- Additional Proxy Soliciting Materials (definitive) (DEFA14A)
May 22 2009 - 9:42AM
Edgar (US Regulatory)
UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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RED
ROBIN GOURMET BURGERS, INC.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required.
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to
which transaction applies:
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(2)
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Aggregate number of securities to
which transaction applies:
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(3)
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of
transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary
materials.
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Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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Date Filed:
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Subject: Red
Robin Gourmet Burgers, Inc. 2009 Annual Meeting of Stockholders
Dear Stockholders:
Our Annual Meeting of
Stockholders will be held on May 28, 2009. As you may know, both
Institutional Shareholder Services, Inc. (ISS) and Glass, Lewis &
Co., LLC (Glass Lewis) have published reports available to our
stockholders. ISS has recommended withhold
votes against all three director candidates, Richard J. Howell, James T. Rothe
and J. Taylor Simonton, while Glass Lewis has recommended a withhold vote
with respect to Mr. Rothe.
Both organizations have
based their recommendations primarily on what they believe to be poor pay
practices in view of what they have determined to be poor shareholder returns
relative to their chosen Global Industry Classification Standard peer groups
and the Russell 3000 Index. Glass Lewis and ISS have used sets of criteria, in
some respects applied retroactively, which differ from what we use to benchmark
ourselves. We believe that ISS and Glass Lewis methods of evaluating our
performance, pay practices and our compensation reflect (i) an incomplete,
checklist model rather than sufficient analysis and balanced consideration of
all the facts, and (ii) a selective methodology for developing data that
does not fully consider the business environment in which we operate.
As we discuss below, we
believe their recommendations are based on a flawed peer group analysis and a
narrow definition of total shareholder return that fails to credit the rest of
the metrics that demonstrate our positive performance. While alleging poor performance, their own
reports, as discussed below, are internally inconsistent and, in some respects,
contradict their own conclusions. By focusing on one or two narrow points, they
ignore other relevant metrics of performance, such as growth rate and
profitability. In fact, Proxy Governance, Inc.,
another proxy advisory service, considers several key metrics and has issued a
favorable recommendation for all director candidates. Moreover, with respect to our recent stock
option tender offer, ISS failed to consider the management stock ownership
guidelines that the board adopted to better align management with our
stockholders interests and the use of net proceeds by management to purchase
shares of our common stock.
We
respectfully ask that, if you rely on ISS or Glass Lewis as your proxy advisor,
you consider factors outside their evaluations that we discuss below and vote
FOR Richard J. Howell, James T. Rothe and J. Taylor Simonton.
Poor Pay Practices Analysis
Peer Group Analysis
.
ISS
. We believe
that ISS measures company performance against a flawed peer group. Its policy that was newly adopted in 2008
calls for ISS to recommend a withhold/against vote on directors of companies
with sustained poor performance relative to peers. Sustained poor performance
is measured by one- and three-year total shareholder returns in the bottom half
of a companys four-digit Global Industry Classification Standard (GICS)
industry group(1). The peer group chosen
by ISS from the GICS code for RRGB bears little relationship to both the casual
dining segment of the industry in which we operate, and to the competitor/peer
restaurants against which we benchmark our performance. This ISS peer group of 12 members includes
non-restaurant businesses such as fitness, gaming and hotel companies, as well
as restaurants that compete in the quick-serve segment of the restaurant
industry. Only two members of the ISS peer group, Texas Roadhouse and
California Pizza Kitchen, Inc., are included in our peer group, as
detailed in our 2009 Proxy Statement, and only four of the twelve are
restaurants. We believe the ISS peer group is not comparable to RRGB in that
the operations of most of these companies are completely different from the
casual dining industry. For example,
they do not service the same demographic groups; they do not have the same
seasonality of operations; and they do not compete for the same type of talent.
Glass Lewis
. Glass Lewis
also indicates it uses a peer group based on the GICS classification, which we
also believe is inappropriate. Glass
Lewis reports that we performed worse than a broad group of 33 peer comparison
companies selected by Glass Lewis and that we paid more total executive
compensation than such companies.
However,
Glass
Lewis own report confirms that, compared to restaurant companies in the group,
we performed equal to or better in most categories other than stock price
performance, and paid less to our executives in compensation than a sub-industry
group of restaurants.
(2)
Rothe Withhold Recommendation
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ISS
. ISS has
recommended a withhold vote against James Rothe, as chair of the Compensation
Committee which approved the alleged poor pay practice of including tax
reimbursement for some executive perquisites granted to Dennis Mullen, Chief
Executive Officer of the Company. Under
its Poor Pay Practice policy, ISS will recommend withhold votes against
compensation committee members who approve such practices. However, in fact, ISS amended its pay
practice policy in 2008
after
Mr. Mullen
and the Company entered into his amended employment agreements. In fact, these tax reimbursement provisions
date back to April 2007 when the Company extended Mr. Mullens
original employment agreement. As noted
in ISS report and our 2009 Proxy Statement, but apparently not given
consideration by ISS, Mr. Mullen extended the term of his agreement
through 2010 and then through 2012, in part to assure stability of executive
management during these difficult economic times. Otherwise, the term was set
to expire at the end of 2008.
(1) (Russell
3000 companies only) RiskMetrics Group U.S. Corporate Governance Policy 2009
Updates November 25, 2008, p. 6.
(2) Glass
Lewis 2009 Red Robin Gourmet Burgers, Inc. Proxy Paper, p. 3 and 4.
Glass Lewis.
Glass Lewis has
recommended a withhold vote against Mr. Rothe as chair of the Compensation
Committee, based on the Companys payment of higher executive compensation than
the median for our peers for purportedly worse performance.(3) We
benchmark our executive compensation against the peer group(4) that is set
forth in our 2009 Proxy Statement, which includes California Pizza Kitchen, Inc.
and Texas Roadhouse, Inc., but not The Steak n Shake Company, as included
in Glass Lewis comparison. As is
disclosed in our 2009 Proxy Statement, our executive compensation program sets
base cash compensation at or below median of our peer group of casual dining
companies, with upside through cash bonuses from median to the 75
th
percentile based on performance. The equity
components of our compensation program are meant to encourage and drive
creation of both short and long term stockholder value. F.W. Cook and Co., Inc.,
the Compensation Committees advisor, confirmed that for 2008, salaries for
four of our six Named Executives individually (excluding Mr. Mullen, and
Todd Brighton, our Chief Development Officer) were below median compared to our
peer group. Moreover, with the exception of Mr. Mullens compensation, you
will note that the 2008 compensation of the other named executives as a group
is
less
than the competitors Glass Lewis
has chosen. With respect to Mr. Mullens
compensation, the majority of which is equity based, Glass Lewis
methodology fails to
consider the various reasons for different compensation practices which lead to
respectively fewer equity grants in other companies. For example, compensation practices are
different for certain chief executive officers because several of the companies
are run by former founders or other long-term executives who hold or held
substantial equity interests already and for which additional equity would not
serve as a substantial incentive. In addition, much of Mr. Mullens equity
compensation is the result of both circumstances of his initial appointment as
CEO and of extending his term with the Company from its initial expiration in
2008 through 2012. Recall that Mr. Mullen
became chief executive officer in 2005 under urgent circumstances relating to
the departure of our former chief executive and chief financial officers, the
departure of which also negatively impacted our stock price. The negative
performance of our common stock over the past several years reflects both the
unusual circumstances of their departure, as well as the economy, rather than
fundamental weaknesses in the Companys performance or business.
Tender Offer/ Repricing
Howell,
Rothe and Simonton Withhold Recommendation
.
ISS recommends a withhold
vote against the entire class of this years nominees for the board of
directors due to the implementation of
the employee stock option tender offer without approval of stockholders. In addition to what we believe to be the
sound bases for conducting the tender offer, the ISS recommendation fails to
consider a key aspect of our overall approach to the alignment of management
interests with those of our stockholders.
ISS chief objection
appears to be a lack of alignment between the Companys management and our
stockholders because management participated in the offering. However,
(3) Neither
Mr. Howell nor Mr. Simonton is a member of the Compensation
Committee.
(4) BJ
Restaurants, Inc., Brinker International Inc., Buffalo Wild Wings, Inc.,
California Pizza Kitchen, Inc., The Cheesecake Factory Inc., Chipotle
Mexican Grill, Inc., Landrys Restaurants, Inc., and McCormick &
Company Inc., Mortons Restaurant Group Inc., OCharleys Inc., Panera Bread
Company, P.F. Chang China Bistro Inc., Rare Hospitality International, Inc.,
Ruby Tuesday Inc., Ruths Chris Steak House Inc. and Texas Roadhouse Inc.
ISS does not acknowledge
or give any credit to the fact that managment used substantially all of their
net proceeds from the tender offer to purchase stock in the Company. See page 23
of the 2009 Proxy Statement. Moreover, the board of directors and management
implemented stock ownership guidelines concurrently in 2009 which require
certain members of management to hold shares with a value equal to from 1 ½ to
4 times annual salary for the entire term of their employment. In fact, only three of our self-selected 15
peers have stock ownership guidelines at all.(5) We believe these
guidelines support and strengthen increased alignment with stockholders. ISS gave no consideration of this fact in
their recommendation.
Withhold Recommendations Against
the Entire Board
In its current report,
ISS recommends a withhold vote against the entire board of directors based on
approval of the employee stock option tender offer, even though only three
members are standing for re-election this year. We believe that any indication
of an intention to recommend a withhold vote for any election after this year
is inappropriate and suggests a reluctance to consider any practices the
Company may undertake in future years.
Such an intention is contrary to objectivity and fairness in evaluating
corporate governance.
Thank you for permitting
us to address these important issues with you.
The Board of
Directors recommends that you vote in favor of the re-election of Mr. Howell,
Mr. Rothe and Mr. Simonton.
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Sincerely,
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/s/ Dennis B. Mullen,
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Chairman
and Chief Executive Officer
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(5) P.F.
Chang China Bistro, Inc., Ruby Tuesday, Inc. and Brinker International, Inc.
In
connection with the matters discussed above, Red Robin has filed a definitive
proxy statement and other relevant documents concerning its Annual Meeting with
the Securities and Exchange Commission (SEC).
SECURITY
HOLDERS OF RED ROBIN ARE URGED TO READ THE 2009 PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders can obtain free copies of the 2009
Proxy Statement and other documents by contacting Shareholder Services, Red
Robin Gourmet Burgers, Inc., 6312 S. Fiddlers Green Circle, Suite 200
North, Greenwood Village, CO 80111, (Telephone: 303.846.6000). In addition, the
definitive 2009 Proxy Statement and other documents filed with the SEC by Red
Robin are available free of charge at the SECs web site at http://www.sec.gov
or at Red Robins web site at http://www.redrobin.com/eproxy.htm.
Red
Robin and its directors, executive officers and certain other members of its
management and employees may, under SEC rules, be deemed to be participants in
the solicitation of proxies from Red Robins shareholders, and may have
interests which may be different than those of Red Robin shareholders
generally. Information regarding the interests of such directors and executive
officers is included in Red Robins proxy statements and Annual Reports on Form 10-K,
previously filed with the SEC, and information concerning all of Red Robins
participants in the solicitation is included in the definitive proxy statement
relating to the annual meeting filed with the SEC. Each of these documents is,
or will be, available free of charge at the SECs web site at
http://www.sec.gov or at Red Robins web site at http://www.redrobin.com.
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