grants.

​

2020 “Say-on-Pay” Advisory Vote on Executive Compensation.   We provide stockholders a “say-on-pay” advisory vote regarding our Named Executive Officers’ compensation on an annual basis. At our 2020 annual meeting of stockholders, our stockholders approved, by a vote of approximately 95% of shares represented in person or by proxy, the say-on-pay proposal regarding the compensation of our Named Executive Officers as presented in the 2020 proxy statement. We believe this level of approval indicates that stockholders strongly support our executive compensation programs and policies. The Compensation Committee will consider the results of this year’s say-on-pay proposal, as well as feedback from our stockholders, when making future executive compensation decisions.

Alignment with Stockholder Interests.   Our executive compensation program is aligned with stockholder interests, as described in the summary below:

 

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Overview of Compensation Program

Compensation Philosophy.   In order to maintain a leadership position in our industry and to continue growing our concepts, both domestically and internationally, we need to attract and retain highly motivated executives who bring experience, innovation and operational excellence to us. With this in mind, we strive to:

•

Attract and retain industry-leading executives by paying competitive compensation relative to other companies within the restaurant industry and other industries with which we compete for talent;

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•

Drive high performance by connecting compensation to our financial, operating, and strategic goals and results and by appropriately rewarding high performance;

​

•

Tie executive pay to Company performance goals that drive stock price performance; and

​

•

Align the interests of our executives with those of our stockholders by tying a portion of our executive compensation to long-term equity incentives and requiring stock ownership for our Named Executive Officers.

​

Elements of Compensation Program.   Our 2020 executive compensation program consisted of the following:

 

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Factors Considered in Making Compensation Decisions.   Our compensation strategy enables us to appropriately differentiate and reward executives by taking into account:

•

Our financial and operational performance;

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•

The executive’s individual performance, experience and qualifications;

​

•

The scope of the executive’s role;

​

•

The level of total compensation for our other executives; and

​

•

Competitive market data, which helps us evaluate how our executive pay levels compare to others in our industry and within the markets in which we compete for talent.

​

All of the factors set forth above are considered by the Compensation Committee in establishing Named Executive Officer compensation, in a subjective manner, without any specific formula.

Market Positioning

Our Compensation Committee, in collaboration with our Chief Executive Officer and Senior Vice President of Human Resources, reviews market data related to pay practices among comparable companies but does not target specific market positioning of pay when determining compensation for individual Named Executive Officers. Rather, the Compensation Committee uses comparative market data as one of several factors when making individual compensation decisions.

As part of its compensation review process for fiscal 2020, the Compensation Committee reviewed an analysis prepared by its independent compensation consultant of market pay practices for positions similar to the positions of our Named Executive Officers, adjusted to take into account differences if any, between the scope of our Named Executives Officers’ responsibilities compared to their counterparts in positions with similar titles in comparable companies. This analysis used pay comparisons from comparable companies in the restaurant and hotel industry as compiled from their proxy disclosures and other SEC filings as well as a recognized market survey source, the Mercer Executive Remuneration Suite Survey. For the Chief Executive Officer, the President of The Cheesecake Factory Incorporated and the Chief Financial Officer, publicly available data from the comparable companies listed below was used in such analysis. For the General Counsel and President of our bakery division, publicly available data was weighted at 50% and the survey was weighted at 50% for purposes of determining market pay positions in such analysis.

2020 Executive Compensation Peer Group.   When we compare ourselves to other companies, we must account for differences between us and others in terms of ownership structure, dining industry segment, size and complexity of operations, sourcing pool for executive talent, and other differentiators. We use the “Executive Compensation Peer Group” for executive compensation comparisons and compensation program design comparisons, as we believe this group reflects companies most similar to us in terms of size and complexity of operations and with which we compete for executive talent. The Executive Compensation Peer Group approved by the Compensation Committee for 2020 consisted of publicly-traded companies in the restaurant and hotel/hospitality industries with revenue between $500 million and $6 billion (approximately 0.2 times to 2.5 times our revenue), and in the aggregate, had an overall median revenue of  $2.4 billion as of fiscal 2019, which was slightly lower than our revenue, as follows:

(1)

Included in our comparison group because of its importance as an industry leader in casual dining, even though its revenues are greater than the $6 billion upper range limit.

​

For the 2020 Executive Compensation Peer Group, the Compensation Committee made no changes from the prior year.

While this comparison group provides the Compensation Committee with an important general frame of reference, as described above, the Compensation Committee does not target our Named Executive Officers’ compensation at any specific percentile or within a specific range of the Executive Compensation Peer Group’s pay levels.

 

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(1)

Awards are based on salaries in effect on February 26, 2020.

​

(2)

The threshold award assumes the achievement of 85% of the Company-wide adjusted EBITDAR objective and none of the strategic objectives.

​

(3)

The target award assumes the achievement of 100% of the Company-wide adjusted EBITDAR objective and 100% of the strategic objectives.

​

(4)

The maximum award assumes achievement of 115% or more of the Company-wide adjusted EBITDAR objective and 100% of the strategic objectives.

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Payouts under the fiscal 2020 Performance Incentive Plan are based 75% on the Company’s level of achievement of a financial performance objective and 25% on the Company’s level of achievement of certain strategic objectives. For corporate executives (including each of our Named Executive Officers other than Mr. Carango), the financial objective is company-wide adjusted EBITDAR, and the strategic objectives relate to company-wide initiatives. For bakery executives (including Mr. Carango), the payout is based 50% on a company-wide adjusted EBITDAR objective, 25% on a bakery-division adjusted EBITDAR objective, and 25% on strategic objectives specific to the bakery division. The financial objective component can be earned from 0-200% of target based on level of achievement, and the strategic objective can be earned from 0-100% of target based on level of achievement, resulting in a total bonus opportunity from 0-175% of target.

The Compensation Committee selected adjusted earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) as the most heavily weighted performance target in our annual plan for fiscal 2020. Like earnings before interest, taxes, depreciation and amortization (EBITDA), EBITDAR is a key driver of stockholder value in that it (i) affects not only earnings per share but also overall cash flow from operations, (ii) supports return on invested capital percentage rates and (iii) is a key driver of a publicly-traded restaurant company’s stock multiple. The Compensation Committee selected EBITDAR over EBITDA because EBITDAR removes the impact of lease accounting rules, to focus more specifically on our operating priorities for the year. Taking into consideration the projected operating environment for casual dining and specific Company objectives for fiscal 2020 (prior to the onset of the COVID-19 pandemic), the Compensation Committee established adjusted EBITDAR goals that were consistent with our annual operating plan approved by the Board for fiscal 2020. For purposes of the bonus plans, adjusted EBITDAR excludes the effects of items we do not consider indicative of our ongoing operations such as impairment charges, acquisitions and the effect of health and welfare plan related costs. EBITDAR is a non-GAAP measure and is defined and reconciled from GAAP in Appendix A of this proxy statement.

At the beginning of fiscal 2020, prior to the COVID-19 pandemic, the Compensation Committee established strategic objectives under the fiscal 2020 Performance Incentive Plan. In July 2020 the Committee approved revising the strategic objectives in order to better align management’s focus with the needs of the business in light of the sudden and severe challenges faced by the Company as a result of the COVID-19 pandemic. The following chart table shows strategic objectives under the fiscal 2020 Performance Incentive Plan before and after these changes were made.

 

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Fiscal 2020 Performance Achievement.   In February 2021, the Compensation Committee reviewed our performance against the Company’s objectives for fiscal 2020. As a result of the financial impact of the COVID-19 pandemic on our business, the Company did not achieve the applicable adjusted EBITDAR objective ($474.7 million), or the minimum required adjusted EBITDAR level ($403.5 million) for any payout of the EBITDAR portion of the plan.

 

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The Compensation Committee also reviewed our bakery division’s performance against its objectives for fiscal 2020 and certified that the bakery division achieved the following results:

 

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As a result of our 2020 performance, our Named Executive Officers would have received Bonuses under our fiscal 2020 Performance Incentive Plan, as follows:

When evaluating Bonuses payable to our Named Executive Officers under our fiscal 2020 Performance Incentive Plan, the Compensation Committee took into account the fact that the Company’s actual financial performance (with respect to sales, adjusted EBITDAR and ending cash balances) exceeded projections prepared in March and April of 2020 (after the COVID-19 pandemic was declared a National Public Health Emergency), which were prepared in connection with an amendment to the Company’s revolving credit facility and in connection with the Company entering into the Subscription Agreement with Roark. The Compensation Committee also considered the extraordinary efforts by management, including our Named Executive Officers, to support our business during the pandemic crisis. See “Executive Summary—2020 Annual Incentive/2018-2020 Long-Term Incentive Plan Outcomes” above. For all of these reasons, the Committee determined it would be appropriate to exercise its discretion under the fiscal 2020 Performance Incentive Plan and approve an adjustment to the final Bonus payments for an additional 10% of the target amount. As such, our Named Executive Officers received Bonuses under our fiscal 2020 Performance Incentive Plan as follows:

2021 Performance Incentive Plan.   Given the extreme uncertainty regarding the ongoing impacts of the COVID-19 pandemic on our business in fiscal 2021, the Compensation Committee decided, with the assistance of its independent compensation consultant, to establish two separate performance periods for the adjusted EBITDAR financial performance goal. The first performance period will cover the first half of fiscal 2021 beginning on December 30, 2020 and ending on June 29, 2021, and the second performance period will cover the second half of fiscal 2021 beginning on June 30, 2021 and ending on December 28, 2021. In February 2021 the Compensation Committee established target adjusted EBITDAR for the first performance period. The Compensation Committee will establish target adjusted EBITDAR for the second performance period in July 2021. Additionally, the payout scale for the adjusted EBITDAR financial performance goals for fiscal 2021 was changed to allow threshold payout of 25% of target at 75% of adjusted EBITDAR attainment (at correspondingly reduced payout), which expands the performance goal range in recognition of continued COVID-19 uncertainty. Maximum payouts for the EBITDAR component were also reduced from 200% of target to 150% of target, in recognition of continued operation of our restaurants below full capacity. The general structure of the strategic objectives component of the Performance Incentive Plan for fiscal 2021 will not change.

Long-Term Equity-Based Compensation

We believe that equity-based compensation should be a significant component of total executive compensation to align executive compensation with our long-term performance and to encourage executives to make value-enhancing decisions for the benefit of our stockholders. Each of our Named Executive Officers

 

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is eligible to receive equity compensation, which can consist of a mix of stock options, restricted stock, and restricted stock units, to encourage a focus on long-term stockholder value and to foster long-term retention.

We approach equity compensation grants by considering the overall value of the grant (as opposed to the number of shares granted). In addition, the use of full value awards, such as restricted stock awards, reduces our total share usage versus granting only stock options. Equity grants to all staff members, including Named Executive Officers and other executives require approval from the Compensation Committee and, in considering whether to approve such equity grants, the Compensation Committee considers past grants, corporate and individual performance, the valuation of grants, and recommendations of our Chief Executive Officer and the Compensation Committee’s compensation consultant. The Compensation Committee has not established formal guidelines for the size of individual equity grants for our Named Executive Officers, but considers the factors listed above as well as market data in making such decisions. See “Market Positioning” above.

Optimizing Share Usage.   The exercise price of our stock options is the closing price of our stock on the grant date, which is also used to calculate the grant date fair value of other awards. We do not time our release of material non-public information for the purpose of affecting the value of our executives’ compensation, nor do we time our grants of equity-based compensation to take advantage of material non-public information. Our Compensation Committee generally makes grants to our corporate executives, including our Named Executive Officers, on an annual basis, except in the case of newly hired executives, promotions or other extraordinary events. Our equity grant procedures are available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.”

Equity Grants in 2020.   For fiscal 2020, the Compensation Committee determined, with the assistance of its independent compensation consultant, that Named Executive Officers should continue to receive a designated value of equity comprised of a mix of 50% performance-based restricted stock subject to achievement of three equally weighted performance conditions (EPS; sales per square foot; and profit, as described in further detail below), and 50%, based upon each executive’s designated preference, of any proportion of stock options (minimum 25%) (with the number of options to be granted determined based on a Black Scholes valuation) and/or time-based restricted stock (see table below for actual equity awards granted based on each executive’s election). The Compensation Committee believes that regardless of the choice elected by each executive, the resulting mix would strongly align the interests of our executives with those of our stockholders and our long-term performance. In the future, this allocation may vary, new performance targets may be chosen and other forms of equity may be used.

Nonqualified Stock Options.   The Compensation Committee believes that stock options are an appropriate vehicle for a portion of long-term equity compensation because they provide value only if our stock price increases over time, which aligns our executives’ interests with those of our stockholders. The Named Executive Officers’ 2020 stock options were granted at an exercise price of  $40.16 per share, which was the closing price per share of our common stock on February 18, 2020, the date of grant, and incrementally vest as to 20% of the shares on each of the first five anniversaries of the grant date subject to continued employment through the applicable vesting date.

Time-Based Restricted Stock Awards.   The time-based restricted stock granted to our Named Executive Officers during 2020 vest as to 60% of the shares on the third anniversary of the grant date, and 20% on each of the fourth and fifth anniversaries of the grant date, and are subject to continued employment through the applicable vesting date. We also granted an award in February, 2020 of 2,490 shares of time-based restricted stock to Mr. Clark in recognition of his efforts to facilitate the Company’s acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC which will vest in full on the third anniversary of the grant date, subject to Mr. Clark’s continued employment through the vesting date.

Performance-Based Restricted Stock.   As described above, the performance-based restricted stock awards granted to the Named Executive Officers in 2020 are subject to the achievement of three equally weighted performance conditions. The adjusted EPS, sales per square foot and adjusted profit goals are collectively referred to as the “Performance Conditions” and are subject to threshold and maximum potential payouts. After the conclusion of the performance period, any earned shares are then subject to time-based vesting at the rate of 60% of the shares on February 18, 2023 and 20% of the shares on each of February 18, 2024 and February 18, 2025, subject to continued employment through each vesting date. If the threshold goal is

 

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achieved, between 60-150% of the target shares will be eligible to vest, based on level of achievement. If the threshold goal is not achieved, the target shares are forfeited.

•

The EPS goal is based upon the Company’s average annual fully-diluted adjusted EPS growth for fiscal years 2020, 2021 and 2022. This metric was selected as it is believed to be the most significant part of our business strategy that has a high correlation with stockholder returns.

​

•

The sales per square foot goal is based upon The Cheesecake Factory Restaurants’ average annual sales per productive square foot over Fiscal Years 2020, 2021, and 2022. Sales per productive square foot was selected as it is a stated goal of the company and a strong driver of long-term financial performance. In response to the COVID-19 pandemic, occupancy restrictions were enacted in many jurisdictions where we operate, affecting our ability to utilize all square footage that otherwise would have been available for dine-in guests. As a result, achievement of this goal will be determined based upon sales per productive square foot available for use during the applicable measurement period.

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•

The profit goal is based upon The Cheesecake Factory Restaurants’ average annual adjusted controllable profit over Fiscal Years 2020, 2021, and 2022. “Controllable profit” only includes expenses over which restaurant management has direct control (e.g. ingredient costs, labor, dining room expenses, etc.). This metric was selected as it is the key profit metric managed at the restaurant level, and aligns with our stated priorities.

​

In February 2020, the following grants were made to our Named Executive Officers under The Cheesecake Factory Stock Incentive Plan, as amended (the “Stock Plan”) in recognition of their performance during fiscal 2019 and expected future contributions, to target competitive compensation levels appropriate to the executive’s tenure in his or her role, and to align their interests with the long-term interests of our stockholders:

(1)

See “Long-Term Equity-Based Compensation — Nonqualified Stock Options” above for a description of exercise price and vesting conditions.

​

(2)

See “Long-Term Equity-Based Compensation — Performance-Based Restricted Stock” above for a description of performance -based vesting conditions.

​

(3)

See “Long-Term Equity-Based Compensation — Time-Based Restricted Stock” above for a description of time -based vesting conditions.

​

(4)

Includes an award granted in February, 2020 of 2,490 restricted shares in recognition of Mr. Clark’s efforts to facilitate the Company’s acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC which will vest in full on the third anniversary of the grant date, subject to Mr. Clark’s continued employment through the vesting date.

​

Attainment of 2018 Grant Performance Condition.   In 2018, as part of our annual long long-term incentive program, our Named Executive Officers at that time were granted performance-based restricted shares (“RSAs”) subject to specific EPS goals. The EPS RSAs were subject to achievement of a cumulative fully diluted EPS target of  $9.56 for a three-year performance period (2018—2020) (the “EPS Target”), were eligible to be earned from 60% for threshold achievement of EPS target to 150% for maximum achievement of EPS target (linear interpolation is applied for achievement between threshold and maximum), and would be forfeited if the Company failed to achieve a threshold goal of  $8.44. The Company’s cumulative adjusted fully diluted EPS for fiscal years 2018 through 2020 was $3.63 or 38% of target, which was below the required threshold for payout. Despite the significant impact of the COVID-19 pandemic on our business, which

 

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significantly impaired the Company’s ability to achieve the EPS Target the Compensation Committee remains committed to paying for performance and elected to not adjust this metric. Accordingly, these RSAs were not earned and have been forfeited.

Retirement Plans

Nonqualified Deferred Compensation Plan.   The Cheesecake Factory Executive Savings Plan (“Executive Savings Plan”) is a nonqualified deferred compensation plan that provides a tax-deferred savings vehicle for our “highly compensated” executives (as defined in the Executive Savings Plan), as well as our non-employee directors. At the end of fiscal 2020, approximately 340 staff members, all of our Independent Directors, and all of our Named Executive Officers were eligible to participate. Approximately 510 staff members and two Independent Directors maintained account balances. Additional information regarding this plan appears in this Proxy Statement in the section below entitled “Compensation of Named Executive Officers-Nonqualified Deferred Compensation.”

The Executive Savings Plan permits us to match a portion of participants’ contributions with Company contributions, on a pre-tax basis to participants (other than Independent Directors). Since inception, we made a partial matching contribution to the Executive Savings Plan each year, except during the period of May 2009 through October 2011, when the Company match was suspended. We currently match 25% of the first 4% of salary and/or Bonus deferred. One hundred percent of a participant’s Bonus, if any, and up to 50% salary may be deferred.

Pension Benefits.   We do not maintain a pension plan for executives or staff members. However, in order to continue to retain Mr. Overton’s services as our Chief Executive Officer and in recognition of his unique contributions as our founder, Mr. Overton’s employment agreement provides for a “Founder’s Retirement Benefit” pursuant to which Mr. Overton (or his beneficiary or estate, if he is deceased) is entitled to fixed annual payments of  $650,000 for a period of ten years following his separation from service for any reason, payable in equal monthly installments, as further described in his employment agreement. Our obligation with respect to the Founder’s Retirement Benefit is unfunded and unsecured, and is payable from our general, unrestricted assets. For additional information concerning Mr. Overton’s employment agreement, see the section in this Proxy Statement entitled “Compensation of Named Executive Officers-Employment Agreements.”

Other Benefits and Perquisites

All of our executives, including our Named Executive Officers, are eligible to participate in our broad-based benefit programs, which include medical, dental, vision, life insurance and long-term disability programs, as well as paid vacation and a sabbatical leave program. Our sabbatical leave program has been suspended in response to challenges related to the COVID-19 pandemic. We look forward to recommencing this benefit when circumstances allow. We also provide group term life insurance to our executives, including each of our Named Executive Officers, as well as all other salaried staff members, at the lesser of one-times base salary or $750,000. The life insurance benefit is reduced to 65% of base salary at age 65 and 50% of base salary at age 70. The IRS requires that the portion of the value of such policy exceeding $50,000 be deemed imputed income to the staff member and provides a formula by which the imputed income is calculated.

We also provide the following limited perquisites to our executives, including Named Executive Officers, that vary based on the executive’s level:

•

The choice of a company-leased vehicle or automobile allowance. This program also is offered to certain other executives and selected additional management positions. Each individual participating in our leased car program is assigned imputed income, according to IRS regulations, for his or her personal use of the automobile or is provided with an automobile allowance, which is subject to taxation at the individual’s tax rate. The type of vehicle and amount of allowance varies with the executive’s level.

​

•

A company-paid executive physical every two years. This program is offered to staff members at the level of Senior Vice President and above, including our Named Executive Officers.

​

•

Relocation expenses. Relocation expenses are reimbursed in accordance with the terms of any employment agreement or as determined on a case-by-case basis.

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We believe that these benefits enhance our ability to attract and retain high-quality talent at a modest cost and help to elevate our Company as an employer of choice among our competitors, including continuing to be recognized by FORTUNE® Magazine as one of the “100 Best Companies to Work For®” for seven consecutive years (due to delays related to the COVID-19 pandemic, Fortune® Magazine has not yet released its “100 Best Companies to Work For®” for 2021). The amounts we paid related to perquisites provided to our Named Executive Officers in fiscal 2020 are disclosed in the section entitled “Compensation of Named Executive Officers—Summary Compensation Table.”

Potential Benefits Upon Termination and Change in Control

The Compensation Committee recognizes that the possibility of the termination of an executive officer’s employment, and the uncertainty it creates, may result in the loss or distraction of the executive officer, and present challenges in recruiting potential executive officers, all to the detriment of the Company and its stockholders. To help ensure that the Company has the continued attention and dedication of these executives and the availability of their continued service, and to focus executive officers on stockholder interests when considering strategic alternatives, the Named Executive Officers are eligible for certain payments and benefits upon a qualifying termination of employment that are consistent with the Company’s overall philosophy and market practices.

These potential severance payments are provided under the terms of our existing employment agreements with our Named Executive Officers. For more information, see “Compensation of Named Executive Officers-Potential Payments upon Termination or Change in Control” in this Proxy Statement.

Furthermore, we do not provide for any automatic “single trigger” equity vesting or other payments upon a change in control and we do not provide for any tax gross-up payments that could be related to change in control excise taxes. Our Stock Plan provides for a “double trigger,” such that equity awards will automatically accelerate if a participant incurs a qualifying termination of employment (without cause or for good reason) within a specified time period following a change in control of the Company. In addition, in the event of a change in control of the Company, if outstanding awards issued under the Stock Plan are not continued, converted, assumed or replaced by the surviving or acquiring entity, then such outstanding awards will fully vest as of immediately prior to such change in control.

Oversight of Named Executive Officer Compensation

Compensation Committee.   Our Compensation Committee determines the compensation of our Named Executive Officers, including their base salaries, bonus, and equity-based compensation, and is supported in that process by an independent compensation consultant and members of senior management, including our Chief Executive Officer, Senior Vice President of Human Resources and Vice President of Compensation and Benefits. The Compensation Committee regularly evaluates our compensation programs to ensure they support our business objectives. The Compensation Committee’s charter is available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.”

Role of Outside Consultants.   For fiscal 2020, the Compensation Committee engaged FW Cook to serve as its independent compensation consultant. Our independent compensation consultant provides detailed evaluation and recommendations regarding our executive and Board compensation programs and advises the Compensation Committee with respect to structuring our compensation plans to achieve our business objectives. FW Cook was retained by and reports directly to the Compensation Committee and does not provide any other services to the Company. The Compensation Committee assessed the independence of its compensation consultants and analyzed whether the work of FW Cook raised any conflict of interest, pursuant to the rules of the SEC and Nasdaq. The Compensation Committee determined, based on this review, that the work of FW Cook as compensation consultant to the Compensation Committee does not create any conflict of interest and that FW Cook is independent.

Role of Chief Executive Officer in Compensation Decisions.   Our Chief Executive Officer provides the Compensation Committee with his assessment of the performance of each Named Executive Officer (other than himself) and his perspective on the factors described above under “Overview of Compensation Program-Factors Considered in Making Compensation Decisions” when developing his recommendations for each Named Executive Officer’s compensation (other than his own). Our Senior Vice President of Human

 

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Resources and our Vice President of Compensation and Benefits work with our Chief Executive Officer during this process by reviewing market data and other performance factors. The Compensation Committee discusses our Chief Executive Officer’s recommendations, consults with its outside compensation consultant, and then approves or modifies the recommendations in collaboration with the Chief Executive Officer.

Compensation of our Chief Executive Officer.   The Compensation Committee determines the compensation of our Chief Executive Officer (including the terms of his employment agreement), following the same principles as are applied to compensation determinations for the other Named Executive Officers. The Compensation Committee solicits our Chief Executive Officer’s perspective on his own compensation but makes determinations regarding his compensation independently and without him or other Named Executive Officers present.

Governance Considerations

Risk Considerations.   The Compensation Committee reviews our employee compensation policies and practices, including those for non-executive officers, on an annual basis to assess how those policies and practices may affect risk-taking by employees. During its review in fiscal 2020, the Compensation Committee determined that our compensation programs are appropriately weighted toward long-term incentives and include policies designed to deter undue risk-taking by employees. These policies include the Clawback Policy, stock retention and ownership policies, and policies against short sales and hedging (see “Policies Regarding Hedging, Short Sales, Publicly Traded Derivatives, Margin Accounts and Pledges”). Based on this assessment, we determined that our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Clawback Policy; Forfeitures.   We maintain a Policy on Reimbursement of Incentive Payments and Equity Awards which applies to bonus payments and equity awards (the “Clawback Policy”). Our Clawback Policy requires certain of our executives to agree in writing to repay all or a portion of any Bonus payments and/or equity award(s), to the extent permitted by law and deemed appropriate by the Audit Committee, when we are required by applicable law or applicable accounting or auditing principles to restate our financial statements to correct an accounting error in any interim or annual financial statement filed with the SEC as a result of material noncompliance with applicable financial reporting requirements and the bonus and/or equity award(s) were directly based on those financial statements. Additionally, the Compensation Committee may (i) cause the cancellation of any award of any Option, SAR, Restricted Stock Grant or Stock Unit under the Stock Plan (“Award”), (ii) require reimbursement of any Award by a participant under the Stock Plan and (iii) effect any other right of recoupment of equity or other compensation provided under the Stock Plan or otherwise in accordance with Company policies (including without limitation the Clawback Policy) and/or applicable law. If the service of a Stock Plan participant is terminated for Cause (as defined under the Stock Plan), then all Options, SARs, unvested portions of Stock Units and unvested portions of Restricted Stock Grants terminate and are forfeited immediately without consideration as of the termination date.

Stock Ownership Requirements.   Stock ownership guidelines applicable to certain of our executive officers, including all current Named Executive Officers, provide that certain executives are required to acquire (and thereafter maintain ownership of) a minimum number of shares of our common stock with a value equal to the multiple of such executive’s annual base salary, as follows:

 

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executive retains beneficial ownership, and (ii) unvested restricted stock or restricted stock units. Compliance is calculated annually, on the first day of the fiscal year. For purposes of determining compliance with the policy, “value” means an assumed per-share value based on the average of the closing price of our common stock on the last day of each of the previous four fiscal quarters. An exception to the policy exists if acquisition of shares would result in a violation of our Special Trading Policy and Procedures. Certain hardship exceptions are also available at the discretion of the Compensation Committee. Due to a sudden and significant decrease to the value of our stock caused by the COVID-19 crisis, not all of our Named Executive Officers met applicable stock ownership guidelines as of March 15, 2021.

Other Considerations

Impact of Accounting and Tax Treatments on Compensation.   Accounting and tax considerations play a role in the design of our executive compensation program. Accounting rules, such as Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, require us to expense the estimated fair market value of our stock-based compensation, which reduces the amount of our reported profits. The Compensation Committee considers the amount of this expense and the financial impact to us in determining the amount of equity compensation awards to grant to executives.

Section 162(m) of the Internal Revenue Code (“Code”) and the regulations promulgated thereunder limit to no more than $1 million per taxable year, the allowable Company deduction for compensation paid to certain current and former executive officers of the Company (although there historically was an exception to this $1 million annual limitation for certain performance-based compensation). As a result, we expect that compensation paid per year to our Named Executive Officers and certain other current and former executive officers in excess of  $1 million generally will not be deductible, subject to limited exceptions. The Compensation Committee generally seeks to preserve tax deductions for executive compensation where available but may make compensation decisions based on other factors when it believes doing so is in the best interest of the Company and its stockholders. Further, the Compensation Committee also reserves the right to make changes or amendments to existing compensation programs and arrangements, including changes or amendments that may result in the loss of tax deductions, if the Compensation Committee believes it is in the best interests of the Company and its stockholders to do so.

Code Section 409A limits flexibility with respect to the time and form of payment of nonqualified deferred compensation. If a payment or award is subject to Code Section 409A but does not meet the requirements that exempt such amounts from taxation under that section, the recipient is subject to (i) income tax at the time the payment or award is not subject to a substantial risk of forfeiture, (ii) an additional 20% federal tax at that time, (iii) possible interest and penalties, and (iv) possible additional state taxes. While Code Section 409A is also very complex and we cannot guarantee compliance with all of its requirements, we have made modifications to our plans and arrangements such that payments or awards under those arrangements either are intended not to constitute “deferred compensation” for Code Section 409A purposes (and will thereby be exempt from the requirements of Code Section 409A) or, if they constitute “deferred compensation,” are intended to comply with the Code Section 409A statutory provisions and final regulations.

The NEO Employment Agreements provide that, if a Named Executive Officer (other than our Chief Executive Officer) is subject to additional taxes imposed by Code Section 409A which relate solely to the timing of payment for the severance benefits under his or her prior employment agreement (if any), then within 60 days after the determination that such Code Section 409A taxes are due, we would pay the executive a cash payment so that the Named Executive Officer would be in the same position on an after-tax basis that the executive would have been in if no Code Section 409A taxes and related interest and/or penalties had been imposed.

 

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