Item 10. Directors, Executive Officers and Corporate Governance.
Directors
Set forth below is certain
information regarding each of the Companys current directors as of April 5, 2018, including the qualifications of such persons to serve as directors. Directors are elected annually to serve until their successors are duly elected and
qualified or until their earlier death, disqualification, resignation or removal from office.
Lawrence J. Johnson
, 65, has
served as our Chief Executive Officer since April 2007 and has been a member of our board of directors since 2012. Prior to that, Mr. Johnson was a partner at Baker McKenzie LLP, where he was employed since
1978. Mr. Johnson has a B.A. from Arizona State University and a J.D. from Southern Methodist University. Mr. Johnson also serves as a member of our board of directors. Based on his extensive industry and management experience, his
tenure with our company and familiarity with us and his deep understanding of restaurant operations, Mr. Johnson is well-qualified to lead us and to serve on our Board.
Eytan Tigay
, 50, has been a member of our board of directors since April 2018. Mr. Tigay joined Rhône Group in 2007 as a
Managing Director after having spent his prior career at Lazard. In 1997, he became a founding member of Lazard Capital Partners, a private equity fund managing partner and firm capital, and later a Managing Principal of Lazards billion
Corporate Partners LLC private equity fund. Mr. Tigay was also the head of strategic planning for Lazard and played a leadership role in structuring and implementing the firms IPO. In addition to Fogo de Chão, Mr. Tigay currently serves
on the Boards of Directors of ASK Chemicals and Ranpak, as well as several philanthropic organizations. Mr. Tigay received a B.A. in Economics, magna cum laude, from the University of Pennsylvania, where he was a Member of Phi Beta Kappa and a
Benjamin Franklin Scholar. Mr. Tigay was nominated to serve on our board of directors by Rhône in accordance with the Merger Agreement. Because of his strong background in banking, finance and investing, and his many years of experience in and
knowledge of management and strategy, Mr. Tigay is well-qualified to serve on our Board.
Lucas Flynn
, 39, has been a member
of our board of directors since April 2018. Mr. Flynn is a Managing Director at Rhône Group, which he joined in 2008. Prior to joining Rhône, Mr. Flynn worked at The Boston Consulting Group and Citigroup, where he was involved in a broad
range of strategic and operational engagements. In addition to Fogo de Chão, Mr. Flynn currently serves on the Board of Directors of ASK Chemicals. He received a B.A. in Industrial Engineering with highest honors from the Instituto Tecnologico
de Buenos Aires and an M.B.A. with distinction from Harvard Business School. Mr. Flynn was nominated to serve on our board of directors by Rhône in accordance with the Merger Agreement. Because of his strong background in banking and finance,
his many years of experience and his knowledge of management and strategy, Mr. Flynn is well-qualified to serve on our Board.
Corporate Governance and
Board Structure
In accordance with our amended and restated certificate of incorporation and the amended and restated bylaws, our
Board of Directors consisted of three members as of April 5, 2018, the date of the consummation of the Merger.
Our Board of
Directors has not established any committees, including an audit committee, a compensation committee or a nominating committee, or any committee performing similar functions. The functions of those committees are currently undertaken by the Board.
The Board may designate from among its members one or more other committees in the future.
The Companys securities are not quoted
on an exchange that has requirements that a majority of the Board be independent, and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of the Board include independent directors, nor
are we required to establish or maintain an Audit Committee, Audit Committee Financial Expert or other committee.
Our articles of
incorporation and bylaws do not provide formal procedures for shareholders to recommend nominees to the Board of Directors. The Board of Directors has determined that it is in the best position to evaluate the Companys requirements as well as
the qualifications of each candidate when the Board considers a nominee for a position on the Board.
Code of Ethics
We have a written Code of Ethics (Code of Ethics) that applies to all of our directors, officers and other employees, including our
principal executive officer, principal financial officer and controller. Included in our written Code of Ethics is a section for Executive Officers and Principal Accounting Personnel which applies to our principal executive officer, principal
financial officer, controller and other designated members of our management.
Copies of our Code of Ethics are available on our corporate
website at
http://ir.fogodechao.com
. We will provide any person, without charge, upon request, a copy of our Code of Ethics. Such requests should be made in writing to the attention of our General Counsel at the following address: Fogo de
Chão, Inc., 5908 Headquarters Drive, Suite K200, Dallas, Texas 75204.
2
Director Compensation
None of our directors currently receives any compensation for his or her services on the Board.
During Fiscal 2017, each member of our Board of Directors who was not an employee and who was not affiliated with Thomas H. Lee Partners, L.P.
or its affiliated funds that hold our shares of common stock was compensated for their services pursuant to the following policy:
|
|
|
Each director was paid an annual cash retainer
(pro-rated
for partial-year service) of $35,000.
|
|
|
|
The chair of our Audit, Compensation, Nominating and Corporate Governance and Development Committees were paid an additional $15,000 annual retainer.
|
|
|
|
Directors were reimbursed for reasonable expenses incurred in connection with attending meetings of the board of directors or its committees.
|
|
|
|
Equity compensation for
non-employee
directors consisted of an annual grant of restricted stock with an aggregate value of approximately $25,000 (with the number of shares
actually granted to be based on the closing price of our common stock on NASDAQ on the grant date, rounded down to the nearest whole share). Such restricted stock was granted at the time of our annual meeting of stockholders and vests ratably over
two years, subject, in each case, to the directors continued service as a member of our board of directors through such date.
|
The following table sets forth the amount of compensation we paid to, or was earned by, each of our former
non-employee
directors, Neil Moses, Douglas R. Pendergast and Gerald W. Deitchle, during Fiscal 2017. Our employee director, Mr. Johnson, did not receive any compensation for his service as a director nor
did Todd Abbrecht, Jeff Swenson or Douglas Haber, each of whom was affiliated with Thomas H. Lee Partners, L.P. or its affiliated funds during Fiscal 2017.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid in
Cash
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(1)
|
|
|
All Other
Compensation
($)(2)
|
|
|
Total
($)
|
|
Neil Moses
|
|
$
|
50,000
|
|
|
$
|
25,000
|
|
|
|
|
|
|
$
|
49
|
|
|
$
|
75,049
|
|
Douglas R. Pendergast
|
|
$
|
35,000
|
|
|
$
|
25,000
|
|
|
|
|
|
|
$
|
2,718
|
|
|
$
|
62,718
|
|
Gerald W. Deitchle
|
|
$
|
50,000
|
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
75,000
|
|
Todd M. Abbrecht
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,996
|
|
|
$
|
3,996
|
|
Jeff T. Swenson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,441
|
|
|
$
|
2,441
|
|
Douglas A. Haber
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,542
|
|
|
$
|
1,542
|
|
(1)
|
This column reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that may
be realized by the director. The assumptions used in the calculation of the amounts are described in the notes to our consolidated financial statements included in our annual report filed on Form
10-K
for our
fiscal year ended December 31, 2017. As of January 1, 2018, the total number of unvested restricted stock awards and outstanding option awards held by each current
non-executive
director was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
Neil Moses
|
|
|
2,567
|
|
|
|
3,105
|
|
Douglas R. Pendergast
|
|
|
2,567
|
|
|
|
2,316
|
|
Gerald W. Deitchle
|
|
|
2,567
|
|
|
|
2,316
|
|
Todd M. Abbrecht
|
|
|
|
|
|
|
|
|
Jeff T. Swenson
|
|
|
|
|
|
|
|
|
Douglas A. Haber
|
|
|
|
|
|
|
|
|
(2)
|
Represents amount of Company dining program benefit.
|
Board Meetings
During Fiscal 2017, the Board of Directors held 11 meetings, the Audit Committee held nine meetings, the Compensation Committee held five
meetings, the Development Committee held 10 meetings and the Nominating and Corporate Governance Committee held four meetings. Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and the committees on
which he served in Fiscal 2017.
3
EXECUTIVE OFFICERS
The following set forth information regarding the executive officers of the Company as of April 5, 2018:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
Lawrence J. Johnson
|
|
|
65
|
|
|
Chief Executive Officer and Director
|
George B. McGowan
|
|
|
53
|
|
|
President
|
Anthony D. Laday
|
|
|
51
|
|
|
Chief Financial Officer
|
Selma Oliveira
|
|
|
60
|
|
|
Chief Operating Officer
|
Michael Prentiss
|
|
|
42
|
|
|
Senior Vice President, Corporate Administration
|
Stacy A. Murray
|
|
|
43
|
|
|
Vice President of Accounting and Controller
|
Albert G. McGrath
|
|
|
60
|
|
|
General Counsel
|
Lawrence J. Johnson
has served as our Chief Executive Officer since April 2007 and has been
a member of our board of directors since 2012. Prior to that, Mr. Johnson was a partner at Baker McKenzie LLP, where he was employed since 1978. Mr. Johnson has a B.A. from Arizona State University and a J.D.
from Southern Methodist University. Mr. Johnson also serves as a member of our board of directors. Based on his extensive industry and management experience, his tenure with our company and familiarity with us and his deep understanding of
restaurant operations, Mr. Johnson is well-qualified to lead us and to serve on our board.
George B. McGowan
has
served as our President since 2013. Mr. McGowan has 33 years of experience in the restaurant industry including more than 10 years with Brinker International. He served as Chief Operating Officer of Macaroni Grill from 2010 to 2013 and as
President and Chief Executive Officer of Waterloo Restaurants from 2002 to 2010. Waterloo Restaurants filed for Chapter 11 bankruptcy protection in March 2012. With his prior experience, we believe Mr. McGowan brings a broad range of
operational knowledge and perspective to the company. Mr. McGowan holds a B.S. in Hotel Restaurant Management from the University of North Texas and a Graduate Certificate in Finance from Southern Methodist University.
Anthony D. Laday
has served as our Chief Financial Officer since April 2014. Prior to that, Mr. Laday served as
Vice-President-Finance, Treasurer and Investor Relations of Brinker International from 2010 to 2013 where he previously was Senior Director-Financial Planning and Analysis from 2007 to 2010. Mr. Laday holds a B.A. in Business Administration and
an M.B.A. from Southern Methodist University.
Selma Oliveira
has served as our Chief Operating Officer since 2006. Prior to
that, she held the positions of Director of Operations and General Manager for us. She previously worked for the Marriott Corporation from 1986 to 1998, holding a number of managerial positions. Mrs. Oliveira holds a degree in education from
the Mackenzie Institute in São Paulo, Brazil.
Michael Prentiss
has served as our Senior Vice President, Corporate
Administration since April 2017. Mr. Prentiss served as our Chief Accounting Officer from April 2014 until April 2017, our Chief Financial Officer from August 2011 to April 2014 and our Controller from September 2007 to August 2011.
Mr. Prentiss served as Assistant Controller of Landrys Restaurants from September 2003 to September 2007. Mr. Prentiss holds a B.B.A. in Accounting from Sam Houston State University.
Stacy A. Murray
has served as our principal accounting officer since April 2017 and our Vice President of Accounting and
Controller since November 2016. Prior to that, Ms. Murray served as Chief Accounting Officer of Azure Midstream Holdings LLC and Azure Midstream Partners, LP from November 2013 to October 2016. Previously, Ms. Murray was the Controller of
TGGT Holdings LLC (the predecessor company to Azure Midstream) since October 2011. Prior to October 2011, Ms. Murray served as Senior Finance Manager for Lineage Power Holdings from 2009 to 2011. Ms. Murray has a M.S. and B.B.A. from Texas
A&M University, and is a Certified Public Accountant in the State of Texas.
Albert G. McGrath
has served as our General
Counsel since October 2014. Prior to that, Mr. McGrath was a partner at Baker McKenzie LLP, from April 2000. Mr. McGrath holds a B.A. from Texas A&M University and a J.D. from Southern Methodist University.
4
Item 11. Executive Compensation.
EXECUTIVE COMPENSATION
The following sets forth all compensation awarded to our Named Executive Officers (the NEOs) for Fiscal 2017 and 2016.
Summary Compensation Table
The following
table sets forth total compensation of our NEOs for Fiscal 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Fiscal
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(1)
|
|
|
Non-equity
Incentive Plan
Compensation
($)(2)
|
|
|
All Other
Compensation
($)(3)
|
|
|
Total
($)
|
|
Lawrence J. Johnson,
|
|
|
2017
|
|
|
$
|
711,133
|
|
|
|
|
|
|
$
|
497,787
|
|
|
|
|
|
|
$
|
243,408
|
|
|
$
|
1,708
|
|
|
$
|
1,454,036
|
|
Chief Executive Officer
|
|
|
2016
|
|
|
$
|
711,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,799
|
|
|
$
|
7,408
|
|
|
$
|
768,340
|
|
George B. McGowan,
|
|
|
2017
|
|
|
$
|
382,147
|
|
|
|
|
|
|
$
|
210,180
|
|
|
|
|
|
|
$
|
108,912
|
|
|
$
|
1,121
|
|
|
$
|
702,360
|
|
President
|
|
|
2016
|
|
|
$
|
382,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,750
|
|
|
$
|
746
|
|
|
$
|
409,643
|
|
Selma Oliveira, Chief
|
|
|
2017
|
|
|
$
|
331,133
|
|
|
|
|
|
|
$
|
132,432
|
|
|
|
|
|
|
$
|
94,373
|
|
|
$
|
2,249
|
|
|
$
|
557,938
|
|
Operating Officer
|
|
|
2016
|
|
|
$
|
331,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,179
|
|
|
$
|
3,237
|
|
|
$
|
357,549
|
|
(1)
|
We did not grant stock options to Mr. Johnson, Mr. McGowan or Ms. Oliveira in 2017 or 2016.
|
(2)
|
Bonuses paid with respect to our Fiscal 2016 were generally calculated by reference to certain targets relating to EBITDA (60%), revenue (24%), operational excellence (10%) and employee retention (6%).
|
(3)
|
Represents amount of Company dining program benefit.
|
Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth certain information regarding outstanding equity awards
of our NEOs as of January 1, 2018. The market value of the shares in the following table is the fair market value of such shares at January 1, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant
Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)
|
|
|
Equity
Incentive Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock that
Have Not
Vested (#)(2)
|
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($)
|
|
Lawrence J. Johnson
|
|
|
7/20/2012
|
|
|
|
417,525
|
|
|
|
|
|
|
|
|
|
|
$
|
7.64
|
|
|
|
7/20/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2012
|
|
|
|
120,929
|
|
|
|
|
|
|
|
|
|
|
$
|
15.27
|
|
|
|
7/20/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
9/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,072
|
|
|
$
|
232,835
|
|
|
|
|
12/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,929
|
|
|
$
|
254,376
|
|
George B. McGowan
|
|
|
7/15/2013
|
|
|
|
150,716
|
|
|
|
37,679
|
|
|
|
|
|
|
$
|
8.06
|
|
|
|
7/15/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
7/15/2013
|
|
|
|
63,136
|
|
|
|
15,786
|
|
|
|
|
|
|
$
|
16.11
|
|
|
|
7/15/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
9/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,475
|
|
|
$
|
98,130
|
|
|
|
|
12/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,259
|
|
|
$
|
107,404
|
|
Selma Oliveira
|
|
|
7/20/2012
|
|
|
|
188,395
|
|
|
|
|
|
|
|
|
|
|
$
|
7.64
|
|
|
|
7/20/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
7/20/2012
|
|
|
|
78,922
|
|
|
|
|
|
|
|
|
|
|
$
|
15.27
|
|
|
|
7/20/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
9/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,340
|
|
|
$
|
61,944
|
|
|
|
|
12/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,834
|
|
|
$
|
67,674
|
|
(1)
|
The stock option grants under the 2012 Plan were typically granted to employees in two tranches, each tranche with separate exercise prices. The option grants vest and become exercisable upon both (i) the
completion of a vesting period and (ii) the satisfaction of a Liquidity Event, as that term is defined in the stock option award agreement. Under the terms of the stock option award agreement, a Liquidity Event is defined as the earlier to
occur of (i) a change in control transaction or (ii) an initial public offering. Upon the closing of the Companys IPO, the Liquidity Event vesting condition was satisfied. Each stock option grant vests over five years in equal annual
installments on the anniversary date of grant.
|
(2)
|
On July 20, 2012, Ms. Oliveira was granted 52,800 shares of restricted stock that vest over four years and three months and 13,416 shares of restricted stock that vest over five years and three months. For all
grants made to Ms. Oliveira, the restricted shares vest in equal annual installments commencing on the
15-month
anniversary of the date of grant, i.e., October 20, 2013.
|
5
Agreements with Named Executive Officers
Lawrence J. Johnson
On
July 20, 2012, we entered into an Amended and Restated Employment Agreement with Lawrence J. Johnson, our Chief Executive Officer.
The initial term of Mr. Johnsons employment agreement expired on December 31, 2017, but the agreement provides for automatic
one-year
renewals, unless either we or Mr. Johnson give notice of our or his intention not to extend the term at least 90 days prior to the expiration of any term. Mr. Johnsons agreement was renewed
until December 31, 2018. Under his employment agreement, Mr. Johnson receives a minimum annual base salary of $700,000. Mr. Johnson is also eligible to receive an annual performance bonus each year, if budget and performance goals
established by our board of directors are met, and is entitled to participate in customary benefit plans.
If we terminate
Mr. Johnsons employment without cause, or if Mr. Johnson resigns for good reason, he will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination,
(y) any amounts previously deferred by Mr. Johnson and (z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to two times the sum of (x) base salary plus
(y) all annual bonus and annual performance bonus paid or payable for the fiscal year immediately preceding the fiscal year in which such termination of employment occurs; and (iii) continued participation, at our expense, in our health
and welfare programs for a period of two years after the date of termination. Any payments in accordance with (ii) above shall be paid in cash at the following times: 50% within 30 days following the termination date, 25% on the
six-month
anniversary of the termination date and the remaining 25% on the
12-month
anniversary of the termination date.
For purposes of Mr. Johnsons employment agreement with us, a termination for cause will be deemed to have occurred upon the
happening of the following, subject to a cure right: (i) his misappropriation or theft of our or any of our subsidiarys funds or property; (ii) his conviction or entering of a plea of
nolo contendere
of any fraud,
misappropriation, embezzlement or similar act, felony or crime involving dishonesty or moral turpitude; (iii) his engagement in any conduct that is materially injurious to us; (iv) his material breach of his employment agreement or
material failure to perform any of his duties owed to us; or (v) his commission of any act involving willful malfeasance or gross negligence or his failure to act involving material nonfeasance.
Under Mr. Johnsons employment agreement with us, good reason means the following: (i) our assignment to Mr. Johnson of
any duties that are materially inconsistent with his position, authority, duties or responsibilities or any actions by us that result in a material diminution in his position, authority, duties or responsibilities, subject to a
30-day
remedial period; (ii) our material breach of Mr. Johnsons employment agreement, which breach remains uncured for 10 days; (iii) any reduction of Mr. Johnsons base salary or
bonus amount, unless such reduction is applied to all of our executives, and our board of directors has determined in good faith that such reduction, not to exceed 20% in the aggregate, is necessary for us to comply with our financial obligations to
third parties or to preserve our company as a going concern; (iv) our requiring Mr. Johnson (x) to be based at any office or location that is more than 50 miles from his initial location of employment in Dallas, Texas, unless the
majority of our executive officers and directors are relocated to such location and Mr. Johnson receives relocation benefits pursuant to his employment agreement or (y) to be based at a location other than our principal executive offices;
(v) any purported termination by us of Mr. Johnsons employment other than as expressly permitted by his employment agreement; or (vi) our failure to require any of our successors to expressly assume and agree to perform our
obligations under his employment agreement.
Under his employment agreement, Mr. Johnson is subject to restrictive covenants for two
years after a termination of employment, for any reason, pursuant to which he cannot compete with us or solicit business or employees.
George B.
McGowan
On July 15, 2013, we entered into an Employment Agreement with George B. McGowan, our President.
The term of Mr. McGowans employment agreement expired on December 31, 2017, but the agreement provides for automatic
one-year
renewals, unless either we or Mr. McGowan give notice of our or his intention not to extend at least 90 days prior to the expiration of any term. Mr. McGowans agreement was renewed until
December 31, 2018. Under his employment agreement, Mr. McGowan receives a minimum annual base salary of $375,000. Mr. McGowan is also eligible to receive an annual performance bonus each year, if budget and performance goals
established by our board of directors are met, and is entitled to participate in customary benefit plans.
If we terminate
Mr. McGowans employment without cause, he will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination, (y) any amounts previously deferred by
Mr. McGowan and (z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to one times the sum of (x) base salary plus (y) all annual bonus and annual performance
bonus paid or payable for the fiscal year immediately preceding the fiscal year in which such termination of employment occurs; and (iii) continued participation, at our expense, in our health and welfare programs for a period of six months
after the date of termination. Any payments in accordance with (ii) above shall be paid in cash at the following times: 50% within 30 days following the termination date, 25% on the
six-month
anniversary
of the termination date and the remaining 25% on the
12-month
anniversary of the termination date.
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For purposes of Mr. McGowans employment agreement with us, a termination for cause
will be deemed to have occurred upon the happening of the following, subject to a cure right: (i) his misappropriation or theft of our or any of our subsidiarys funds or property; (ii) his conviction or entering of a plea of
nolo
contendere
of any fraud, misappropriation, embezzlement or similar act, felony or crime involving dishonesty or moral turpitude; (iii) his engagement in any conduct that is materially injurious to us; or (iv) his commission of any act
involving willful malfeasance or gross negligence or his failure to act involving material nonfeasance.
Under his employment agreement,
Mr. McGowan is subject to restrictive covenants for two years after a termination of employment, for any reason, pursuant to which he cannot compete with us or solicit business or employees.
Selma Oliveira
On July 11,
2014, we entered into an Employment Agreement with Selma Oliveira, our Chief Operating Officer. The term of Ms. Oliveiras employment agreement expired on December 31, 2017, but the agreement provides for automatic
one-year
renewals, unless either we or Ms. Oliveira give notice of our or her intention not to extend at least 90 days prior to the expiration of any term. Ms. Oliveiras agreement was renewed until
December 31, 2018. Under her employment agreement, Ms. Oliveira receives a minimum annual base salary of $320,000. Ms. Oliveira is eligible to receive an annual performance bonus each year, if performance goals established by our
board of directors are met, and is entitled to participate in customary benefit plans.
If we terminate Ms. Oliveiras
employment without cause, she will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination, (y) any amounts previously deferred by Ms. Oliveira and
(z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to
one-third
of the base salary and (iii) continued participation, at our
expense, in our health and welfare programs for a period of two years after the date of termination.
Definition of cause under
Ms. Oliveiras employment agreement is the same as that in Mr. Johnsons employment agreement.
Change of Control Agreements
On December 1, 2017, our Board of Directors approved Change of Control Agreements (the CoC Agreements) for
certain of our employees, including Mr. Johnson, Mr. McGowan and Mrs. Oliveira. Each CoC Agreement has a term of three years. Under the terms of each CoC Agreement, if, during the term of the CoC Agreement, the employees
employment is terminated by the Company or its successor within two years following a change of control of the Company, other than for death, disability or cause, or by the employee for good reason, as those terms are defined
in the agreement, he or she is entitled to receive:
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a lump sum payment in an amount equal to a stated multiple times the sum of (a) base pay (at the rate in effect for the year in which the termination date occurs), plus (b) bonus pay opportunity (at the
targeted amount in effect for the year in which the termination date occurs or, if the bonus pay opportunity shall not have been established or shall be reduced after a change in control, the highest aggregate bonus pay opportunity as in effect for
any of the three fiscal years immediately preceding the year in which the change in control occurred); and
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continuation for 18 months of all welfare benefits substantially similar to those that the employee was receiving or entitled to receive immediately prior to the termination date.
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The applicable multiple under Mr. Johnsons CoC Agreement is two and the applicable multiple for each of Mr. McGowan and Mrs. Oliveira is
one. Upon a change of control, each employees equity awards will vest and any applicable restrictions will lapse.
Equity-Based Awards
Pursuant to the terms of the Merger Agreement:
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each outstanding stock option, whether or not exercisable or vested, was canceled, and the holder of such stock option became entitled to receive an amount in cash, less applicable tax withholding, equal to (i) the
excess, if any, of (a) the Per Share Merger Consideration minus (b) the exercise price per share of common stock subject to such stock option, multiplied by (ii) the number of shares of common stock subject to such stock option
immediately prior to the Effective Time;
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the restrictions on each outstanding share of restricted common stock (excluding shares of performance-based restricted common stock discussed below) lapsed, and the holder of such share of restricted common stock
became entitled to receive, in respect of such share, an amount in cash, less applicable tax withholding, equal to the Per Share Merger Consideration; and
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the restrictions on each outstanding share of restricted common stock subject to performance-based vesting conditions lapsed, and the holder of each award of performance-based restricted stock became entitled to receive
an amount in cash, less applicable tax withholding, equal to (i) the Per Share Merger Consideration multiplied by (ii) the number of shares of common stock subject to such award of performance-based restricted stock (assuming that the
performance conditions on such restricted stock are deemed to be achieved at the target performance level).
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The material
terms of our equity incentive plans are described below.
2012 Omnibus Equity Incentive Plan
General
Our 2012 Omnibus Equity Incentive
Plan (the 2012 Plan) was adopted July 20, 2012. The following is a summary of the material features of the 2012 Plan.
Awards
Awards granted under the 2012 Plan may consist of incentive stock options (ISOs), nonqualified stock options, stock appreciation
rights (SARs), restricted stock and other share-based awards. Each award is subject to the terms and conditions set forth in the 2012 Plan and to those other terms and conditions specified by the board and memorialized in a written award
agreement.
Shares Subject to the 2012 Plan
Subject to adjustment in certain circumstances as discussed below, the 2012 Plan authorizes up to 2,291,296 shares of our common stock for
issuance pursuant to the terms of the 2012 Plan, excluding 640,263 shares of restricted stock that were issued in connection with the Acquisition. If and to the extent awards granted under the 2012 Plan, other than restricted stock issued in
connection with the Acquisition, expire, are forfeited, are cancelled or are otherwise terminated without consideration, the shares subject to such awards will again be available for grant under the 2012 Plan. To the extent any shares subject to an
award are tendered to or withheld by us as partial or full payment for the purchase price or to satisfy all or part of our tax withholding obligation with respect to an award, those shares will not be available for grant under the 2012 Plan.
In the event of any corporate event or transaction such as a merger, consolidation, reorganization, recapitalization, separation, stock
dividend, stock split, reverse stock split,
split-up,
spin-off,
combination of shares, exchange of shares, dividend in kind, extraordinary cash dividend, amalgamation,
or other similar change in capital structure (other than normal cash dividends to our stockholders), or any similar corporate event or transaction, the board, to prevent dilution or enlargement of rights under the 2012 Plan, shall substitute or
adjust, in its sole discretion, the number and kind of shares or other property that may be issued under the 2012 Plan or under particular forms of awards, the number and kind of shares or other property subject to outstanding awards, the option,
grant or purchase price applicable to outstanding awards and/or other value determinations (including performance conditions) applicable to the 2012 Plan or outstanding awards.
Administration
The 2012 Plan is
administered and interpreted by our board. Our board has full authority (i) to interpret and administer the 2012 Plan, (ii) to select the directors, employees and consultants to whom awards will be granted and (iii) to determine the
type and amount of awards, as well as the terms and conditions of such awards, to be granted to each such director, employee or consultant. Our board also has full authority to specify the time(s) at which awards will be exercisable or settled. All
actions taken and all interpretations and determinations made by the board will be final and binding on the participants of the 2012 Plan, us and all other interested individuals.
Eligibility
Employees, directors and
consultants, as our board in its sole discretion determines and whom our board may designate from time to time to receive awards under the 2012 Plan, are eligible to participate in the 2012 Plan; provided that stock options and SARs may only be
granted to those employees, directors and consultants with respect to whom we are an eligible issuer within the meaning of Section 409A of the Code.
Stock Options
Our board may grant stock
options to purchase a stated number of shares at a price established by the board, subject to the terms and conditions described in the 2012 Plan and to such additional terms and conditions, as established by the board, in its sole discretion, that
are consistent with the provisions of the 2012 Plan. Our board may grant nonqualified stock options and stock options qualifying as ISOs under Section 422 of the Code; provided that ISOs may only be granted to our employees.
The exercise price of any stock option granted under the 2012 Plan will be not less than the fair market value of our common stock, par value
$0.01 per share, on the date the stock option is granted.
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Our board may determine the term for each stock option; provided, however, that the term of any
stock option may not exceed ten years from the date of grant. The vesting schedule for each stock option will be determined by our board and set forth in the applicable award agreement.
Generally, payment of the option exercise price must be made in full at the time of exercise and may be made using one of the following
methods, at the election of the option holder: (a) in cash or its equivalent (e.g., by cashiers check); (b) to the extent permitted by the board, in shares (whether or not previously owned) having a fair market value equal to
the aggregate option exercise price for the shares being purchased and satisfying such other requirements as may be imposed by the board; (c) partly in cash and, to the extent permitted by the board, partly in such shares (as described in
(b) above); (d) to the extent permitted by the board, by reducing the number of shares otherwise deliverable upon the exercise of the stock option by the number of shares having a fair market value equal to the option exercise price; or
(e) if there is a public market for the shares at such time, subject to such requirements as may be imposed by the board, through the delivery of irrevocable instructions to a broker to sell shares obtained upon the exercise of the stock option
and to deliver promptly to us an amount out of the proceeds of such sale equal to the aggregate option exercise price for the shares being purchased.
SARs
Our board is authorized to grant
stock SARs, which provide the right to receive, upon exercise thereof, the excess of: (a) the fair market value of a specified number of shares on the date of exercise over (b) the grant price of the right as specified by the board on the
date of the grant. Such payment may be in the form of cash, shares, other property or any combination thereof, as the board shall determine in its sole discretion. No SAR may have a term of more than ten years from the date of grant.
Restricted Stock
Our board is authorized
to grant awards of restricted stock, which awards are subject to forfeiture upon the occurrence of specified events. Participants shall be awarded restricted stock in exchange for consideration not less than the minimum consideration required by
applicable law. Prior to the end of the restricted period, shares received as restricted stock may not be sold or disposed of by participants, and may be forfeited in the event of a termination of employment in certain circumstances. The board will
determine and set forth in an award agreement whether an award of restricted stock entitles the participant to all of the rights of a stockholder, including the right to vote and the right to receive any dividends thereon.
Other Share-Based Awards
Our board is
authorized to grant other share-based awards, valued in whole or in part, by reference to, or otherwise based on, the fair market value of shares of our common stock, including restricted stock units (RSUs), dividend equivalent rights
and other phantom awards, under the 2012 Plan. The board will determine the terms and conditions of such other share-based awards.
Effects of
Termination of Service with Us
Unless otherwise provided in an award agreement, in the event (a) a participants service is
terminated for cause, as defined in the 2012 Plan, (b) the participants service is terminated due to the participants resignation after an inquiry by the board as to the existence of cause has been initiated and the board determines
that cause existed as of the date of such resignation, or (c) the board determines that a participants acts or omissions constitute cause, all outstanding awards held by the participant shall terminate and be forfeited without
consideration, effective on the date the participants service is terminated for cause or the date the act or omission constituting cause is determined to have occurred, as applicable.
Unless otherwise provided in an award agreement, in the event a participants service is terminated due to death or disability (and cause
does not exist as of such date): (a) all unvested awards held by the participant shall terminate and be forfeited without consideration, effective as of the date service is terminated and (b) all vested stock options and SARs shall
terminate on the earlier of (i) one year following the termination of service and (ii) the expiration of the term of such stock options and SARs.
Unless otherwise provided in an award agreement, in the event a participants service is terminated for any reason other than cause,
disability or death, (a) all unvested awards held by the participant shall terminate and be forfeited without consideration, effective as of the date the participants service is terminated and (b) all vested stock options and SARs
shall terminate on the earlier of (i) 90 days following such termination of service and (ii) the expiration of the term of such stock options and SARs.
Amendment and Termination of the 2012 Plan
The 2012 Plan will terminate on the tenth anniversary of the effective date. Our board may amend, alter, suspend, discontinue or terminate the
2012 Plan, or any portion thereof, or any award (or award agreement) at any time, in its sole discretion; provided that no action taken by the board shall adversely affect the rights granted to any participant under any outstanding awards (other
than pursuant to certain provisions of the 2012 Plan, or as the board deems necessary to comply with applicable law) without the participants written consent.
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Change of Control
In the event of a change of control of us, our board is authorized (but not obligated) to make adjustments in the terms and conditions of
outstanding awards, including (a) continuation or assumption of outstanding awards under the 2012 Plan by us (if we are the surviving company or corporation) or by the surviving company or corporation or its parent; (b) substitution by the
surviving company or corporation or its parent of awards with substantially the same terms for outstanding awards (excluding the consideration payable upon settlement of the awards); (c) accelerated exercisability, vesting and/or lapse of
restrictions under outstanding awards immediately prior to the occurrence of such event; (d) upon written notice, provide that any outstanding awards must be exercised, to the extent then exercisable, during a reasonable period of time
immediately prior to the scheduled consummation of the event or such other period as determined by the board (contingent upon the consummation of the event); (e) cancellation of all or any portion of outstanding awards for fair value (in the
form of cash, shares, other property or any combination thereof) as determined in the sole discretion of our board and which value may be zero and which will be equal to the applicable spread value, if any, in the case of options; and
(f) cancellation of all or any portion of outstanding unvested and/or unexercisable awards for no consideration.
Unless otherwise
specified in the award agreement, a change in control under the 2012 Plan means any transaction or a series of related transactions as a result of which any person or group of persons other than THL Funds (a) acquires (whether by purchase,
exchange, tender offer, merger, consolidation, recapitalization, redemption, reorganization, issuance of capital stock or otherwise) directly or indirectly more than 50% of the voting power of us or more than 50% of common stock equivalents that
were issued and outstanding immediately prior to such transaction or series of transactions, or (b) acquires assets constituting all or substantially all of our assets.
To the extent necessary to comply with Section 409A of the Code with respect to the payment of deferred compensation, a change of control
under the 2012 Plan will be limited to a change in control event as defined in Treasury Regulations
Section 1.409A-3(i)(5).
See Item 11. Executive Compensation Executive Compensation Equity-Based Awards for information about the treatment
and disposition of all equity-based awards under the Merger Agreement.
2015 Omnibus Incentive Plan
General
Our 2015 Omnibus Incentive Plan
(the 2015 Plan) was adopted in June 2015. The following is a summary of the material features of the 2015 Plan.
Awards
Awards granted under the 2015 Plan may consist of ISOs, nonqualified stock options, SARs, restricted stock, RSUs, other share-based awards and
cash awards. Each award will be subject to the terms and conditions set forth in the 2015 Plan and to those other terms and conditions specified by the compensation committee and memorialized in a written agreement.
Shares Subject to the 2015 Plan
Subject
to adjustment in certain circumstances as discussed below, the 2015 Plan authorizes up to 1,200,000 shares of our common stock for issuance. The maximum number of shares available for granting ISOs under the 2015 Plan is 1,000,000.
Shares of common stock subject to an award under the 2015 Plan that remain unissued upon the forfeiture, cancellation, termination or
settlement in cash of the award will again become available for grant under the 2015 Plan.
Subject to adjustment in certain circumstances
as discussed below, the maximum number of shares with respect to awards under the 2015 Plan that can be granted to any single individual during any plan year will be 210,000 for employees,
non-employee
directors and consultants. The maximum number of stock options that may be granted to any employee,
non-employee
director or consultant during any plan year will be 210,000, and the maximum number of SARs that
may be granted to any employee,
non-employee
director or consultant under any equity plan in any plan year will be 210,000.
In the event of any corporate event or transaction involving us, a subsidiary and/or an affiliate (including, but not limited to, a change in
our shares or our capitalization) such as a merger, consolidation, reorganization, recapitalization, separation, extraordinary stock dividend, stock split, reverse stock split, split up,
spin-off,
combination
of shares, exchange of shares, dividend in kind, extraordinary cash dividend, amalgamation, or other similar change in capital structure (other than normal cash or stock dividends to our stockholders), or any similar corporate event or transaction,
the compensation committee, to prevent dilution or enlargement of participants rights under the 2015 Plan, will, subject to compliance with Section 409A of the Code, substitute or adjust, in its sole discretion, the number and kind of
shares or other property that may be issued under the 2015 Plan or under particular forms of awards, the number and kind of shares or other property subject to outstanding awards, the option exercise price, grant price or purchase price applicable
to outstanding awards, the annual award limits and/or other value determinations applicable to the 2015 Plan or outstanding awards.
10
Administration
The 2015 Plan is administered by our compensation committee. The compensation committee will have full authority to: (i) interpret and
administer the 2015 Plan, (ii) select the eligible individuals who will receive awards, (iii) determine the type and number of awards to be granted to each such individual and (iv) determine the terms and conditions of those awards.
Eligibility
Employees,
non-employee
directors and consultants, as the compensation committee in its sole discretion determines and whom our compensation committee may designate from time to time to receive awards under the 2015 Plan, will
be eligible to participate in the 2015 Plan.
Stock Options
Our compensation committee may grant stock options to purchase a stated number of shares at a price established by the compensation committee,
subject to the terms and conditions described in the 2015 Plan and to such additional terms and conditions, as established by the compensation committee, in its sole discretion, that are consistent with the provisions of the 2015 Plan. Our
compensation committee may grant nonqualified stock options and stock options qualifying as ISOs under Section 422 of the Code; provided that ISOs may only be granted to our employees.
The exercise price of any stock option granted under our 2015 Plan will not be less than 100% of the fair market value of our common stock on
the date of grant, or 110% of fair market value in the case of ISOs granted to 10% stockholders. The maximum term of a stock option granted under our 2015 Plan will be ten years, or five years in the case of ISOs granted to 10% stockholders. The
vesting schedule and performance goals, if any, for each stock option will be determined by the compensation committee.
SARs
Our compensation committee may grant SARs under the 2015 Plan either alone or in addition to other awards granted under the 2015 Plan. The
grant price of each SAR will be not less than 100% of the fair market value of the related shares of common stock on the date of grant. The maximum term of all SARs granted under the 2015 Plan will be determined by the compensation committee, but
may not exceed ten years. Upon exercise, each SAR may be settled in shares of common stock, cash, other property or any combination thereof.
Restricted Stock and RSUs
Our
compensation committee may grant restricted stock and RSUs under the 2015 Plan. The compensation committee will determine the vesting schedule and performance goals, if any, applicable to the grant of restricted stock and RSUs. If the restrictions,
performance goals or other conditions determined by the compensation committee are not satisfied, the restricted stock and RSUs will be forfeited.
Unless the applicable award agreement provides otherwise, participants with grants of restricted stock and RSUs will generally have none of
the rights of a stockholder during the restricted period; provided that the compensation committee will determine and set forth in the applicable award agreement whether or not a participant holding restricted stock under the 2015 Plan has the right
to exercise voting rights with respect to such restricted stock during the restricted period. Participants will have no right to receive dividends, dividend equivalents or other distributions on a current basis with respect to restricted stock or
RSUs during the restricted period.
Other Share-Based Awards
Our compensation committee will be authorized to issue other share-based awards, valued in whole or in part by reference to, or otherwise based
on, the fair market value of shares of our common stock, including phantom awards, under the 2015 Plan. The compensation committee will determine the terms and conditions of such other share-based awards.
Cash Awards
Bonuses that are payable
solely in cash may also be granted under the 2015 Plan, and may be granted contingent upon the achievement of performance goals. The maximum amount of cash awards that may be granted to any single individual during any plan year will be $1,000,000.
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Performance Goals
The vesting of awards that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the
Code will be based upon a
pre-established
formula that includes one or more of the following criteria: (a) consolidated earnings before or after taxes (including EBITDA); (b) net income before or
after taxes; (c) operating income; (d) earnings per share; (e) book value per share; (f) return on stockholders equity; (g) expense management; (h) return on investment; (i) improvements in capital structure;
(j) profitability of an identifiable business unit or product; (k) maintenance or improvement of profit margins; (l) stock price; (m) market share; (n) revenue or sales; (o) costs; (p) cash flow (including, but not
limited to, operating cash flow and free cash flow); (q) working capital; (r) return on assets; (s) attainment of objectives relating to store remodels or repair and maintenance; (t) staff training; (u) corporate social
responsibility policy implementation; (v) economic value added; (w) debt reduction; (x) completion of acquisitions or divestitures; (y) operating efficiency; (z) sales per square foot; (aa) revenue mix; (bb) capital
expenditures versus budgeted expenditures (total, exclusive of IT/Games, or maintenance only); (cc) operating income; (dd) income from franchise units; (ee) unit-level EBITDA less general and administrative expenses; (ff) managers operating
contribution; (gg) regional operating contribution; (hh) profitability of various revenue streams; (ii) cash flow per share (before and after dividends or before and after debt payments); (jj) total stockholder return (relative to industry/peer
group and/or absolute); (kk) lease executions; (ll) franchise unit growth; (mm) employee turnover/retention (for entire population or a subset of employee population); (nn) employee satisfaction; (oo) guest satisfaction (overall and/or
specific metrics); (pp) guest traffic; (qq) guest loyalty (including but not limited to participation and satisfaction); (rr) attainment of strategic and operational initiatives; (ss) marketing/brand awareness scores; (tt) third-party
operational/compliance audits; (uu) balanced scorecard; (vv) culinary product pipeline goals; (ww) guest experience; (xx) inventory turnover; (yy) brand positioning goals; (zz) comparable store sales; (aaa) return on invested capital;
(bbb) new store openings; (ccc) development pipeline goals; (ddd) attainment of objectives relating to acquisitions or divestitures; (eee) attainment of specified business expansion goals; and (fff) expansion of specified programs or
initiatives.
Any performance measure may be (i) used to measure our performance, or that of any of our subsidiaries or affiliates,
as a whole, any business unit thereof or any combination thereof against any goal including past performance or (ii) compared to the performance of a group of comparable companies, or a published or special index, in each case as the
compensation committee, in its sole discretion, deems appropriate. To the extent permitted by Section 162(m) of the Code, the compensation committee may adjust the performance goals (including to prorate goals and payments for any partial year)
in consideration of the following: (a) the effects of changes in accounting standards or principles and in tax rules or regulations; (b) extraordinary gains and losses; (c) any costs and/or expenses attributable to an acquisition,
including those related to the negotiation, completion and/or integration of an acquisition, incurred during the plan year; (d) any costs related to the purchase accounting step up in the basis of tangible or intangible assets not classified as
depreciation or amortization; (e) any costs and/or expenses associated with the sale or separation (or attempted sale or separation) of a business in the plan year; (f) the reported results of an acquisition completed in the plan year;
(g) any costs and/or expenses attributable to a financing transaction; (h) any costs related to the opening and organizing of new restaurants; (i) any litigation or claim judgments or settlements; and (j) any significant or
non-recurring
items.
Amendment and Termination of the 2015 Plan
The 2015 Plan will terminate on the tenth anniversary of its effective date. The 2015 Plan will terminate sooner if, prior to the end of the
ten-year
term, the maximum number of shares available for issuance under the 2015 Plan has been issued.
The Compensation Committee may amend, alter, suspend, discontinue or terminate the 2015 Plan, but no such action may materially impair the
rights of any participant with respect to outstanding awards without the participants consent. No amendment, alteration, suspension, discontinuance or termination of the 2015 Plan may be made without stockholder approval (i) if such
approval is necessary to comply with any tax or regulatory requirement applicable to the 2015 Plan, (ii) if such action increases the number of shares available under the 2015 Plan unless otherwise permitted, (iii) if such action results
in a material increase in benefits permitted under the 2015 Plan or (iv) for any action that results in a reduction of the option exercise price or grant price of any outstanding stock option or SAR or the cancellation of any outstanding stock
option or SAR in exchange for cash.
Change of Control
In the event of a change of control of us, our compensation committee is authorized (but not obligated) to make adjustments in the terms and
conditions of outstanding awards, including (i) continuation or assumption of outstanding awards under the 2015 Plan by us (if we are the surviving company or corporation) or by the surviving company or corporation or its parent;
(ii) substitution by the surviving company or corporation or its parent of awards with substantially the same terms for outstanding awards (excluding the consideration payable upon settlement of the awards); (iii) accelerated
exercisability, vesting and/or lapse of restrictions under outstanding awards immediately prior to the occurrence of such event; (iv) upon written notice, provide that any outstanding awards must be exercised, to the extent then exercisable,
during a reasonable period of time immediately prior to the scheduled consummation of the event or such other period as determined by the compensation committee (contingent upon the consummation of the event); and (v) cancellation of all or any
portion of outstanding awards for fair value as determined in the sole discretion of our compensation committee.
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For purposes of the 2015 Plan, a change of control will mean the occurrence of one or
more of the following: (i) a person or entity other than Thomas H. Lee Partners, L.P., Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P., Thomas H. Lee Parallel (DT) Fund VI, L.P. or any affiliated fund becomes the
beneficial owner of, or has acquired during the
12-month
period ending on the date of the most recent acquisition by such person, 30% or more of our combined voting power; (ii) an unapproved change in the
majority membership of our board during any period of 12 consecutive months; (iii) a reorganization, merger, consolidation or similar event to which we are a party or the consummation of a transaction (or series of transactions within a
12-month
period) constituting a sale of all or substantially all of our assets other than (A) an event in which all or substantially all of the beneficial owners of our common stock immediately prior to such
event are the beneficial owners, directly or indirectly of 50% or more of the combined voting power of the outstanding securities entitled to vote in the election of directors of any successor entity, (B) no person is the beneficial owner,
directly or indirectly, of 30% or more of the combined voting securities entitled to vote in the election of directors of any successor entity, and (C) at least a majority of the members of the board of directors of any successor entity were
members of the incumbent board; or (iv) stockholder approval of a complete liquidation or dissolution of us.
To the extent any award
provides for accelerated vesting on a change of control of amounts that would constitute deferred compensation (as defined in Section 409A of the Code), if the event constituting a change of control does not also constitute a change
in the ownership or effective control of us, or in the ownership of a substantial portion of our assets (in either case, as defined in Section 409A of the Code), such amount will not be distributed on the change of control but instead will vest
as of the change of control and will be distributed on the scheduled distribution dates.
See Item 11. Executive Compensation
Executive Compensation Equity-Based Awards for information about the treatment and disposition of all equity-based awards under the Merger Agreement.
Compensation Recovery
If a participant
receives compensation pursuant to an award based on financial statements that are subsequently required to be restated in a way that would decrease the value of such compensation, the participant will, upon the written request of the compensation
committee and in the compensation committees sole discretion, forfeit and repay to us the difference between what the participant received and what the participant should have received based on the accounting restatement, in accordance with
(a) our compensation recovery, clawback or similar policy, if any, as may be in effect from time to time and (b) any compensation recovery, clawback or similar policy made applicable by law.
Fogo de Chão, Inc. Management Incentive Plan
General
We have a Management Incentive
Plan that is intended to enhance our ability to attract and retain highly qualified executives, to provide additional financial incentives to such executives and to promote our and our subsidiaries success through awards of incentive
compensation that satisfy the requirements for performance-based compensation under Section 162(m) of the Code.
Administration
The Management Incentive Plan is administered by our Compensation Committee.
Eligible Employees
Not later than the
90th day of the start of the applicable performance period, our Compensation Committee will designate those of our executive officers who will be deemed our covered employees, as defined in Section 162(m) of the Code.
Performance Goals
The maximum amount of
compensation payable to any such covered employee for the applicable performance period will be 6% of Adjusted EBITDA, which will be calculated as follows: (a) income from continuing operations;
plus
(b) income tax expense;
plus
(c) interest expense;
minus
(d) interest income;
plus
(e) depreciation expense; and
plus
(f) amortization expense. Adjusted EBITDA will be calculated without regard to: (i) the effects of
changes in accounting standards or principles and in tax rules or regulations; (ii) any ongoing and/or
one-time
costs and/or expenses attributable to an acquisition, including those related to the
negotiation, completion and/or integration of an acquisition, incurred during the applicable fiscal year; (iii) any costs related to the purchase accounting step up in the basis of tangible or intangible assets not classified as depreciation or
amortization; (iv) any ongoing and/or
one-time
costs and/or expenses associated with the sale or separation (or attempted sale or separation) of a business in the applicable fiscal year; (v) the
reported results of an acquisition completed in the applicable fiscal year; (vi) any ongoing and/or
one-time
costs and/or expenses attributable to a financing transaction; (vii) any
pre-opening
costs; (viii) any litigation or claim judgments or settlements; and (ix) any significant or
non-recurring
items which are disclosed in managements
discussion and analysis of financial condition and results of operations in our Annual Report on
Form 10-K
for such period. Notwithstanding the foregoing, in the event that a business is sold or separated
from us during the applicable fiscal year, such business target and adjusted actual results will be eliminated from all calculations.
13
Negative Discretion
At any time before an incentive amount for a performance period is paid, our Compensation Committee may, in its sole discretion, determine to
pay an amount that is less than the maximum payable amount, or to pay no amount. The amount by which a covered employees maximum payable amount is reduced cannot be paid to any other covered employee.