BIGLARI HOLDINGS INC. | ||||||||||||||
(Name of Registrant as Specified in Its Charter) |
N/A | ||||||||||||||
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant) |
☐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.
BIGLARIBIGLARI HOLDINGS INC.
April 25, 2019
The Shareholders:
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March
If you are a shareholder |
BIGLARI
MAY 27, 2021
MAY 27, 2021.
Upon
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Name | Age | Business Experience | ||||||||||||
Sardar Biglari | 43 | Chairman of the Board and Chief Executive Officer of Biglari Holdings since 2008. In addition, Mr. Biglari has served as Chairman and Chief Executive Officer of Biglari Capital Corp. (“Biglari Capital”) since 2000. Biglari Capital is the general partner of The Lion Fund, L.P. and The Lion Fund II, L.P., private investment partnerships. Mr. Biglari is | ||||||||||||
Philip L. Cooley | 77 | Vice Chairman of the Board of Biglari Holdings since April 2009 and a director since March 2008. Prassel Distinguished Professor of Business at Trinity University, San Antonio, Texas, from 1985 until his retirement in May 2012. |
Ruth J. Person | 75 | Director of the | ||||||||||||
Kenneth R. Cooper | 76 | Director of the Corporation since October 2010. Attorney in the private law practice of |
75 | Director of the Corporation since |
The Governance, Compensation and Nominating Committee
Person, and John G. Cardwell.
meeting.
The role of the Governance, Compensation and Nominating Committee is to assist the Board by a) recommending governance guidelines applicable to the Corporation; b) identifying, evaluating and recommending the nomination of Board members; c) setting the compensation of the Corporation’s Chief Executive Officer and performing other compensation oversight; d) reviewing related persons transactions; and e) assisting the Board with other related tasks, as assigned from time to time. The Governance, Compensation and Nominating Committee held one formal meeting and acted by written consent twiceonce during 2018.
2020.
Biglari Holdings does not provide directors and officers liability insurance to its directors.
Name | Fees Earned or Paid in Cash | All Other Compensation | Total | |||||||||
Philip L. Cooley | $ | 252,500 | $ | — | $ | 252,500 | ||||||
Kenneth R. Cooper | $ | 80,000 | $ | — | $ | 80,000 | ||||||
James P. Mastrian | $ | 70,000 | $ | — | $ | 70,000 | ||||||
Ruth J. Person | $ | 70,000 | $ | — | $ | 70,000 |
Name | Fees Earned or Paid in Cash | All Other Compensation | Total | |||||||||||||||||
Philip L. Cooley | $ | 253,000 | $ | — | $ | 253,000 | ||||||||||||||
Kenneth R. Cooper | $ | 81,000 | $ | — | $ | 81,000 | ||||||||||||||
John G. Cardwell | $ | 71,000 | $ | — | $ | 71,000 | ||||||||||||||
Ruth J. Person | $ | 67,500 | $ | — | $ | 67,500 | ||||||||||||||
James P. Mastrian | $ | 31,500 | $ | — | $ | 31,500 |
2021.
PROPOSAL THREE:
Background
The advisory vote on executive compensation is a non-binding vote on the compensation of the Corporation’s Named Executive Officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules promulgated by the SEC, including the
The Governance, Compensation and Nominating Committee believes the Corporation’s executive compensation program, including the Incentive Agreement with Mr. Biglari, reflects a pay-for-performance philosophy. The basic idea is to tie compensation with shareholders’ long-term interests. We have chosen an unconventional compensation that we believe achieves an objective consistent with the interests of long-term shareholders. The Compensation Discussion and Analysis section starting on page 11 of this proxy statement provides a more detailed discussion of the Corporation’s executive compensation policies and practices.
Non-Binding Advisory Resolution
We are asking our shareholders to indicate their support for the Company’s executive compensation program as described in this proxy statement. This proposal, commonly known as a “say-on-pay”, gives our shareholders the opportunity to express their views on our Named Executive Officers’ compensation. This advisory vote on executive compensation is not binding on the Board. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we will ask our shareholders to voteFOR the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement is hereby APPROVED.”
Required Vote
If a quorum is present, the affirmative vote of a majority of the Class A common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution.
Our Board recommends a vote FOR adoption of the advisory resolution approving the compensation of the Corporation’s Named Executive Officers. Properly dated and signed proxies will be so voted unless shareholders specify otherwise.
PROPOSAL FOUR:
FREQUENCY OF FUTURE SAY-ON-PAY ADVISORY VOTES
Background
The Corporation is also providing shareholders an advisory vote on the frequency with which the Corporation’s shareholders shall have the advisory vote on executive compensation provided for in Proposal 3 above. For convenience, in this Proposal 4 the shareholders’ advisory vote on executive compensation provided for in Proposal 3 above is referred to as the “say-on-pay vote”.
The advisory vote on the frequency of the say-on-pay vote is a non-binding vote as to how often the say-on-pay vote should occur: every year, every two years, or every three years. In addition, shareholders may abstain from voting.
The Board believes that a triennial frequency (i.e., every three years) is the optimal frequency for the say-on-pay vote. Therefore, the Board recommends that you voteFOR a triennial interval for the advisory say-on-pay vote. The Board supports a triennial vote because the Corporation’s executive compensation policies and practices are designed to maximize long-term value. This advisory vote on the frequency of the say-on-pay vote is not binding on the Board.
Non-Binding Advisory Resolution
We are asking our shareholders to vote on the following resolution:
“RESOLVED, that the option of once every one year, two years, or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which Biglari Holdings Inc. (the “Corporation”) is to hold a shareholder vote to approve the compensation of the Corporation’s Named Executive Officers, as disclosed in the Corporation’s proxy statement for annual meetings of shareholders pursuant to the compensation disclosure rules promulgated by the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.”
Required Vote
If a quorum is present, the frequency option of every one year, two years or three years that receives the greatest number of votes on this Proposal 4 will be the advisory vote on the frequency for the advisory vote on executive compensation.
Our Board recommends a vote FOR the option of every THREE YEARS for the frequency with which shareholders are provided an advisory vote on the compensation of the Corporation’s Named Executive Officers. Properly dated and signed proxies will be so voted unless shareholders specify otherwise. Shareholders are not voting to approve or disapprove the Board’s recommendation. Shareholders may choose among the choices included in the resolutions set forth above.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Compensation Discussion and Analysis is designed to provide shareholders with a better understanding of our compensation philosophy, core principles, and decision-making process.philosophy. It explains the compensation-related actions taken regarding the executive officers identified in the Summary Compensation Table (the “Named Executive Officers”). Details regarding the compensation we paid to the Named Executive Officers for 20182020 are found in the tables and narrative that follow them.
Executive Summary
Mr. Biglari does not have a severance agreement, a change-in-control arrangement, or an employment agreement with the Company and has neither been granted nor holds any stock options or restricted stock awards from the Company. The Corporation does not grant any stock options or other awards. The Board believes its unconventional compensation system is a rational one, creating less, not more, enterprise risk. For each of the last three years, Mr. Biglari earned a total compensation of $900,000.
Chief Executive Officer Compensation for Managing the Operating Businesses
In his capacity as CEOCommittee of the Company,Corporation’s Board of Directors. Because Mr. Biglari earnedwishes that his salary remain unchanged, his annual salary has been $900,000 for more than 10 years and Mr. Biglari has advised the Committee that he would not expect or desire such salary to increase in total directthe future.
authority. These incentives are never related to measures over which an executive exercises no authority.
Philosophy.
Incentive Design.
factors.
The Incentive Agreement was amended on March 26, 2019 to remove the $10,000,000 annual limitation on Mr. Biglari’s incentive compensation and the requirement of Mr. Biglari to use 30% of his incentive payments to purchase shares of the Company, in consideration for the elimination of the change of control and severance provisions contained in the Incentive Agreement and the termination of the License Agreement with Mr. Biglari. The March 26, 2019 amendment is effective in 2019. See “Related Person Transactions”.
2018 Incentive Payout. Mr. Biglari did not receive an incentive payment for 2018.
For 2017, Mr. Biglari received an incentive fee of $7,353,250 primarily attributable to net earnings of $50,071,000. Net earnings included an income tax benefit of $53,545,000 derived from a reduction in deferred tax liability related to the Corporation’s significant unrealized gains on marketable securities.
Mr. Biglari did not receive an incentive payment for 2016.
Our executive compensation philosophy is intended to reward and promote such long-term growth in per-share intrinsic value for the benefit of all shareholders.
The CEO incentive payment is reviewed by the Committee and its advisors.
Compensation of Controller
The Committee has charged Mr. Biglari with the responsibility of reviewing and determining the compensation of other executive officers, including senior executives of the Company’s major subsidiaries. Factors considered are typically subjective, such as the executive’s performance and any changes in that executive’s functional responsibilities, which were the primary factors used in determining the compensation for the Company’s Controller, Bruce Lewis.
We may also utilize different incentive arrangements, with their terms dependent upon such elements as the economic potential or capital intensity of the business. The incentives could be large and will always be tied to the operating results for which an executive exercises authority.
Employment Agreements, Severance, and Change-in-Control Arrangements
Neither Mr. Biglari nor Mr. Lewis has an employment agreement with the Company and neither has been granted or holds any stock options or restricted stock awards from the Company. The Corporation does not grant any stock options or other awards.
Mr. Biglari’s Incentive Agreement has been amended to remove the change-in-control and severance provisions effective 2019. As such, neither Mr. Biglari nor Mr. Lewis has a severance or change-in-control arrangement.
Name and Principal Position | Year | Salary | Bonus | Non-Equity Incentive | All Other Compensation | Total | ||||||||||||||||||
Sardar Biglari | 2018 | $ | 900,000 | $ | — | $ | — | $ | — | $ | 900,000 | |||||||||||||
Chairman / Chief Executive Officer | 2017 | 900,000 | — | 7,353,250 | — | 8,253,250 | ||||||||||||||||||
2016 | 900,000 | — | — | — | 900,000 | |||||||||||||||||||
Bruce Lewis | 2018 | $ | 435,000 | $ | 460,000 | $ | — | $ | — | $ | 895,000 | |||||||||||||
Controller | 2017 | 415,000 | 440,000 | — | — | 855,000 | ||||||||||||||||||
2016 | 390,000 | 420,000 | — | — | 810,000 |
Name and Principal Position | Year | Salary | Bonus | Non-Equity Incentive | All Other Compensation | Total | ||||||||||||||||||||||||||||||||
Sardar Biglari | 2020 | $ | 900,000 | $ | — | $ | — | $ | — | $ | 900,000 | |||||||||||||||||||||||||||
Chairman / Chief | 2019 | 900,000 | — | — | — | 900,000 | ||||||||||||||||||||||||||||||||
Executive Officer | 2018 | 900,000 | — | — | — | 900,000 | ||||||||||||||||||||||||||||||||
Bruce Lewis | 2020 | $ | 480,000 | $ | 500,000 | $ | — | $ | — | $ | 980,000 | |||||||||||||||||||||||||||
Controller | 2019 | 455,000 | 485,000 | — | — | 940,000 | ||||||||||||||||||||||||||||||||
2018 | 435,000 | 460,000 | — | — | 895,000 |
Transactions.”
The median employee was determined using 20182020 W-2 wages for all U.S. employees, and equivalent taxable compensation for all non-U.S. employees werewas excluded. The median employee determination included all domestic employees who were employed at December 31, 2018.2020. The compensation of the median employee was $10,636.$9,285. Our median employee works part time.part-time. Therefore, the ratio of the Chief Executive Officer’s compensation ($900,000) to that of the median employee (i.e., part time)a part-time employee) was approximately 8597 to 1.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Corporation’s officers and directors, and persons who own more than ten percent of a registered class of the Corporation’s equity securities, to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange. Officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish the Corporation with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, and written representations from certain reporting persons that no Section 16(a) forms were required for those persons, the Corporation believes that during 2018 all filing requirements applicable to its officers, directors and greater than ten-percent shareholders were complied with.
GOVERNANCE,
James P. Mastrian
Name | Title of Class of Stock | Shares Beneficially Owned | Percentage of Voting Power of Class A | Percentage of Aggregate Economic Interest of Class A and Class B | ||||||||||
Sardar Biglari | Class A | 117,770.9 | (1) | 56.9 | % | 55.2 | % | |||||||
Class B | 1,123,313.0 | (2) | ||||||||||||
Philip L. Cooley | Class A | 744.1 | (3) | * | * | |||||||||
Class B | 7,474.0 | (4) | ||||||||||||
Ruth J. Person | Class A | 51.1 | * | * | ||||||||||
Class B | 511.0 | |||||||||||||
Kenneth R. Cooper | Class A | 32.1 | * | * | ||||||||||
Class B | 321.0 | |||||||||||||
James P. Mastrian | Class A | 32.0 | (5) | * | * | |||||||||
Class B | 336.0 | (5) | ||||||||||||
Bruce Lewis | Class A | — | — | — | ||||||||||
Class B | — | |||||||||||||
Directors and executive | Class A | 118,630.2 | 57.3 | % | 55.6 | % | ||||||||
officers as a group (6 persons) | Class B | 1,131,955.0 |
Name | Title of Class of Stock | Shares Beneficially Owned | Percentage of Voting Power of Class A | Percentage of Aggregate Economic Interest of Class A and Class B | ||||||||||||||||||||||
Sardar Biglari | Class A | 139,598 | (1) | 67.5% | 63.0% | |||||||||||||||||||||
Class B | 1,255,830 | (2) | ||||||||||||||||||||||||
Philip L. Cooley | Class A | 744 | (3) | * | * | |||||||||||||||||||||
Class B | 7,474 | (4) | ||||||||||||||||||||||||
Ruth J. Person | Class A | 51 | * | * | ||||||||||||||||||||||
Class B | 511 | |||||||||||||||||||||||||
Kenneth R. Cooper | Class A | 32 | * | * | ||||||||||||||||||||||
Class B | 321 | |||||||||||||||||||||||||
Edmund B. Campbell, III | Class A | 27 | * | * | ||||||||||||||||||||||
Class B | 275 | |||||||||||||||||||||||||
John G. Cardwell | Class A | — | — | * | ||||||||||||||||||||||
Class B | 450 | (5) | ||||||||||||||||||||||||
Bruce Lewis | Class A | — | — | — | ||||||||||||||||||||||
Class B | — | |||||||||||||||||||||||||
Directors and executive | Class A | 140,452 | 67.9% | 63.4% | ||||||||||||||||||||||
officers as a group (7 persons) | Class B | 1,264,861 |
Name & Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||||
Biglari Capital Corp. 17802 IH 10 West, Suite 400 San Antonio, TX 78257 | 139,598(1) | 67.5% | ||||||||||||
GAMCO Investors, Inc. One Corporate Center Rye, NY 10580-1435 | ||||||||||||||
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22,028 (2) |
Investments in the
Mr. High-water marks are tracked individually for each partner and for each partner contribution. Biglari statedHoldings and its subsidiaries have made investments into the partnerships over time with each investment separately tracked. The capital contributions made in his 2015 letter to shareholders: “Our incentive system differs from that of most investment managers, whose compensation is tied to the level of assets under management. Regardless of whether an investor makes or loses money, the investment manager is guaranteed significant income. A typical manager’s incentive is to earn2020 earned a return onhiscapital, rather than a return on hisinvestors’capital. In addition, a hedge fund manager may charge both a large management fee, 2% of assets, plus a significant contingent payment, 20% of profits — and usually absent a minimum hurdle rate.” The Committee agrees with this view and believes that the incentive reallocation under the termsprofit in excess of the investment partnership agreements is favorable.
hurdle rate, resulting in an incentive fee of $986,561. An incentive reallocation to Biglari Capital is determined as of December 31 of each year. NoThere were no incentive reallocation was earned in 2018 and 2017. Based on Biglari Holdings’ $281 million of earnings from the investment partnerships for 2016, the incentive reallocationreallocations from Biglari Holdings to Biglari Capital from 2017 through 2019.
Services$590,926,016.
License Agreement
During 2013, the Company entered into a Trademark License Agreement (the “License Agreement”) with The Biglari Entities are owned by Mr. Biglari. The license underBoard reviews the License Agreement was provided on a royalty-free basis incosts against the absencebenefits of specified extraordinary events. The Companythe service agreement and its subsidiaries paid no royalties to Mr. Biglari under the License Agreement since its inception. The License Agreement has been terminatedis pleased by the CompanyCompany's total general and administrative expenses since the service agreement went into effect in exchange for removing the annual $10,000,000 limitation under Mr. Biglari’s Incentive Agreement with the Company. The removal of the $10,000,000 cap is effective 2019.
2017.
2020.
INDEPENDENT PUBLIC ACCOUNTANTS
Type of Fee |
2018 |
2017 | ||||||
Audit Fees(1) | $ | 815,413 | $ | 779,000 | ||||
Audit-Related Fees(2) | 106,175 | 109,500 | ||||||
Tax Fees(3) | — | 21,465 | ||||||
All Other Fees(4) | — | — | ||||||
Total Fees | $ | 921,588 | $ | 909,965 |
2019.
Type of Fee | 2020 | 2019 | ||||||||||||
Audit Fees(1) | $ | 1,056,000 | $ | 860,350 | ||||||||||
Audit-Related Fees(2) | 132,500 | 57,500 | ||||||||||||
Tax Fees(3) | — | 6,471 | ||||||||||||
All Other Fees(4) | — | — | ||||||||||||
Total Fees | $ | 1,188,500 | $ | 924,321 | ||||||||||
2020.
James P. Mastrian
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March