Non-qualified Deferred Compensation
The following table shows information about the amount of contributions, earnings, and balances for each named executive officer under the
Company's Deferred Compensation Plan as of December 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last
Fiscal Year
($)(1)
|
|
Registrant
Contributions
in Last
Fiscal Year
($)(1)
|
|
Aggregate
Earnings (Loss)
in Last
Fiscal Year
($)(2)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance
at Last
Fiscal
Year-End
($)(3)
|
|
Denny Marie Post
|
|
-
|
|
-
|
|
(19,277)
|
|
-
|
|
264,717
|
Guy J. Constant
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Jonathan A. Muhtar
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Beverly K. Carmichael
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Michael L. Kaplan
|
|
-
|
|
-
|
|
(1,710)
|
|
-
|
|
20,647
|
Former Executive
Carin L. Stutz
|
|
13,342
|
|
3,000
|
|
(2,036)
|
|
-
|
|
28,017
|
-
(1)
-
Executive
Contributions in Last Fiscal Year and Registrant Contributions in Last Fiscal Year were reported as compensation to the relevant named executive officers
in our Summary Compensation Table.
49
Table of Contents
-
(2)
-
No
portion of the Aggregate Earnings (Loss) in Last Fiscal Year was reported as compensation to the relevant named executive officers in our Summary Compensation
Table.
-
(3)
-
All
Aggregate Balance at Last Fiscal Year-End amounts reported in this column were reported as compensation to the relevant named executive officers in our Summary
Compensation Table for previous years except for any earnings or losses on deferred amounts.
Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan.
In 2018, Company employees who are generally considered "highly
compensated" pursuant to Internal Revenue Code Section 414(q) were not permitted to participate in the Company's 401(k) program. To permit these employees to save for retirement, the Company
has established the Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan. The plan permits executives and other eligible employees to defer portions of their compensation. Under this
plan, eligible employees may elect to defer up to 75% of their base salary and up to 100% of incentive compensation each plan year. The Company may make matching contributions in an amount determined
by the compensation committee. For the 2018 plan year, the compensation committee authorized matching contributions equal to 50% of the first 4% of compensation that is deferred by the participant.
The Company match for named executive officers and other members of the executive team was capped at $3,000 for the 2018 plan year.
The
Company contributes all amounts deferred under the plan to a rabbi trust. Assets in the rabbi trust are invested in certain mutual funds that cover an investment spectrum ranging
from equities to money market instruments. All rabbi trust assets remain available to satisfy the claims of the Company's creditors in the event of the Company's bankruptcy or insolvency.
When
participants elect to defer amounts into the plan, they also select when the amounts ultimately will be distributed. Participants can elect to have deferrals for a particular year
paid in a future year if the participant is still employed at that time. Such in-service distributions are made in the form of a lump sum or, up to 15 annual installments. Otherwise, payment of a
participant's account is made a minimum of six months from participant's termination of employment in the form of a lump sum or up to 15 annual installments if the participant so elected at the time
of deferral and if the participant's total account balance is at least $50,000. A participant can elect to change a prior distribution election to further delay distribution provided that such new
election must be provided at least 12 months before the date the previously scheduled distribution would have occurred and provided that the new distribution date is at least 5 years
from the originally scheduled distribution date. A participant may obtain a withdrawal prior to the date otherwise scheduled or elected by the participant if the participant incurs an "unforeseeable
emergency" (generally including illness, casualty losses, etc.).
With
respect to deferrals after 2004, the plan is intended to comply with the requirements of section 409A of the Internal Revenue Code, which was enacted as part of the American
Jobs Creation Act of 2004. The plan is a "non-qualified" plan for federal tax purposes, meaning the arrangements are deemed to be unfunded and an employee's interest in the plan is no greater than
that of an unsecured general creditor of the Company.
Employment Agreements and Change in Control Plan
Executive Employment Agreements
Denny Marie Post Amended and Restated Employment Agreement.
Our employment agreement with Ms. Post, our chief executive officer,
dated August 8, 2016, and amended effective August 20, 2018, has an indefinite term. The agreement provides that she is entitled to receive certain benefits upon termination of her
employment not related to a change in control. If Ms. Post's employment is
50
Table of Contents
terminated
either by the Company without cause, or by Ms. Post for good reason, as those terms are defined in the agreement, Ms. Post will receive, among other things,
(a) continued payment of her annual base salary for a period of two years following the effective date of termination; (b) her pro rata share of the annual incentive, calculated and paid
at the end of the plan cycle, that would otherwise have been earned and be payable had she continued to be employed by the Company; and (c) payment of an amount equal to the product of
(i) the portion of premiums of Ms. Post's group health insurance that the Company paid immediately prior to her date of termination and (ii) eighteen.
Good
reason is defined in Ms. Post's agreement as a reduction in her compensation other than as permitted under the employment agreement, relocation of the Company's headquarters
to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective
responsibilities of the chief executive officer; provided that the Company has 30 days to cure any such condition following Ms. Post's notice thereof (which notice is required to be
provided within 90 days of the initial existence of the condition).
Guy J. Constant Employment Agreement.
Our employment agreement with Mr. Constant, our chief operating officer (and former chief
financial officer), dated December 13, 2016, and amended effective August 20, 2018, has an indefinite term. The employment agreement provides that he is entitled to receive certain
benefits upon termination of his employment not related to a change in control. If the Company terminates Mr. Constant's employment without cause, or Mr. Constant terminates his
employment for good reason, Mr. Constant will receive, among other things, payment of an amount equal to one time his annual base salary.
Good
reason is defined in Mr. Constant's employment agreement as a material reduction in his compensation other than as permitted under the employment agreement, relocation of
the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in
his then-effective responsibilities; provided that the Company has 30 days to cure any such condition following Mr. Constant's notice thereof (which notice is required to be provided
within 90 days of the initial existence of the condition).
Jonathan A. Muhtar Employment Agreement.
Our employment agreement with Mr. Muhtar, our chief concept officer, dated
November 26, 2015, and amended effective August 20, 2018, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of
his employment not related to a change in control. If the Company terminates Mr. Muhtar's employment without cause, or Mr. Muhtar terminates his employment for good reason,
Mr. Muhtar will receive, among other things, payment of an amount equal to one time his annual base salary.
Good
reason is defined in Mr. Muhtar's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's
headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in his
then-effective responsibilities; provided that the Company has 30 days to cure any such condition following Mr. Muhtar's notice thereof (which notice is required to be provided within
90 days of the initial existence of the condition).
Beverly K. Carmichael Employment Agreement.
Our employment agreement with Ms. Carmichael, our chief people, culture and resource
officer, dated December 7, 2017 and amended effective August 20, 2018, has an indefinite term. The employment agreement provides that she is entitled to receive certain benefits upon
termination of her employment not related to a change in
51
Table of Contents
control.
If the Company terminates Ms. Carmichael's employment without cause, or Ms. Carmichael terminates her employment for good reason, Ms. Carmichael will receive, among other
things, payment of an amount equal to one time her annual base salary.
Good
reason is defined in Ms. Carmichael's employment agreement as a reduction in her compensation other than as permitted under the employment agreement, relocation of the
Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in her
then-effective responsibilities; provided that the Company has 30 days to cure any such condition following Ms. Carmichael's notice thereof (which notice is required to be provided
within 90 days of the initial existence of the condition).
Michael L. Kaplan Employment Agreement.
Our employment agreement with Mr. Kaplan, our chief legal officer, dated
September 30, 2013, and amended effective August 20, 2018, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of
his employment not related to a change in control.
If
the Company terminates Mr. Kaplan's employment without cause, or Mr. Kaplan terminates his employment for good reason, Mr. Kaplan will receive, among other
things, (a) payment of an amount equal to one time his annual base salary; and (b) payment of an amount equal to the target amount of Mr. Kaplan's annual incentive for the fiscal
year in which the effective date of termination occurs.
Good
reason is defined in Mr. Kaplan's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's
headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the
then-effective responsibilities of the chief legal officer; provided that the Company has 30 days to cure any such condition following Mr. Kaplan's notice thereof (which notice is
required to be provided within 90 days of the initial existence of the condition).
Carin L. Stutz Employment Agreement.
Effective as of September 4, 2018, Ms. Stutz's employment with the Company was
terminated without cause. Ms. Stutz served as Executive Vice President and Chief Operating Officer of the Company from April 2016 until her departure. Our employment agreement with
Ms. Stutz, dated April 27, 2016, provided certain severance benefits to her, including, among other things, payment of an amount equal to one time her annual base salary.
Each
of the above agreements also contain standard confidentiality and non-solicitation provisions.
Change in Control Plan
The Company's employment agreements with its executive officers provide that such executive officers shall participate in the Company's
Executive Change in Control Severance Plan, effective August 14, 2018 (the "Change in Control Plan"). Following a review of the Company's change in control benefits, which were set forth in
individual change-in-control benefits, the compensation committee found the benefits were below market and had inconsistent terms among various executives. The committee transitioned to the Change in
Control Plan to adjust and adopt provisions consistent with the market and to provide consistent benefits across the executive team while enabling the Company to maintain the ability to differentiate
benefits by title, lessen administrative burdens, ease the ability to modify benefits and simplify negotiations in the future. The Change in Control Plan provides that if the executive's employment
with the Company is terminated (a) by the Company
52
Table of Contents
without
cause or (b) by the executive for good reason during the 24-month period following a change in control, the executive is entitled to receive, among other things, the following payments
and benefits:
-
•
-
payment in a lump sum in cash of an amount equal to 3.0 (for the chief executive officer of the Company); 2.0 (for the president (if not the
chief executive officer) and the executive vice presidents of the Company); or 1.0 (for the senior vice presidents of the Company), as applicable, times the sum of his or her (i) annual base
salary and (ii) target annual incentive opportunity, payable within ten (10) days following the date of termination;
-
•
-
payment in a lump sum in cash of an amount equal to the pro rata portion of the executive's target annual incentive opportunity for the year in
which the date of termination occurs, determined by multiplying such target annual incentive opportunity by a fraction, the numerator of which is the number of days in the then-current calendar year
through the date of termination and the denominator of which is three hundred sixty-five (365), payable within ten (10) days following the date of termination;
-
•
-
upon the executive's timely election of continuation coverage under COBRA, payment in a lump sum in cash of an amount equal to the product of
(i) the portion of premiums of the executive's group health insurance, including coverage for the executive's eligible dependents, if any, that the Company paid immediately prior to the date of
termination and (ii) twenty-four (24) months (in the case of the chief executive officer, president or any executive vice president of the Company) or twelve (12) months (in the
case of any senior vice president of the Company), as applicable; and
-
•
-
all outstanding and unvested stock option and restricted stock awards subject solely to time-based vesting shall vest in full and any
restrictions or forfeiture provisions applicable to restricted stock awards shall lapse, notwithstanding the provisions of any equity incentive plan or any award agreement(s) between the executive and
the Company thereunder.
Generally,
under the Change in Control Plan and subject to limited exceptions set forth in the Change in Control Plan, a change in control will be deemed to occur if any person acquires
more than 30% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do
not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar
corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another
entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. Good reason is defined as a reduction in the executive's
compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a significant reduction in the then-effective responsibilities of the executive
without the executive's prior written consent, or failure by the Company to obtain the assumption of the obligations contained in the change in control agreement by any successor to the Company.
None
of our change in control provisions provide for an excise tax gross up payment for Internal Revenue Code Section 280G/4999 purposes. The board has determined not to enter
into any agreements with a named executive officer that contain such an excise tax gross up provision.
53
Table of Contents
Incentive Plans
Set forth below is a description of the change in control provisions contained within our 2017 Plan and our Second Amended and Restated
2007 Performance Incentive Plan (under which there are unvested awards currently outstanding). All outstanding awards under our 2004 Plan are vested.
2017 Plan.
Generally, and subject to limited exceptions set forth in the 2017 Plan, if any person acquires more than 50% of the
outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own
more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction
involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any
of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2017 Plan may become fully vested or paid, as applicable, and may terminate or be terminated
upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company,
upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the two-year period following
such change in control event. The compensation committee also has the discretion to establish other change in control provisions with respect to awards granted under the 2017 Plan. For example,
subject to certain limitations, the compensation committee could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above
and provide that any such acceleration shall be automatic upon the occurrence of any such event. The compensation committee has established awards of PSUs and cash performance awards under the 2017
that provide for acceleration of vesting of such awards in the event of death, disability, or retirement of the participant or a change in control event of the Company.
Second Amended and Restated 2007 Performance Incentive Plan.
Generally, and subject to limited exceptions set forth in the 2007 Plan, if
any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior
to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation
or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or
the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2007 Plan may become fully
vested or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect
to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated
by the Company without cause within the two-year period following such change in control event. The administrator also has the discretion to establish other change in control provisions with respect
to awards granted under the 2007 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not
described above and provide that any such acceleration shall be automatic upon the occurrence of any such event. Beginning in fiscal year 2018, the Company has made all awards, including annual
incentive awards, under the 2017 Plan.
There
are currently no amounts payable to or accrued for payment to any named executive officer under the change in control provisions contained in the plans.
54
Table of Contents
Potential Payments upon Termination or Change in Control
The following table presents the amount of compensation payable to each of our named executive officers as if the triggering termination event
had occurred on the last day of our most recently completed fiscal year, December 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Benefit(1)
|
|
Termination
w/o Cause or
Resignation
with Good
Reason($)
|
|
Termination
with Cause or
Resignation
w/o Good
Reason($)
|
|
Death($)
|
|
Disability($)
|
|
Change in
Control($)(2)
|
|
Denny Marie Post
|
|
Salary
|
|
1,600,000(3)
|
|
|
|
|
|
|
|
|
|
|
|
Salary + Annual Incentive
|
|
|
|
|
|
|
|
|
|
5,280,000(4)
|
|
|
|
Annual Incentive
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
957,370(10)
|
|
|
|
Health Benefits
|
|
10,672(11)
|
|
|
|
|
|
|
|
14,229(12)
|
|
|
|
Acceleration of LTI Cash Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Restricted Stock Units
|
|
|
|
|
|
|
|
|
|
426,825(14)
|
|
|
|
Acceleration of Options
|
|
|
|
|
|
|
|
|
|
-(15)
|
|
|
|
Acceleration of Performance Stock Units
|
|
|
|
|
|
216,646(17)
|
|
216,646(17)
|
|
685,475(18)
|
|
Guy J. Constant
|
|
Salary
|
|
515,000(5)
|
|
|
|
|
|
|
|
|
|
|
|
Salary + Annual Incentive
|
|
|
|
|
|
|
|
|
|
1,802,500(20)
|
|
|
|
Annual Incentive
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
385,192(10)
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
14,229(12)
|
|
|
|
Acceleration of LTI Cash Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Restricted Stock Units
|
|
|
|
|
|
|
|
|
|
598,635(14)
|
|
|
|
Acceleration of Options
|
|
|
|
|
|
|
|
|
|
-(15)
|
|
|
|
Acceleration of Performance Stock Units
|
|
|
|
|
|
73,320(17)
|
|
73,320(17)
|
|
237,461(18)
|
|
Jonathan A. Muhtar
|
|
Salary
|
|
425,000(6)
|
|
|
|
|
|
|
|
|
|
|
|
Salary + Annual Incentive
|
|
|
|
|
|
|
|
|
|
1,487,500(20)
|
|
|
|
Annual Incentive
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
317,877(10)
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
14,229(12)
|
|
|
|
Acceleration of LTI Cash Award
|
|
|
|
|
|
55,689(13)
|
|
55,689(13)
|
|
210,015(16)
|
|
|
|
Acceleration of Restricted Stock Units
|
|
|
|
|
|
|
|
|
|
155,751(14)
|
|
|
|
Acceleration of Options
|
|
|
|
|
|
|
|
|
|
-(15)
|
|
|
|
Acceleration of Performance Stock Units
|
|
|
|
|
|
14,963(17)
|
|
14,963(17)
|
|
84,168(18)
|
55
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Benefit(1)
|
|
Termination
w/o Cause or
Resignation
with Good
Reason($)
|
|
Termination
with Cause or
Resignation
w/o Good
Reason($)
|
|
Death($)
|
|
Disability($)
|
|
Change in
Control($)(2)
|
|
Beverly K. Carmichael
|
|
Salary
|
|
420,000(7)
|
|
|
|
|
|
|
|
|
|
|
|
Salary + Annual Incentive
|
|
|
|
|
|
|
|
|
|
1,428,000(20)
|
|
|
|
Annual Incentive
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
293,195(10)
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
5,685(12)
|
|
|
|
Acceleration of LTI Cash Award
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Restricted Stock Units
|
|
|
|
|
|
|
|
|
|
142,818(14)
|
|
|
|
Acceleration of Options
|
|
|
|
|
|
|
|
|
|
-(15)
|
|
|
|
Acceleration of Performance Stock Units
|
|
|
|
|
|
12,665(17)
|
|
12,665(17)
|
|
71,289(18)
|
|
Michael L. Kaplan
|
|
Salary
|
|
365,000(8)
|
|
|
|
|
|
|
|
|
|
|
|
Salary + Annual Incentive
|
|
|
|
|
|
|
|
|
|
620,500(21)
|
|
|
|
Annual Incentive
|
|
255,500(19)
|
|
-(9)
|
|
-(9)
|
|
-(9)
|
|
254,800(10)
|
|
|
|
Health Benefits
|
|
|
|
|
|
|
|
|
|
8,734(12)
|
|
|
|
Acceleration of LTI Cash Award
|
|
|
|
|
|
32,938(13)
|
|
32,938(13)
|
|
74,345(16)
|
|
|
|
Acceleration of Restricted Stock Units
|
|
|
|
|
|
|
|
|
|
72,091(14)
|
|
|
|
Acceleration of Options
|
|
|
|
|
|
|
|
|
|
-(15)
|
|
|
|
Acceleration of Performance Stock Units
|
|
|
|
|
|
8,256(17)
|
|
8,256(17)
|
|
46,466(18)
|
-
(1)
-
A
number of our employee benefit and incentive pay plans provide for payment upon termination of employment of any participant. If terminated on December 30,
2018, each of the named executive officers would have received benefits and payments under these plans in addition to the amounts described in the table above.
-
(2)
-
As
discussed above, the change in control provisions or termination provisions that apply before or after a change in control in the Change in Control Plan and
applicable award agreements contain double trigger provisions, and thus any payments described in the above table are generally required to be made only if the Company terminates the executive's
employment without cause or the executive resigns with good reason, within a defined protection period following the change in control.
-
(3)
-
Represents
the total amount of continued payments for a period of twenty-four months following the effective date of termination based on Ms. Post's 2018 base
salary.
-
(4)
-
Represents
an amount equal to three times the sum of (i) Ms. Post's 2018 base salary and (ii) Ms. Post's target annual incentive award
for 2018, payable in a lump sum within 10 days following the effective date of termination of employment.
-
(5)
-
Represents
an amount equal to one times Mr. Constant's 2018 base salary payable in a lump sum within 60 days following termination of employment.
56
Table of Contents
-
(6)
-
Represents
an amount equal to one times Mr. Muhtar's 2018 base salary payable in a lump sum within 60 days following termination of employment.
-
(7)
-
Represents
an amount equal to one times Ms. Carmichael's 2018 base salary payable in a lump sum within 60 days following termination of employment.
-
(8)
-
Represents
an amount equal to one times Mr. Kaplan's 2018 base salary payable in a lump sum within 60 days following termination of employment.
-
(9)
-
Represents
the amount the named executive officer or his or her estate would have been paid for his or her annual incentive award for 2018 had the named executive
officer been employed on the payment date. Because we did not achieve pre-set Company EBITDA goals for 2018, our named executive officers did not receive a payout of their annual incentive award for
2018.
-
(10)
-
Represents
the pro-rata amount of the named executive officer's target annual incentive award for 2018 determined by multiplying such target annual incentive award
by a fraction, the numerator of which is the number of days in the then-current calendar year through the termination date and the denominator of which is 365, payable in a lump sum within
10 days following the termination of employment.
-
(11)
-
Consists
of the costs of the Company portion of premiums for Ms. Post and her dependents under the Company's existing medical, dental, and prescription
insurance plans per month for a period of eighteen months following the effective date of termination without cause or resignation with good reason under Ms. Post's employment agreement.
-
(12)
-
Consists
of the costs of the Company portion of premiums for the named executive officer and his or her dependents under the Company's existing medical, dental, and
prescription insurance plans per month for a period of twenty-four months following the effective date of termination, except for Mr. Kaplan which costs are for twelve months.
-
(13)
-
The
values included in the table above are based on the pro-rata amount of LTI cash that would have vested on December 30, 2018. For purposes of this
calculation, it is assumed that a pro-rata portion of the LTI cash target amount would vest upon death or total disability as of December 30, 2018. The actual award amount calculated at
December 30, 2018, if any, would be based on the Company's performance during the performance period as measured by the annually set performance targets, with appropriate adjustments to account
for the performance period being deemed to end on the effective date of death or total disability.
-
(14)
-
The
values included in the table above are based on the number of restricted shares or restricted stock units that would have vested on December 30, 2018,
multiplied by the closing sales price of the Company's common stock on Nasdaq as of December 28, 2018, the business day immediately preceding such date ($26.72).
-
(15)
-
The
Change in Control Plan and the applicable award agreements for the named executive officers provide that upon a termination in connection with a change in
control, the named executive officer has the right to require the Company to pay the difference between the fair market value of the Company's common stock on December 30, 2018 and the exercise
price of the options held by the named executive officer on an aggregate basis.
-
(16)
-
The
actual award amount calculated at December 30, 2018, if any, would be based on the Company's performance during the performance period as measured by the
annually set performance targets, with appropriate adjustments to account for the performance period being deemed to end on the effective date of the change in control.
57
Table of Contents
-
(17)
-
The
PSU awards provide, among other things, that upon the death or disability of such named executive officer after the completion of the performance period
applicable to a particular tranche, the number of shares of stock earned with respect to such tranche is based on the extent to which the performance goals for such tranche have been achieved.
Accordingly, the values included in the table above are based on the number of shares that would have vested under the PSU on December 31, 2017 (as to the CEO and CFO only) and
December 30, 2018 (each of which are the last day of a tranche under the PSU awards), multiplied by the closing sales price of the Company's common stock on Nasdaq as of December 28,
2018, the business day immediately preceding such date ($26.72).
-
(18)
-
The
PSU awards provide that if a change in control occurs prior to the last day of the third performance period under the award, then each tranche will be deemed
earned as follows: (a) if the change in control occurs on or prior to the completion of six months of the performance period applicable to such tranche, the number of shares earned with respect
to such tranche will be determined as if the performance goals had been achieved at target; and (b) for other tranches, based on the extent to which the performance goals for such tranche have
been achieved (which amount would be pro-rated, and the Company's performance against the performance goals for any partial periods determined by the compensation committee in good faith as of the
date of the change in control). Accordingly, the values included in the table above are based on the number of shares that would have vested under the PSU on December 30, 2018 (using the actual
achievement for the tranche ending December 30, 2018 and based on target for the remaining two tranches ending December 30, 2019 and 2020), multiplied by the closing sales price of the
Company's common stock on Nasdaq as of December 28, 2018, the business day immediately preceding such date ($26.72).
-
(19)
-
Represents
the named executive officer's target annual incentive payable in a lump sum at the regularly scheduled payment date.
-
(20)
-
Represents
an amount equal to two times the sum of (i) the named executive officer's 2018 base salary and (ii) the named executive officer's target
annual incentive award for 2018, payable in a lump sum within 10 days following effective date of termination of employment.
-
(21)
-
Represents
an amount equal to one times the sum of (i) the named executive officer's 2018 base salary and (ii) the named executive officer's target
annual incentive award for 2018, payable in a lump sum within 10 days following effective date of termination of employment.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, beginning with this proxy
statement, we are providing information about the ratio of the annual total compensation of our Chief Executive Officer (Ms. Post) to the annual total compensation of our median employee. We
believe our pay ratio, which is based on our payroll and employment records using the methodology described below, is a reasonable estimate calculated in a manner consistent with the SEC pay ratio
rules.
Approximately
92% of our employee population consists of hourly restaurant Team Members. Red Robin hourly restaurant roles can be full-time or part-time. Flexible and part-time
employment opportunities can be attractive for Team Members seeking to balance other commitments, have a social
connection, or earn supplemental income. However, part-time employment has the effect of reducing the annual total compensation for our median employee.
58
Table of Contents
To
determine the median employee, we used total cash compensation paid in 2018 as reported to the Internal Revenue Service on Form W-2 of our employee population (including
full-time, part-time, temporary, and seasonal employees), excluding our Chief Executive Officer, on December 30, 2018. In reliance on the de minimis exemption under the pay ratio rules, we
excluded 1,286 Team Members in Canada, representing less than 5% of our total employee population of approximately 25,841 individuals as of December 30, 2018. No cost of living adjustments were
made to determine the median employee. We did, however, annualize the compensation used for full-time and part-time employees who were not employed by Red Robin for all of 2018 by taking an employee's
compensation for the number of active weeks for which they were employed and annualizing such amount for the full year. We believe the use of total cash compensation for all employees is a
consistently applied compensation measure because we do not widely distribute equity awards to employees. Less than 1.0% of our total employee population of 25,841 individuals as of
December 30, 2018 received equity awards in 2018. Based on total cash compensation, our median employee was identified as a restaurant team member who was paid on an hourly basis and who worked
an average of 17.23 hours per week (or 896 hours per year) in 2018. After identifying the median employee, we calculated that employee's annual total compensation using the same
methodology (and including all the same compensation elements) that we used for our named executive officers in the 2018 Summary Compensation Table set forth above in this proxy statement.
Using
this methodology, our median employee's annual total compensation for 2018 was $17,524. Ms. Post's annual total compensation for fiscal year 2018 was $3,112,330, as
reflected in the Summary Compensation Table above. As a result, we estimate that for fiscal year 2018, the ratio of Ms. Post's annual total compensation to that of our median employee was
approximately 178:1.
Because
the rules governing pay ratio disclosure allow for companies to use different methodologies, apply various exclusions, and otherwise make reasonable assumptions and estimates
that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio. As a result, our pay ratio should not be used as a basis for comparison
between us and other companies. We have provided this pay ratio information for compliance purposes, and neither the compensation committee nor Company management have used the pay ratio measure to
influence decisions in determining compensation for our executives or other employees.
59
Table of Contents
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, the Company is again asking our stockholders to cast an advisory vote to approve the
executive compensation of our named executive officers as disclosed in this proxy statement. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to express
their views on the design and effectiveness of our executive compensation programs. As an advisory vote, the outcome of the vote on this proposal is not binding upon us. Our compensation committee,
which is responsible for designing and administering our executive compensation programs, values the opinions expressed by our stockholders and will consider the outcome of this vote when making
future compensation decisions for our named executive officers. In 2018, our advisory vote proposal was supported by approximately 99.3% of the votes cast. The board has adopted a policy of providing
for annual say-on-pay advisory votes.
As
described in detail under the heading "Compensation Discussion and Analysis," our executive compensation objectives have been designed to link incentives and rewards for our
executives to the achievement of specific and sustainable financial and strategic goals which are expected to result in increased stockholder value. We believe our executive compensation program
satisfies these goals and is aligned with the long-term interests of our stockholders. Highlights of our current compensation program include the following:
-
•
-
Direct retention by the compensation committee of its independent compensation consultant.
-
•
-
Emphasis on a long-term pay for
performance, including our LTI program that is measured over three-year performance periods.
-
•
-
Financial measures used for the annual performance-based and long-term incentive grants are
linked to the Company's strategic business plans
reviewed and approved by our board of directors.
-
•
-
The LTI component shifted from performance-based cash to performance-based equity in the form of PSUs for all executives in 2018.
-
•
-
Minimum financial goals must be met for payouts to be made under both the annual performance-based and long-term incentive grants.
-
•
-
Payouts under our annual and long-term incentive compensation plans are capped.
-
•
-
None of our change in control provisions provide for excise
tax gross-ups, and the board has committed not to enter into any such agreements.
In addition, we have double-trigger equity vesting upon a change in control (other than certain performance awards).
-
•
-
Repricing of stock options is expressly prohibited by our equity
compensation plan without stockholder approval.
-
•
-
Meaningful stock ownership guidelines for executives, which promote alignment with stockholders.
-
•
-
Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors.
-
•
-
Adoption of a clawback policy that
provides for the recoupment of incentive compensation, including equity and cash awards, from executive
officers under certain circumstances.
-
•
-
Relatively modest executive perquisites, and no excessive executive only perquisites.
Please
read the "Compensation Discussion and Analysis" section contained in this proxy statement, including the tables and narrative disclosures contained therein for additional details
about our executive compensation programs.
60
Table of Contents
Advisory Vote
We request stockholder approval of the 2018 compensation of our named executive officers as disclosed in this proxy statement. This vote is not
intended to address any specific element of compensation, but rather the overall compensation of our named executive officers and the compensation philosophy, policies, and practices described in this
proxy statement. Accordingly, we ask that you vote FOR the following resolution to approve, on an advisory basis, the compensation of our named executive officers:
"RESOLVED,
that the stockholders of Red Robin Gourmet Burgers, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company's proxy
statement for the 2019 annual meeting of stockholders pursuant to the compensation disclosure rules of the U. S. Securities and Exchange Commission, including the Compensation Discussion and Analysis,
the 2018 Summary Compensation Table, and the other related tables and disclosure within this proxy statement."
Vote Required
Proposal No. 2 requires the approval of a majority of the votes cast on the proposal.
Board Recommendation
Our board of directors unanimously recommends a vote FOR this proposal.
61
Table of Contents
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE 2017 PERFORMANCE INCENTIVE PLAN
Introduction
Our board of directors recommends and proposes an amendment (the "Amendment to the 2017 Plan") to the original 2017 Performance Incentive Plan
(referred to in this section as the "current 2017 Plan"), which was originally adopted by our stockholders in 2017. The Company now wishes to amend the current 2017 Plan.
If
approved by the Company's stockholders, the Amendment to the 2017 Plan would increase the balance of the number of shares of our common stock available for issuance under the current
2017 Plan by 660,000 shares. The total number of shares authorized under the Amendment to the 2017 Plan would increase from 630,182 shares under the current 2017 Plan to 1,290,182 shares
under the 2017 Plan as amended. However, the maximum number of shares of common stock that may be delivered pursuant to new awards granted to eligible persons under the Amendment to the 2017 Plan will
equal the sum of: (i) 660,000 shares; (ii) the remaining number of shares of common stock available for additional award grant purposes under the current 2017 Plan as of the date of
stockholder approval of the Amendment to the 2017 Plan (which was 409,454 shares as of March 1, 2019); and (iii) the number of shares of common stock subject to outstanding awards that
may become available because they are not deemed issued under Section 2.2 of the 2017 Plan, such as for example shares that are forfeited or canceled (but not including shares not delivered due
to net settlement of options or that are withheld to pay taxes). Our compensation committee approved the Amendment to the 2017 Plan on March 11, 2019, subject to stockholder approval at the
2019 annual meeting. If the Amendment to the 2017 Plan is approved by our stockholders, it will become effective on the day of the 2019 annual meeting. Outstanding awards under the terms of the
current 2017 Plan will continue in effect in accordance with their terms. In addition, the Amendment to the 2017 Plan would enhance certain minimum vesting requirements applicable to grants of awards
under the 2017 Plan as further described below.
Purpose for the Amendment
The board of directors unanimously recommends that the Company's stockholders approve the Amendment to the 2017 Plan for several reasons. We
believe that an increase in the number of shares available for future grants is necessary as part of our ongoing commitment to align the interests of our employees (including executive officers) with
those of our stockholders. We believe that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company. Moreover, approval
of the Amendment to the 2017 Plan is central to the compensation committee's shift of executive officer compensation to include more equity and less cash. In 2018, the compensation committee shifted
the structure of the long-term incentive component for all of our named and other executive officers to include more equity and less cash, similar to the approach adopted in 2017 for our chief
executive officer and chief financial officer. As noted elsewhere, in 2018, the 40% long-term incentive component for executive officer compensation was comprised of equity grants in the form of PSUs,
with the other components otherwise remaining the same. Without the amendment, we could be required to use additional cash incentives instead of equity-based awards.
Further,
the Company's ability to grant an appropriate number of equity-based awards continues to be crucial in allowing the Company to effectively compete for key employee talent. It
is in the long-term interest of the Company and its stockholders to strengthen the ability to attract, motivate and retain employees, officers, and directors, and to provide additional incentive for
those persons through stock ownership and other incentives to improve operations, increase profits, and strengthen the mutuality of interest between those persons and the Company's stockholders.
62
Table of Contents
As
of March 1, 2019, of the 630,182 shares authorized under the current 2017 Plan, there were approximately 409,454 shares remaining available for issuance. Without adequate
share availability under the Amendment to the 2017 Plan, the board will need to consider alternative compensation arrangements in order to ensure that the Company remains competitive and is able to
continue to recruit and retain quality talent.
Summary of the Amendment to the 2017 Plan
The Amendment to the 2017 Plan would increase the total aggregate number of shares authorized by 660,000 shares of common stock, from 630,182
shares to 1,290,182 shares.
As
of March 1, 2019, we had 409,454 shares available for issuance under the current 2017 Plan, which would increase to 1,069,454 shares available for issuance as of such date
with the approval of the Amendment to the 2017 Plan, plus the number of shares of Common Stock subject to outstanding awards that may become available because they are not deemed delivered. The
current 2017 Plan permits the re-use of shares that are cancelled, terminated, forfeited, otherwise failed to vest ("Forfeited Shares"). The exact number of shares remaining under the current 2017
Plan will vary because additional awards may be made to newly-hired or promoted employees prior to the annual meeting on May 30, 2019. If the Amendment to the 2017 Plan is approved, the
aggregate number of shares underlying outstanding awards under the current 2017 Plan, and our other equity plans (the "Existing Plans"), plus the number of shares available for issuance in connection
with the grant of awards under the Amendment to the 2017 Plan, would increase to approximately 11.7% of the number of shares of Company common stock outstanding on a fully diluted basis (including all
common stock outstanding at March 1, 2019 plus all shares reserved for outstanding or future awards under the Existing Plans and the Amendment to the Plan).
In
addition to the share increase described above, the Amendment to the 2017 Plan would provide that all awards, including awards of stock options and stock appreciation rights (but
excluding performance-based awards) issued to individuals other than non-employee directors of the board shall be subject to a minimum vesting period of at least one year from the date of the award,
and that all awards, including awards of stock options and stock appreciation rights, if any, to non-employee directors of the board shall be subject to a minimum vesting period ending no earlier than
the sooner of the next annual stockholders meeting and one year from the date of the award.
Summary Description of the 2017 Plan (as proposed to be amended)
A copy of the full text of the 2017 Plan (the current 2017 Plan as amended by the Amendment to the 2017 Plan) is attached to this proxy
statement as
Appendix A
. A summary of the 2017 Plan (as proposed to be amended by the Amendment to the 2017 Plan) is set forth below. Other than
set forth in the summary below, there have been no other material changes to the 2017 Plan which would require prior stockholder approval.
Purpose.
The purpose of the 2017 Plan is to promote the success of the Company and to increase stockholder value by
(a) incentivizing the officers, employees, directors, consultants, and other service providers of the Company and our affiliates to foster and build upon the continued success of the Company
and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain officers, employees,
directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of stock, or to receive compensation which is based
upon appreciation in the value of stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.
63
Table of Contents
Administration.
Our compensation committee will administer the 2017 Plan. The compensation committee has full authority in its discretion
to determine the officers, employees, directors, consultants, and other service providers of the Company or our affiliates to whom awards will be granted and the terms and provisions of awards,
subject to the provisions of the 2017 Plan. Subject to the provisions in the 2017 Plan, the compensation committee has full and conclusive authority to: (a) interpret the 2017 Plan;
(b) prescribe, amend, and rescind rules and regulations relating to the 2017 Plan; (c) determine the terms and provisions of the respective award agreements; and (d) make
all other determinations necessary or advisable for the proper administration of the 2017 Plan.
Our
board of directors may by resolution authorize one or more officers of the Company and/or the chair of the compensation committee to designate individuals to receive awards under
the 2017 Plan, and to determine the type of awards and the terms and conditions and number of shares of common stock or the amount of cash subject to such awards; provided however, that any such
delegation will be subject to such parameters and restrictions consistent with the 2017 Plan.
No Repricing.
In no case (except due to an adjustment to reflect a stock split, or similar event, or any repricing that may be approved
by our stockholders) will any adjustment be made to a stock option or stock appreciation right award under the 2017 Plan (by cancellation, surrender, or exchange) that would constitute a repricing of
the per share exercise or base price of the award.
Eligibility and Limits.
Persons eligible to receive awards under the 2017 Plan, subject to limited exceptions set forth in the 2017 Plan,
include officers, employees, directors, consultants, and other service providers of the Company or any affiliate of the Company. Currently, approximately 550 officers and employees of the
Company and our affiliates (including all of our named executive officers), and each of our non-employee directors are considered eligible under the 2017 Plan.
The
maximum number of shares of our common stock that would be authorized for awards under the Amendment to the 2017 Plan, if approved, is approximately 1,290,182. This number includes,
as of March 1, 2019, 220,728 grants previously issued and outstanding, 409,454 shares available for awards under the current 2017 Plan (including Forfeited Shares), and 660,000 newly authorized
shares.
The
following other limits are also contained in the 2017 Plan:
-
•
-
The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the 2017 Plan is
700,000 shares.
-
•
-
The maximum number of shares subject to those options and stock appreciation rights that are granted under the 2017 Plan during any calendar
year to any individual other than a non-employee director is 170,000 shares.
-
•
-
The maximum number of shares subject to those options and stock appreciation rights that are granted under
the 2017 Plan during any calendar
year to any non-employee director is 25,000 shares, and the maximum value (determined on the grant date) of full-value awards (as defined in the 2017 Plan and discussed below) that may be granted
under the 2017 Plan during any calendar year to any non-employee director is $250,000.
-
•
-
The maximum number of shares that are granted with the intent that they qualify as qualified
performance-based compensation to any employee may
not exceed 150,000 shares.
-
•
-
The maximum aggregate dollar amount that may be paid in any calendar year to any employee with respect to performance-based compensation
payable in cash may not exceed $3,000,000.
As
of March 1, 2019, in addition to shares available for awards under the current 2017 Plan, there were approximately 383,814 shares subject to awards then outstanding under the
Existing Plans.
64
Table of Contents
Types of Awards.
The 2017 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in
our common stock or unit of our common stock, as well as cash performance awards pursuant to Section 3.5 of the 2017 Plan.
A
stock option is the right to purchase shares of our common stock at a future date at a specified price per share (the "Exercise Price"). The per share Exercise Price of an option
generally may not be less than the fair market value of a share of our common stock on the date of grant. The maximum term of an option is ten years from the date of the grant. An option may either be
an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under "Federal Income Tax Consequences of
Awards under the 2017 Plan" below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2017 Plan. Incentive stock
options may only be granted to employees of the Company or a subsidiary.
A
stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of a specified or determinable number of shares of our common stock
at the time of payment or exercise over a specified or determinable price, which may not be less than the fair market value of such shares of stock on the date of grant. Stock appreciation rights may
be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant.
With
respect to any stock option or stock appreciation right issued to a Participant other than a non-employee member of the board of directors, the minimum service period required for
such award (or portion thereof) to vest is one year following the date of grant of such award.
The
other types of awards that may be granted under the 2017 Plan include, without limitation, grants of our common stock, grants of rights to receive our common stock in the future,
dividend equivalent rights, and cash performance awards granted consistent with "Performance-Based Awards" as described below.
Performance-Based Awards.
The compensation committee historically granted awards intended to be performance-based awards within the
meaning of Section 162(m) of the U.S. Internal Revenue Code ("Performance-Based Awards"), prior to its repeal in 2017. Performance-Based Awards are in addition to any of the other types of
awards that may be granted under the 2017 Plan (including options and stock appreciation rights which may also qualify as performance-based awards for Section 162(m)
purposes). Performance-Based Awards may be in the form of restricted stock, performance stock, stock units, other rights, or cash performance awards.
The
vesting or payment of Performance-Based Awards (other than options or stock appreciation rights) will depend on the absolute or relative performance of the Company on a
consolidated, business unit, division, or affiliate (or business unit or division of an affiliate) basis. The compensation committee will establish the criterion or criteria and target(s) on which
performance will be measured. The compensation committee must establish criteria and targets in advance of applicable deadlines under the U.S. Internal Revenue Code and while the attainment of the
performance targets remains substantially uncertain. The criteria that the compensation committee may use for this purpose include one or more of the following: earnings per share; book value per
share; operating cash flow; free cash flow; cash flow from return on investments; cash available; net income (before or after taxes); revenue or revenue growth; total stockholder return; return on
invested capital; return on stockholder equity; return on assets; return on common book equity; return on gross investment; market share; economic value added; operating margin; profit margin; stock
price; enterprise value; operating income; EBIT or EBITDA; expenses or operating expenses; productivity of employees as measured by revenues, costs, or earnings per employee; working capital;
improvements in capital structure; guest retention,
65
Table of Contents
traffic
and/or satisfaction; employee retention and/or engagement; completion of operating milestones; cost reduction goals; Company, franchise, or system same restaurant sales; Company, franchise, or
system restaurant growth in number of new restaurants; average restaurant volume growth; or any combination of the foregoing. The performance measurement period with respect to an award will be
established by the compensation committee at the time the award is granted. The compensation committee may appropriately adjust any evaluation of performance under a performance goal to remove the
effect of any one or more of the following: equity compensation expense under accounting standard ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs;
litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and
restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items
that are unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the award under Section 162(m),
if applicable.
With
respect to any full-value award, the vesting of which is based solely on service with the Company (and not upon, either all or in part, the attainment of any performance measures),
with the exception of such awards to non-employee directors, the minimum period of service required for such award to vest is three years following the date of grant of such award, provided that such
award may vest ratably in no less than equal annual increments over such period. With respect to any full-value award that is a Performance-Based Award and issued to an individual under the 2017 Plan
other than a non-employee director, the applicable performance measurement period may not be less than one year. With respect to any award issued to a non-employee director, the minimum period of
service required for such award to vest (or the minimum performance period for any such award) shall be the period beginning
on the date of grant and ending on the sooner of (i) the date of the next annual stockholders meeting and (ii) the one-year anniversary of the grant date of such award. Except as
described in the immediately preceding sentence with respect to awards issued to non-employee directors, no installment or portion of any award subject to a minimum vesting period described under the
2017 Plan may vest earlier than one-year after the date of grant of such award. The compensation committee may not waive the applicable vesting requirements for an award except in the case of death,
disability, or change in control. The term "full-value awards" includes awards of restricted stock, restricted stock units, performance shares, and Other Stock-Based Awards (as defined in the 2017
Plan) granted under the 2017 Plan, but does not include awards pursuant to which the participant's ultimate remuneration is limited solely to the post-grant appreciation in the value of the shares of
the Company's common stock subject to the award (such as options or stock appreciation rights having a per share exercise of base price, as applicable, at least equal to the fair market value of a
share of the Company's common stock at the time of grant of such award).
Performance-Based
Awards may be paid in stock or cash (in either case, subject to the limits described under the heading "Eligibility and Limits" above). Before any Performance-Based
Award (other than an option or stock appreciation right) is paid, the compensation committee must certify in writing that the performance target or targets have been satisfied. The compensation
committee has discretion to determine the performance target or targets and any other restrictions or other limitations of Performance-Based Awards and may reserve discretion to reduce payments below
maximum award limits.
Acceleration of Awards; Early Termination of Awards.
Generally, and subject to limited exceptions set forth in the 2017 Plan, if any
person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a
transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger,
66
Table of Contents
statutory
share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's
assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2017 Plan may
become fully vested or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise,
with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company
is terminated by the Company without cause within the two-year period following such change in control event. The compensation committee also has the discretion to establish other change in control
provisions with respect to awards granted under the 2017 Plan. For example, subject to certain limitations, the compensation committee could provide for the acceleration of vesting or payment of an
award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Restrictions on Transfer.
Subject to certain exceptions contained in Section 4.2 of the 2017 Plan or the applicable award
agreement, awards under the 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution, or pursuant to domestic relations orders, and are
generally exercisable, during the recipient's lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the
recipient's beneficiary or representative. The compensation committee has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities,
provided that such transfers comply with applicable federal and state securities laws.
Adjustments.
As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the
2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the
event of certain reorganizations, mergers, consolidations, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends.
No Limit on Other Authority.
Except as expressly provided with respect to the termination of the authority to grant new awards under the
2007 Plan, the 2017 Plan does not limit the authority of the board of directors or the compensation committee to grant awards or authorize any other compensation, with or without reference to our
common stock, under any other plan or authority.
Termination and Amendment of the 2017 Plan.
The board of directors may amend or terminate the 2017 Plan at any time without stockholder
approval; provided, however, that the board of directors shall obtain stockholder approval for any amendment to the 2017 Plan that, except as provided under Section 5.1 of the 2017 Plan,
increases the number of shares of stock available under the 2017 Plan, materially expands the classes of individuals eligible to receive awards, materially expands the type of awards available for
issuance under the 2017 Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the award agreement explicitly provides otherwise, no such termination
or amendment may materially and adversely affect the rights of the recipient under such award without the consent of the holder of an award.
Federal Income Tax Consequences of Awards under the 2017 Plan
The U.S. federal income tax consequences of the 2017 Plan under current federal law, which is subject to change, are summarized in the
following discussion of the general tax principles applicable to the 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or
international tax consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under
67
Table of Contents
the
2017 Plan. Furthermore, any tax advice contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Stock Options and Stock Appreciation Rights.
With respect to nonqualified stock options, the Company is generally entitled to deduct, and
the participant will recognize, taxable ordinary income in an amount equal to the excess of the fair market value of the shares at the time of exercise over the option exercise price. Stock
appreciation rights are taxed and deductible in substantially the same manner as nonqualified stock options.
With
respect to incentive stock options, a participant who exercises an incentive stock option will not be taxed at the time of exercise. Instead, the participant will be taxed at the
time the participant sells common stock purchased pursuant to the incentive stock option on the difference between the price the participant paid for the stock pursuant to the incentive stock option
and the amount for which the participant sells that stock. If the participant does not sell the stock prior to two years after the date the option was granted to the participant and one year after the
date the stock is transferred to the participant, then the participant will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and
the aggregate exercise price and the Company will not get a corresponding tax deduction. If the participant sells the stock at a gain prior to the expiration of such one and two year periods, the
amount by which (A) the lesser of (i) the fair market value of the stock on the date of exercise and (ii) the amount for which the stock is sold exceeds (B) the amount the
recipient paid for the stock will be taxed as ordinary income and the Company will be entitled to a corresponding tax deduction in the same amount (if the amount for which the stock is sold exceeds
the fair market value on the date of exercise, such excess amount is taxed as capital gain). If the participant sells the stock for less than the amount paid for the stock prior to the expiration of
the one and two year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive option may subject a recipient to, or increase
a recipient's liability for, the alternative minimum tax.
Stock Awards.
A participant will not be taxed upon the grant of a stock award if such award is not transferable by the recipient and is
subject to a "substantial risk of forfeiture," as defined in the U.S. Internal Revenue Code. However, when the shares of common stock that are subject to the stock award are transferable by the
participant or are no longer subject to a substantial risk of forfeiture, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the
stock subject to the stock award minus any amount paid for such stock, and the Company will at such time be entitled to a corresponding deduction. However, if a participant so elects at the time the
participant receives a stock award, the participant may include the fair market value (at the time of receipt) of the stock subject to the stock award, less any amount paid for such stock, in the
participant's income at that time and the Company also will be entitled to a corresponding deduction at that time.
Other Awards.
A participant will not recognize income upon the grant of a dividend equivalent right, restricted stock unit or cash
performance award. Generally, at the time a payment receives payment under any dividend equivalent right, restricted stock unit, or cash performance award, the participant will recognize compensation
taxable as ordinary income in an amount equal to the cash or the fair market value of common stock received, and the Company will then be entitled to a corresponding deduction.
General.
Unless specified otherwise in an individual agreement between a participant and the Company, to the extent that acceleration of
an award made under the 2017 Plan in connection with a "change in control" (as this term is used under the U.S. Internal Revenue Code) would result in compensation being paid that is not fully
deductible by the Company or one of its subsidiaries because
68
Table of Contents
of
Section 280G of the U.S. Internal Revenue Code, such award will not accelerate to the extent or in a manner that would result in any compensation being paid that is not fully deductible.
The
compensation committee has historically generally intended to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m) of
the Internal Revenue Code, provided additional requirements are satisfied. The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective
for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers in excess of $1 million will not be deductible unless it qualifies for
transition relief applicable to certain arrangements in place as of November 2, 2017.
The
2017 Plan is not qualified under Section 401(a) of the U.S. Internal Revenue Code.
New Plan Benefits under the 2017 Plan
Because future awards under the amended 2017 Plan will be granted at the discretion of the compensation committee, the type, number,
recipients, and other terms of such awards cannot be determined at this time. Information regarding our recent practices with respect to annual and long-term incentive awards and stock-based
compensation under existing plans is presented in the
"Summary Compensation Table" and "Outstanding Equity Awards at 2018 Fiscal Year-End" table contained elsewhere in this proxy statement, and in our financial statements for the fiscal year ended
December 30, 2018, in the Annual Report on Form 10-K which accompanies this proxy statement.
Vote Required
Proposal No. 3 requires the affirmative vote of a majority of the votes cast in person or by proxy at the annual meeting.
Board Recommendation
Our board of directors unanimously recommends that you vote FOR approval of the Amendment to the 2017 Performance
Incentive Plan.
69
Table of Contents
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting
firm retained to perform the audit of our financial statements and our internal control over financial reporting. The audit committee selected KPMG LLP ("KPMG") as our independent auditor for
the fiscal year ending December 29, 2019. In 2018, stockholders approved the ratification of KPMG by approximately 99.9% of votes cast. The audit
committee believes the continued retention of KPMG is in the best interests of the Company and our stockholders. Representatives from KPMG are expected to be present at the annual meeting, will have
an opportunity to make a statement if they desire to do so, and will be available to respond to any questions that might arise.
Evaluation of Auditor
In approving the selection of KPMG as the Company's independent auditor for the fiscal year ending December 29, 2019, the audit
committee considered, among other factors:
-
•
-
Firm and engagement team experience, including in our industry;
-
•
-
Audit approach and supporting tools;
-
•
-
General technical expertise;
-
•
-
Audit quality factors, including timing of procedures and engagement team workload and allocation;
-
•
-
Recent Public Company Oversight Board (PCAOB) inspection findings and the firms' responses thereto;
-
•
-
Communication and
interaction with the audit committee and management;
-
•
-
Independence and commitment to objectivity and professional skepticism;
-
•
-
Prior year audit performance; and
-
•
-
The reasonableness and appropriateness of fees.
Based
on this evaluation, our board is requesting that our stockholders ratify KPMG's appointment for the 2019 fiscal year. We are not required to seek ratification from stockholders of
our selection of independent auditor but are doing so as a matter of good governance. If the selection is not ratified, the audit committee will consider whether it is appropriate to select another
independent auditor. Even if the selection is ratified, the audit committee in its discretion may select a different independent auditor at any time during the year if it determines that such a change
would be in the best interests of the Company and its stockholders.
Principal Accountant Fees and Services
The following table summarizes the aggregate fees billed or expected to be billed by KPMG for the fiscal years ended December 30, 2018
and December 31, 2017:
|
|
|
|
|
|
|
|
2018($)
|
|
2017($)
|
|
Audit fees
|
|
828,891
|
|
755,616
|
|
Audit-related fees
|
|
-
|
|
-
|
|
Tax fees
|
|
13,134
|
|
30,000
|
|
All other fees
|
|
-
|
|
-
|
|
|
|
|
|
|
|
Total
|
|
842,025
|
|
785,616
|
70
Table of Contents
Audit Fees
Fees for audit services in 2018 and 2017 consisted of the audit of our annual financial statements and reports on internal controls required by
the Sarbanes-Oxley Act of 2002, reviews of our quarterly financial statements, and fees related to a review of our Franchise Disclosure Document.
Audit-Related Fees
There were no audit-related fees billed by KPMG in 2018 or 2017.
Tax Fees
The tax fees billed by KPMG in 2018 and 2017 related to tax compliance services with respect to tax accounting methods used in tax filings.
All Other Fees
There were no other fees billed by KPMG in 2018 or 2017.
Audit Committee's Pre-Approval Policies and Procedures
The audit committee pre-approves all audit and non-audit services to be performed by its independent auditor and has established policies and
procedures to ensure the Company is in full compliance with the requirements for pre-approval set forth in the Sarbanes-Oxley Act of 2002 and the SEC rules regarding auditor independence. The policies
and procedures are detailed as to the particular service and do not delegate the audit committee's responsibility to management.
In
accordance with these policies and procedures, management submits for approval audit and non-audit services that management may wish to have the independent auditor perform during
the fiscal year, accompanied by an estimated range of fees for each service to be performed. The audit committee pre-approves or rejects the service and an accompanying range of fees for each service
desired to be performed. Management is required to seek additional audit committee pre-approval when management becomes aware that any pre-approved service will result in actual fees greater than the
fees initially approved. During the course of the year, the chair of the audit committee has the authority to pre-approve requests for services. At each subsequent audit committee meeting, the chair
of the audit committee reports any interim pre-approvals since the last meeting.
All
of the fees set forth in the Principal Accountant Fees and Services table above for fiscal year 2018 were pre-approved by the audit committee.
Vote Required
Proposal No. 4 requires the approval of a majority of the votes cast on the proposal.
Board Recommendation
Our board of directors recommends that you vote FOR ratification of the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal year ending December 29, 2019.
71
Table of Contents