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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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ý | Definitive Proxy Statement | |
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RED ROBIN GOURMET BURGERS, INC. | ||||
(Name of the Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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RED ROBIN GOURMET BURGERS, INC.
6312 South Fiddler's Green Circle, Suite 200N
Greenwood Village, CO 80111
(303) 846-6000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 28, 201518, 2017
To our Stockholders:
The annual meeting of stockholders of Red Robin Gourmet Burgers, Inc. will be held at 8:00 a.m. MDT, on Thursday, May 28, 2015,18, 2017, at our corporate headquarters, located at 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111, for the following purposes:
We direct your attention to the proxy statement, which includes information about the matters to be considered at the annual meeting and certain other important information and which we encourage you to carefully review.review carefully. Our board of directors recommends that you voteFOR the board's nominees for director,FOR approval of our executive compensation,FOR the option of annually as the frequency with which stockholders are provided an advisory vote on compensation of our named executive officers,FORapproval of the Cashour 2017 Performance Incentive Plan,FOR approval of the amendment to increase the authorized shares of common stock of the Company,Amended and Restated Employee Stock Purchase Plan, andFOR ratification of the independent auditor. Your vote is important.
Stockholders of record at the close of business on March 30, 201527, 2017 are entitled to notice of, and to vote at, the annual meeting or any postponement or adjournment thereof. This Notice of Annual Meeting of Stockholders and related proxy materials are being distributed or made available to stockholders beginning on or about April 10, 2015.7, 2017.
This year, we have again elected to provide access to our proxy materials on the Internet under the U.S. Securities and Exchange Commission's "notice and access" rules. Our proxy materials are available at the following website:
http://www.redrobin.com/eproxy
We cordially invite you to attend the annual meeting. Whether or not you plan to attend, it is important that your shares be represented and voted at the meeting. Please refer to your proxy card or Notice Regarding the Availability of Proxy Materials for more information on how to vote your shares at the meeting and return your voting instructions as promptly as possible.
Thank you for your support.
By Order of the Board of Directors, | ||
Pattye L. Moore Chair of the Board of Directors |
Greenwood Village, Colorado
April 6, 20154, 2017
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PROXY STATEMENT SUMMARY | 1 | |
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PROXY STATEMENT | ||
PROPOSAL 1 ELECTION OF DIRECTORS | ||
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Directors and Nominees | ||
Vote Required | ||
Board Recommendation | ||
CORPORATE GOVERNANCE AND BOARD MATTERS | ||
Governance Principles | ||
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Board Leadership Structure | ||
Role in Risk Oversight | ||
Board Membership and Director Independence | ||
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Committees of the Board of Directors | ||
Stockholder Submission of Director Nominees | ||
Communications with our Board of Directors | ||
Certain Relationships and Related Transactions | ||
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Compensation Committee Interlocks and Insider Participation | ||
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Director Stock Ownership Guidelines | ||
Indemnification of Directors | 21 | |
STOCK OWNERSHIP INFORMATION | 22 | |
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COMPENSATION DISCUSSION AND ANALYSIS | ||
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Executive Compensation Decision-making | ||
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Key Components of our Executive Compensation Program | ||
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Summary of | ||
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Deductibility of Executive Compensation | ||
Executive Compensation Policies and Guidelines | ||
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Compensation Committee Report | ||
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Employment Agreements, Separation Related Arrangements, and Change in Control Agreements | ||
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Potential Payments upon Termination or Change in Control | ||
PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION | ||
Advisory Vote | ||
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Vote Required | 62 | |
Board Recommendation | 62 | |
PROPOSAL | 63 | |
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Vote Required | ||
Board Recommendation | 63 | |
PROPOSAL 4 APPROVAL OF 2017 PERFORMANCE INCENTIVE PLAN | 64 | |
Introduction | 64 | |
Summary Description of the 2017 Plan | 65 | |
Federal Income Tax Consequences of Awards under the 2017 Plan | 69 | |
New Plan Benefits under the 2017 Plan | 70 |
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Vote Required | 70 | |
Board Recommendation | 70 | |
PROPOSAL 5 APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN | 71 | |
Introduction | 71 | |
Summary Description of the ESPP | 71 | |
Federal Income Tax Information | 73 | |
Vote Required | 74 | |
Board Recommendation | 74 | |
PROPOSAL 6 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
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Evaluation of Auditor | ||
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Vote Required | ||
Board Recommendation | ||
AUDIT COMMITTEE REPORT | ||
VOTING PROCEDURES | ||
ADDITIONAL INFORMATION | ||
ANNUAL REPORT ON FORM 10-K | ||
APPENDIX | A-1 | |
APPENDIX B—AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN | B-1 |
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This summary is intended to provide an overview of the items that you will find elsewhere in this proxy statement about our Company and the upcoming 20152017 annual meeting of stockholders. As this is only a summary, we encourage you to read the entire proxy statement for more information about these topics before voting.
Time and Date: | 8:00 a.m. MDT on Thursday, May | |
Location: | Red Robin Gourmet Burgers, Inc. corporate headquarters 6312 South Fiddler's Green Circle, Suite 200N Greenwood Village, Colorado 80111 | |
Record Date: | March |
Proposal | Board's Voting Recommendation | Page References (for more detail) | ||||||
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1 | Election of Directors | FOR EACH NOMINEE | 7 | |||||
2 | Advisory Vote to Approve Executive Compensation | FOR | 61 | |||||
3 | Advisory Vote to Approve the Frequency of the Advisory Vote on Executive Compensation | FOR AN ANNUAL VOTE | 63 | |||||
4 | Approval of 2017 Performance Incentive Plan | FOR | 64 | |||||
5 | Approval of Amended and Restated Employee Stock Purchase Plan | FOR | 71 | |||||
6 | Ratification of Independent Auditor | FOR | 75 |
Stockholders may also vote on such other matters as may properly come before the meeting or any postponement or adjournment thereof. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the board of directors or, if no recommendation is given, in their own discretion.
Name | Age | Director Since | Principal Occupation | Independent | Current Committee Assignments | |||||||
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Robert B. Aiken | 52 | 2010 | CEO, Feeding America | X | *NGC, CC | |||||||
Stephen E. Carley | 62 | 2010 | CEO, Red Robin | |||||||||
Cambria W. Dunaway | 52 | 2014 | Former U.S. President, Global Chief Marketing Officer, Kidzania | X | FC, NGC | |||||||
Lloyd L. Hill | 71 | 2010 | Former CEO, Applebee's | X | *CC, AC | |||||||
Richard J. Howell | 72 | 2005 | Former Partner, Arthur Andersen | X | *AC, CC | |||||||
Glenn B. Kaufman | 47 | 2010 | Managing Member, D Cubed Group investment firm | X | *FC, CC | |||||||
Pattye L. Moore | 57 | 2007 | Consultant; former President and Director, Sonic Corp. | X | (C), AC, NGC | |||||||
Stuart I. Oran | 64 | 2010 | Partner, Liberty Hall Capital Partners private equity firm | X | AC, FC |
Name | Age | Director Since | Principal Occupation | Independent | Current Committee Assignments | |||||||
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Robert B. Aiken | 54 | 2010 | CEO, Essendant | FC | ||||||||
Cambria W. Dunaway | 54 | 2014 | Former U.S. President, Global Chief Marketing Officer, Kidzania | X | *NGC, CC | |||||||
Kalen F. Holmes | 50 | 2016 | Former Executive Vice President (Human Resources), Starbucks | X | *CC, NGC | |||||||
Richard J. Howell | 74 | 2005 | Former Partner, Arthur Andersen | X | *AC, CC | |||||||
Glenn B. Kaufman | 49 | 2010 | Managing Member, D Cubed Group investment firm | X | *FC, CC | |||||||
Steven K. Lumpkin | 62 | 2016 | Consultant, Former Executive Vice President, Chief Financial Officer and director, Applebee's | X | FC | |||||||
Pattye L. Moore | 59 | 2007 | Former President and Director, Sonic Corp. | X | (C), AC, NGC | |||||||
Stuart I. Oran | 66 | 2010 | Partner, Liberty Hall Capital Partners private equity firm | X | AC, FC | |||||||
Denny Marie Post | 59 | 2016 | President and CEO, Red Robin |
In 2015, all eight2017, nine of our directors are standing for re-election and the board recommends a vote FOR all director nominees. All directors except our CEO, Ms. Post, and Mr. Aiken are independent, and therefore currently 80% of our board is independent. Directors are elected by a majority of votes cast. One of our current directors, Mr. Lloyd Hill, will retire and conclude his board service on the date of the annual meeting, and accordingly is not standing for reelection to the board. See "PROPOSAL"Proposal 1—ELECTION OF DIRECTORS—Election of Directors—Directors and Nominees" on page 6 ofin this proxy statement for more information about our directors and nominees. In 2014,2016, each director attended at least 75% of the aggregate number of board and applicable committee meetings.
Key Corporate Governance Highlights
The board of directors recognizes the connection between good corporate governance and the creation of sustainable stockholder value and is committed to practices that promote the long-term interests of the Company, accountability of management, and stockholder trust. To this end, we continually evolve our practices to ensure alignment with our stockholders.
Highlights include:
We are requesting that stockholders approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. The board recommends a vote FOR Proposal No. 2 because it believes that the Company's executive compensation program is designed to link incentives and rewards for our executives to the achievement of specific and sustainable financial and strategic goals, which are expected to result in increased stockholder value. In 2014,2016, our executive compensation advisory vote proposal was supported by approximately 99.5%98.2% of the votes cast. Highlights of our executive compensation program, pay for performance compensation structure, 20142016 performance, and 20142016 compensation are set forth below. Please see "Compensation Discussion and Analysis" beginning on page 25in this proxy statement for a full discussion of the items below.
Executive Compensation Program
Listed below are highlights of our executive compensation program that reflect our focus on strong corporate governance and prudent compensation decision-making:
Our compensation program is designed to pay our executives for performance. Our short-term annual cash incentive program uses performance targets based primarily on annual EBITDA (earnings before interest, taxes, depreciation, and amortization) goals. Long-term incentive compensation is based on achievement of financial goals designed to demonstrate sustained improvement over multi-year periods, and time vesting designed to reward executive retention. The cash portion of our long-term incentive awards is measured over a three-year performance period based on both cumulative EBITDAretention and ROIC (return on invested capital) metrics.value creation. Restricted stock units and options each vest ratably in annual increments over four years, with the amount realizable from such awards being dependent, in whole or in part, on increased stock price. Our 2014 performance was driven by strong operating results fromThrough 2016, the implementationcash portion of our aggressive strategic plan, begunlong-term incentive awards has measured over a three-year performance period based on both cumulative EBITDA and ROIC (return on invested capital) metrics. In 2017, our chief executive officer and chief financial officer compensation will shift to increase the portion of long-term incentive compensation paid in 2011. Our strategic plan is designedequity and based on performance, subject to drive performance through top-line growthstockholder approval of the new 2017 Plan. The compensation committee contemplates this change for all executive officers beginning in sales and increased guest traffic, and lays the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value.2018.
20142016 Performance Highlights
Our fiscal 20142016 performance continued to be strong.fell below our expectations and performance goals. Highlights are set forth below.
Based on this performance, our named executive officers did not meet the performance goals necessary to achieve payout of the annual corporate bonus. In addition, only a small portion of the long-term incentive program that covered the last three fiscal years paid out despite relative outperformance in the two prior years.
Mr. Carley served as chief executive officer of the Company from late 2010 until August 2016. In August 2016, Ms. Post became our chief executive officer after serving as president and chief concept officer. Under Ms. Post's leadership, the Company continues to pursue improvement in performance designed to drive top-line growth in sales and lay the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value. We launched initiatives in the latter part of 2016 to further strengthen our business, improve guest service, and grow market share. We have identified and continue to focus on opportunities that will allow us to:
We continue to make progress strengthening the fundamentals of our business and improving our performance. We have identified and continue to examine opportunities that will:
The table below sets forth the 20142016 compensation for our named executive officers:
Name and Principal Position | Salary ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||
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Stephen E. Carley | |||||||||||||||||||
Chief Executive Officer | 750,000 | 383,357 | 794,753 | 1,319,344 | 20,219 | 3,267,673 | |||||||||||||
Stuart B. Brown | |||||||||||||||||||
SVP & Chief Financial Officer | 357,000 | 82,069 | 164,215 | 398,053 | 15,730 | 1,017,066 | |||||||||||||
Denny Marie Post | |||||||||||||||||||
EVP & Chief Concept Officer | 392,700 | 286,345 | 172,782 | 406,189 | 17,523 | 1,275,539 | |||||||||||||
Michael L. Kaplan | |||||||||||||||||||
SVP Legal & Chief Legal Officer | 335,000 | 53,561 | 107,190 | 269,471 | 332,374 | 1,097,596 | |||||||||||||
Cathy Cooney | |||||||||||||||||||
SVP & Chief People Officer | 305,000 | 48,737 | 97,596 | 245,339 | 25,635 | 722,308 | |||||||||||||
Former Executives | |||||||||||||||||||
Eric C. Houseman | |||||||||||||||||||
Former President & Chief Operating Officer | 303,866 | 144,446 | 229,090 | 991,308 | 1,668,710 | ||||||||||||||
Todd A. Brighton | |||||||||||||||||||
Former SVP & Chief | |||||||||||||||||||
Development Officer | 212,419 | 99,876 | 185,540 | 483,449 | 981,284 |
Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
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Current Executives | ||||||||||||||||||||||
Denny Marie Post | 539,544 | — | 217,565 | 435,281 | 51,408 | 15,916 | 1,259,714 | |||||||||||||||
President & Chief Executive Officer | ||||||||||||||||||||||
Guy J. Constant(1) | 15,385 | 200,000 | — | — | — | 516 | 215,901 | |||||||||||||||
EVP & Chief Financial Officer Officer | ||||||||||||||||||||||
Jonathan A. Muhtar | 375,000 | 200,000 | 354,934 | 460,298 | — | 133,894 | 1,524,126 | |||||||||||||||
SVP & Chief Marketing Officer | ||||||||||||||||||||||
Carin L. Stutz(2) | 246,146 | 172,308 | 137,494 | 137,664 | — | 21,825 | 715,447 | |||||||||||||||
EVP & Chief Operating Officer | ||||||||||||||||||||||
Michael L. Kaplan | 343,850 | — | 60,246 | 120,592 | 31,908 | 14,183 | 570,779 | |||||||||||||||
SVP & Chief Legal Officer | ||||||||||||||||||||||
Terry Harryman | 295,063 | 27,300 | 114,333 | 28,801 | 7,749 | 12,145 | 485,391 | |||||||||||||||
Interim Chief Financial Officer and Chief Accounting Officer | ||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||
Stephen E. Carley | 794,235 | — | 389,940 | 780,001 | 214,221 | 20,572 | 2,198,969 | |||||||||||||||
Former Chief Executive Officer | ||||||||||||||||||||||
Stuart B. Brown | 216,617 | — | 124,896 | 249,895 | — | 10,386 | 601,794 | |||||||||||||||
Former EVP & Chief Financial Officer |
See "2014"Compensation Discussion and Analysis—2016 Executive Compensation Tables" and accompanying footnotes and narratives beginning on page 44 for additional information about the 20142016 compensation for each named executive officer.
The board of directors recommends a vote FOR the approval of the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan. The compensation committee and our board unanimously adopted the Cash Incentive Plan in October of 2014, subject to stockholder approval, and directed that we submit the Cash Incentive Plan to a vote of our stockholders at this annual meeting.
The Cash Incentive Plan, if approved by stockholders, would be an important element of our executive compensation program going forward as it would allow us to continue to provide senior management with incentives for the achievement of both near-term and mid-term financial and operational corporate goals and individual objectives in a manner that is intended to be tax-deductible. See "Summary of the Cash Incentive Plan" beginning on page 60 for more information about the purpose and operation of the plan.
The board of directors recommends an annual advisory vote on the compensation of our named executive officers. See "Proposal 3—Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation" in this proxy statement for more information about this proposal.
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The board of directors recommends a vote FOR the approval of an amendment to the Company's Restated Certificate2017 Performance Incentive Plan. See "Proposal 4—Approval of Incorporation to increase the authorized common stock of the Company from 30,000,000 shares, par value $0.001 per share, to 45,000,000 shares, par value $0.001 per share.
The board is recommending an increase2017 Performance Incentive Plan" in authorized shares primarily to provide the Company the flexibility to issue shares of common stock for future corporate needs, such as future acquisitions, capital-raising or financing transactions, stock splits, stock dividends, and current or future equity compensation plans. See "Effects of Increasing the Number of Authorized Shares of Common Stock" and "Purpose of the Amendment" on page 63this proxy statement for more information related to the effects of the increase in authorized shares and the purpose.about this proposal.
The board of directors recommends a vote FOR approval of the amendment and restatement of the Employee Stock Purchase Plan to increase shares authorized under the plan by 100,000 shares, extend the term of the plan, and make certain other technical adjustments. See "Proposal 5—Approval of the Amended and Restated of the Employee Stock Purchase Plan" in this proxy statement for more information about this proposal.
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Independent Auditors (Proposal No. |
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The board of directors recommends a vote FOR the ratification of the appointment of KPMG LLP ("KPMG") as the Company's independent auditor for the fiscal year ending December 27, 2015.
For the 2014 and 2013 fiscal years, Deloitte & Touche LLP ("D&T") served as the Company's independent auditor. Set forth below are the fees billed by D&T31, 2017. See "Proposal 6—Ratification of Appointment of Independent Registered Public Accounting Firm" in this proxy statement for fiscal years 2014 and 2013:
| 2014($) | 2013($) | |||||
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Audit fees | 749,254 | 749,658 | |||||
Audit-related fees | 125,000 | — | |||||
Tax fees | 139,309 | 10,774 | |||||
All other fees | 2,200 | 37,200 | |||||
Total | 1,015,763 | 797,632 |
more information about this proposal.
The Board of Directors ("board" or "board of directors") of Red Robin Gourmet Burgers, Inc. ("Red Robin" or the "Company") is providing this proxy statement to stockholders in connection with the solicitation of proxies on its behalf to be voted at ourthe annual meeting of stockholders. The meeting will be held on Thursday, May 28, 2015,18, 2017, beginning at 8:00 a.m. MDT, at our corporate headquarters, located at 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111. The proxies may be voted at any time and date to which the annual meeting may be properly adjourned or postponed.
PROPOSAL 1
ELECTION OF DIRECTORS
As of the date of this proxy statement, our board of directors consists of eightten directors, all of whom are independent except our CEO.CEO and Director Robert B. Aiken. Therefore, currently, 80% of our board is independent. One of our current directors, Mr. Lloyd Hill, will retire and conclude his board service on the date of the annual meeting, and accordingly is not standing for reelection to the board. The board of directors has reduced its size from ten to nine members effective as of the date of the annual meeting. Consequently, the board will consist of nine directors following the annual meeting, seven of whom will be independent. The board may decide at a later time to add one or more directors who possess skills and experience that may be beneficial to our board and the Company. All of our directors are elected on an annual basis for a one-year term.
The directors elected at this annual meeting will serve in office until our 20162018 annual meeting of stockholders or until their successors have been duly elected and qualified, or until the earlier of their respective deaths, resignations, or retirements. Each nominee has consented to serve if elected and we expect that each of them will be able to serve if elected. If any nominee should become unavailable to serve as a director, our board of directors can name a substitute nominee, and the persons named as proxies in the proxy card, or their nominees or substitutes, will vote your shares for such substitute nominee unless an instruction to the contrary is written on your proxy card.
Selecting Nominees for Director
Our board has delegated to the nominating and governance committee the responsibility for reviewing and recommending nominees for director. The board determines which candidates to nominate or appoint, as appropriate, after considering the recommendation of the committee.
In evaluating a director candidate, the nominating and governance committee considers the candidate's independence, character, corporate governance skills and abilities, business experience, industry specific experience, training and education, commitment to performing the duties of a director, and other skills, abilities, or attributes that fill specific needs of the board or its committees. While there is no policy with regard tofor consideration of diversity in identifying director nominees, the nominating and governance committee considers diversity in business experience, professional expertise, gender, and ethnic background, along with various other factors when evaluating director nominees. The nominating and governance committee will use the same criteria in evaluating candidates suggested by stockholders.
The nominating and governance committee is authorized under its charter to retain, at our expense, outside search firms and any other professional advisors it deems appropriate to assist in identifying or evaluating potential nominees for director. During fiscal year 2014, a third-party director search firm retained by the nominating and governance committee recommended Ms. Dunaway as a candidate for our board.
Below, you can find the principal occupation and other information about each of the director nominees standing for re-election at the annual meeting. Information related to each director nominee's key attributes, experience, and skills, as well as their recent public company board service is included with each director's biographical information.
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Robert B. Aiken, Director Since: March 2010 Committees: • Other Public Company Board Service: Recent Past Public Company Board Service: | Mr. Aiken currently serves as President and Chief Executive Officer of Essendant Inc., formerly United Stationers Inc., and has Mr. Aiken brings to the board of directors, among his other skills and qualifications, experience as a chief executive officer of a corporation with significant operations and a large, labor-intensive workforce. He gained extensive experience in management, operations, and logistics, as well as an understanding of the dining industry through his service at USF. | |||||
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Cambria W. Dunaway, Director Since: June 2014 Committees: • • Compensation Other Public Company Board Service: Nordstrom FSB (2014-present) Recent Past Public Company Board Service: Marketo (2015-2016) Brunswick Industries (2006-2014) | Ms. Dunaway served as the U.S. President and Global Chief Marketing Officer of KidZania, an international location based entertainment concept focused on children's role-playing activities, from October 2010 to December 2014 and Ms. Dunaway brings to the board of directors, among her other skills and qualifications, more than 20 years of experience as a senior marketing and general management executive, launching and growing consumer businesses in entertainment, media, consumer electronics, and package goods. She brings experience in the areas of marketing strategy, communications, data analytics, loyalty, digital transformation, and governance. In light of the foregoing, our board of directors has concluded that Ms. Dunaway should continue as a member of our board. | |||||
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Kalen F. Holmes, 50 Director Since: August 2016 Committees: • Compensation (Chair) • Nominating and Governance Other Public Company Board Service: Zumiez Inc. (December 2014-Present) Other Board Service: YWCA King and Snohomish counties (2009-present) Pacific Northwest Ballet, Governing Board of Trustees (2013-present) Recent Past Public Company Board Service: None | Ms. Holmes served as an Executive Vice President of Partner Resources (Human Resources) at Starbucks Corporation from November 2009 until her retirement in February 2013. Prior to her employment with Starbucks, Ms. Holmes held a variety of leadership roles with HR responsibility for Microsoft Corporation from September 2003 through November 2009. Prior to joining Microsoft, Ms. Holmes served in a variety of industries, including high-tech, energy, pharmaceuticals, and global consumer sales. Ms. Holmes serves on the board of directors of Zumiez Inc., a publicly traded, Nasdaq-listed company. She also serves on the Board of Directors for the YWCA King and Snohomish counties and on the Board of Trustees for the Pacific Northwest Ballet. Ms. Holmes holds a Bachelor of Arts in Psychology from the University of Texas and a Master of Arts and a Ph.D. in Industrial/Organization Psychology from the University of Houston. Ms. Holmes brings to the board of directors, among her other skills and qualifications an extensive background in human resources at large corporations, including management of compensation programs. Considering the foregoing, our board of directors has concluded that Ms. Holmes should continue as a member of our board. | |||||
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Richard J. Howell, Director Since: September 2005 Committees: • Audit (Chair) • Compensation Other Public Company Board Service: Independent Trustee for the LKCM Funds Other Board Service: Board of Directors of NACD North Texas Chapter (2010-present) Recent Past Public Company Board Service: None | Mr. Howell was an audit partner with Arthur Andersen LLP for over 25 years before retiring in 2002. From January 2004 through May 2009, Mr. Howell served as an adjunct professor of auditing at the Cox School of Business at Southern Methodist University, and he served in a similar capacity from August 2002 to December 2003 at the Neely School of Business at Texas Christian University. Mr. Howell brings to the board of directors, among his other skills and qualifications, significant experience in accounting and information systems, as well as knowledge of controls and financial reporting requirements of public companies. In addition, during Mr. Howell's career in public accounting he gained significant knowledge of due diligence practices, mergers and acquisitions, and risk management. In his role as the head of the audit division, he gained experience with recruiting, personnel management, budgeting, and client development and management. As a public accountant, Mr. Howell worked with retail and manufacturing companies and developed experience working with supply chain, procurement, manufacturing processes, and inventory management. Mr. Howell's work with audit committees of numerous public reporting companies and his directorship roles have provided him with substantial experience in corporate governance. | |||||
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Glenn B. Kaufman, Director Since: August 2010 Committees: • Finance (Chair) • Compensation Other Public Company Board Service: None Recent Past Public Company Board Service: None | Mr. Kaufman has been a Managing Member of the D Cubed Group, a private-market investment firm, Mr. Kaufman brings to the board of directors, among his other skills and qualifications, valuable strategic, finance, budgeting, and executive leadership experience, as well as an extensive understanding of restaurant operations, direct/omni-channel marketing, and franchising. He has approximately 20 years of experience as an active, engaged, private market investor. Mr. Kaufman has extensive restaurant, food service, franchising, healthcare, and retail expertise as a result of his investing and business activities at both the D Cubed Group and American Securities Capital Partners. In addition, Mr. Kaufman also has legal and business consulting expertise. In light of the foregoing, our board of directors has concluded that Mr. Kaufman should continue as a member of our board. | |||||
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Steven K. Lumpkin, 62 Director Since: August 2016 Committees: • Finance Other Public Company Board Service: None Recent Past Public Company Board Service: Applebee's International, Inc. (2004-2007) | Mr. Lumpkin currently serves as Principal of Rolling Hills Capital Partners, a consulting firm. Mr. Lumpkin served as Executive Vice President, Chief Financial Officer, and a director of Applebee's International, Inc., where he served in various executive positions from 1995 until his retirement in 2007. Prior to joining Applebee's, he was Executive Vice President and director at Kimberly Quality Care Inc. Mr. Lumpkin is a CPA, with a bachelor in Accounting from the University of Missouri—Columbia. Mr. Lumpkin brings to the board of directors, among his other skills and qualifications, extensive experience in the restaurant industry and an accounting and finance background. In light of the foregoing, our board of directors has concluded that Mr. Lumpkin should continue as a member of our board. | |||||
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Pattye L. Moore, Director Since: August 2007 (Board Chair since February 2010) Committees: • Audit • Nominating and Governance Other Public Company Board Service: ONEOK (2002-present) ONEGAS, Inc. (January 2014-present) Recent Past Public Company Board Service: Sonic Corp. (2000-2006) | Ms. Moore is a business strategy consultant and the author of Confessions from the Corner Office, a book on leadership instincts. Ms. Moore was on the board of directors for Sonic Corp. from 2000 through January 2006 and was the President of Sonic from January 2002 to November 2004. She held numerous senior management positions during her 12 years at Sonic, including Executive Vice President, Senior Vice President—Marketing and Brand Development and Vice President—Marketing. Prior to joining Sonic Corp., she served as a senior executive and account supervisor on the Sonic account at the advertising agency Advertising, Inc. Ms. Moore brings to the board of directors, among her other skills and qualifications, significant executive leadership, management, marketing, business strategy, brand and concept development, and public relations experience as well as deep knowledge of the restaurant industry. During her tenure at Sonic, the company grew from $900 million in system-wide sales with 1,100 units to over $3 billion in system-wide sales and 3,000 units. Ms. Moore was named one of the top 100 marketers by Advertising Age magazine in 2000 and one of the top 50 women in foodservice by Nation's Restaurant News in 2002. Ms. Moore's directorships at other companies also provide her with extensive corporate governance experience. In light of the foregoing, our board of directors has concluded that Ms. Moore should continue as a member of our board. | |||||
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Stuart I. Oran, Director Since: March 2010 Committees: • Audit • Finance Other Public Company Board Service: FCB Financial Holdings, Inc. (2010-Present) OHA Investment Corporation (2014-present) Recent Past Public Company Board Service: Deerfield Capital Corp. (2008-2010) Hughes Telematics (f/k/a Polaris Acquisition Corp.) (2007-2009) Wendy's International, Inc. (2005-2008) Spirit Airlines (2004-2015) | Since 2011, Mr. Oran has been a partner at Liberty Hall Capital Partners, a private equity firm focused on the aerospace and defense sectors. Mr. Oran is also the co-founder of FCB Financial Holdings, Inc., a bank holding company formed to acquire failed banks in FDIC-assisted transactions. Mr. Oran founded Roxbury Capital Group LLC in 2002 and was its managing member until December Mr. Oran brings to the board of directors, among his other skills and qualifications, valuable business, leadership, management, and strategic planning experience which he gained during his employment with UAL Corporation and as a board member of Wendy's International, Inc. He also brings significant knowledge of the restaurant industry from his board service at Wendy's. In addition, Mr. Oran has experience serving as a director of a number of other large public companies which provided him with extensive corporate governance experience. | |||||
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Denny Marie Post, 59 Director Since: August 2016 Other Public Company Board Service: None Recent Past Public Company Board Service: None | Ms. Post has served as Chief Executive Officer of the Company since August 2016 and as President since February 2016. Prior to that, Ms. Post served as Executive Vice President and Chief Concept Officer of the Company since March 2015. Ms. Post joined the Company in August 2011 as Senior Vice President and Chief Marketing Officer. Before joining the Company, Ms. Post was the Managing Member of mm&i Consulting LLC, a marketing consulting firm, from June 2010 to July 2011. She served as Senior Vice President, Chief Marketing Officer of T-Mobile USA from July 2008 to May 2010, as Senior Vice President, Global Beverage, Food, and Quality at Starbucks Corporation from February 2007 to June 2008, as Senior Vice President, Chief Concept Officer of Burger King Corp. from April 2004 to January 2007, and prior to that, in various marketing executive roles at YUM! Brands, Inc. Ms. Post brings to the board of directors, among her other skills and qualifications, restaurant industry experience and valuable executive leadership, including in the areas of marketing and brand management. In light of the foregoing, our board of directors has concluded that Ms. Post should continue as a member of our board. | |||||
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Proposal No. 1 requires the approval of a majority of the votes cast for each director.
Our board of directors recommends that you vote FOR the election of each of the nominees for director.
CORPORATE GOVERNANCE AND BOARD MATTERS
The board of directors seeks to ensure that good governance and responsible business practices are part of our culture and values. To ensure that we achieve this goal, the board of directors has previously established corporate governance guidelines that it follows with respect to corporate governance matters, which are available on the investor relations section of our website atwww.redrobin.com. The board of directors reviews the governance guidelines annually to ensure that they are timely, effective, and supportive of the board's oversight and other responsibilities.
Executive Development and Management Succession
Executive development and succession is an important responsibility of the board of directors. Under the Company's corporate governance guidelines, the board maintains an ongoing policy and plan for the development and succession of the CEO and other senior officers. The board has delegated some of this responsibility to the nominating and governance committee. As provided in our corporate governance guidelines, the succession policy and plan has a multi-year focus that encompasses, among other things, the following attributes:
The nominating and governance committee and the board work closely with management to ensure that development and succession are anticipated, planned for, and addressed in a timely manner. Under the guidance of the committee, Mr. CarleyMs. Post and each of the executive officers conduct annual succession planning activities. This process includes annual performance reviews, evaluations, and development plans of the CEO and executive officers, who also conduct evaluations and development of their direct reports.
Mr. CarleyMs. Post regularly meets with the full board on hisher performance, and hisher annual performance evaluation is conducted under the oversight of the compensation committee. Mr. CarleyMs. Post conducts annual and interim performance and development evaluations of the other senior executives and reviews these evaluations with the compensation committee or full board.
At least annually, and when otherwise necessary, the nominating and governance committee reviews, makes recommendations for, and reports to the board on programs that have been implemented by management for executive and leadership team development and succession planning.
The board and management believe that the Company's relationships with our stockholders and other stakeholders are an important part of our corporate governance responsibility, and recognize the value of continuing communications. Among other things, engagement with our stockholders helps us to:
This approach has helped us to identify mutual perspectives and goals and to adopt a collaborative approach to these relationships, which has resulted in our receiving essential input and additional perspectives from our stockholders. To this end, weWe regularly engage with our stockholders through attendance at investor conferences, issuance of press releases and quarterly conference calls, other stockholder communications, and individual meetings throughout the year. We spoke to holders of more than 34% of our outstanding shares since the last annual meeting to discuss our business and solicit feedback.
We also recognize the connection between good corporate governance and our ability to create and sustain value for our stockholders. In response to evolving governance practices, regulatory changes, and concerns of our stockholders, the Company has made a number of changes to our corporate governance practices over the past fewseveral years.
Highlights of our governance program include:
The board recognizes that one of its key responsibilities is to evaluate and determine the optimal leadership structure so as to provide independent oversight of management. Accordingly, at this time, we believe it is appropriate for our board to maintain the separation of the roles of board chair and chief executive officer. Pattye L. Moore currently serves as chair of the board due to, among other things, her prior experience on public company boards of directors, as well as her extensive leadership experience within the restaurant industry.
We believe that having a non-executive, independent board chair is in the best interests of the Company and our stockholders at this time. The separation of the roles of board chair and chief executive officer allows Mr. CarleyMs. Post to focus on managing the Company's business and operations, and allows Ms. Moore to focus on board matters, especially in light of the high level of regulation and scrutiny of public company boards. Further, we believe that the separation of these roles ensures the
independence of the board in its oversight role of evaluating and assessing the chief executive officer and management generally.
Our executive officers have the primary responsibility for enterprise risk management within our Company. Our board actively oversees the Company's risk management and regularly engages in discussions of the most significant risks that the Company faces and how these risks are being
managed. The board receives regular reports on enterprise risk areas from senior officers of the Company.Company, including the areas of food safety and data security. The board delegates certain risk oversight functions to the audit committee. Under its charter, the audit committee is responsible for oversight of the enterprise risk assessment and management process framework and ensures that the board or a designated committee is monitoring the identification, assessment, and mitigation of significant enterprise risks. The audit committee oversees policies and guidelines that govern the process by which major financial and accounting risk assessment and management may be undertaken by the Company. The audit committee also oversees our corporate compliance programs and the internal audit function. In addition, the other board committees receive reports and evaluate risks related to their areas of focus. The committees regularly report to the full board on the assessment and management of these risks. The board believes that the work undertaken by the audit committee, together with the work of the other committees, the full board, and the senior officers of the Company, enables the board to effectively oversee the Company's risk management.
Board Membership and Director Independence
Our board of directors has determined that each of our directors, except our CEO, Ms. Post, and Mr. Carley,Aiken qualifies as an independent director under the rules promulgated by the U.S. Securities and Exchange Commission ("SEC") and The NASDAQNasdaq Stock Market® ("NASDAQ"Nasdaq") listing standards. OnlyTherefore, currently 80% of our board is independent. Mr. Aiken is disqualified from being an independent member of our board based on Nasdaq listing standards because his brother-in-law is a current partner of KPMG LLP ("KPMG"), the Company's outside auditor. Mr. Aiken's brother-in-law is not involved in the audit of Red Robin. Pursuant to these rules, only independent directors are appointed tomay serve on the board's audit committee, compensation committee, and nominating and governance committee. AllCurrently, all members of each of our boardthese committees are independent in accordance with SEC rules and NASDAQNasdaq listing standards. There are no family relationships among any of our executive officers, directors, or nominees for directors.
The board of directors held ninethirteen meetings in 2014,2016, including fourfive in-person meetings. Each of our current directors attended at least 75% of the aggregate total of meetings of the board of directors and committees during their period of service in 2014.2016. The non-management directors of the Company meet at least quarterly throughout the year and as necessary or appropriate in executive sessions at which members of management are not present.
The board of directors strongly encourages each of the directors to attend the annual meeting of stockholders. All of our current directors who were directorsserving at the time attended our 20142016 annual meeting.
Committees of the Board of Directors
Our board of directors has four standing committees: an audit committee, a compensation committee, a finance committee, and a nominating and governance committee. Each of our standing committees generally meets at least once each quarter. In addition, other regular and special meetings
are scheduled as necessary and appropriate depending on the responsibilities of the particular committee. Each committee regularly meets in executive session without management present.
Each board committee operates pursuant to a written charter. The charter for each committee is available on the corporate governance section of the investor relations tab of our website atwww.redrobin.com. The committee charters are reviewed at least annually by the respective committee to revise and update the committee duties and responsibilities as necessary.
Stockholder Submission of Director Nominees
A stockholder may submit the name of a director candidate for consideration by the nominating and governance committee by writing to: Nominating and Governance Committee, Red Robin Gourmet Burgers, Inc., 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111.
The stockholder must submit the following information in support of the candidate: (a) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner, (ii) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of such stockholder's notice by, or on behalf of, such stockholder and such beneficial owner, whether or not
such instrument or right shall be subject to settlement in underlying shares of capital stock of the Company, the effect or intent of which is to mitigate loss to, manage risk of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of the Company, and (iv) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Company's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company's voting shares to elect such nominee or nominees.
Communications with our Board of Directors
You may communicate with any director, the entire board of directors, the independent directors, or any committee by sending a letter to the director, the board of directors, or the committee addressed to: Board of Directors, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111, or by sending an e-mail to:Board@redrobin.com. The Company's chief legal officer will review all communications, categorize them, and forward them to the appropriate board member(s). Messages pertaining to administrative matters, ordinary business matters, personal grievances, and similar issues will be forwarded to the appropriate member of management.
With respect to issues arising under the Company's Code of Ethics, you may also communicate directly with the chair of the audit committee, vice president of internal audit, or the compliance officer in the manner provided in the Company's Problem Resolution and Whistleblower Policy and Reporting Procedures. Both the Code of Ethics and the Problem Resolution and Whistleblower Policy and Reporting Procedures may be found on the corporate governance section of the investor relations tab of our website at:www.redrobin.com.
Certain Relationships and Related Transactions
Transactions with Related Persons
For 2014,2016, we had no material related party transactions which were required to be disclosed in accordance with SEC regulations.
Review, Approval, or Ratification of Transactions with Related Persons
The board of directors recognizes that transactions between the Company and certain related persons present a heightened risk of conflicts of interest. In order toTo ensure that the Company acts in the best interest of our stockholders, the board has delegated the review and approval of related party transactions to the audit committee. Pursuant to our Code of Ethics and the audit committee charter, any related party transaction required to be disclosed in accordance with applicable SEC regulations must be reviewed and approved by the audit committee. In reviewing a proposed transaction, the audit committee must:
After its review, the audit committee will only approve or ratify transactions that are fair to the Company and not inconsistent with the best interests of the Company and our stockholders.
Compensation Committee Interlocks and Insider Participation
During the last completed fiscal year, Robert B. Aiken, Lloyd L. Hill, Kalen F. Holmes, Richard J. Howell, and Glenn B. Kaufman Pattye L. Moore, and James T. Rothe each served as members of the Company's compensation committee. None of the members of the compensation committee is or has been an officer or employee of the Company. None of our current executive officers serves as a director of another entity that has an executive officer who serves on our Board.
Set forth below are the elements of our director compensation for 2014.2016.
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Annual Retainer | �� | Each non-employee director of the Company received an annual retainer of | |||||||||||
Chair of the board | $ | ||||||||||||
Chair of audit committee | $15,000 | ||||||||||||
Chair of compensation committee | $12,500 | ||||||||||||
Chair of nominating and governance committee | $ 7,500 | ||||||||||||
Chair of finance committee | $10,000 | ||||||||||||
| *The compensation committee increased the board chair retainer from | ||||||||||||
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Equity Awards | Upon initial appointment or election to the board of directors, each non-employee director generally receives a non-qualified stock option grant covering 5,000 shares. Each initial grant of 5,000 stock options vests and becomes exercisable in equal monthly installments over the 24-month period following the date of grant. In addition, at the discretion of the board of directors, each non-employee director is eligible to receive annual grants of stock options, restricted stock, or restricted stock units. In | ||||||||||||
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20142016 Director Compensation
The following table sets forth a summary of the compensation we paid toearned by our non-employee directors in fiscal 2014:2016.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | Fees Earned or Paid in Cash ($) | Option Awards ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||||||||||||
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Robert B. Aiken | 71,500 | 109,937 | — | 181,437 | 80,223 | — | 109,986 | — | 190,209 | |||||||||||||||||||||||
Cambria W. Dunaway | 26,262 | 150,241 | 100,792 | — | 277,295 | 76,652 | — | 109,986 | — | 186,638 | ||||||||||||||||||||||
Lloyd L. Hill | 86,500 | 109,937 | — | 196,437 | 73,125 | — | 109,986 | — | 183,111 | |||||||||||||||||||||||
Kalen F. Holmes(3) | 28,269 | 69,084 | 91,632 | — | 188,985 | |||||||||||||||||||||||||||
Richard J. Howell | 89,000 | 109,937 | — | 198,937 | 85,000 | — | 109,986 | — | 194,986 | |||||||||||||||||||||||
Glenn B. Kaufman | 77,000 | 109,937 | — | 186,937 | 80,000 | — | 109,986 | — | 189,986 | |||||||||||||||||||||||
Steven K. Lumpkin(3) | 28,269 | 69,084 | 91,632 | — | 188,985 | |||||||||||||||||||||||||||
Pattye L. Moore | 119,024 | 109,937 | — | 228,961 | 155,000 | — | 109,986 | — | 264,986 | |||||||||||||||||||||||
Stuart I. Oran | 66,000 | 109,937 | — | 175,937 | 70,000 | — | 109,986 | — | 179,986 | |||||||||||||||||||||||
James T. Rothe | 35,810 | (4) | — | 35,810 |
As of the end of the fiscal year 2014,2016, the aggregate number of options and restricted stock units outstanding for each non-employee director is set forth below. Options are considered outstanding until exercised and restricted stock units are considered outstanding until vested and paid.
| Options | Restricted Stock Units | Options | Restricted Stock Units | ||||||||||
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Robert B. Aiken | 5,000 | 5,111 | 5,000 | 2,808 | ||||||||||
Cambria W. Dunaway | 5,000 | 1,391 | 5,000 | 2,763 | ||||||||||
Lloyd L. Hill | 5,000 | 5,111 | 5,000 | 2,808 | ||||||||||
Kalen F. Holmes | 5,000 | 1,781 | ||||||||||||
Richard J. Howell | 10,000 | 5,111 | 4,500 | 2,808 | ||||||||||
Glenn B. Kaufman | 0 | 4,893 | 0 | 2,808 | ||||||||||
Steven K. Lumpkin | 5,000 | 1,781 | ||||||||||||
Pattye L. Moore | 6,500 | 5,111 | 1,500 | 2,808 | ||||||||||
Stuart I. Oran | 5,000 | 5,111 | 5,000 | 2,808 |
Table of Contents 2015 Director Compensation
In October 2014, the compensation committee voted to change the pay mix for non-employee directors effective in 2015. The committee eliminated director meeting fees, rolling the approximate $30,000 value into the annual retainer, which was increased from $40,000 to $70,000. The change was made to ease administrative burden with respect to the payment of director cash compensation and to better align the Company's practices with those of its peer group. This change was exclusive of chair retainers, which were not changed. In addition, the board voted to reduce the vesting terms for future restricted stock unit grants from three years to one year. This change was made to be consistent with the Company's decision to declassify its board of directors and move from a staggered board with three-year elected terms to a non-staggered board with annual elections for one-year terms in accordance with governance best practices. No changes were made to the vesting terms of existing awards.
Director Stock Ownership Guidelines
The compensation committee has had stock ownership guidelines in place for non-employee directors since March 2009 (see "Executive"Compensation Discussion and Analysis—Executive Compensation Policies and Guidelines—Executive Stock Ownership Guidelines" on page 42 for discussion of the ownership guidelines for executive officers). The current ownership guidelines require non-employee directors to own Company securities with a cumulative cost basis of at least five times the director's annual retainer. Based on the current annual retainer for non-employee directors, that dollar amount is $350,000. The value of the director's holdings is based on the cumulative cost basis of securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. New non-employee directors have five years from the time the director joins the board to reach the minimum ownership threshold. Non-employee directors may not sell, transfer, or otherwise dispose of common stock that would decrease such director's cumulative cost basis below the ownership guideline amount. All of our directors are currently in compliance or properly on track to be in compliance with the minimum ownership threshold.
The following table sets forth the ownership guidelines and the holdings of the non-employee directors as of March 10, 2015,9, 2017, valued at the acquisition dates pursuant to our director stock ownership guidelines:
Director | Ownership Guideline | Current Dollar Value of Guideline | Cumulative Cost Basis | Ownership Guideline | Current Dollar Value of Guideline | Cumulative Cost Basis | ||||||||||||
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Robert B. Aiken | 5x Retainer | $ | 350,000 | $ | 819,241 | 5x Retainer | $ | 350,000 | 912,711 | |||||||||
Cambria W. Dunaway | 5x Retainer | $ | 350,000 | (1) | $ | 108,441 | 5x Retainer | $ | 350,000 | (1) | 320,976 | |||||||
Lloyd L. Hill | 5x Retainer | $ | 350,000 | $ | 828,180 | 5x Retainer | $ | 350,000 | 865,290 | |||||||||
Kalen F. Holmes | 5x Retainer | $ | 350,000 | (2) | 91,820 | |||||||||||||
Richard J. Howell | 5x Retainer | $ | 350,000 | $ | 983,023 | 5x Retainer | $ | 350,000 | 987,258 | |||||||||
Glenn B. Kaufman | 5x Retainer | $ | 350,000 | $ | 710,836 | 5x Retainer | $ | 350,000 | 934,438 | |||||||||
Steven K. Lumpkin | 5x Retainer | $ | 350,000 | (2) | 91,820 | |||||||||||||
Pattye L. Moore | 5x Retainer | $ | 350,000 | $ | 672,829 | 5x Retainer | $ | 350,000 | 854,814 | |||||||||
Stuart I. Oran | 5x Retainer | $ | 350,000 | $ | 567,703 | 5x Retainer | $ | 350,000 | 454,266 |
The Company has entered into agreements to indemnify its directors, executive officers, and certain other key employees. Under these agreements, the Company is obligated to indemnify its directors and officers to the fullest extent permitted under the Delaware General Corporation Law for expenses, including attorneys' fees, judgments, fines, and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or officer. The Company believes that these agreements are necessary in attracting and retaining qualified directors and officers.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and except for community property laws where applicable, the persons named in the tables below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership for each table is based on 14,107,10812,864,453 shares of common stock outstanding as of March 10, 2015.9, 2017.
Stock Ownership of Certain Beneficial Owners
The following table sets forth information regarding beneficial owners of more than 5% of our common stock as of March 10, 2015.9, 2017 (unless otherwise indicated). All information is taken from or based upon ownership filings made by such persons with the SEC or upon information provided by such persons to the Company.
| Shares Beneficially Owned | Shares Beneficially Owned | ||||||||||||
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Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||||
T. Rowe Price Associates, Inc.(1) | 1,373,837 | 9.7 | % | 2,067,540 | 16.07 | % | ||||||||
BlackRock, Inc.(2) | 1,220,453 | 8.7 | % | 1,482,739 | 11.53 | % | ||||||||
Dimensional Fund Advisors LP(3) | 838,025 | 6.51 | % | |||||||||||
Millennium Management LLC(4) | 665,204 | 5.17 | % |
disclaims that it is, in fact, the beneficial owner of such securities. The address for Dimensional's principal business office is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
Stock Ownership of Directors and Management
The following table contains information about the beneficial ownership (unless otherwise indicated) of our common stock as of March 10, 20159, 2017 by:
| Shares Beneficially Owned(1) | ||||
---|---|---|---|---|---|
Name of Beneficial Owner | Amount and Nature of Ownership | Percent of Class | |||
Stephen E. Carley(2) | 151,864 | 1.07% | |||
Todd A. Brighton(3) | 26,254 | * | |||
Stuart B. Brown(4) | 35,644 | * | |||
Eric C. Houseman (5) | 22,049 | * | |||
Denny Marie Post(6) | 21,754 | * | |||
Michael L. Kaplan(7) | 958 | * | |||
Cathy Cooney(8) | 2,124 | * | |||
Robert B. Aiken(9) | 16,030 | * | |||
Cambria W. Dunaway(10) | 2,083 | * | |||
Lloyd L. Hill(11) | 17,030 | * | |||
Richard J. Howell(12) | 22,905 | * | |||
Glenn B. Kaufman(13) | 17,777 | * | |||
Pattye L. Moore(14) | 18,685 | * | |||
Stuart I. Oran(15) | 8,120 | * | |||
Directors and Current Executive Officers as a group (13 persons)(16) | 330,499 | 2.31% |
| Shares Beneficially Owned(1) | ||||
---|---|---|---|---|---|
Name of Beneficial Owner | Amount and Nature of Ownership | Percent of Class | |||
Denny Marie Post(2) | 38,215 | * | |||
Guy J. Constant(3) | 5,000 | * | |||
Jonathan A. Muhtar(4) | 7,710 | * | |||
Carin L. Stutz(5) | 4,115 | * | |||
Michael L. Kaplan(6) | 6,311 | * | |||
Terry Harryman(7) | 4,338 | * | |||
Stephen E. Carley(8) | 138,354 | 1.07% | |||
Stuart B. Brown(9) | 1,761 | * | |||
Robert B. Aiken(10) | 20,885 | * | |||
Cambria W. Dunaway(11) | 7,243 | * | |||
Lloyd L. Hill(12) | 19,385 | * | |||
Kalen F. Holmes(13) | 1,667 | * | |||
Richard J. Howell(14) | 24,760 | * | |||
Glenn B. Kaufman(15) | 22,632 | * | |||
Steven K. Lumpkin(16) | 1,667 | * | |||
Pattye L. Moore(17) | 23,540 | * | |||
Stuart I. Oran(18) | 8,315 | * | |||
Directors and Current Executive Officers as a group (15 persons)(19) | 203,736 | 1.57% |
Equity Compensation Plan Information
We maintain two equity based compensation plans—the Second Amended and Restated 2007 Performance Incentive Plan (the "2007 Plan"), and the Employee Stock Purchase Plan (the "ESPP"). Our stockholders have approved each of these plans.
The following table sets forth for our equity compensation plans in the aggregate, the number of shares of our common stock subject to outstanding options and rights under these plans, the weighted average exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 25, 2016:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
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Equity compensation plans approved by security holders 2007 Plan | 408,445 | $ | 53.82 | 575,865 | ||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||
| | | | | | | | | | |
Total | 408,445 | $ | 53.82 | 575,865 | (1) |
COMPENSATION DISCUSSION AND ANALYSIS
In this Compensation Discussion and Analysis, we provide an analysis and explanation of our executive compensation program and the compensation derived from this program by our executive officers, including our "named executive officers." For 2014,2016, our named executive officers were:
Red Robin Gourmet Burgers, Inc., together with its subsidiaries, is a casual dining restaurant chain focusedprimarily develops, operates, and franchises full-service restaurants in North America and focuses on serving an imaginative selection of high quality gourmet burgers in a fun environment welcoming to guests of all ages. We are committedRed Robin's goal is to delivering superior experiences for our guests which we believe will lead to operating and financial results better than those of ourdifferentiate itself from typical casual dining peers. Throughestablishments based on quality, service, and value. To differentiate on quality, we offer a large and varied selection of highly craveable and customizable burgers. To differentiate on service, our engaged and motivated team members, our missiongoal is to deliver a customized experience and create a unique connection withbe highly attentive to guests of all ages, who wantserving food and beverages quickly so they can spend more time enjoying their food and less time waiting. We also strive to enjoy craveable gourmet burgersdeliver tremendous value by providing delicious food at a range of price points, accompanied with our bottomless steak fries and other sides with every meal. Red Robin guests give us credit for these key points of differentiation and we seek to build on them every day by living our B.U.R.G.E.R. values: Bottomless Fun, Unwavering Integrity, Relentless Focus on Improvement, Genuine Spirit of Service, Extraordinary People, and Recognized Burger Authority.
To ensure the continued success of Red Robin in a fun, energetic environment with attentive and friendly service. We have identified and continue to search for opportunities that will drive strong financial performance through increasing guest traffic and revenues, improving operational efficiencies and expense management, enhancing our restaurant environments, and expanding our restaurant base. We have built short-term and long-term strategies and initiatives around these opportunities, and have optimized returns through allocation of our capital. These strategies and initiatives include:rapidly evolving marketplace, we focus on four strategic areas:
quantity, price, and experience. This includes providing high quality core menu items, delivering value through new products and abundance, and enhancing loyalty offerings to drive guest traffic. Additionally, we are focused on driving guest preference by offering our products through alternate platforms. As part of this strategy, we are currently testing and deploying online ordering, to-go, and catering services and developing partnerships with and deploying third-party delivery services.
We believe these strategic initiatives also comprisewill provide the foundations for scalable and sustainable long-term growth, profitability, and increased stockholder value.
Our executive compensation program supports this focus through several key objectives:
Accordingly,
Following is an executive summary of our 2016 executive compensation program:
Governance Standards and Compensation Best Practices Currently in Effect
20142016 Performance and Impact on Pay
Mr. Carley joined the Company in late 2010 as chief executive officer and served in that role until August 2016. In August 2016, Ms. Post became our chief executive officer after serving as president and chief concept officer. Under Mr. Carley's direction, we have pursued a course ofMs. Post's leadership, the Company continues to pursue improvement in performance improvement designed to drive top-line growth in sales and lay the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value. Our compensation objectives are designed to link incentives and rewards with current and long-term sustained achievement of these goals. ForOur performance in 2016 was below our expectations and the past four years,compensation awarded for 2016 is reflective of such performance. We believe we have experienced significant improvement inare poised to return to higher levels of performance with our operating performance. Highlights of our improvedstrategic initiatives. Our performance are set forth below. Note that all of the fiscal years noted were comprised of 52 weeks except for our 2012 fiscal year, which was comprised of 53 weeks due to our fiscal calendar (we experience a 53rd week every 5th or 6th fiscal year).2016 is summarized below:
Based on this performance, our named executive officers did not meet the cumulative total return overperformance goals necessary to achieve payout of the same period forannual corporate bonus. In addition, only a small portion of the Russell 3000 Index,three-year long-term incentive that covered the Bloomberg U.S. Full Service Restaurant Index, and a Peer Composite made up of our Current Peer Group restaurants (see "Benchmarking" below beginning on page 31 for a list of our peer restaurants). The comparison assumes $100 was invested on December 31, 2010last three fiscal years paid out despite relative outperformance in the Company's common stock and in each of the indices (including reinvestment of dividends based on calendar years ending December 31 for purposes of comparability).
Four-Year Indexed Share Price Performance
| | Calendar Years | ||||||||||||||
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| 12/31/2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||
Red Robin Gourmet Burgers, Inc. | $ | 100.00 | $ | 129.02 | $ | 164.37 | $ | 342.52 | $ | 358.52 | ||||||
Russell 3000 | 100.00 | 100.44 | 116.20 | 154.30 | 172.71 | |||||||||||
Bloomberg Full Service | 100.00 | 101.30 | 119.20 | 174.91 | 200.11 | |||||||||||
Peer Composite | 100.00 | 114.68 | 147.75 | 216.41 | 281.40 |
Source: Capital IQ and Bloomberg as of December 31, 2014
Highlights of 2014 Compensation Actions
The table below summarizes key actions taken by our compensation committee in 2014. As described below, the compensation committee did not make significant structural changes to our executive compensation program for 2014.
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Table of Contentstwo prior years.
Executive Compensation Decision-making
The compensation committee determines target total direct compensation for named executive officers by establishing base salaries and setting long-term and annual incentive compensation targets. When appropriate, the committee also approves special awards and relatively modest perquisites. When determining target total direct compensation, the committee considers the following:
Our compensation program is designed to pay for performance and link incentives to current and long-term sustained achievement of Company strategic goals. Accordingly, a significant portion of our named executive officers' compensation, excluding base salary, is incentive based, and is comprised of performance-based short-term and long-term awards. Such compensation therefore varies in value and is at-risk of forfeiture or reduced payout if performance goals are not achieved for cash-based incentives, or loss of value if our performance does not drive increases in our stock price. Financial measures such as EBITDA (earnings before interest, taxes, depreciation, and amortization) and ROIC (return on invested capital) used for the annual bonus and cash incentive grants are linked to the Company's strategic business plans that are reviewed and approved by our board of directors. Minimum financial targets must be achieved for any payouts of cash to be made under both the annual bonus and long-term incentive grants. Restricted stock units and stock options vest ratably over four years, the value of which is dependent, in whole or in part, on an increase in the Company's stock price.
The compensation committee believes that the annual incentives (which are generally based on annual Company EBITDA or other financial targets) and the long-term incentives (the cash portions of which are currently based on three-year cumulative EBITDA and ROIC targets) place a large portion of the executive's pay at risk because such pay will fluctuate or vary in value based upon the level of performance achieved by the Company. Because incentive awards are performance-based, they are at risk of forfeiture or reduced payout if performance goals are not achieved. Moreover, long-term equity awards are at risk of forfeiture if the executive does not remain with the Company until the equity vests, and are at risk of reduced realized value based upon Company stock price at the date of exercise.
Risk Profile of 20142016 Named Executive Officer Compensation. In 2014,2016, "at-risk" payor "variable pay" (subject to forfeiture or partial or complete loss of value) made up 79%80% of total target compensation for CEO Stephen Carleycompensation and 63%67% of total target compensation for the other named executive officers as a group (including our former officers in the named executive officer group) and included short-term and long-term incentives. Short-term incentive pay, aligned with achievement of annual business results based on EBITDA, comprised 26%24% and 27%23% of our CEO's and other named executive officers' total target compensation
opportunity, respectively. Long-term incentive ("LTI") awards that are designed to maximize retention and to link compensation to the Company's long-term stock price performance comprised 53%56% and 36%44% of our CEO's and other named executive officers' total target compensation, respectively. LTI awards are based on achievement of longer-term business goals adopted as part of our multi-year strategy.
The charts below reflect the portion of the executives' 20142016 compensation that is considered at risk or variable, because it is subject to forfeiture or partial or complete loss of value.value based on our compensation structure. The charts below represent the target total compensation.
Other Named Executive Officers
The chart above assumes that at-risk portions of pay at the beginning of 2014 included the 2014 annual cash bonus opportunities (annual short-term bonus incentive) and the three-year long-term incentive grant (40% cash, 40% restricted stock units, and 20% options). The charts above also assumes payout of long-term cash incentives at 100% target levels.
Restaurant Peer Group. Restaurant peer group companies are selected by the compensation committee upon recommendation of its compensation consultant, AONAon Hewitt, and are based on their similarity to us with respect to several criteria, including revenue, size, and scope. Specifically, peers include U.S. public companies within the restaurant industry that have similar revenue and market value.
The current peer group used for 20142016 compensation benchmarking consists of the 15 restaurants20 restaurant companies identified in the chart below. The Company ranked in the 62nd53rd percentile for its current peer group in sales and 24th41st percentile in market value based on Aon Hewitt compensation analysis conducted in 2013.
In connection with its review of our executive compensation program in 2014, AON Hewitt recommended changes to the Company's peer group for compensation benchmarking beginning in 2015. Specifically, AON Hewitt recommended an increase in the number of companies in the peer group to include additional companies that meet the comparability criteria and removal of companies
that no longer meet the criteria. Based on that recommendation, the compensation committee added eight new companies and removed two companies. The new peer group for 2015 compensation benchmarking is comprised of the 21 restaurant companies listed below. The Company ranked in the 53rd percentile for this new peer group in sales and 46th percentile in market value based on the AON Hewitt compensation analysis conducted in 2014.
Biglari Holdings, Inc. | ||||
BJ's Restaurants, Inc. | ||||
Bob Evans Farms, Inc. | ||||
Brinker International, Inc. | Noodles & Company | |||
Buffalo Wild Wings, Inc. | ||||
Carrols Restaurant Group, Inc. | ||||
The Cheesecake Factory, Inc. | ||||
Cracker Barrel Old Country Store, Inc. | ||||
Sonic Corp. | ||||
Denny's Corporation | Texas Roadhouse, Inc. | |||
DineEquity, Inc. | The Wendy's |
2014 Compensation.2016 Compensation Setting. AnnualThe compensation committee uses competitive compensation data from the annual total direct compensation for 2014, which is comprisedstudy of base salariespeer and annual bonus opportunity, together with long-term incentives, wasother restaurant companies and other relevant survey sources to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the compensation committee uses multiple reference points when establishing targeted at approximately the 60th percentilecompensation levels. The committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business unit, and individual performance, scope of our peer group (the sum of median total cashresponsibility, critical needs and 65th percentile long-term incentives). Although total direct compensation is targeted above the median for our peer group, realization of that level of compensation occurs only upon achievement of both the shortskill sets, leadership potential, and long-term performance results.succession planning.
Independent Compensation Consultant
The compensation committee has retained AONAon Hewitt as its independent compensation consultant. Aon Hewitt assists with the compensation committee's annual review of our executive compensation program, cash and equity compensation practices, ongoing development of our executive compensation philosophy, and acts as an advisor to the compensation committee on compensation matters as they arise. AONAon Hewitt also advises the compensation committee on compensation for the
board of directors. In 2016, Aon Hewitt received $229,794 in fees for executive compensation consulting services provided on behalf of the compensation committee, and an additional $145,968 for other services provided by Aon Hewitt not related to executive compensation, at the request of management. The compensation committee evaluated AONAon Hewitt's independence as its compensation consultant by considering each of the independence factors adopted by NASDAQNasdaq and the SEC. Based on such evaluation, the compensation committee believes that no conflict of interest exists that would prevent AONAon Hewitt from independently representing the compensation committee.
The compensation committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking. The factors considered by the committee include:
The compensation committee believes that it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them because:
The compensation committee completes this evaluation annually. Accordingly, based upon the foregoing, the Company believes that the risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Say on Pay Vote ResultsConsideration of Prior Say-on-Pay Votes
At our 20142016 annual meeting of stockholders, holders of approximately 99.5%98.2% of the votes cast on such proposal approved the advisory vote ("say-on-pay") on the 20132015 compensation of our named
executive officers. Theofficers, which was consistent with the level of support we received in 2015 and 2014, when 99.0% and 99.5%, respectively, of stockholders voted for our "say-on-pay" proposal.
We believe the level of support we received from stockholders for the last three years was driven in part by our sustained and continued improvement in performance and our commitment to pay for performance and link incentives to current and long-term sustained achievement of Company strategic goals. Based on our say-on-pay results, the compensation committee did not make significant structural changes to our executive compensation program for 2014. The compensation committee believes the advisory stockholder vote indicates strong support for the Company's executive compensation program.2016. The compensation committee will continue to consider the results of the advisory vote on executive compensation in future executive compensation policies and decisions.
Key Components of our Executive Compensation Program
Base salary provides a minimum level of remuneration to our named executive officers for their efforts. The compensation committee sets base salaries for our executives to reflect the scope of each executive's responsibilities, experience, and performance. The compensation committee reviews base salaries annually, and adjusts them from time to time to account for relevant factors such as market changes, as documented by the compensation consultant. The compensation committee also considers the CEO's evaluation of each executive's performance and reviews hisher salary recommendations for our executives.
For our incentive-based compensation, the compensation committee utilizes a mix of performance metrics and time and tenure. Each type of metric serves a different purpose. The short-term (annual bonus) and the cash component of the long-term incentive awards are performance-based and require achievement of certain financial targets, measured over either one or three years. If the financial metrics are not achieved at a minimum threshold level at the end of the performance period, no payment is earned or made. The equity portion of the grants vests ratably over four years. The time-based vesting of the restricted stock units, a comparatively lesser portion of the total long-term incentive awards, is used primarily for retention purposes and to encourage stock ownership by executives, thereby aligning their interests with our stockholders. The stock options vest over time, but require improved stock price performance to realize value.
Annual Performance-Based Incentive (Cash Bonus). Annual performance-based cash bonuses are intended to reward achievement of short-term operating goals and financial performance that are incremental to long-term, sustained creation of stockholder value. Our annual bonuses are established with reference to the annual portion of our multi-year strategic plan and, although measured in one-year increments, are designed to tie each year's results into a long-term target. As the Company's business evolves and develops, the long-term targets may be revised with concurrent impact on each year's annual planning. Generally, the annual performance metrics are financial-based measures that the compensation committee believes are highly correlated to our strategic goals described above. The compensation committee continually evaluates the measures against which we gauge our performance and may incorporate additional or alternative metrics to incentivize executives to achieve appropriate performance targets and respond to industry changes or market forces.
Each of our executives is eligible to receive an annual cash bonus based on achievement of certain performance objectives, predominantly based on annual EBITDA. The EBITDA measure was selected because we believe it best captures our operating results without reflecting the impact of decisions related to our growth, non-operating factors, and other matters. The EBITDA goal is intended to be a "stretch" goal, or challenging target, and is meant to encourage superior performance. The 2007 Plan permitsand the Cash Incentive Plan permit the compensation committee to adjust, in its discretion, EBITDA
for non-cash, non-recurring, or unusual items. The compensation committee approves the annual bonus program based on achievement of a predetermined range of minimum threshold, target, and maximum-level EBITDA and approves payout of the bonuses, if any, following review of actual results. Bonuses are based on a percentage of the executive's salary and are set based on market and peer comparisons, and the corresponding dollar payout value varies up or down depending on the actual EBITDA performance level. Bonuses are not payable at all if the minimum threshold of EBITDA is not achieved. The compensation committee sets the EBITDA ranges each year based on performance expectations and other factors. The compensation committee may add or substitute performance measures in future plans. The compensation committee may also use various factors to exercise negative discretion when evaluating performance for purposes of awarding annual incentive compensation. CashPrior to 2016, cash incentive awards are currentlywere granted and paid pursuant to the 2007 Plan. It is anticipated that futureIn 2016, cash incentive awards would bewere awarded and paid
pursuant to the proposed Cash Incentive Plan (see Proposal 3—Approval ofPlan. Future cash incentive awards are anticipated to be granted under the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan beginning on page 60).new 2017 Plan.
In addition, the compensation committee may approve special bonuses on an individual or group basis in recognition of extraordinary achievements, or to address other special situations.
Long-Term Performance-Based Incentives. The compensation committee determines the long-term incentive grants for the executive officers, including the named executive officers, pursuant to market data and with respect to comparisons to peer restaurant compensation practices. The compensation committee believes that a mix of performance and time-based cash and equity incentives provides an element of performance risk for executives and encourages equity ownership, thereby aligning the interests of executive officers with our stockholders.
Long-term incentive grants consist of equity awards, typically in the form of restricted stock units and stock options, and a long-term cash incentive component. They are designed to focus management on our strategy of driving consistent, sustainable achievement of long-term goals, both incrementally and over long performance periods. The annual granting of multi-year performance compensation (including three-year performance targets) is designed to ensure that the execution of our strategic plan considers appropriate risks and returns and allows for initiatives that span several fiscal years.
Currently, except as described below, the long-term incentive awards for executives consist of an equity component comprised of 40% stock options and 20% restricted stock units (both of which vest ratably over four years), and a 40% performance-based cash component. We use stock options to align the interests of our executive officers with stockholders because value is realized only if the stock price appreciates (stock price performance). We use restricted stock units to help retain our executives and further align their interests with our stockholders. The cash component is payable if cumulative EBITDA or ROIC targets are achieved over a three-year performance period. The cumulative EBITDA and ROIC long-term incentive cash metrics are independent of each other. The compensation committee selected a target earnings metric (cumulative EBITDA) and a return metric (ROIC) in the design of the long-term incentive cash design to achieve a balance between profitability and growth, and to effectively reward both. Both the EBITDA goal and the ROIC goal are intended to be "stretch" goals, or challenging targets, and are meant to encourage superior performance. The 2007 Plan permitsand the Cash Incentive Plan permit the compensation committee to adjust, in its discretion, EBITDA or ROIC for non-cash, non-recurring, or unusual items. While there is some overlap with a metric in our annual performance-based cash bonuses and long-term incentive cash awards (EBITDA), in establishing this program prior to this year, the compensation committee believesbelieved this iswas appropriate because the annual performance-based cash bonus is focused on earnings in a particular year, whereas the three-year cumulative EBITDA used in the long-term incentive program is focused on progress over the three-year performance period and can be measured at any point in the performance period. The longer termcompensation committee believed that the longer-term nature of the long-term incentive cash program linkslinked performance to our multi-year strategic plan and growth objectives and encouragesencouraged management's collaboration on strategic initiatives. IncentivePrior to 2016, equity incentive awards were paid
Table of both cash and equity are currently paid Contents
pursuant to the 2007 Plan. It is anticipated that futureIn 2016, cash incentive awards would bewere awarded and paid pursuant to the proposedCash Incentive Plan. 2017 cash incentive awards will be granted under the Cash Incentive Plan (see Proposal 3—Approvaland future year awards are anticipated to be granted under the new 2017 Plan.
We also provide certain other customary retirement and health and welfare benefits and other ancillary compensation to executives, which are in line with those offered to other groups of the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan beginning on page 60).our employees, and which comprise a modest portion of our named executive officer compensation.
We offer relatively few perquisites to our executives, but we do provide certain benefits such as car allowances and meal allowances to our named executive officers and certain other employees. In addition, where appropriate, we offer usual and customary relocation expense reimbursements including related tax reimbursements.
Summary of 20142016 Compensation Activity
During 2014, the compensation committee did not make any changes to named executive officer salaries. Named executive officer salaries for 20142016 are set forth below. The compensation committee considers various factors when setting base salaries including peer compensation practices, Companythe Company's performance, individual contributions, CEO recommendations for hisher direct reports, and other relevant matters.
Named Executive Officer | Salary | |||
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Stephen E. Carley, Chief Executive Officer | $ | 750,000 | ||
Stuart B. Brown, Senior Vice President and Chief Financial Officer | $ | 357,000 | ||
Denny Marie Post, Executive Vice President and Chief Concept Officer | $ | 392,700 | ||
Michael L. Kaplan, Senior Vice President and Chief Legal Officer | $ | 335,000 | ||
Cathy Cooney, Senior Vice President and Chief People Officer | $ | 305,000 | ||
Eric C. Houseman, Former President and Chief Operating Officer | $ | 420,240 | ||
Todd A. Brighton, Former Chief Development Officer | $ | 340,920 |
Named Executive Officer | Salary | |||
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Denny Marie Post, President and Chief Executive Officer(1) | $ | 700,000 | ||
Guy J. Constant, Executive Vice President and Chief Financial Officer(2) | $ | 500,000 | ||
Jonathan A. Muhtar, Senior Vice President and Chief Marketing Officer | $ | 375,000 | ||
Carin L. Stutz, Executive Vice President and Chief Operating Officer(3) | $ | 400,000 | ||
Michael L. Kaplan, Senior Vice President and Chief Legal Officer | $ | 345,000 | ||
Terry Harryman, Interim Chief Financial Officer and Chief Accounting Officer | $ | 265,000 | ||
Stephen E. Carley, Former Chief Executive Officer | $ | 800,000 | ||
Stuart B. Brown, Former Senior Vice President and Chief Financial Officer | $ | 400,000 |
Each of Mr. Carley, Mr. Brown, Ms. Post, Mr. Constant, Mr. Muhtar, Ms. Stutz, and Mr. Kaplan has an employment agreement with the Company, the terms of which are discussed below under "Executive Employment Agreements."
20142016 Annual Performance-Based Cash Incentives. For 2014,2016, annual performance-based cash bonuses were contingent upon achievement of an annual Company EBITDA target to focus our efforts on continuing to improve performance and maximizing stockholder returns. In fiscal year 2014,2016, we continued to realize significant movement toward these goals, reporting increased revenues and net income in fiscal 2014 over 2013 and 2012 and sustainable cost reductions. We view these achievements as progress toward establishing best in class operations, profitability, and brand value.
Target bonus opportunities under our annual performance-based cash incentive program are equal to a pre-established percentage of the employee's base salary. BonusesActual bonuses are determined by comparing the Company's fiscal year EBITDA to a target level of EBITDA for the year established by our compensation committee. For 2014,Actual bonus amounts can range from 0% to 200% of the EBITDAexecutive's target was $117.9 million, and preliminary bonus amountsopportunity based on achievement of EBITDA targets rangeranging from 85%90% to 115%120% of the executive's target bonus opportunity.level of EBITDA for the year. For 20142016, the EBITDA target was $162.7 million and we achieved 100.2%85.0% of the EBITDA target based on our 20142016 EBITDA of approximately $118.1$138.3 million, which resulted in aand therefore generated no corresponding payout of 100.8%. For purposes of calculating our 2014 bonus, EBITDA, as defined in the Company's earnings releases filed with the SEC on Form 8-K, is adjusted for unusual or nonrecurring items including acquisitions, executive transition, changes to thebonus.
chief executive officer's retirement provisions, and impairments. Such adjustments were approved by the compensation committee.
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EBITDA Target and Preliminary Bonus % | ||||||||||||||||||||||||
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EBITDA Target Achieved | Bonus Payout as a % of Target | |||||||||||||||||||||||
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Below Minimum | <85% | 0% | ||||||||||||||||||||||
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Minimum | 85% | 30% | EBITDA Target and Preliminary Bonus % | |||||||||||||||||||||
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Target | 100% | 100% | EBITDA Target Achieved | Bonus Payout as a % of Target | ||||||||||||||||||||
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| Actual | | 100.2% | | 100.8% | | Actual | | 85.0% | | 0% | | ||||||||||||
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Maximum | ³115% | 170% | Minimum | 90% | 33% | |||||||||||||||||||
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Target | 100% | 100% | ||||||||||||||||||||||
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Maximum | ³120% | 200% | ||||||||||||||||||||||
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The 20142016 annual performance-based cash bonus incentive also included a feature, if EBITDA of at least 100% of the target level was achieved, that allows for an increase in the amount up to 120%130% of the preliminary bonus amount based on achievement of guest traffic outcomes favorable to our casual dining peers as reported by Black Box Intelligence, a financial benchmarking report for the restaurant industry. Due toBecause our achievement of above-target EBITDA performance goals in 2014, and above-target guest traffic increases, eligible employees, including2016 was below 100%, this feature of the cash bonus incentive plan was not earned.
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Guest Count Modifier and Final Bonus as % of Target | ||||||||||||
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Guest Count Increment over Black Box | Guest Count Modifier Payout | |||||||||||
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Threshold | 1.90% | 105.0% | ||||||||||
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Maximum | ³2.80% | 130% | ||||||||||
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Based on our 2016 performance, our named executive officers earned a bonus payout of 114.9% of target, as reflected indid not earn an annual performance-based cash bonus. Bonus targets for the tablesnamed executive officers are set forth below.
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Guest Count Modifier and Final Bonus as % of Target | ||||||||||||
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Guest Count Increment over Black Box | Guest Count Modifier Payout | |||||||||||
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Threshold | 0.58% | 101% | ||||||||||
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| Actual | | 1.57% | | 114% | | ||||||
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Maximum | ³2.00% | 120% | ||||||||||
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The actual amounts of our 2014 annual performance-based cash incentives paid to ourOnly those named executive officers that were a new hire or served in February 2015 for fiscal 2014 performance are as follows.an interim executive officer capacity during the year received a bonus in 2016 pursuant to their agreement or arrangement.
| | | | | Performance-Based Bonus Amount | ||||||||||||||||||||||||||||||||||||
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Named Executive Officer(1) | 2014 Annualized Salary | Bonus at Target (% of Actual Salary) | $ Bonus at Target | | Multiplied by Actual EBITDA Target Achieved (%) | | Multiplied by Actual Guest Count Modifier Achieved (%) | | 2014 Actual Bonus | 2014 Actual Bonus (% of Actual Salary) | |||||||||||||||||||||||||||||||
Named Executive Officer | 2016 Annualized Salary | Bonus at Target (% of Actual Salary) | $ Bonus at Target | 2016 Actual Bonus | |||||||||||||||||||||||||||||||||||||
Current Executives | |||||||||||||||||||||||||||||||||||||||||
D. Post | $ | 700,000 | 120 | % | $ | 655,394 | (1) | $ | 0 | ||||||||||||||||||||||||||||||||
G. Constant(2) | $ | 500,000 | — | — | — | ||||||||||||||||||||||||||||||||||||
J.Muhtar | $ | 375,000 | 70 | % | $ | 262,500 | $ | 0 | |||||||||||||||||||||||||||||||||
C.Stutz. | $ | 400,000 | 70 | % | $ | 280,000 | $ | 172,308 | (3) | ||||||||||||||||||||||||||||||||
M. Kaplan | $ | 345,000 | 70 | % | $ | 241,500 | $ | 0 | |||||||||||||||||||||||||||||||||
T. Harryman | $ | 265,000 | 30 | % | $ | 79,500 | $ | 27,300 | (4) | ||||||||||||||||||||||||||||||||
Former Executives(5) | |||||||||||||||||||||||||||||||||||||||||
S. Carley | $ | 750,000 | 120 | % | $ | 900,000 | x | 100.8 | % | x | 114.0 | % | = | $ | 1,034,218 | 137.9 | % | $ | 800,000 | 120 | % | $ | 960,000 | $ | 0 | ||||||||||||||||
S. Brown | $ | 357,000 | 70 | % | $ | 249,900 | x | 100.8 | % | x | 114.0 | % | = | $ | 287,168 | 80.4 | % | ||||||||||||||||||||||||
D. Post | $ | 392,700 | 70 | % | $ | 274,890 | x | 100.8 | % | x | 114.0 | % | = | $ | 315,885 | 80.4 | % | ||||||||||||||||||||||||
M. Kaplan | $ | 335,000 | 70 | % | $ | 234,500 | x | 100.8 | % | x | 114.0 | % | = | $ | 269,471 | 80.4 | % | ||||||||||||||||||||||||
C. Cooney | $ | 305,000 | 70 | % | $ | 213,500 | x | 100.8 | % | x | 114.0 | % | = | $ | 245,339 | 80.4 | % |
20142016 Long-Term Incentive ("LTI") Program. The 20142016 LTI grants made to named and other executive officers followed the same program design implemented in 2011 and used in 2012, 2013, 2014, and 2013.2015. For our executives, the program consists of an equity component comprised of 40% stock options and 20% restricted stock units (both of which vest ratably over four years), and a 40% long-term cash incentive component measured by company performance over three years. The LTI program grants are made under the 2007 Plan. It is intended that this program will continue annually in overlapping cycles. The compensation committee will change the structure of the long-term incentive component to move to including more equity and less cash going forward. See "—2017 Compensation Program" below.
20142016 Incentive Grants. In February 2014,2016, the Company made the following annual grants to our named executive officers in the form of LTI cash award,awards, options, and restricted stock units under the
2007 Plan. As described above, an executive's total target incentive is comprised of 40% long-term performance-based cash, 40% stock options, and 20% restricted stock units.
Named Executive Officer | Total Long Term Incentive Target Value ($) | Long-Term Incentive Cash ($) | Non-Qualified Stock Options (#) | Time-Based Restricted Stock Units (#) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
D. Post | 687,225 | 274,945 | 12,170 | 2,153 | |||||||||
G. Constant(1) | — | — | — | — | |||||||||
J. Muhtar | 525,000 | 210,031 | 9,297 | 1,645 | |||||||||
C. Stutz(2) | 275,000 | — | 7,038 | 2,218 | |||||||||
M. Kaplan | 301,500 | 120,666 | 5,339 | 944 | |||||||||
T. Harryman | 72,000 | 28,843 | 1,275 | 225 | |||||||||
Former Named Executive Officer | |||||||||||||
S. Carley | 1,950,000 | 780,064 | 34,534 | 6,110 | |||||||||
S. Brown | 624,750 | 249,959 | 11,064 | 1,957 |
Named Executive Officer | Total Long Term Incentive Target Value ($) | Long-Term Incentive Cash ($) | Non-Qualified Stock Options (#) | Time-Based Restricted Stock Units (#) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
S. Carley | 1,800,000 | 720,069 | 21,085 | 5,000 | |||||||||
S. Brown | 410,550 | 164,270 | 4,809 | 1,140 | |||||||||
D. Post | 431,970 | 172,800 | 5,060 | 1,200 | |||||||||
M. Kaplan | 268,000 | 107,253 | 3,139 | 744 | |||||||||
C. Cooney | 244,000 | 97,672 | 2,858 | 677 | |||||||||
Former Named Executive Officer | |||||||||||||
E. Houseman | 336,192 | 134,556 | 3,938 | 933 | |||||||||
T. Brighton | 340,920 | 136,398 | 3,993 | 947 |
The estimated fair value of each option granted is calculated using the Black-Scholes multiple option-pricing model. The fair value of the restricted stock units is based on the grant date market value of the common shares.
Long-Term Cash Portion. The long-term cash portion of the performance plan is focused on operational metrics with a three-year performance period. The awards cliff vest at the end of a three-year performance cycle. Performance is measured over the three years based on a range of minimum threshold, target, and maximum level. There are two independent metrics used that provide an appropriate balance between capital efficiency and operational results. The first metric is cumulative
EBITDA, which allows progress toward the EBITDA goal to be measured over three years. The second metric is three-year average ROIC, which recognizes that capital-related returns may take time to manifest. The goals are equally weighted and the payouts may be different depending on the achievement level of each metric.
The same LTI cash award metrics and methodology were implemented for years 2011 through 2014.2016. It is currently intended that each subsequent annual plan will have similar three-year performance periods and vesting.
At the end of 2014,2016, the Company completed a three-year performance cycle for the long-term cash incentive portion of the LTI plan. The performance period covered fiscal 20122014 through fiscal 2014.2016. The 20122014 LTI cash awards represented 40% of the executive's total 20122014 LTI award. Based on achievement of EBITDA and ROIC performance goals, our executive officers earned aan LTI cash payout, as reflected in the summary compensation table and the tables below.
For the 2012-20142014-2016 LTI cash incentive, our target (100%) level EBITDA objective was approximately $338.7$407.6 million. The range of EBITDA objectives to achieve a LTI cash payout based on EBITDA was 90% of target EBITDA for the minimum threshold level, and 120% of target EBITDA
for the maximum level (which corresponds to a 50% to 200% target payout range). Our EBITDA achievement for 2012-20142014-2016 was $321.8$374.5 million, which was 95.0%91.9% of the target EBITDA level, and generated a corresponding payout multiple of 75.0%59.5%. For purposes of calculating our 2012-20142014-2016 LTI cash payout, EBITDA, as set forth in the Company's earnings releases filedfurnished with the SEC on Form 8-K, is adjusted for unusual or non-recurring items including acquisitions, asset impairments, incremental gift card breakage revenue, executive transition, changes to the chief executive officer's equity incentive award retirement provisions, the 2013 special discretionary bonus, the 2012 variance in the number of operating weeks,legal contingencies, Red Robin Burger Works closure costs, and impairments,reorganization costs related to U.S. and Canadian operations, and is calculated using cumulative EBITDA for the years 2012-2014. Such adjustments were2014-2016. The compensation committee approved by the compensation committee.such adjustments.
| | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA Target and Preliminary Payout % | EBITDA Target and Preliminary Payout % | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA Target Achieved | Payout as a % of Target | EBITDA Target Achieved | Payout as a % of Target | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Below Minimum | <90% | 0% | Below Minimum | <90% | 0% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Minimum | 90% | 50% | Minimum | 90% | 50% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | 95% | | 75% | | Actual | | 91.9% | | 59.5% | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||
Target | 100% | 100% | Target | 100% | 100% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Maximum | ³120% | 200% | Maximum | ³120% | 200% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Our target (100%) level ROIC objective for the 2012-20142014-2016 performance period was approximately 10.37%14.3%. The range of ROIC objectives to achieve a LTI cash payout based on ROIC was 95.18%89.5% of target ROIC for the minimum threshold level, and 104.82%108.4% of target ROIC for the maximum level, with a corresponding multiple range that decreased or increased the payout of the executive's target LTI cash incentive. Our ROIC achievement for 2012-20142014-2016 was 10.29%82.2%, which was 99.2%below minimum of the target ROIC level, and therefore generated ano corresponding payout multiple of 83.4%. For purposes of calculating our 2012-2014 LTI cash payout, ROIC is calculated by dividing the income from operations plus interest income, each as reported in our annual report on Form 10-K filed with the SEC, and is adjusted for unusual or non-recurring items including acquisitions, executive transition, changes to the chief executive officer's retirement provisions, the 2013 special discretionary bonus, the 2012 variance in thepayout.
number of operating weeks, and impairments, for the years 2012-2014 by our average invested capital over the three years. Such adjustments were approved by the compensation committee.
| | | | | | | | | | | | | ||||||||||||
ROIC Target and Preliminary Payout % | ||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||
ROIC Target Achieved | Payout as a % of Target | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Below Minimum | <95.18% | 0% | ROIC Target and Preliminary Payout % | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Minimum | 95.18% | 20% | ROIC Target Achieved | Payout as a % of Target | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | 99.2% | | 83.4% | | Actual | | 82.2% | | 0% | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Target | 100% | 100% | Below Minimum | <89.6% | 0% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Maximum | ³104.82% | 200% | Minimum | 91.6% | 20% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Target | 100% | 100% | ||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||
Maximum | ³108.4% | 180% | ||||||||||||||||||||||
| | | | | | | | | | | | |
The actual amounts of our LTI cash incentive paid to our named executive officers in February 20152017 for fiscal 20122014 through fiscal 20142016 performance are as follows. Together, the overall performance
of the EBITDA and ROIC metrics averaged a payout percentage of 79.2%.29.75%, which was reflective of a payout on the EBITDA portion only and no payout on the ROIC performance.
| | EBITDA-Based LTI Payout | ROIC-Based LTI Payout | Total LTI Cash Payout | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Named Executive Officer(1) | LTI Award at Target ($) | EBITDA Portion of LTI Award at Target (1/2 of total) ($) | | Multiplied by Actual EBITDA Payout as a % of Target | | EBITDA Based LTI Cash Award Payout ($) | ROIC Portion of LTI Award at Target (1/2 of total) ($) | | Multiplied by Actual ROIC Payout as a % of Target | | ROIC Based LTI Cash Award Payout ($) | EBITDA- Based LTI Payout + ROIC Based LTI Payout ($) | |||||||||||||||||||||
S.Carley | 360,007 | 180,003 | x | 75 | % | = | 135,003 | 180,003 | x | 83.4 | % | = | 150,123 | 285,126 | |||||||||||||||||||
S.Brown | 140,006 | 70,003 | x | 75 | % | = | 52,502 | 70,003 | x | 83.4 | % | = | 58,383 | 110,885 | |||||||||||||||||||
D.Post | 114,021 | 57,010 | x | 75 | % | = | 42,757 | 57,010 | x | 83.4 | % | = | 47,547 | 90,304 | |||||||||||||||||||
M.Kaplan(2) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
C.Cooney(2) | — | — | — | — | — | — | — | — |
| | EBITDA-Based LTI Payout | Total LTI Cash Payout | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Named Executive Officer | LTI Award at Target ($) | EBITDA Portion of LTI Award at Target (1/2 of total) ($) | | Multiplied by Actual EBITDA Payout as a % of Target | | EBITDA Based LTI Cash Award Payout ($) | EBITDA- Based LTI Payout + ROIC Based LTI Payout ($) | |||||||||||||
Current Executives | ||||||||||||||||||||
D.Post | 172,800 | 86,400 | x | 59.5 | % | = | 51,408 | 51,408 | ||||||||||||
G. Constant(1) | — | — | x | — | = | — | — | |||||||||||||
J. Muhtar(2) | — | — | x | — | = | — | — | |||||||||||||
C.Stutz(3) | — | — | x | — | = | — | — | |||||||||||||
M.Kaplan | 107,253 | 53,627 | x | 59.5 | % | = | 31,908 | 31,908 | ||||||||||||
T. Harryman | 26,046 | 13,023 | x | 59.5 | % | = | 7,749 | 7,749 | ||||||||||||
Former Executives(4) | ||||||||||||||||||||
S. Carley | 720,069 | 360,035 | x | 59.5 | % | = | 214,221 | 214,221 |
Stock Options. The stock options that were granted in 20142016 vest ratably over four years on each anniversary date of the grant, which is designed to align incentives with longer-term achievement of objectives.
Restricted Stock Units. The restricted stock units that were granted in 20142016 vest ratably over four years on each anniversary date of the grant.
D. Post Special Equity Award Retirement Provisions Applicable to Mr. Carley.. In addition to the amounts reflected above, the compensation committee awarded a special equity award to Ms. Post in October 2014 based on her expanded role at the Company, including oversight of Canadian and franchise operations, and the recommendation of the committee's compensation consultant. Ms. Post received a restricted stock unit award with a value of $200,000, which is scheduled to vest over four years.
S. Carley Amendments to Restricted Stock Unit and Stock Option Award Agreements. In July of 2014, the compensation committee approved certain amendments to Mr. Carley's existing and future restricted stock unit and stock option award agreements. The amendments provideprovided for the non-forfeitability of such awards upon Mr. Carley's death, disability, or retirement. Following such death, disability, or retirement, stock options would become exercisable in accordance with their existing, normal vesting schedules and would remain outstanding for the duration of their original terms. Affected restricted stock units would similarly be paid out in accordance with their original vesting schedules. Retirement, for purposes of these changes, means Mr. Carley's voluntary resignation when his age and whole years of service with the company equals or exceeds 67, provided that he is at least 58 years of age and has a minimum of 5 full years of service. The changes to Mr. Carley's restricted stock units and stock options arewere designed to maintain incentives for Mr. Carley as he approachesapproached retirement age and to provide market competitive protections to Mr. Carley in the event of his death or disability. The compensation committee considered carefully these changes after soliciting input from the consultant, and concluded that the existing award structure (which would result in the forfeiture of awards upon retirement) may not provide a meaningful incentive to
Subsequently, Mr. Carley asresigned from his career with the Company progresses, given that awards issued close in proximity to his expected retirement may be perceivedposition as having little value based on their expected forfeiture. The committee believes that the amended structure, which provides for the non-forfeiture and the extended payout of such awards for several years following retirement, will appropriately incentivize and retain Mr. Carley (as the awards will become non-forfeitable upon his retirement), and will align Mr. Carley's interests with those of our stockholders, both during employment and thereafter, as his ability to garner value from these awards upon retirement will be directly linked not only to the Company's success during his continued tenure as chief executive officer but also in subsequent years. The committee believes this alignment will encourageand as a member of the board of directors effective August 8, 2016. In connection with Mr. Carley's continued efforts towardresignation, Mr. Carley and the Company entered into an amendment to his employment agreement that, among other things, provided that he is deemed to have retired as of December 25, 2016 (the "Retirement Date") for purposes of the Company's long-term financialcompensation and business health,benefit plans programs, and that his equity awards will be treated in accordance with the retirement provisions of the 2007 Performance Incentive Plan and any related award agreements between us and Mr. Carley. As a result of those July 2014 amendments, following Mr. Carley's retirement on the Retirement Date, his stock options continue to pursue appropriate succession planning activities ifbecome exercisable in accordance with their existing, normal vesting schedules and when appropriate.will remain outstanding for the duration of their original terms. Affected restricted stock units will similarly be paid out in accordance with their original vesting schedules.
Our 20152017 compensation program has substantially the same key components and elements as our 2014 program.2016 program, with a few exceptions. In 2017, our chief executive officer and chief financial officer compensation will shift to increase the portion of compensation paid in equity and based on performance, subject to stockholder approval of the new 2017 Plan. In connection with their employment agreements, in February these executives received equity grants in the form of performance share units (PSUs), instead of cash for that portion of the long-term incentive program, as follows:
The PSU awards are subject to stockholder approval of the 2017 Plan and cliff-vest at the end of a three-year performance cycle, generally subject to executive's continued employment through the applicable vesting date, with the number of PSUs earned and issued to be determined based on achievement of EBITDA and ROIC threshold, target or maximum performance objectives approved by the compensation committee. Assuming the new 2017 Plan is approved, the compensation committee contemplates using PSUs in place of LTI cash in the LTI program for all executive officers in the future.
Deductibility of Executive Compensation
The compensation committee considers the tax impacts of material elements of our executive compensation program. These factors alone do not drive our compensation decisions, but rather they are considered along with other factors such as the cash and non-cash impact of the program, and whether the program is consistent with our compensation objectives.
Section 162(m) of the Internal Revenue Code generally limits the deductibility for tax purposes of compensation over $1 million paid by a publicly traded company to certainits named executive officers (other than the chief financial officer), unless such compensation qualifies as "performance-based compensation." The policy of the compensation committee is to establish and maintain a compensation program that maximizes the creation of long-term stockholder value. The compensation committee generally attempts to structure most compensation approaches to preserve deductibility. The compensation committee, however, reserves the right to adopt programs giving consideration to factors other than deductibility where the compensation committee believes stockholder interests are best served by retaining flexibility. In such cases, the compensation committee may consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its compensation objectives.
As discussed above,Our annual performance-based cash bonuses, are generally paid under the 2007 Plannon-qualified stock options, and thusLTI cash awards are intended to qualifycomply with Section 162(m) such that compensation paid pursuant to such awards may be deductible by us, provided additional requirements are satisfied. While we consider deductibility as "performance-based compensation"one factor in determining executive compensation, in some cases we may decide that it is either not possible or desirable to satisfy all of the conditions of Section 162(m) for deductibility and still meet our compensation needs. Accordingly, we may pay compensation that is not deductible under Section 162(m) of the Internal Revenue Code. Accordingly, such amounts are intendedfrom time to be deductible by the Company even if in excess of the $1 million statutory limit. Non-qualified stock options and long-term performance-based cash awards are also granted under the 2007 Plan and are also intended to qualify as "performance-based compensation" under Section 162(m). Such amounts are also intended to be deductible by the Company even if in excess of the $1 million statutory limit. Time-based vesting RSUs
do not satisfy the requirements of Section 162(m). Consequently, a portion of that compensation is expected to not be deductible in fiscal 2014 and in future years based on certain executives' aggregate non-performance-based compensation being in excess of statutory limits. Nonetheless, we believe time-based vesting RSUs are an appropriate component of our executive compensation program for the reasons discussed above in this CD&A.time.
Executive Compensation Policies and Guidelines
Executive Employment Agreements
Each of Mr. Carley, Mr. Brown, Ms. Post, Mr. Constant, Mr. Muhtar, Ms. Stutz, and Mr. Kaplan has an employment agreement with the Company, described below under "Executive Employment Agreements." The employment agreements have indefinite terms, terminating on discontinuance of employment in accordance with the terms of the agreement.agreements. The agreements provide for severance payments upon terminationcertain terminations of employment (both before and after a change of control of the Company.Company). The compensation committee believes that the terms of these agreements are in line with market standards and are an important means to allow management to continue to focus on running the business of the
Company in the event of a pending or actual change of control event or other event potentially affecting their employment. More detailed information concerning these severance payments appears below under the caption "Potential Payments upon Termination or Change in Control."
Executive Stock Ownership Guidelines
Stock ownership guidelines have been in effect for the Company's executive officers and directors since March 2009. (See "Director"Corporate Governance and Board Matters—Director Stock Ownership Guidelines" beginning on page 20in this proxy statement for ownership guidelines for directors). The compensation committee believes that executive stock ownership requirements increase alignment of executive interests with those of stockholders with respect to long-term ownership risk. The guidelines require executive officers to holdachieve and maintain during the term of the executive's employment a dollar value of Company's securities based on a multiple of base salary. In 2014, the ownership guideline values were increased to five times base salary for our CEO, Mr. Carley, and three times base salary for the other executive officers. Pursuant to the guidelines, the value of the executive's holdings is based on the cumulative cost basis of Company securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. The executive officers have five years to achieve the guidelines from their effective date of employment.employment or promotion date. An executive officer may receive additional time to achieve his or her minimum requirement if the officer's requirement is increased, calculated based on the additional incremental amount. The compensation committee periodically reviews the guidelines and receives guidance and market data from its advisors.
The following table sets forth the ownership guidelines and the holdings of the named executive officers as of March 10, 2015,9, 2017, valued at the acquisition dates pursuant to our executive stock ownership guidelines(1):
Named Executive Officer | Ownership Guideline | Current Dollar Value of Guideline | Cumulative Cost Basis | Ownership Guideline | Current Dollar Value of Guideline | Cumulative Cost Basis | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
S. Carley | 5x salary | $ | 3,750,000 | $ | 7,124,481 | |||||||||||||
S. Brown | 3x salary | $ | 1,071,000 | $ | 1,438,067 | |||||||||||||
D. Post | 3x salary | $ | 1,178,100 | (2) | $ | 1,251,962 | 5x salary | $ | 3,500,000 | $ | 1,299,394 | (2) | ||||||
G. Constant | 3x salary | $ | 1,500,000 | $ | 436,460 | (3) | ||||||||||||
J. Muhtar | 3x salary | $ | 1,125,000 | $ | 419,118 | (4) | ||||||||||||
C. Stutz | 3x salary | $ | 1,200,000 | $ | 460,123 | (5) | ||||||||||||
M. Kaplan | 3x salary | $ | 1,005,000 | (3) | $ | 125,133 | 3x salary | $ | 1,035,000 | $ | 215,082 | (6) | ||||||
C. Cooney | 3x salary | $ | 915,000 | (4) | $ | 234,322 |
In March 2012, the Company's board of directors adopted a compensation clawback policy for its executive officers that provides for the recoupment by the Company of certain excess incentive compensation paid to the officers under certain circumstances. In the event of a restatement of the
Company's previously issued financial statements as a result of either (i) material non-compliance with financial reporting requirements under the securities law or (ii) intentional misconduct by an executive, the Company may recover, to the extent permitted by law, certain incentive compensation received by the executive that was in excess of what would have been paid in the absence of the incorrect financial statements.
In July 2015, the SEC proposed new rules that would direct the national securities exchanges and associations to establish listing standards that would, among other things, require listed companies to develop and enforce recovery policies that, in the event of an accounting restatement, "claw back" from current and former executive officers (not just named executive officers) incentive-based compensation they would not have received based on the restatement, regardless of fault. If such rules are adopted, the Company would be required to review and revise its clawback policy to comply with the new rules.
Pledging and Hedging Transactions in Company Securities
In 2014, the board adopted a formal policy prohibiting hedging and pledging of Company securities by executive officers and directors. The policy is set forth in the Company's Insider Trading Policy. All directors and executive officers have confirmed that they are currently in compliance with the policy.
The compensation committee, which is comprised of independent directors, has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the Company's management. Based on this review and discussion, the compensation committee recommended to the Company's board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE
Lloyd L. Hill,Kalen F. Holmes, ChairRobert B. AikenCambria W. Dunaway
Richard J. Howell
Glenn B. Kaufman
20142016 Executive Compensation Tables
The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to the Company in all capacities by our principal executive officer, principal financial officer, and each of our three other most highly compensated executive officers who were serving as executive officers at the end of fiscal year 2014, as well as two former officers2016 (collectively, the named executive officers), for fiscal years 20122014 through 2014:2016:
Name and Principal Position | Year | Salary ($)(3) | Bonus ($)(4) | Stock Awards ($)(5) | Option Awards ($)(6) | Non-Equity Incentive Plan Compensation ($)(8) | All Other Compensation ($)(9) | Total ($) | Year | Salary ($)(4) | Bonus ($)(5) | Stock Awards ($)(6) | Option Awards ($)(7) | Non-Equity Incentive Plan Compensation ($)(9) | All Other Compensation ($)(10) | Total ($) | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 2016 | 539,544 | — | 217,565 | 435,281 | 51,408 | 15,916 | 1,259,714 | ||||||||||||||||||||||||||||||||||||||||||
President and Chief | 2015 | 392,700 | — | 98,143 | 196,330 | 548,728 | 13,309 | 1,249,210 | ||||||||||||||||||||||||||||||||||||||||||
Executive Officer | 2014 | 392,700 | — | 286,345 | 172,782 | 406,189 | 17,523 | 1,275,539 | ||||||||||||||||||||||||||||||||||||||||||
Guy J. Constant(1) | 2016 | 15,385 | 200,000 | — | — | — | 516 | 215,901 | ||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and | ||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan A. Muhtar(2) | 2016 | 375,000 | 200,000 | 354,934 | 460,298 | — | 133,894 | 1,524,126 | ||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and | 2015 | 14,423 | — | — | — | 262,500 | 415 | 277,338 | ||||||||||||||||||||||||||||||||||||||||||
Chief Marketing Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Carin L. Stutz(3) | 2016 | 246,156 | 172,308 | 137,494 | 137,664 | — | 21,825 | 715,447 | ||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and | ||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Operating Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Kaplan | 2016 | 343,850 | — | 60,246 | 120,592 | 31,908 | 14,183 | 570,779 | ||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and | 2015 | 335,000 | — | 53,562 | 107,192 | 288,615 | 13,455 | 797,824 | ||||||||||||||||||||||||||||||||||||||||||
Chief Legal Officer | 2014 | 335,000 | — | 53,561 | 107,190 | 269,471 | 332,374 | 1,097,596 | ||||||||||||||||||||||||||||||||||||||||||
Terry Harryman | 2016 | 295,063 | 27,300 | 114,333 | 28,801 | 7,749 | 12,145 | 485,391 | ||||||||||||||||||||||||||||||||||||||||||
Interim Chief Financial | ||||||||||||||||||||||||||||||||||||||||||||||||||
Officer and Chief Accounting | ||||||||||||||||||||||||||||||||||||||||||||||||||
Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen E. Carley | 2014 | 750,000 | 383,357 | (7) | 794,753 | (7) | 1,319,344 | 20,219 | 3,267,673 | 2016 | 794,235 | — | 389,940 | 780,001 | 214,221 | 20,572 | 2,198,969 | |||||||||||||||||||||||||||||||||
Chief Executive Officer | 2013 | 735,578 | 650,000 | 299,959 | 599,998 | 1,352,231 | 15,558 | 3,653,324 | 2015 | 750,000 | — | 389,960 | 779,996 | 1,879,344 | 20,490 | 3,819,790 | ||||||||||||||||||||||||||||||||||
2012 | 740,769 | 179,995 | 351,425 | 794,104 | 15,765 | 2,082,058 | 2014 | 750,000 | — | 383,357 | (6) | 794,753 | (8) | 1,319,344 | 20,219 | 3,267,673 | ||||||||||||||||||||||||||||||||||
Stuart B. Brown | 2014 | 357,000 | 82,069 | 164,215 | 398,053 | 15,730 | 1,017,066 | 2016 | 216,617 | — | 124,896 | 249,895 | — | 10,386 | 601,794 | |||||||||||||||||||||||||||||||||||
Senior Vice President and | 2013 | 350,135 | 280,000 | 79,975 | 159,999 | 479,603 | 11,207 | 1,360,919 | ||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2012 | 352,692 | 69,998 | 136,666 | 264,660 | 10,591 | 834,607 | |||||||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 2014 | 392,700 | 286,345 | 172,782 | 406,189 | 17,523 | 1,275,539 | |||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and | 2013 | 385,147 | 280,000 | 62,979 | 125,999 | 493,897 | 186,928 | 1,534,950 | ||||||||||||||||||||||||||||||||||||||||||
Chief Concept Officer | 2012 | 387,962 | 56,984 | 111,281 | 291,126 | 137,825 | 985,178 | |||||||||||||||||||||||||||||||||||||||||||
Michael L. Kaplan(1) | 2014 | 335,000 | 53,561 | 107,190 | 269,471 | 332,374 | 1,097,596 | |||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and | 2013 | 70,865 | 22,000 | 19,962 | 76,614 | 23,773 | 213,214 | |||||||||||||||||||||||||||||||||||||||||||
Chief Legal Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cathy Cooney(2) | 2014 | 305,000 | 48,737 | 97,596 | 245,339 | 25,635 | 722,308 | |||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and | 2013 | 133,731 | 34,000 | 48,757 | 97,579 | 133,068 | 97,278 | 544,413 | ||||||||||||||||||||||||||||||||||||||||||
Chief People Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Eric C. Houseman | 2014 | 303,866 | 144,446 | (7) | 229,090 | (7) | 991,308 | 1,668,710 | ||||||||||||||||||||||||||||||||||||||||||
President and Chief | 2013 | 412,159 | 169,000 | 71,982 | 144,002 | 596,773 | 11,360 | 1,405,276 | ||||||||||||||||||||||||||||||||||||||||||
Operating Officer | 2012 | 415,170 | 59,998 | 117,140 | 356,050 | 11,458 | 959,816 | |||||||||||||||||||||||||||||||||||||||||||
Todd A. Brighton | 2014 | 212,419 | 99,876 | (7) | 185,540 | (7) | 483,449 | 981,284 | ||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and | 2013 | 334,363 | 169,000 | 62,979 | 125,999 | 402,187 | 11,608 | 1,106,136 | ||||||||||||||||||||||||||||||||||||||||||
Chief Development Officer | 2012 | 336,806 | 45,992 | 89,801 | 252,739 | 13,208 | 738,546 | |||||||||||||||||||||||||||||||||||||||||||
Executive Vice President | 2015 | 357,000 | — | 99,940 | 199,912 | 557,303 | 15,806 | 1,229,961 | ||||||||||||||||||||||||||||||||||||||||||
and Chief Financial Officer | 2014 | 357,000 | — | 82,069 | 164,215 | 398,053 | 15,730 | 1,017,066 |
pursuant to agreement or arrangement in connection with a new hire or for serving in an interim executive officer capacity.
| Named Executive Officer | 2014 Annual Performance- Based Cash Incentive Payout ($) | 2012 LTI Cash Award Payout ($) | Total ($) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Stephen E. Carley | 1,034,218 | 285,126 | 1,319,344 | |||||||||
Stuart B. Brown | 287,168 | 110,885 | 398,053 | |||||||||
Denny Marie Post | 315,885 | 90,304 | 406,189 | |||||||||
Michael L. Kaplan(1) | 269,471 | — | 269,471 | |||||||||
Cathy Cooney(1) | 245,339 | — | 245,339 |
Named Executive Officer | 2016 Annual Performance- Based Cash Incentive Payout ($) | 2014 LTI Cash Award Payout ($) | Total ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Denny Marie Post | — | 51,408 | 51,408 | |||||||
Guy J. Constant(1) | — | — | — | |||||||
Jonathan A. Muhtar(2) | — | — | — | |||||||
Carin L. Stutz(3) | — | — | — | |||||||
Michael L. Kaplan | — | 31,908 | 31,908 | |||||||
Terry Harryman | — | 7,749 | 7,749 |
Name | Year | Car Allowance ($)(a) | Phone Allowance (b) | Meal Discounts ($)(c) | Life Insurance/ LT Disability Premium Payments ($)(d) | Company Match under Non-Qualified Deferred Compensation Plan | Separation of Service Agreement payments ($) | Consultant Agreement payments ($) | Moving Expenses & Other Payments ($) | Total ($) | Year | Car Allowance ($)(a) | Phone Allowance (b) | Meal Discounts ($)(c) | Life Insurance/ LT Disability Premium Payments ($)(d) | Company Match under Non-Qualified Deferred Compensation Plan | Moving Expenses & Other Payments ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 2016 | 12,046 | 1,620 | 1,348 | 902 | — | — | 15,916 | ||||||||||||||||||||||||||||||||||||||||||||||||
Guy J. Constant | 2016 | 392 | 62 | 62 | — | — | — | 516 | ||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan A. Muhtar | 2016 | 10,200 | 1,620 | 834 | 800 | 120,440 | (e) | 133,894 | ||||||||||||||||||||||||||||||||||||||||||||||||
Carin L. Stutz | 2016 | 6,277 | 997 | 305 | 519 | 3,000 | 10,727 | (e) | 21,825 | |||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Kaplan | 2016 | 10,200 | 1,620 | 1,544 | 819 | — | — | 14,183 | ||||||||||||||||||||||||||||||||||||||||||||||||
Terry Harryman | 2016 | 9,000 | 1,620 | 840 | 685 | — | — | 12,145 | ||||||||||||||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen E. Carley | 2014 | 15,000 | 1,620 | — | 599 | 3,000 | — | 20,219 | 2016 | 15,000 | 1,620 | 0 | 952 | 3,000 | — | 20,572 | ||||||||||||||||||||||||||||||||||||||||
Stuart B. Brown | 2014 | 10,200 | 1,620 | 476 | 433 | 3,000 | — | 15,730 | 2016 | 5,885 | 935 | 147 | 419 | 3,000 | — | 10,386 | ||||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 2014 | 10,200 | 1,620 | 718 | 448 | 3,000 | 1,537 | (e) | 17,523 | |||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Kaplan | 2014 | 10,052 | 1,620 | 1,208 | 424 | 3,000 | 316,070 | (e) | 332,374 | |||||||||||||||||||||||||||||||||||||||||||||||
Cathy Cooney | 2014 | 10,200 | 1,620 | 199 | 412 | 3,000 | 10,204 | (e) | 25,635 | |||||||||||||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eric C. Houseman | 2014 | 6,669 | 1,059 | 384 | 258 | 982,938 | (f) | — | 991,308 | |||||||||||||||||||||||||||||||||||||||||||||||
Todd A. Brighton | 2014 | 5,884 | 935 | 312 | 208 | 476,110 | (g) | — | 483,449 |
The following table provides additional information about equity awards and non-equity incentive plan awards granted to our named executive officers during fiscal 2014:2016:
| | | | | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | | | | | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Grant Date Fair Value of Option and Stock Awards ($)(3) | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Grant Date Fair Value of Option and Stock Awards ($)(3) | ||||||||||||||||||||||||||||||||||||||||||
| | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | ||||||||||||||||||||||||||||||||||||||||||||
| Grant Date | Threshold ($) | Target ($) | Maximum ($) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||||||||||||||
Current Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 2/17/2016 | (1) | 216,280 | 655,394 | 1,572,946 | — | 12,170 | 274,881 | ||||||||||||||||||||||||||||||||||||||||||
2/17/2016 | (2) | 68,736 | 274,945 | 522,396 | 2,153 | (5) | — | — | 137,404 | |||||||||||||||||||||||||||||||||||||||||
10/03/2016 | 10,453 | (6) | 45.52 | 160,401 | ||||||||||||||||||||||||||||||||||||||||||||||
10/03/2016 | 1,761 | (6) | 80,161 | |||||||||||||||||||||||||||||||||||||||||||||||
Guy J. Constant(10) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Jonathan A. Muhtar | 1/4/2016 | 12,765 | (7) | 59.94 | 250,309 | |||||||||||||||||||||||||||||||||||||||||||||
1/4/2016 | 4,170 | (7) | 249,950 | |||||||||||||||||||||||||||||||||||||||||||||||
2/17/2016 | (1) | 86,625 | 262,500 | 630,000 | — | 9,297 | (4) | 63.82 | 209,989 | |||||||||||||||||||||||||||||||||||||||||
2/17/2016 | (2) | 52,508 | 210,031 | 399,059 | 1,645 | (5) | — | — | 104,984 | |||||||||||||||||||||||||||||||||||||||||
Carin L. Stutz | 5/16/2016 | (1) | 92,400 | 280,000 | 672,000 | — | 7,038 | (8) | 61.99 | 137,664 | ||||||||||||||||||||||||||||||||||||||||
5/16/2016 | 2,218 | (8) | — | — | 133,494 | |||||||||||||||||||||||||||||||||||||||||||||
Michael L. Kaplan | 2/17/2016 | (1) | 79,695 | 241,500 | 579,600 | — | 5,339 | (4) | 63.82 | 120,592 | ||||||||||||||||||||||||||||||||||||||||
2/17/2016 | (2) | 30,166 | 120,666 | 229,265 | 944 | (5) | — | — | 60,246 | |||||||||||||||||||||||||||||||||||||||||
Terry Harryman | 2/17/2016 | (1) | 26,235 | 79,500 | 190,800 | 1,275 | (4) | 63.82 | 28,801 | |||||||||||||||||||||||||||||||||||||||||
2/17/2016 | (2) | 7,210 | 28,842 | 54,800 | 225 | (5) | — | 14,359 | ||||||||||||||||||||||||||||||||||||||||||
7/1/2016 | 2,066 | (9) | 99,974 | |||||||||||||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen E. Carley | 2/19/2014 | (1) | 270,000 | 900,000 | 1,836,000 | 21,085 | (4) | 71.99 | 719,984 | 2/17/2016 | (1) | 316,800 | 960,000 | 2,304,000 | — | 34,534 | (4) | 63.82 | 780,001 | |||||||||||||||||||||||||||||||
2/19/2014 | (2) | 180,017 | 720,069 | 1,368,131 | 5,000 | (5) | 359,950 | 2/17/2016 | (2) | 195,016 | 780,065 | 1,482,123 | 6,110 | (5) | — | — | 389,940 | |||||||||||||||||||||||||||||||||
Stuart B. Brown | 2/19/2014 | (1) | 74,970 | 249,900 | 509,796 | 4,809 | (4) | 71.99 | 164,215 | 2/17/2016 | (1) | 105,600 | 320,000 | 768,000 | — | 11,064 | (4) | 63.82 | 249,895 | |||||||||||||||||||||||||||||||
2/19/2014 | (2) | 41,068 | 164,270 | 312,114 | 1,140 | (5) | 82,068 | 2/17/2016 | (2) | 62,490 | 249,959 | 474,923 | 1,957 | (5) | — | — | 124,895 | |||||||||||||||||||||||||||||||||
Denny Marie Post | 2/19/2014 | (1) | 82,467 | 274,890 | 560,776 | 5,060 | (4) | 71.99 | 172,782 | |||||||||||||||||||||||||||||||||||||||||
2/19/2014 | (2) | 43,200 | 172,800 | 328,320 | 1,200 | (5) | 86,388 | |||||||||||||||||||||||||||||||||||||||||||
10/1/2014 | 3,675 | (6) | 199,957 | |||||||||||||||||||||||||||||||||||||||||||||||
Michael L. Kaplan | 2/19/2014 | (1) | 70,350 | 234,500 | 478,380 | 3,139 | (4) | 71.99 | 107,190 | |||||||||||||||||||||||||||||||||||||||||
2/19/2014 | (2) | 26,813 | 107,253 | 203,781 | 744 | (5) | 53,561 | |||||||||||||||||||||||||||||||||||||||||||
Cathy Cooney | 2/19/2014 | (1) | 64,050 | 213,500 | 435,540 | 2,858 | (4) | 71.99 | 97,596 | |||||||||||||||||||||||||||||||||||||||||
2/19/2014 | (2) | 24,418 | 97,672 | 185,576 | 677 | (5) | 48,737 | |||||||||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Eric C. Houseman | 2/19/2014 | (1) | 100,858 | 336,192 | 685,832 | 3,938 | (4) | 71.99 | 134,475 | |||||||||||||||||||||||||||||||||||||||||
2/19/2014 | (2) | 33,639 | 134,556 | 255,656 | 933 | (5) | 67,167 | |||||||||||||||||||||||||||||||||||||||||||
Todd A. Brighton | 2/19/2014 | (1) | 71,293 | 238,644 | 486,834 | �� | 3,993 | (4) | 71.99 | 136,351 | ||||||||||||||||||||||||||||||||||||||||
2/19/2014 | (2) | 34,100 | 136,398 | 259,156 | 947 | (5) | 68,175 |
and restricted stock units are scheduled to vest 25% on each of the first, second, third and fourth anniversaries of the date of grant subject to continuing employment orof service with the Company.
Outstanding Equity Awards at 20142016 Fiscal Year-End
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | | | | | Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | | | | | ||||||||||||||||||||||||||
| Option Exercise Price ($) | | Number of Shares That Have Not Vested | Market Value of Shares That Have Not Vested ($)(18) | Option Exercise Price ($) | | Number of Shares That Have Not Vested | Market Value of Shares That Have Not Vested ($)(21) | ||||||||||||||||||||||||||||||
| Option Expiration Date | Option Expiration Date | ||||||||||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Market Value of Shares That Have Not Vested ($)(18) | Exercisable | Unexercisable | Market Value of Shares That Have Not Vested ($)(21) | ||||||||||||||||||||||||||||||||
Current Executives | ||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 8,551 | — | 32.29 | 8/2/21 | (2) | 374 | (11) | 21,112 | ||||||||||||||||||||||||||||||
7,620 | — | 35.46 | 2/21/22 | (3) | 600 | (13) | 33,870 | |||||||||||||||||||||||||||||||
6,361 | 2,121 | 42.07 | 2/26/23 | (4) | 1,837 | (14) | 103,698 | |||||||||||||||||||||||||||||||
2,530 | 2,530 | 71.99 | 2/19/24 | (5) | 901 | (15) | 50,861 | |||||||||||||||||||||||||||||||
1,617 | 4,852 | 81.65 | 2/18/25 | (6) | 2,153 | (17) | 121,536 | |||||||||||||||||||||||||||||||
— | 12,170 | 63.82 | 2/17/26 | (8) | 1,761 | (20) | 99,408 | |||||||||||||||||||||||||||||||
— | 10,453 | 45.52 | 10/3/26 | (10) | ||||||||||||||||||||||||||||||||||
Guy J. Constant(1) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Jonathan A. Muhtar | — | 12,765 | 59.94 | 1/4/26 | (7) | 4,170 | (16) | 235,396 | ||||||||||||||||||||||||||||||
— | 9,297 | 63.82 | 2/17/26 | (8) | 1,645 | (17) | 92,860 | |||||||||||||||||||||||||||||||
Carin Stutz | — | 7,038 | 61.99 | 5/16/26 | (9) | 2,218 | (18) | 125,206 | ||||||||||||||||||||||||||||||
Michael L. Kaplan | 1,569 | 1,570 | 71.99 | 2/19/24 | (5) | 67 | (12) | 3,782 | ||||||||||||||||||||||||||||||
883 | 2,649 | 81.65 | 2/18/25 | (6) | 372 | (13) | 20,999 | |||||||||||||||||||||||||||||||
— | 5,339 | 63.82 | 2/17/26 | (8) | 492 | (15) | 27,773 | |||||||||||||||||||||||||||||||
944 | (17) | 53,289 | ||||||||||||||||||||||||||||||||||||
Terry Harryman | 1,211 | 404 | 42.07 | 2/26/23 | (4) | 71 | (11) | 4,008 | ||||||||||||||||||||||||||||||
528 | 529 | 71.99 | 2/19/24 | (5) | 90 | (13) | 5,080 | |||||||||||||||||||||||||||||||
252 | 759 | 81.65 | 2/18/25 | (6) | 128 | (15) | 7,226 | |||||||||||||||||||||||||||||||
— | 1,275 | 63.82 | 2/17/26 | (8) | 225 | (17) | 12,701 | |||||||||||||||||||||||||||||||
2,066 | (19) | 116,626 | ||||||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||
Stephen E. Carley | 54,787 | — | 19.64 | 9/13/17 | (1) | 1,225 | (9) | 93,614 | 22,080 | — | 34.71 | 6/25/17 | (22) | 1,782 | (11)(24) | 100,594 | ||||||||||||||||||||||
19,320 | 2,760 | 34.71 | 6/24/21 | (2) | 2,538 | (10) | 193,954 | 24,064 | — | 35.46 | 2/21/22 | (3)(23) | 2,500 | (13)(24) | 141,125 | |||||||||||||||||||||||
12,032 | 12,032 | 35.46 | 2/21/22 | (3) | 5,347 | (14) | 408,618 | 30,294 | 10,098 | 42.07 | 2/26/23 | (4)(23) | 3,582 | (15)(24) | 202,203 | |||||||||||||||||||||||
10,098 | 30,294 | 42.07 | 2/26/23 | (4) | 5,000 | (16) | 382,100 | 10,542 | 10,543 | 71.99 | 2/19/24 | (5)(23) | 6,110 | (17)(24) | 344,909 | |||||||||||||||||||||||
— | 21,085 | 71.99 | 2/19/24 | (7) | 6,425 | 19,276 | 81.65 | 2/18/25 | (6)(23) | |||||||||||||||||||||||||||||
— | 34,534 | 63.82 | 2/17/26 | (8)(23) | ||||||||||||||||||||||||||||||||||
Stuart B. Brown | 3,838 | 2,113 | 28.15 | 9/12/21 | (5) | 621 | (11) | 47,457 | 2,404 | 71.99 | 1/15/17 | (25) | ||||||||||||||||||||||||||
4,678 | 4,680 | 35.46 | 2/21/22 | (3) | 986 | (9) | 75,350 | |||||||||||||||||||||||||||||||
2,692 | 8,079 | 42.07 | 2/26/23 | (4) | 1,425 | (14) | 108,898 | |||||||||||||||||||||||||||||||
— | 4,809 | 71.99 | 2/19/24 | (7) | 1,140 | (16) | 87,119 | |||||||||||||||||||||||||||||||
Denny Marie Post | 7,126 | 1,425 | 32.29 | 8/2/21 | (6) | 476 | (13) | 36,376 | ||||||||||||||||||||||||||||||
3,810 | 3,810 | 35.46 | 2/21/22 | (3) | 803 | (10) | 61,365 | |||||||||||||||||||||||||||||||
2,120 | 6,362 | 42.07 | 2/26/23 | (4) | 1,122 | (14) | 85,743 | |||||||||||||||||||||||||||||||
— | 5,060 | 71.99 | 2/19/24 | (7) | 1,200 | (16) | 91,704 | |||||||||||||||||||||||||||||||
3,675 | (17) | 280,843 | ||||||||||||||||||||||||||||||||||||
Michael L. Kaplan | — | 3,139 | 71.99 | 2/19/24 | (7) | 203 | (15) | 15,513 | ||||||||||||||||||||||||||||||
744 | (16) | 56,856 | ||||||||||||||||||||||||||||||||||||
Cathy Cooney | 1,154 | 3,462 | 59.46 | 7/9/23 | (8) | 615 | (12) | 46,998 | ||||||||||||||||||||||||||||||
— | 2,858 | 71.99 | 2/19/24 | (7) | 677 | (16) | 51,736 | |||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||
Eric C. Houseman | 1,174 | 718 | 34.71 | 6/24/21 | (2) | 518 | (9) | 39,586 | ||||||||||||||||||||||||||||||
1,102 | 2,876 | 35.46 | 2/21/22 | (3) | 846 | (10) | 64,651 | |||||||||||||||||||||||||||||||
1,212 | 6,054 | 42.07 | 2/26/23 | (4) | 1,283 | (14) | 98,047 | |||||||||||||||||||||||||||||||
— | 3,938 | 71.99 | 219/24 | (7) | 933 | (16) | 71,300 | |||||||||||||||||||||||||||||||
Todd A. Brighton | 2,445 | 670 | 34.71 | 6/24/21 | (2) | 297 | (9) | 22,697 | ||||||||||||||||||||||||||||||
1,537 | 3,075 | 35.46 | 2/21/22 | (3) | 648 | (10) | 49,520 | |||||||||||||||||||||||||||||||
2,120 | 6,362 | 42.07 | 2/26/23 | (4) | 1,122 | (14) | 85,743 | |||||||||||||||||||||||||||||||
— | 3,993 | 71.99 | 2/19/24 | (7) | 947 | (16) | 72,370 |
Options Exercises and Stock Vested
The following table contains information with respect to the named executive officers concerning option exercises and vesting of restricted stock units during fiscal year 2014:2016:
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(2) | ||||||||||||||||||
Current Executives | ||||||||||||||||||||||||||
Denny Marie Post | — | — | 2,295 | 128,817 | ||||||||||||||||||||||
Guy J. Constant | — | — | — | — | ||||||||||||||||||||||
Jonathan A. Muhtar | — | — | — | — | ||||||||||||||||||||||
Carin L. Stutz | — | — | — | — | ||||||||||||||||||||||
Michael L. Kaplan | — | — | 418 | 25,041 | ||||||||||||||||||||||
Terry Harryman | — | — | 502 | 25,575 | ||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||
Stephen E. Carley | 5,000 | 258,175 | 9,278 | 592,431 | 54,787 | 1,854,906 | 5,495 | 347,636 | ||||||||||||||||||
Stuart B. Brown | 2,500 | 104,409 | 8,695 | 487,376 | 23,387 | 405,410 | 1,559 | 98,644 | ||||||||||||||||||
Denny Marie Post | — | — | 1,254 | 89,600 | ||||||||||||||||||||||
Michael L. Kaplan | — | — | 68 | 3,700 | ||||||||||||||||||||||
Cathy Cooney | — | — | 205 | 14,559 | ||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||
Eric C. Houseman | 6,016 | 281,530 | 2,694 | 203,079 | ||||||||||||||||||||||
Todd A. Brighton | — | — | 1,671 | 125,924 |
Non-qualified Deferred Compensation
The following table shows information about the amount of contributions, earnings, and balances for each named executive officer under the Company's Deferred Compensation Plan as of December 28, 2014.25, 2016.
Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(1)(2) | Aggregate Earnings (Loss) in Last Fiscal Year ($)(1) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(1)(2) | Aggregate Earnings (Loss) in Last Fiscal Year ($)(1) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current Executives | ||||||||||||||||||||||||||||||||
Denny Marie Post | — | — | 17,980 | — | 255,488 | |||||||||||||||||||||||||||
Guy J. Constant | — | — | — | — | — | |||||||||||||||||||||||||||
Jonathan A. Muhtar | — | — | — | — | — | |||||||||||||||||||||||||||
Carin L. Stutz | 8,616 | 3,000 | 146 | — | 11,762 | |||||||||||||||||||||||||||
Michael L. Kaplan | — | — | 1,401 | — | 18,326 | |||||||||||||||||||||||||||
Terry Harryman | — | — | 3,047 | — | 31,439 | |||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||
Stephen E. Carley | 2,116,728 | 3,000 | 0 | — | 2,119,728 | — | — | (15,529 | ) | — | 3,406,542 | |||||||||||||||||||||
Stuart B. Brown | 124,571 | 3,000 | 7,589 | — | 135,160 | 6,362 | 3,000 | 28,179 | — | 248,479 | ||||||||||||||||||||||
Denny Marie Post | 153,086 | 3,000 | 12,476 | — | 239,954 | |||||||||||||||||||||||||||
Michael L. Kaplan | 13,400 | 3,000 | 756 | — | 17,156 | |||||||||||||||||||||||||||
Cathy Cooney | 251,843 | 3,000 | 421 | — | 255,264 | |||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||
Eric C. Houseman | 21,968 | — | 1,795 | 59,500 | 23,095 | |||||||||||||||||||||||||||
Todd A. Brighton | — | — | — | — | — |
Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan. Company employees who are generally considered "highly compensated" pursuant to Internal Revenue Code Section 414(q) are not permitted to participate in the Company's 401(k) program. To permit these employees to save for retirement, the Company has established the Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan. The plan permits executives and other eligible employees to defer portions of their compensation. In 2014 the Company paid all administrative expenses of the plan. Under this plan, eligible employees may elect to defer up to 75% of their base salary and up to 100% of incentive compensation and commissions each plan year. The Company may make matching contributions in an amount determined by the compensation committee. For the 20142016 plan year, the compensation committee authorized matching contributions equal to 25%50% of the first 4% of compensation that is deferred by the participant. The Company match for named executive officers and other members of the executive team was capped at $3,000 for the 2016 plan year.
The Company investscontributes all amounts deferred under the deferred compensation plan assets throughto a rabbi trust. Assets in the rabbi trust are invested in certain mutual funds that cover an investment spectrum ranging from equities to money market instruments and areinstruments. All rabbi trust assets remain available to satisfy the claims of the Company's creditors in the event of the Company's bankruptcy or insolvency.
When participants elect to defer amounts into the plan, they also select when the amounts ultimately will be distributed. Participants can elect to have deferrals for a particular year paid in a
future year if the participant is still employed at that time. Such in-service distributions are made in the form of a lump sum or, if the participant's total account balance at the time of the in-service distribution is at least $25,000, the participant can elect to receive payment in up to 5 annual installments. The participant can elect up to 15 annual installments. Otherwise, payment of a participant's account is made the latera minimum of (i) in the February following the participant's termination of employment or (ii) six months from participant's termination of employment in the form of a lump sum or in 5, 10, orup to 15 annual installments if the participant so elected at the time of deferral and if the participant's total account balance is at least $50,000.
$25,000. A participant can elect to change a prior distribution election to further delay distribution provided that such new election must be provided at least 12 months before the date the previously scheduled distribution would have occurred and provided that the new distribution date is at least 5 years from the originally scheduled distribution date. A participant may obtain a withdrawal prior to the date otherwise scheduled or elected by the participant if the participant incurs an "unforeseeable emergency" (generally including illness, casualty losses, etc.).
With respect to deferrals after 2004, the plan is intended to comply with the requirements of section 409A of the Internal Revenue Code, which was enacted as part of the American Jobs Creation Act of 2004. The plan is considered to be a "non-qualified" plan for federal tax purposes, meaning that the arrangements are deemed to be unfunded and an employee's interest in the plan is no greater than that of an unsecured general creditor of the Company.
Equity Compensation Plan Information
We maintain three equity based compensation plans—the 2004 Performance Incentive Plan (the "2004 Plan"), the Second Amended and Restated 2007 Performance Incentive Plan (the "2007 Plan"), and the Employee Stock Purchase Plan (the "ESPP"). Our stockholders have approved each of these plans.
The following table sets forth for our equity compensation plans in the aggregate, the number of shares of our common stock subject to outstanding options and rights under these plans, the weighted average exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 28, 2014:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | ||||||||||
2004 Plan | 12,100 | |||||||||
2007 Plan | 449,586 | |||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||
| | | | | | | | | | |
Total | 461,686 | $ | 38.83 | 786,867 | (1) |
Employment Agreements, Separation Related Arrangements, and Change in Control Agreements
Executive Employment Agreements
Stephen E. CarleyDenny Marie Post Amended and Restated Employment Agreement. Our employment agreement with Mr. Carley,Ms. Post, our chief executive officer, dated August 11, 2010,8, 2016, has an indefinite term. The agreement provides that heshe is entitled to receive certain benefits upon termination of hisher employment. If the Company terminates Mr. Carley'sMs. Post's employment upon the occurrence of a change in control event, heshe will
receive, among other things, (a) payment of an amount equal to two times hisher annual base salary; (b) hisher pro rata share of the annual bonus, calculated and paid at the end of the plan cycle, that would otherwise have been earned and be payable had heshe continued to be employed by the Company; (c) payment of an amount equal to two times the highest annual bonus amount earned by Mr. CarleyMs. Post for performance in the last three calendar years prior to the change in control event for which bonuses have been paid or are payable; and (d) coverage under the Company's medical, dental, and prescription insurance plans for the 18-month period following the date of termination.
If Mr. Carley'sMs. Post's employment is terminated either by the Company without cause, or by Mr. CarleyMs. Post for good reason, as those terms are defined in the agreement, Mr. CarleyMs. Post will receive, among other things, (a) continued payment of an amount equal to two times hisher annual base salary;salary for a period of two years following the effective date of termination; (b) hisher pro rata share of the annual bonus, calculated and paid at the end of the plan cycle, that would otherwise have been earned and be payable had heshe continued to be employed by the Company; and (c) coverage under the Company's medical, dental, and prescription insurance plans for the 18-month period following the date of termination.
Generally, under Mr. Carley'sMs. Post's employment agreement and subject to limited exceptions set forth in the agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Ms. Post is not entitled to any such payment unless her employment with the Company is terminated by the Company without cause or by Ms. Post for good reason within the two-year period following such change in control event.
Good reason is defined in Ms. Post's agreement as a reduction in her compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief executive officer; provided that the Company has 30 days to cure any such condition following Ms. Post's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Guy J. Constant Employment Agreement. Our employment agreement with Mr. CarleyConstant, our chief financial officer, dated December 13, 2016, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment, whether or not a change in control has occurred. If the Company terminates Mr. Constant's employment without cause, or Mr. Constant terminates his employment for good reason, Mr. Constant will receive, among other things, payment of an amount equal to one time his annual base salary.
Good reason is defined in Mr. Constant's employment agreement as a material reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief financial officer; provided that the Company has 30 days to cure any such condition following Mr. Constant's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
In connection with entering his employment agreement, Mr. Constant received a sign-on equity award consisting of (i) a stock option for 20,695 shares (representing an aggregate grant date fair value
of $400,000) and (ii) 3,666 restricted stock units ("RSUs") with a grant date fair value of $200,000. He also received a performance stock unit of 7,332 shares (at target) as described under "—2017 Compensation Program."
Jonathan A. Muhtar Employment Agreement. Our employment agreement with Mr. Muhtar, our chief marketing officer, dated November 26, 2015, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Muhtar's employment without cause, or Mr. Muhtar terminates his employment for good reason, in both cases either before or following the occurrence of a change in control event, Mr. Muhtar will receive, among other things, payment of an amount equal to one time his annual base salary.
Generally, under Mr. Muhtar's employment agreement and subject to limited exceptions set forth in the employment agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Muhtar is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. CarleyMuhtar for good reason within the two-year period following such change in control event.
Good reason is defined in Mr. Carley's agreement as a material reduction in his annual base salary or target annual bonus opportunity, relocation of the Company's headquarters to a location more than 50 miles from the existing location, a material breach of any provision contained in theMuhtar's employment agreement or any material provision of any equity award agreement, the removal of Mr. Carley from the board of directors, requiring that Mr. Carley report to any other person other than the board, or a material diminution in Mr. Carley's title, duties, or responsibilities; provided that the Company has 30 days to cure any such condition following Mr. Carley's notice thereof.
Stuart B. Brown Employment Agreement. Our employment agreement with Mr. Brown, our chief financial officer, dated August 10, 2011 has an indefinite term. The agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Brown's employment upon the occurrence of a change in control event, Mr. Brown will receive, among other things, (a) continued payment of his annual base salary for a period of twelve months following the effective date of termination; (b) payment of an amount equal to the annual bonus amount earned by Mr. Brown for performance in the last completed fiscal year prior to the change in control event for which bonuses have been paid or are payable; and (c) coverage under the Company's
medical, dental, and prescription insurance plans for the 12-month period following the date of termination.
Upon termination of Mr. Brown's employment either by the Company without cause, or by Mr. Brown for good reason (as each term is defined in the employment agreement), Mr. Brown will receive, among other things, (a) continued payment of his annual base salary for a period of twelve months following the effective date of termination; (b) his pro rata share of the annual bonus that would otherwise have been earned and be payable had he continued to be employed by the Company; and (c) coverage under the Company's medical, dental, and prescription insurance plans for the 12-month period following the date of termination.
The definition of change in control event is substantially the same as that contained in Mr. Carley's employment agreement, and payment of any amount following a change in control event requires that Mr. Brown's employment be terminated by the Company without cause or by Mr. Brown for good reason within the two-year period following such change in control event. Good reason is defined in Mr. Brown's agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, anya willful breach by the Company of a material provision contained in the employment agreement, or a significant reduction in the then-effect responsibilities of the Company's chief financial officer; provided that the Company has 30 days to cure any such condition following receipt of notice from Mr. Brown of such reason.
Denny Marie Post Employment Agreement. Our employment agreement with Ms. Post, our chief concept officer, dated August 1, 2011 has an indefinite term. The agreement provides that she is entitled to receive certain benefits upon termination of her employment. If the Company terminates Ms. Post's employment upon the occurrence of a change in control event, Ms. Post will receive, among other things, continued payment of her annual base salary for a period of twelve months following the effective date of termination.
Upon termination of Ms. Post's employment either by the Company without cause, or by Ms. Post for good reason (as each term is defined in the employment agreement), Ms. Post will receive, among other things, continued payment of her annual base salary for a period of twelve months following the effective date of termination.
The definition of change in control event is substantially the same as that contained in Mr. Carley's employment agreement, and payment of any amount following a change in control event requires that Ms. Post's employment be terminated by the Company without cause or by Ms. Post for good reason within the two-year period following such change in control event. Good reason is defined in her agreement as a reduction in her compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, any willful breach by the Company of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the Company's chief marketing officer; provided that the Company has 30 days to cure any such condition following receiptMr. Muhtar's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Carin L. Stutz Employment Agreement. Our employment agreement with Ms. Stutz, our chief operating officer, dated April 27, 2016, has an indefinite term. The employment agreement provides that she is entitled to receive certain benefits upon termination of her employment, whether or not a change in control has occurred. If the Company terminates Ms. Stutz's employment without cause, or Ms. Stutz terminates her employment for good reason, Ms. Stutz will receive, among other things, payment of an amount equal to one time her annual base salary.
Good reason is defined in Ms. Stutz's employment agreement as a reduction in her compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief operating officer; provided that the Company has 30 days to cure any such condition following Ms. Stutz's notice from Ms. Postthereof (which notice is required to be provided within 90 days of such reason.the initial existence of the condition).
Michael L. Kaplan Employment Agreement. Our employment agreement with Mr. Kaplan, our chief legal officer, dated September 30, 2013, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Kaplan's employment without cause, or Mr. Kaplan terminates his employment for good reason, in both cases either before or following the occurrence of a change in
control event, Mr. Kaplan will receive, among other things, (a) payment of an amount equal to one time his annual base salary; and (b) payment of an amount equal to the target amount of Mr. Kaplan's annual bonus for the fiscal year in which the effective date of termination occurs.
Generally, under Mr. Kaplan's employment agreement and subject to limited exceptions set forth in the employment agreement, a change in control will be deemed to occur if any person acquires more
than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Kaplan is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. Kaplan for good reason within the two-year period following such change in control event.
Good reason is defined in Mr. Kaplan's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief legal officer; provided that the Company has 30 days to cure any such condition following Mr. Kaplan's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Separation Related AgreementsArrangements
Eric Houseman Severance Agreement.Stephen E. Carley Separation Arrangements. Mr. Houseman'sCarley resigned from his position ofas chief operatingexecutive officer of the Company was eliminated effective as of August 1, 2014.8, 2016. In connection with Mr. Houseman's departure, the Company,Carley's resignation, Red Robin International,Gourmet Burgers, Inc., and Mr. HousemanCarley entered into a severancean amended employment agreement, dated August 8, 2016, under which Mr. Carley agreed to serve as Senior Advisor to the Company effective as of JulyAugust 8, 2016 through December 25, 2014.2016. Pursuant to the terms of the severanceamended employment agreement, Mr. Carley is deemed to have retired on December 25, 2016 for purposes of the Company agreed to pay to Mr. Houseman (i) $174,561.23, less applicable taxes, which is an amount equalCompany's compensation and benefit plans programs, and agreements, including but not limited to the salary the Company would have paid Mr. Houseman if he had remained employed with the Company through December 31, 2014; (ii) a single lump-sum severance payment to Mr. Houseman of $420,240.00, less applicable taxes; and (iii) a lump sum payment in an amount equivalent to the annual bonus that would otherwise have been earned and be payable had he continued to be employed by the Company for the full fiscal year (the bonus targets set forth in the Company's 2014 bonus plan shall govern Mr. Houseman's eligibility for the payment and the amount of the payment, if any is owed). The amounts set forth in (i) and (ii) above are in considerationtreatment of Mr. Houseman's obligationsCarley's outstanding equity awards under the severance agreement2007 Plan and his provision of transition and other services to the Company through March 1, 2015. In addition, all unvested stock options, restricted stock units, and other equity-based awards held by Mr. Houseman will continue to vest through March 1, 2015.any related award agreements. The severanceamended employment agreement also contains non-solicitation and confidentiality provisions, as well as a general release by Mr. HousemanCarley of claims against the Company, and other customary terms.
Todd Brighton Consulting Agreement. Todd A. Brighton departed from his position as chief development officer of the Company effective as of July 1, 2014. In connection with Mr. Brighton's departure, Red Robin International, Inc., and Mr. Brighton (through his consulting firm) entered into a consulting agreement, dated as of August 8, 2014, under which Mr. Brighton agreed to provide real estate development services to the Company effective as of July 2, 2014 through June 30, 2015. Pursuant to the terms of the consulting agreement, the Company agreed to pay to Mr. Brighton (i) $29,260 per month for the first six-month period of the consulting term; (ii) $14,630 per month during the remaining term of the agreement; (iii) reimbursement for his actual reasonable travel expenses incurred in providing the services under the consulting agreement; and, (iv) an amount equivalent to the annual bonus that would otherwise have been earned and be payable had he continued to be employed by the Company for the full fiscal year (the bonus targets set by the Company's 2014 bonus program shall govern Mr. Brighton's eligibility for the payment and the amount of the payment, if any is owed). In February 2015, Mr. Brighton also received an amount equivalent to
the long term incentive cash that would otherwise have been earned and be payable for the 2012-2014 performance period had he continued to be employed by the Company for the full performance period (the LTI cash targets set by the Company's long term incentive plan shall govern Mr. Brighton's eligibility for the payment and the amount of the payment, if any). In addition, all unvested stock options, restricted stock units, and other equity-based awards held by Mr. Brighton will continue to vest in accordance with existing plan documents during the period that he provides consulting services. The consulting agreement also contains non-competition and non-solicitation provisions, as well as other customary terms, and is subject to delivery of a general release by Mr. Brighton that is not revoked within the periods set forth under applicable law.
The Company has change in control agreements with eachcertain of its current named executive officer except for Messrs. Carley, Brown, and Kaplan, and Ms. Post,officers other than those who have change in control provisions in theirseparate employment agreements, as discussed above in "Executive Employment Agreements."agreements. The Company's change in control agreements provide that if the executive resigns for good reason or is terminated by the Company other than for cause or disability or other than as a result of the executive's death during the 18-month period following a change in control, the executive is entitled to receive the following payments and benefits:
None of our change in control provisions provide for aan excise tax gross up payment for Internal Revenue Code Section 280G/4999 purposes. The board has determined not to enter into any agreements with a named executive officer that contain such aan excise tax gross up provision. The definition of change in control is substantially similar to the definition contained in the 2007 Plan, as discussed below. Good reason is defined as a reduction in the executive's compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a significant reduction in the then-effective responsibilities of the executive without the executive's prior written consent (for this purpose, if the Company ceases to be a publicly traded corporation, the executive will not be deemed to have suffered such a reduction in the nature and scope of his or her responsibilities solely because of the change in the nature and scope thereof resulting from the Company no longer being publicly traded), or failure by the Company to obtain the assumption of the obligations contained in the change in control agreement by any successor to the Company. The agreements also contain standard confidentiality and non-solicitation provisions.
Set forth below is a description of the change in control provisions contained within our Second Amended and Restated 2007 Performance Incentive Plan under which there are unvested awards currently outstanding.outstanding, and our Cash Incentive Plan. All outstanding awards under our 2004 Plan are vested.
Second Amended and Restated 2007 Performance Incentive Plan. Generally, and subject to limited exceptions set forth in the 2007 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of
our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2007 Plan may become fully vested or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the two-year period following such change in control event. The administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2007 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Cash Incentive Plan. At the beginning of each performance period under the Cash Incentive Plan, the compensation committee shall establish when bonus awards for such performance period shall be paid. The compensation committee may at such time also provide for the effect of any participant's death, disability, termination without cause, or a change in control event of the Company on the payment of awards for the performance period. The definition of a change in control event under the Cash Incentive Plan is substantially the same as that contained in the 2007 Plan. The compensation committee also has the discretion to establish other change in control provisions with respect to awards granted under the Cash Incentive Plan.
There are currently no amounts payable to or accrued for payment to any named executive officer under the change in control provisions contained in the plans.
Potential Payments upon Termination or Change in Control
The following table presents the amount of compensation payable to each of our named executive officers as if the triggering termination event had occurred on the last day of our most recently completed fiscal year, December 28, 2014:25, 2016:
Name | Benefit(1) | Termination w/o Cause or Resignation with Good Reason($) | Termination with Cause($) | Death($) | Disability($) | Change in Control($)(2) | Benefit(1) | Termination w/o Cause or Resignation with Good Reason($) | Termination with Cause($) | Death($) | Disability($) | Change in Control($)(2) | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current Executives | ||||||||||||||||||||||||||||||||||||
Stephen E. Carley | Salary | 1,500,000 | (3) | 1,500,000 | (3) | |||||||||||||||||||||||||||||||
Denny Marie Post | Salary | 1,400,000 | (3) | 1,400,000 | (3) | |||||||||||||||||||||||||||||||
Bonus | 1,034,218 | (8) | 1,034,218 | (8) | 1,034,218 | (8) | 3,102,654 | (9) | Bonus | 773,316 | (9) | |||||||||||||||||||||||||
Health Benefits | 14,691 | (12) | 14,691 | (12) | Health Benefits | 16,358 | (10) | |||||||||||||||||||||||||||||
Acceleration of LTI Cash Award | 640,051 | (14) | 640,051 | (14) | 1,320,111 | (17) | Acceleration of LTI Cash Award | 222,583 | (11) | 222,583 | (11) | 471,351 | (14) | |||||||||||||||||||||||
Acceleration of Restricted Stock Units | 1,078,286 | (15) | Acceleration of Restricted Stock Units | 430,488 | (12) | |||||||||||||||||||||||||||||||
Acceleration of Options | 6,498,296 | (16) | Acceleration of Options | 602,758 | (13) | |||||||||||||||||||||||||||||||
Stuart B. Brown | Salary | 357,000 | (4) | 357,000 | (4) | |||||||||||||||||||||||||||||||
Guy J. Constant | Salary | 500,000 | (4) | 500,000 | (4) | |||||||||||||||||||||||||||||||
Bonus | 287,168 | (8) | 287,168 | (8) | 287,168 | (8) | 287,168 | (8) | 613,751 | (10) | Bonus | |||||||||||||||||||||||||
Health Benefits | 8,886 | (13) | 8,886 | (13) | Health Benefits | |||||||||||||||||||||||||||||||
Acceleration of LTI Cash Award | 161,442 | (14) | 161,442 | (14) | 324,299 | (17) | Acceleration of LTI Cash Award | |||||||||||||||||||||||||||||
Acceleration of Restricted Stock Units | 318,824 | (15) | Acceleration of Restricted Stock Units | |||||||||||||||||||||||||||||||||
Acceleration of Options | 1,061,846 | (16) | Acceleration of Options | |||||||||||||||||||||||||||||||||
Denny Marie Post | Salary | 392,700 | (5) | 392,700 | (5) | |||||||||||||||||||||||||||||||
Jonathan A. Muhtar | Salary | 375,000 | (5) | 375,000 | (5) | |||||||||||||||||||||||||||||||
Bonus | ||||||||||||||||||||||||||||||||||||
Health Benefits | ||||||||||||||||||||||||||||||||||||
Acceleration of LTI Cash Award | 70,003 | (11) | 70,003 | (11) | 210,031 | (14) | ||||||||||||||||||||||||||||||
Acceleration of Restricted Stock Units | 328,257 | (12) | ||||||||||||||||||||||||||||||||||
Acceleration of Options | ||||||||||||||||||||||||||||||||||||
Carin Stutz | Salary | 400,000 | (6) | 400,000 | (6) | |||||||||||||||||||||||||||||||
Bonus | — | Bonus | 172,308 | (8) | ||||||||||||||||||||||||||||||||
Health Benefits | — | Health Benefits | ||||||||||||||||||||||||||||||||||
Acceleration of LTI Cash Award | 141,618 | (14) | 141,618 | (14) | 298,826 | (17) | Acceleration of LTI Cash Award | |||||||||||||||||||||||||||||
Acceleration of Restricted Stock Units | 556,032 | (15) | Acceleration of Restricted Stock Units | 125,206 | (12) | |||||||||||||||||||||||||||||||
Acceleration of Options | 1,003,243 | (16) | Acceleration of Options | |||||||||||||||||||||||||||||||||
Michael L. Kaplan | Salary | 335,000 | (6) | 335,000 | (6) | Salary | 345,000 | (7) | 345,000 | (7) | ||||||||||||||||||||||||||
Bonus | 269,471 | (8) | 269,471 | (8) | Bonus | |||||||||||||||||||||||||||||||
Health Benefits | Health Benefits | |||||||||||||||||||||||||||||||||||
Acceleration of LTI Cash Award | 35,751 | (14) | 35,751 | (14) | 107,253 | (17) | Acceleration of LTI Cash Award | 111,719 | (11) | 111,719 | (11) | 227,912 | (14) | |||||||||||||||||||||||
Acceleration of Restricted Stock Units | 72,370 | (15) | Acceleration of Restricted Stock Units | 105,844 | (12) | |||||||||||||||||||||||||||||||
Acceleration of Options | 13,906 | (16) | Acceleration of Options | |||||||||||||||||||||||||||||||||
Cathy Cooney | Salary | 305,000 | (7) | |||||||||||||||||||||||||||||||||
Terry Harryman | Salary | |||||||||||||||||||||||||||||||||||
Bonus | 133,068 | (11) | Bonus | 27,300 | (8) | |||||||||||||||||||||||||||||||
Health Benefits | 3,882 | (13) | Health Benefits | |||||||||||||||||||||||||||||||||
Acceleration of LTI Cash Award | 97,665 | (14) | 97,665 | (14) | 195,333 | (17) | Acceleration of LTI Cash Award | 28,323 | (11) | 28,323 | (11) | 56,906 | (14) | |||||||||||||||||||||||
Acceleration of Restricted Stock Units | 98,735 | (15) | Acceleration of Restricted Stock Units | 145,641 | (12) | |||||||||||||||||||||||||||||||
Acceleration of Options | 90,948 | (16) | Acceleration of Options | 23,224 | (13) | |||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||
Eric C. Houseman(18) | Salary | 594,801 | ||||||||||||||||||||||||||||||||||
Stephen E. Carley | Salary | |||||||||||||||||||||||||||||||||||
Payment in lieu of Bonus | 386,329 | Bonus | ||||||||||||||||||||||||||||||||||
Health Benefits | 1,807 | Health Benefits | ||||||||||||||||||||||||||||||||||
Modification of Restricted Stock Units | 69,581 | Acceleration of LTI Cash Award | ||||||||||||||||||||||||||||||||||
Modification of Options | 110,369 | Acceleration of Restricted Stock Units | 788,832 | (12) | ||||||||||||||||||||||||||||||||
Todd A. Brighton(18) | Consulting | 125,699 | ||||||||||||||||||||||||||||||||||
Payment in lieu of Bonus | 274,233 | Acceleration of Options | 1,565,960 | (13) | ||||||||||||||||||||||||||||||||
Payment of LTI Cash award | 72,879 | |||||||||||||||||||||||||||||||||||
Health Benefits | 3,298 |
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
ThePursuant to Section 14A of the Exchange Act, the Company is again asking our stockholders to cast an advisory vote to approve the executive compensation of our named executive officers as disclosed in this proxy statement. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation programs. As an advisory vote, the outcome of the vote on this proposal is not binding upon us. Our compensation committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by our stockholders and will consider the outcome of this vote when making future compensation decisions for our named executive officers. In 2014,2016, our advisory vote proposal was supported by approximately 99.5%98.2% of the votes cast. The board has adopted a policy of providing for annual say-on-pay advisory votes.
As described in detail under the heading "Compensation Discussion and Analysis," our executive compensation objectives have been designed to link incentives and rewards for our executives to the achievement of both specific and sustainable financial and strategic goals which are expected to result in increased stockholder value. We believe that our executive compensation program satisfies these goals and is aligned with the long-term interests of our stockholders.
Highlights of our current compensation program include the following.
Please read the "Compensation Discussion and Analysis" section contained in this proxy statement, beginning on page 25, including the tables and narrative disclosures contained therein for additional details about our executive compensation programs, including information about the fiscal year 2014 compensation of our named executive officers.
Table of Contentsprograms.
We request stockholder approval of the 20142016 compensation of our named executive officers as disclosed in this proxy statement. This vote is not intended to address any specific element of compensation, but rather the overall compensation of our named executive officers and the compensation philosophy, policies, and practices described in this proxy statement.
Accordingly, we ask that you vote FOR the following resolution to approve, on an advisory basis, the compensation of our named executive officers:
"RESOLVED, that the stockholders of Red Robin Gourmet Burgers, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company's proxy statement for the 20152017 annual meeting of stockholders pursuant to the compensation disclosure rules of the U. S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20142016 Summary Compensation Table, and the other related tables and disclosure within this proxy statement."
Proposal No. 2 requires the approval of a majority of the votes cast on the proposal.
Our board of directors unanimously recommends a vote FOR this proposal.
PROPOSAL 3APPROVALADVISORY VOTE ON THE FREQUENCY OF
THE RED ROBIN GOURMET BURGERS, INC. CASH INCENTIVE PLANADVISORY VOTE ON EXECUTIVE COMPENSATION
Description of the ProposalAdvisory Vote
TheOur board of directors proposesbelieves that say-on-pay votes should be conducted every year so that our stockholders may provide us with their direct input on our compensation philosophy, policies, and recommendspractices, as disclosed in our proxy statement each year. Our board's determination was based upon the approvalpremise that named executive officer compensation is evaluated, adjusted, and approved on an annual basis by our compensation committee and that the metrics that are used in determining performance-based award achievements are annual metrics. Our compensation committee, which administers our executive compensation programs, values the opinions expressed by our stockholders in these votes and will consider the outcome of these votes in making its decisions on executive compensation.
You may cast your vote on your preferred voting frequency by choosing one year, two years, three years or abstain from voting when you vote in response to the resolution set forth below.
"RESOLVED, that the option of once every one year, two years, or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting will be determined to be the preferred frequency of the stockholders with which Red Robin Gourmet Burgers, Inc. Cash Incentive Plan. Theis to hold a stockholder vote to approve, on an advisory basis, the compensation committee and our board unanimously adopted the Cash Incentive Plan in October of 2014, subject to stockholder approval, and directed that we submit the Cash Incentive Plan to a vote of our stockholders at this annual meeting.
Purpose of the Cash Incentive Plan; Section 162(m)
The Cash Incentive Plan is designed to provide annual and multi-year cash incentives to members of our senior management team based on the achievement of pre-established, objective performance goals in accordance with the "qualified performance based compensation" rules of Code Section 162(m). Section 162(m) generally limits a corporation's federal tax deduction for compensation paid to "covered employees" (generally, the currently-employedits named executive officers, whoseas disclosed pursuant to the Securities and Exchange Commission's compensation disclosure rules (which disclosure shall include the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure)."
The option of one year, two years, or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting will be the frequency for the advisory vote on executive compensation that has been recommended by stockholders. Abstentions and broker non-votes will have no effect on the outcome of this Proposal. However, because this vote is disclosed inadvisory and not binding on the proxy statement, other thanboard of directors or the chief financial officer) to $1 millionCompany in any taxable year. However, the deduction limit of Section 162(m) does not apply to "qualified performance-based compensation," such as the compensation that is intended to be paid under the Cash Incentive Plan. Thus, we expect that the Cash Incentive Plan, if approved by our stockholders, would be an important element of our executive compensation program going forward as it would allow us to continue to provide senior management with incentives for the achievement of both near-term and mid-term financial and operational corporate goals and individual objectives in a manner that is intended to be tax-deductible.
Summary of the Cash Incentive Plan
The following is a summary of the material terms of the Cash Incentive Plan, and does not describe all of the Cash Incentive Plan terms. Please read the complete text of the Cash Incentive Plan included asAppendix A to this proxy statement.
The Cash Incentive Plan must be administered and interpreted by a committee consisting solely of two or more "outside directors" within the meaning of Section 162(m). The committee will generally be the compensation committee, but may be such other committee of subcommittees ofway, the board asof directors may be appointed by the board from time to time. All determinations and interpretations by the committee are final and binding on all persons.
Performance Periods; Eligibility and Participation
The committee may establish up to two performance periods beginning in any calendar year. The length of each performance period shall be determined by the committee, but no performance period may last for more than three years. Itdecide that it is currently anticipated, although not required, that one of the performances for each year will be established for annual bonus awards to our senior management team. It is anticipated, although not required, that the other performance period for such year will cover multi-year awards, such as our long-term cash incentive awards described in this proxy statement. Awards under the Cash Incentive Plan may be granted to any members of our senior management team whom the committee designates as participants for the performance period. The committee will generally make such designation within 90 days of the beginning of each performance period. As of March 10, 2015, there are approximately six members of our senior management team who would be eligible to be designated as participants under the Cash Incentive Plan.
Performance Goals; Bonus Formulas
Within 90 days of the beginning of each performance period, the committee will establish (a) the performance goals and underlying performance criteria for the performance period, and (b) the formula or other methodology used to determine the amount of any earned bonus award. The performance goals and formula or methodology for determining awards need not be the same for all participants.
A performance goal under the Cash Incentive Plan may be based on one or more of the following measures:
The committee may establish performance goals such that they are adjusted to account for any unusual items or specified events or occurrences during the performance period. In addition, unless the committee determines otherwise at the time the goals are established, the level of attainment of the performance goals shall automatically be adjusted to exclude (a) asset write-downs, (b) extraordinary litigation, claims judgments, or settlements, (c) the effects of changes in tax law, accounting principles, or similar items affecting our reported results, (d) accruals for reorganization and restructuring programs, (e) material changes to invested capital from pension and post-retirement benefits-related items and similar non-operational items, and (f) certain extraordinary or non-recurring items as described in the applicable accounting rules or as announced by us when reporting results of operations.
After the end of each performance period, the committee reviews and certifies the level of attainment of the performance goals for the performance period and calculates the potential bonus award amounts for each participant based on the pre-specified formula or other methodology. The bonus to be paid to any participant will not exceed the maximum amount described below. The committee has discretion to reduce or eliminate the amount of any potential earned award for any reason (including individual performance) to the extent it deems such reduction to be in the best interests of our stockholders and the stockholders.
The maximum amount ofCompany to hold an advisory vote on executive compensation payable as a performance award undermore or less frequently than the Cash Incentive Plan for any performance period is $3 millionmultiplied by the number of years (or portion thereof) in the performance period.
At the beginning of each performance period, the committee shall establish when bonus awards for such performance period shall be paid. The committee may at such time also provide for the effect of any participant's death, disability, termination without cause, or company change in control on the payment of awards for the performance period. Awards shall generally be paid in cash, but may in the committee's discretion be paid in the form of vested or unvested common stock.
The Cash Incentive Plan may generally be amended or terminated at any time for any reasonoption approved by our board.
All earned awards will be subject to applicable tax withholdings.
The amounts of awards payable under the Cash Incentive Plan, if any, are not determinable. The potential amount payable to any participant depends on the performance goals established for the participant, the determination as to whether the performance goals were met, the participant's individual performance, and the discretion of the committee.stockholders.
Proposal No. 3 requires the approval of a majority of the votes cast on the proposal.
Our board of directors unanimously recommends aan annual advisory vote FOR this proposal.on the compensation of our executive officers.
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATIONTO INCREASE AUTHORIZED SHARES OF COMMON STOCK2017 PERFORMANCE INCENTIVE PLAN
Description of the Proposed AmendmentIntroduction
TheOur board of directors recommends and proposes the 2017 Performance Incentive Plan (the "2017 Plan"), which was approved by our compensation committee on February 16, 2017. We believe that incentives and recommendsstock-based awards focus employees on the approvalobjective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the proposed 2017 Plan are an amendmentimportant attraction, retention, and motivation tool for participants in the plan.
The compensation committee approved the 2017 Plan because it believes the Company needs to continue to adequately provide for future incentives. Approval of the 2017 Plan is central to the Company's Restated Certificate of Incorporationcompensation committee's plan to shift executive officer compensation to include more equity and less cash components and be more performance based in a manner that is compliant with Internal Revenue Code section 162(m). In 2017, our chief executive officer and chief financial officer compensation will shift to increase the authorized common stockportion of the Company from 30,000,000 shares, par value $0.001 per share, to 45,000,000 shares, par value $0.001 per share. The board of directors approved this amendment to the Restated Certificate of Incorporationcompensation paid in equity and based on February 11, 2015,performance, subject to stockholder approval.
Effectsapproval of Increasing the Numbernew 2017 Plan. In February 2017, these executives received the following equity grants in the form of Authorized Sharesperformance share units (PSUs), instead of Common Stock
Thecash for that portion of the long-term incentive program, under the 2017 (subject to stockholder approval of the plan as proposed amendment would increase the number ofherein):
Assuming the new 2017 Plan is approved, the compensation committee contemplates this change for all executive officers beginning in 2018. See "Compensation Discussion and Analysis—2017 Compensation Program" in this proxy statement.
In approving the 2017 Plan, the compensation committee also ensured that it was consistent with best practices, including the following plan features which are described in greater detail below:
We currently maintain the Company is authorized to issue from 30,000,000 to 45,000,000.Second Amended and Restated 2007 Performance Plan (the "2007 Plan") and the Employee Stock Purchase Plan (the "ESPP"). As of March 10, 2015,9, 2017, a total of the 30,000,000 currently authorized647,432 shares of our common stock approximately 19,025,385were then subject to outstanding awards granted under the 2007 Plan, and an additional 354,732 shares of our common stock were either issued or reservedthen available for issuance. Shares reserved for issuance consisted of 662,049 shares reserved forfuture issuance under the 2007 Plan. Based upon these issued and reserved sharesAs of common stock, we currently have 10,974,615 shares of common stock remaining availableMarch 9, 2017, the weighted average term for issuance for other corporate purposes.
If the proposed amendment is adopted, there would be 25,974,615 authorized shares of common stock available for issuance. Except for shares reserved for issuanceall outstanding awards under the 2007 Plan the board has no current plans to issue additionalwas 7.54 years, and a total of 21,504 shares of our common stock.stock were then available for future issuance under the ESPP. We are also seeking an increase in shares that would be available under the ESPP to 100,000. See "Proposal 5—Approval of the Amended and Restated of the Employee Stock Purchase Plan" in this proxy statement for more information about this proposal. The 2007 Plan and the ESPP are referred to collectively in this proposal as the "Existing Plans."
The Restated Certificate2017 Plan provides for grant of Incorporation currently also authorizes the issuanceawards of up to 3,000,000619,732 shares of preferred stock, par value $0.001 per share, noneour common stock. The 619,732 shares is comprised of which are issued or outstanding. The proposed amendment to the Restated Certificate of Incorporation would not change the authorized number of shares of preferred stock. There are currently no plans, arrangements, commitments, or understandings with respect tothat will be available for grant that remain from the issuance of any shares of preferred stock.
We propose to amend paragraph A of Article FOURTH of the Restated Certificate of Incorporation so that it would read in its entirety as follows:
"FOURTH: A. The total2007 Plan and an additional number of shares of all classes of stock which the Corporation shall have authority to issue is Forty-Eight Million (48,000,000) shares, consisting of Forty-Five Million (45,000,000) shares of Common Stock, par value $0.001 per share (the "Common Stock"), and Three Million (3,000,000) shares of Preferred Stock, par value $0.001 per share (the "Preferred Stock")."
The only changes that would be made to paragraph A of Article FOURTH, as currently in effect, would be to increase the total number of shares of common stock that we may issue from 30,000,000new shares to 45,000,000 shares and to reflectequal a corresponding increase in the aggregatetotal of 265,000. The exact number of shares of capital stock of all classes that may be issued from 33,000,000 to 48,000,000 shares.
The board of directors is recommending this increase in the authorized shares of common stock primarily to provide the Company the flexibility to issue shares of common stock for future corporate needs. As a general matter, the board of directors would be able to issue these additional shares of common stock in its discretion from time to time, subject to and as limited by applicable law, the rules and listing requirements of NASDAQ, or of any other securities exchange, as applicable, and without further action or approval of the stockholders. The newly authorized shares of common stock would be issuable for any proper corporate purpose, including future acquisitions, capital-raising or financing
transactions involvingof new shares and shares available under the 2007 Plan will vary because additional awards may be made under the 2007 Plan prior to the annual meeting on May 18, 2017. However, the total number available under the proposed 2017 Plan will not exceed 619,732 shares.
If stockholders approve the 2017 Plan, no new awards will be granted under the 2007 Plan after the annual meeting.
Based on our equity award plans in effect and outstanding awards at March 9, 2017, if stockholders approve the 2017 Plan, the total number of shares subject to outstanding awards and available for future awards under the 2017 Plan and other continuing equity compensation plans would be as follows:
Shares subject to outstanding awards(1) | 677,104 | |||
Shares to be available for future equity awards, including under the proposed 2017 Plan | 590,060 | |||
Total shares | 1,267,164 | |||
Percentage of outstanding shares(2) | 9.85 | % |
If stockholders do not approve the 2017 Plan, we will continue to have the authority to grant awards under the 2007 Plan. If stockholders approve the 2017 Plan, the termination of our grant authority under the 2007 Plan will not affect awards then outstanding under that plan.
Prior to 2016, cash incentive awards were granted and paid pursuant to the 2007 Plan. Beginning in 2016, we began awarding and paying cash incentive awards pursuant to the Cash Incentive Plan. See "2016 Executive Summary—Employment Agreements, Separation Related Arrangements, and Change in Control Agreements—Incentive Plans—Cash Incentive Plan" above for a description of our Cash Incentive Plan. Future cash incentive awards are anticipated to be granted under the new 2017 Plan, if approved by our stockholders.
Summary Description of the 2017 Plan
The board believesprincipal terms of the 2017 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2017 Plan, which appears as Appendix A to this proxy statement.
Purpose. The purpose of the 2017 Plan is to promote the success of the Company and to increase stockholder value by (a) incentivizing the officers, employees, directors, consultants, and other service providers of the Company and our affiliates to foster and build upon the continued success of the Company and to operate and manage the business in a manner that these additional shares will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain officers, employees, directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of stock, or to receive compensation which is based upon appreciation in the value of stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.
Administration. Our compensation committee will administer the 2017 Plan. The compensation committee has full authority in its discretion to determine the officers, employees, directors,
consultants, and other service providers of the Company or our affiliates to whom awards will be granted and the terms and provisions of awards, subject to the provisions of the 2017 Plan. Subject to the provisions in the 2017 Plan, the compensation committee has full and conclusive authority to (a) interpret the 2017 Plan; (b) prescribe, amend, and rescind rules and regulations relating to the 2017 Plan; (c) determine the terms and provisions of the respective award agreements; and (d) make all other determinations necessary or advisable for the proper administration of the 2017 Plan.
Our board of directors may by resolution authorize one or more officers of the Company and/or the chair of the compensation committee to designate individuals to receive awards under the 2017 Plan, and to determine the type of awards and the terms and conditions and number of shares of common stock or the amount of cash subject to such awards; provided however, that any such delegation will be subject to such parameters and restrictions consistent with the flexibility2017 Plan.
No Repricing. In no case (except due to issuean adjustment to reflect a stock split, or similar event, or any repricing that may be approved by our stockholders) will any adjustment be made to a stock option or stock appreciation right award under the 2017 Plan (by cancellation, surrender, or exchange) that would constitute a repricing of the per share exercise or base price of the award.
Eligibility and Limits. Persons eligible to receive awards under the 2017 Plan, subject to limited exceptions set forth in the 2017 Plan, include officers, employees, directors, consultants, and other service providers of the Company or any affiliate of the Company. Currently, approximately 667 officers and employees of the Company and our affiliates (including all of our named executive officers), and each of our non-employee directors, except for Mr. Hill, who will retire and conclude his board service on the date of our annual meeting, are considered eligible under the 2017 Plan.
The maximum number of shares of our common stock that may be issued or transferred pursuant to awards under the 2017 Plan is 619,732, which is comprised of that number of shares available for additional award grant purposes under the 2007 Plan as of the date of the annual meeting and an additional number of new shares that together with shares available under the 2007 Plan total 619,732 shares. As of March 9, 2017, 354,732 shares were available for awards under the 2007 Plan, and 647,432 shares were subject to awards then outstanding under the Existing Plans. As noted above, no new awards will be granted under the 2007 Plan after the annual meeting if stockholders approve the 2017 Plan.
The following other limits are also contained in the 2017 Plan:
Types of Awards. The 2017 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in our common stock or unit of our common stock, as well as cash performance awards pursuant to Section 3.5 of the 2017 Plan.
A stock option is the right to purchase shares of our common stock at a future date at a specified price per share (the "Exercise Price"). The per share Exercise Price of an option generally may not be less than the fair market value of a share of our common stock on the date of grant. The maximum term of an option is ten years from the date of the grant. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under "Federal Income Tax Consequences of Awards under the 2017 Plan" below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2017 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.
A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of a specified or determinable number of shares of our common stock at the time of payment or exercise over a specified or determinable price, which may not be less than the fair market value of such shares of stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant.
The other types of awards that may be granted under the 2017 Plan include, without limitation, grants of our common stock, grants of rights to receive our common stock in the future, dividend equivalent rights, and cash performance awards granted consistent with "Performance-Based Awards" as described below.
Performance-Based Awards. The compensation committee may grant awards that are intended to be performance-based awards within the meaning of Section 162(m) of the U.S. Internal Revenue Code ("Performance-Based Awards"). Performance-Based Awards are in addition to any of the other types of awards that may be granted under the 2017 Plan (including options and stock appreciation rights which may also qualify as performance-based awards for Section 162(m) purposes). Performance-Based Awards may be in the form of restricted stock, performance stock, stock units, other rights, or cash performance awards.
The vesting or payment of Performance-Based Awards (other than options or stock appreciation rights) will depend on the absolute or relative performance of the Company on a consolidated, business unit, division, or affiliate (or business unit or division of an affiliate) basis. The compensation committee will establish the criterion or criteria and target(s) on which performance will be measured. The compensation committee must establish criteria and targets in advance of applicable deadlines under the U.S. Internal Revenue Code and while the attainment of the performance targets remains substantially uncertain. The criteria that the compensation committee may use for this purpose will include one or more of the following: earnings per share; book value per share; operating cash flow; free cash flow; cash flow from return on investments; cash available; net income (before or after taxes); revenue or revenue growth; total stockholder return; return on invested capital; return on stockholder equity; return on assets; return on common book equity; return on gross investment; market share; economic value added; operating margin; profit margin; stock price; enterprise value; operating income; EBIT or EBITDA; expenses or operating expenses; productivity of employees as measured by revenues, costs, or earnings per employee; working capital; improvements in capital structure; guest retention, traffic and/or satisfaction; employee retention and/or engagement; completion of operating milestones; cost reduction goals; Company, franchise, or system same restaurant sales; Company, franchise, or system restaurant growth in number of new restaurants; average restaurant volume growth; or any combination of the foregoing. The performance measurement period with respect to an award will be established by the compensation committee at the time the award is granted. The compensation committee may appropriately adjust any evaluation of performance under a performance goal to remove the effect of any one or more of the following: equity compensation expense under accounting standard ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting
principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the award under Section 162(m), if applicable.
With respect to any full-value award, the vesting of which is based solely on service with the Company (and not upon, either all or in part, the attainment of any performance measures), with the exception of such awards to non-employee directors, the minimum period of service required for such award to vest is three years following the grant of such award, provided that such award may vest ratably in no less than equal annual increments over such period. With respect to any full-value award that is a Performance-Based Award and issued to an individual under the 2017 Plan other than a non-employee member of the Board of Directors, the applicable performance measurement period may not be less than one year. The compensation committee may not waive the applicable vesting requirements for any full-value award except in the case of death, disability, and change in control.
Performance-Based Awards may be paid in stock or cash (in either case, subject to the limits described under the heading "Eligibility and Limits" above). Before any Performance-Based Award (other than an option or stock appreciation right) is paid, the compensation committee must certify in writing that the performance target or targets have been satisfied. The compensation committee has discretion to determine the performance target or targets and any other restrictions or other limitations of Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.
Acceleration of Awards; Early Termination of Awards. Generally, and subject to limited exceptions set forth in the 2017 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2017 Plan may become fully vested or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the potential expensetwo-year period following such change in control event. The compensation committee also has the discretion to establish other change in control provisions with respect to awards granted under the 2017 Plan. For example, subject to certain limitations, the compensation committee could provide for the acceleration of vesting or delay incidentpayment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Restrictions on Transfer. Subject to obtainingcertain exceptions contained in Section 4.2 of the 2017 Plan or the applicable award agreement, awards under the 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution, or pursuant to domestic relations orders, and are generally exercisable, during the recipient's lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient's beneficiary or representative. The compensation committee has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws.
Adjustments. As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, consolidations, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends.
No Limit on Other Authority. Except as expressly provided with respect to the termination of the authority to grant new awards under the 2007 Plan, the 2017 Plan does not limit the authority of the board of directors or the compensation committee to grant awards or authorize any other compensation, with or without reference to our common stock, under any other plan or authority.
Termination and Amendment of the 2017 Plan. The board of directors may amend or terminate the 2017 Plan at any time without stockholder approval; provided, however, that the board of directors shall obtain stockholder approval for any particular issuance. Thereamendment to the 2017 Plan that, except as provided under Section 5.1 of the 2017 Plan, increases the number of shares of stock available under the 2017 Plan, materially expands the classes of individuals eligible to receive awards, materially expands the type of awards available for issuance under the 2017 Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the award agreement explicitly provides otherwise, no such termination or amendment may materially and adversely affect the rights of the recipient under such award without the consent of the holder of an award.
Federal Income Tax Consequences of Awards under the 2017 Plan
The U.S. federal income tax consequences of the 2017 Plan under current federal law, which is subject to change, are currently no commitmentssummarized in the following discussion of the general tax principles applicable to the 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or understandings withinternational tax consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under the 2017 Plan. Furthermore, any tax advice contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Stock Options and Stock Appreciation Rights. With respect to nonqualified stock options, the issuance of anyCompany is generally entitled to deduct, and the participant will recognize, taxable ordinary income in an amount equal to the excess of the additionalfair market value of the shares at the time of exercise over the option exercise price. Stock appreciation rights are taxed and deductible in substantially the same manner as nonqualified stock options.
With respect to incentive stock options, a participant who exercises an incentive stock option will not be taxed at the time of exercise. Instead, the participant will be taxed at the time the participant sells common stock purchased pursuant to the incentive stock option on the difference between the price the participant paid for the stock pursuant to the incentive stock option and the amount for which the participant sells that stock. If the participant does not sell the stock prior to two years after the date the option was granted to the participant and one year after the date the stock is transferred to the participant, then the participant will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and the aggregate exercise price and the Company will not get a corresponding tax deduction. If the participant sells the stock at a gain prior to the expiration of such one and two year periods, the amount by which (A) the lesser of (i) the fair market value of the stock on the date of exercise and (ii) the amount for which the stock is sold exceeds (B) the amount the recipient paid for the stock will be taxed as ordinary income and the Company will be entitled to a corresponding tax deduction in the same amount (if the amount for which the stock is sold exceeds the fair market value on the date of exercise, such excess amount is taxed as capital gain). If the participant sells the stock for less than the amount paid for the stock prior to the expiration of the one and two year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive option may subject a recipient to, or increase a recipient's liability for, the alternative minimum tax.
Stock Awards. A participant will not be taxed upon the grant of a stock award if such award is not transferable by the recipient and is subject to a "substantial risk of forfeiture," as defined in the U.S. Internal Revenue Code. However, when the shares of common stock that would be authorizedare subject to the stock award are transferable by the proposed amendment.participant or are no longer subject to a substantial risk of forfeiture, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the stock subject to the stock award minus any amount paid for such stock, and the Company will at such time be entitled to a corresponding deduction. However, if a participant so elects at the time the participant receives a stock award, the participant may include the fair market value (at the time of receipt) of the stock subject to the stock award, less any amount paid for such stock, in the participant's income at that time and the Company also will be entitled to a corresponding deduction at that time.
Other Awards. A participant will not recognize income upon the grant of a dividend equivalent right, restricted stock unit or cash performance award. Generally, at the time a payment receives payment under any dividend equivalent right, restricted stock unit, or cash performance award, the participant will recognize compensation taxable as ordinary income in an amount equal to the cash or the fair market value of common stock received, and the Company will then be entitled to a corresponding deduction.
General. Unless specified otherwise in an individual agreement between a participant and the Company, to the extent that acceleration of an award made under the 2017 Plan in connection with a "change in control" (as this term is used under the U.S. Internal Revenue Code) would result in compensation being paid that is not fully deductible by the Company or one of its subsidiaries because of Section 280G of the U.S. Internal Revenue Code, such award will not accelerate to the extent or in a manner that would result in any compensation being paid that is not fully deductible.
The aggregate compensation in excess of $1,000,000 attributable to awards that are not "performance-based" within the meaning of Section 162(m) of the U.S. Internal Revenue Code may not be permitted to be deducted for tax purposes by the Company in certain circumstances.
The 2017 Plan is not qualified under Section 401(a) of the U.S. Internal Revenue Code.
Rights of Additional Authorized SharesNew Plan Benefits under the 2017 Plan
Any authorized sharesBecause future awards under the 2017 Plan will be granted at the discretion of common stock, ifthe compensation committee, the type, number, recipients, and when issued, wouldother terms of such awards cannot be part ofdetermined at this time. Information regarding our existing class of common stock and would have the same rights and privileges as the shares of common stock currently outstanding. Our stockholders do not have preemptive rightsrecent practices with respect to annual and long-term incentive awards and stock-based compensation under existing plans is presented in the common stock, nor do they have cumulative voting rights. Accordingly, should"Summary Compensation Table" and "Outstanding Equity Awards at 2016 Fiscal Year-End" table contained elsewhere in this proxy statement, and in our financial statements for the board of directors issue additional shares of common stock, existing stockholders would not have any preferential rights to purchase any of such shares, and their percentage ownership of our then outstanding common stock could be reduced.
Potential Adverse Effects of Amendment
Future issuances of common stock or securities convertible into common stock could have a dilutive effectfiscal year ended December 25, 2016, in the Annual Report on our earnings per share, book value per share, and the voting power and interests of current stockholders. In addition, the availability of additional shares of common stock for issuance could, under certain circumstances, discourage or make more difficult any efforts to obtain control of the Company. The board is not currently aware of any attempt, or contemplated attempt, to acquire control of the Company, nor isForm 10-K which accompanies this proposal being presented with the intent that it will be used to prevent or discourage any acquisition attempt. However, nothing would prevent the board from taking any such actions that it deems to be consistent with its fiduciary duties.
Effectiveness of Amendment
proxy statement.
If stockholders decline to approve the proposed amendment is adopted, it2017 Plan, no awards will become effectivebe granted under the 2017 Plan, but awards may continue to be granted under the 2007 Performance Incentive Plan. In addition, there are likely insufficient shares available for grants of awards under the 2007 Plan beyond the current year to participants based upon our past practices and compensation programs. Consequently, the filing of a certificate of amendmentCompany may use additional cash or other compensation to the Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.retain, reward and incent employee performance.
Approval of Proposal No. 4 requires approvalthe affirmative vote of such proposal at the annual meeting by a majority of the outstanding shares of common stock as ofvotes cast in person or by proxy at the record date.annual meeting.
Our board of directors unanimously recommends athat you vote FOR this proposal.approval of the 2017 Performance Incentive Plan.
PROPOSAL 5
APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
Our Employee Stock Purchase Plan (the "ESPP") was adopted by our board of directors and approved by our stockholders in 2002. Since its original adoption in 2002, our board of directors has effected two subsequent amendments, in August 2009 and in December 2009. Under the ESPP, eligible employees have the opportunity to acquire shares of our common stock at a discount.
A total of 300,000 shares of our common stock were authorized for issuance under the ESPP. As of March 9, 2017, 278,496 shares of our common stock were issued and outstanding under the ESPP, and 21,504 shares of our common stock were available for issuance under the ESPP. On February 16, 2017, the compensation committee approved a proposal to amend and restate the ESPP to (i) increase the number of shares of common stock authorized for issuance under the ESPP by an additional 100,000 shares, (ii) extend date after which no new offering periods may commence by an additional ten years through July 13, 2027 and (iii) to effect certain technical revisions. We are seeking stockholder approval of the amendment and restatement of the ESPP.
Set forth below is a summary of the principal terms of the ESPP as proposed to be amended, and all references in this section are to the ESPP as proposed to be amended. The summary of the provisions below is qualified in its entirety by the full text of the ESPP. A copy of the ESPP as amended and restated by the proposed amendment is attached to this proxy statement as Appendix B.
Summary Description of the ESPP
Purpose. The purpose of the ESPP is to assist eligible employees in acquiring a stock ownership interest in the Company, at a favorable price and upon favorable terms, pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code (the "Code"). The ESPP is also intended to encourage eligible employees to remain in the employ of the Company or a subsidiary and to provide them with an additional incentive to advance the best interests of the Company.
Administration. The compensation committee shall supervise and administer the ESPP and shall have full power and discretion to adopt, amend, and rescind any rules deemed desirable and appropriate for the administration of the ESPP, and to make all other determinations necessary or advisable for the administration of the ESPP.
Eligibility. Any person who is employed by the Company or a participating subsidiary as of the first day of any offering period (the "Grant Date") shall be eligible to participate in the ESPP during the offering period in which such Grant Date occurs; provided, however, that any person who has been employed by the Company or a subsidiary for less than one year or whose customary employment is for twenty hours or less per week shall not be eligible to participate in the ESPP.
Maximum Purchase. The maximum number of shares that any one participant may acquire upon exercise of his or her option with respect to any one offering period is 750; provided, however, that the compensation committee may establish a different individual limit in offering documents, in which case the 750 share limit shall be superseded by the individual limit set forth in such offering documents.
Offering Periods. The ESPP is implemented by consecutive six-month offering periods; provided, however, that the compensation committee may declare, as it deems appropriate and in advance of the applicable offering period, a shorter or longer offering period. Unless otherwise specified by the compensation committee in advance of the offering period, an offering period that commences on or about July 1 will end the following December 31, and an offering period that commences on or about January 1 will end the following June 30.
Method of Payment of Contributions. At the time an eligible employee files a subscription agreement with the Company to participate in the ESPP, he or she elects to have payroll deductions made on each payday during the offering period in an amount not exceeding 15% of the compensation such participant receives on each payday during the offering period. The Company shall maintain on its books, or cause to be maintained by a recordkeeper, an account in the name of each eligible employee who has elected to participate in the ESPP. A participant may not make any additional payments to his or her account. A participant may terminate his or her contributions during an offering period by filing with the Company a written withdrawal form; provided, however, that for such withdrawal to be effective, the Company must receive the participant's withdrawal form prior to the last day of that offering period (the "Exercise Date").
Grant of Option. On each Grant Date, each eligible employee who is a participant during that offering period shall be granted an option to purchase a number of shares of our common stock. The option shall be exercised on the Exercise Date. The number of shares subject to the option shall be determined by dividing the participant's account balance as of the applicable Exercise Date by the option price, subject to the maximum number of shares provided under the heading "Maximum Purchase" above.
The compensation committee shall determine the option price per share at which shares of our common stock are sold in an offering period under the ESPP; provided that such option price may not be less than the lesser of (a) 85% of the fair market value of a share of our common stock on the applicable Grant Date; and (b) 85% of the fair market value of a share of our common stock on the applicable Exercise Date. Fair market value shall mean, as of any date and unless the compensation committee determines otherwise, the closing sales price of our common stock as quoted on any established stock exchange or national market system on the date of determination (or the closing bid, if no sales were reported) as reported in a source the compensation committee deems reliable.
A person who is otherwise eligible to participate in the ESPP shall not be granted any option or other right to acquire our common stock under the ESPP to the extent (a) it would cause the person to own stock possessing 5% or more of the total combined voting power or value of all classes of our common stock or that of any subsidiary; or (b) such option would cause the individual to have rights to acquire stock under the ESPP (and any of our other existing compensation plans or compensation plans of our subsidiaries) that accrue at a rate that exceeds $25,000 of the fair market value of our common stock or that of a subsidiary for each calendar year in which such right is outstanding at any time.
Exercise of Option. Unless a participant terminates his or her participation in the ESPP by filing a withdrawal form, as discussed above, his or her option to acquire our common stock shall be exercised automatically on the Exercise Date for that offering period, without any further action on the participant's part, and the maximum number of whole shares of our common stock subject to such option shall be acquired at the option price with the balance of such participant's account. Fractional shares of our common stock may not be acquired. If an amount which exceeds the individual limit established pursuant to Section 4(b) of the ESPP or one of the limitations set forth in Section 8(c) of the ESPP remains in a participant's account after the exercise of his or her option on the Exercise Date, such amount shall be refunded to the participant as soon as administratively practicable after such date.
Transferability. Rights granted under the ESPP are not transferable by a participant other than by will, by the laws of descent and distribution or pursuant to the ESPP's beneficiary designation provisions.
Adjustments of and Changes in our Common Stock. Should any change be made to our common stock by reason of any reclassification, recapitalization, stock split, or reverse stock split; any merger,
combination, consolidation, or other reorganization; any split-up, spin-off, or similar extraordinary dividend; any exchange of our common stock or other securities, any similar, unusual or extraordinary corporate transaction in respect to our common stock; or any sale of substantially all of the assets of the Company as an entirety; the compensation committee may make appropriate adjustments to the option price and number of shares of our common stock issuable under the ESPP.
Possible Early Termination of ESPP and Options. Upon a dissolution of the Company, or any other event described in "Adjustments of and Changes in our Common Stock" above, that the Company does not survive, the ESPP and, if prior to the last day of an offering period, any outstanding option granted with respect to that offering period shall terminate, subject to any provision that has been expressly made by our board of directors for the survival, substitution, assumption, exchange, or other settlement of the ESPP and options. In the event a participant's option is terminated without a provision having been made by our board of directors for a substitution, exchange, or other settlement of the option, such participant's account shall be paid to him or her in cash without interest.
Term of Plan; Amendment or Termination. The ESPP shall become effective as of July 12, 2017 (the "Effective Date"). No new offering periods shall commence on or after the day after the tenth anniversary of the Effective Date and the ESPP shall terminate as of the later of (a) the tenth anniversary of the Effective Date; and (b) the Exercise Date of the last offering period commenced on or prior to the day before the tenth anniversary of the Effective Date, unless sooner terminated pursuant to Section 4, Section 18, or Section 19 of the ESPP.
Our board of directors may, at any time, terminate or, from time to time, amend, modify or suspend the ESPP, in whole or in part, without notice. Stockholder approval for any amendment or modification shall not be required, except to the extent required by applicable law or required under Section 423 of the Code in order to preserve the intended tax consequences of the ESPP, or otherwise deemed necessary or advisable by our board of directors.
Tax Withholding. The Company may deduct from a participant's account balance as of an Exercise Date, and before the exercise of the participant's option takes effect, the amount of any taxes which the Company reasonably determines we may be required to withhold with respect to such exercise. In such event, the maximum number of whole shares of our common stock subject to such option shall be acquired at the option price with the balance of the participant's account.
Federal Income Tax Information
The U.S. federal income tax consequences of the ESPP under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the ESPPP. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under the ESPP. Furthermore, any tax advice contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Rights to acquire shares of our common stock granted under the ESPP are intended to qualify for favorable federal income tax treatment associated with rights granted under an "employee stock purchase plan" that qualifies under the provisions of Section 423(b) of the Code. Under these provisions, no income will be taxable to a participant until the shares acquired under the ESPP are sold or otherwise disposed of by the participant. If shares acquired under the ESPP are disposed of within two years from the date of grant or within one year from the date of purchase,(a transaction referred to as a "disqualifying disposition"), the participant will recognize ordinary income in the year of such disposition equal to the excess of the fair market value of the stock on the date of purchase over the option exercise price. The amount of such ordinary income will be added to the participant's basis in
the shares and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. A capital gain or loss will be long-term if the participant holds the shares for more than one year after the date the participant purchases the shares.
If stock acquired under the ESPP is sold (or otherwise disposed of) more than two years after the date of grant and more than one year after the date of purchase, then the lesser of (i) the excess of the sale price of the stock at the time of disposition over the option price and (ii) the excess of the fair market value of the stock as of the date the participant entered the offering period over the option price (determined as of the date the participant entered the offering period) will be treated as ordinary income. If the sale price is less than the option price, no ordinary income will be reported. The amount of such ordinary income will be added to the participant's basis in the shares and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be long-term capital gain or loss.
The Company will generally be entitled to a deduction in the year of a disqualifying disposition equal to the amount of ordinary income realized by the participant as a result of such disposition, subject to the satisfaction of any tax-reporting obligations. In all other cases, no deduction is allowed.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE ESPP. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
Proposal No. 5 requires the approval of a majority of the votes cast on the proposal.
Our board of directors unanimously recommends that you vote FOR approval of the Amended and Restated Employee Stock Purchase Plan.
PROPOSAL 6
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm retained to perform the audit of our financial statements and our internal control over financial reporting. The audit committee selected KPMG LLP ("KPMG") as our independent auditor for the fiscal year ending December 31, 2017. KPMG also served as our independent auditor for the 2016 fiscal year ended December 25, 2016 and the 2015 fiscal year ended December 27, 2015. See "Recent ChangePrior to that, Deloitte & Touche LLP ("D&T") served as our independent auditor. In 2016, stockholders approved the ratification of KPMG by approximately 99.96% of votes cast. The audit committee believes the continued retention of KPMG is in Auditor" below.the best interests of the Company and our stockholders. Representatives from KPMG are expected to be present at the annual meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to any questions that might arise.
Recent Change in Auditor in 2015
With a rotation of audit engagement partner required in 2015, the audit committee decided to open the annual selection process to several other independent registered public accounting firms. The audit committee, with the assistance of management, performed an evaluation of firms to determine the Company's independent auditor for the 2015 fiscal year. As a result of this process, on March 26, 2015, the audit committee formally approved the engagement of KPMG as the Company's independent auditor for the fiscal year ending December 27, 2015. On March 25, 2015, the Company informed Deloitte & Touche LLP ("D&T") that it was being dismissed as the Company's independent auditor. On March 31, 2015, the Company signed an engagement letter with KPMG.
D&T served as our independent auditor from 1992 to March 2015. The reports of D&T on the Company's consolidated financial statements for the two most recent fiscal yearsyear ended December 28, 2014 and December 29, 2013 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company's two most recent fiscal yearsyear ended December 28, 2014, and December 29, 2013, and during the subsequent interim period preceding D&T's dismissal, there were: (i) no disagreements with D&T on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of D&T would have caused D&T to make reference to the subject matter of the disagreements in connection with its reports, and (ii) no reportable events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K.
During the Company's two most recent fiscal yearsyear ended December 28, 2014, and December 29, 2013, and during the subsequent interim period preceding KPMG's engagement, neither the Company, nor anyone on its behalf, consulted KPMG with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, and neither a written report was provided to the Company nor oral advice was provided to the Company that KPMG concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
On March 31, 2015, we filed with the SEC a Current Report on Form 8-K disclosing the appointment of KPMG as our new independent auditor and the related dismissal of D&T from that role.
Selection ProcessEvaluation of Auditor
In approving the selection of KPMG as the Company's independent auditor for the fiscal year ending December 27, 2015,31, 2017, the audit committee considered, among other factors:
Based on this evaluation, our board is requesting that our stockholders ratify KPMG's appointment for the 20152017 fiscal year. We are not required to seek ratification from stockholders of our selection of independent auditor, but are doing so as a matter of good governance. If the selection is not ratified, the audit committee will consider whether it is appropriate to select another independent auditor. Even if the selection is ratified, the audit committee in its discretion may select a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
Representatives from KPMG are expected to be present at the annual meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to any questions that might arise. We do not expect that representatives from D&T, our former independent auditor, will be present at the meeting.
Principal Accountant Fees and Services
For the 2014 and 2013 fiscal years, D&T served as the Company's independent auditor. The following table summarizes the aggregate fees billed or to be billed by D&TKPMG for the fiscal years ended December 28, 201425, 2016 and December 29, 2013:27, 2015, respectively:
| 2014($) | 2013($) | 2016($) | 2015($) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit fees | 749,254 | 749,658 | 824,379 | 770,881 | ||||||||||
Audit-related fees | 125,000 | — | — | — | ||||||||||
Tax fees | 139,309 | 10,774 | — | — | ||||||||||
All other fees | 2,200 | 37,200 | — | — | ||||||||||
| | | | | | | | | | | | | | |
Total | 1,015,763 | 797,632 | 824,379 | 770,881 |
Fees for audit services in 20142016 and 20132015 consisted of the audit of our annual financial statements and reports on internal controls required by the Sarbanes-Oxley Act of 2002, reviews of our quarterly financial statements, and fees related to a review of our Franchise Disclosure Document. Fees for audit services in 2014 also included additional procedures performed as a result of acquisitions of franchised restaurants. Fees for audit services in 2013 included additional procedures performed in connection with our Enterprise Resource Planning ("ERP") system implementation.
Audit-relatedThere were no audit-related fees billed by KPMG in 20142015 or 2016.
There were related to advisory services performedno tax fees billed by KPMG in connection with our acquisitions of franchised restaurants.2015 or 2016.
There were no all other fees billed by KPMG in 2015 or 2016.
Tax fees billed in 2014 were related to services performed in connection with research and development credit analysis and acquisitions of franchised restaurants. Tax fees billed in 2013 were related to certain services performed primarily related to various federal and state tax issues.
All other fees billed in 2014 and 2013 included license fees related to D&T's proprietary web-based research database. All other fees billed in 2013 also included fees related to human resources benchmarking services.
With respect to non-audit services provided from time to time, the audit committee considered whether D&T's provision of other non-audit services to the Company was compatible with maintaining D&T's independence. The audit committee discussed such services with the independent auditor and Company management to determine whether the services were permitted under SEC rules and regulations concerning auditor independence.
Audit Committee's Pre-Approval Policies and Procedures
The audit committee pre-approves all audit and non-audit services to be performed by its independent auditor, and has established policies and procedures to ensure that the Company is in full compliance with the requirements for pre-approval set forth in the Sarbanes-Oxley Act of 2002 and the SEC rules regarding auditor independence. The policies and procedures are detailed as to the particular service and do not delegate the audit committee's responsibility to management.
In accordance with these policies and procedures, management submits for approval audit and non-audit services that management may wish to have KPMGthe independent auditor perform during the fiscal year, accompanied by an estimated range of fees for each service to be performed. The audit committee pre-approves or rejects the service and an accompanying range of fees for each service desired to be performed. Management is required to seek additional audit committee pre-approval when management becomes aware that any pre-approved service will result in actual fees greater than the fees initially approved. During the course of the year, the chair of the audit committee has the authority to pre-approve requests for services. At each subsequent audit committee meeting, the chair of the audit committee reports any interim pre-approvals since the last meeting.
All of the fees set forth in the Principal Accountant Fees and Services table above for fiscal year 20142016 were pre-approved by the audit committee.
Proposal No. 56 requires the approval of a majority of the votes cast on the proposal.
Our board of directors recommends that you vote FOR ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 27, 2015.31, 2017.
The audit committee is responsible for overseeing and evaluating the Company's financial reporting process on behalf of the board of directors. Management has the primary responsibility for the Company's financial reporting process, accounting principles, and internal controls as well as preparation of the Company's financial statements in accordance with generally accepted accounting principles in the United States (GAAP). D&T,KPMG, our independent auditor for 2014,2016 and 2015, is responsible for expressing opinions on the conformity of the Company's audited financial statements with generally accepted accounting principles and on the Company's internal control over financial reporting.
The audit committee has reviewed and discussed with management and D&TKPMG the audited financial statements for the year ended December 28, 2014,25, 2016, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, the clarity of the disclosures in the financial statements, and D&T'sKPMG's evaluation of the Company's internal control over financial reporting.
The audit committee has reviewed and discussed with D&TKPMG the matters required to be discussed pursuant to Public Company Accounting Oversight Board (PCAOB) standards. The audit committee has received from D&TKPMG the written disclosures and the letter required by applicable PCAOB requirements regarding the independent accountant's communications with the audit committee concerning independence. The audit committee has also discussed such independence with D&T. The audit committee has considered whether the independent auditor's provision of other non-audit services to the Company is compatible with maintaining auditor independence. The audit committee has concluded that the provision of non-audit services by the independent auditor was compatible with D&T's independence in the conduct of its auditing functions.KPMG.
Based upon the review and discussions described above, the audit committee recommended to the board of directors that the Company's audited financial statements be included in its annual report on Form 10-K for the year ended December 28, 2014,25, 2016, and the board of directors accepted the audit committee's recommendations.
THE AUDIT COMMITTEE
Richard J. Howell, ChairLloyd L. Hill
Pattye L. Moore
Stuart I. Oran
Whether or not you plan to attend the meeting, please take the time to vote your shares as soon as possible.
The SEC's "notice and access" rule allows companies to deliver a notice ofregarding internet availability of proxy materials ("notice ofregarding internet availability") to stockholders in lieu of a paper copy of the proxy statement and related materials and the Company's annual report on Form 10-K (collectively, the "proxy materials"). We use the notice and access process for all of our beneficial holders. The notice ofregarding internet availability provides instructions as to how these holders can access the proxy materials online, contains a listing of matters to be considered at the meeting, and sets forth instructions as to how shares can be voted. Shares must be voted either by telephone, online, or by completing and returning a proxy card.Shares cannot be voted by marking, writing on, and/or returning the notice ofregarding internet availability. Any notices ofregarding internet availability that are returned will not be counted as votes. Instructions for requesting a paper copy of the proxy materials are set forth on the notice ofregarding internet availability.
Important Notice Regarding Availability of Proxy Materials
Our proxy materials are available at http://www.redrobin.com/eproxy.
"Householding" of Proxy Materials
As permitted by applicable law, we may deliver only one copy of certain of our documents, including the notice ofregarding internet availability, proxy statement, annual report, and information statement to stockholders residing at the same address, unless such stockholders have notified us of their desire to receive multiple copies thereof. This process, which is commonly referred to as "householding," is intended to provide extra convenience for stockholders and cost savings for the Company.
If you wish to opt-out of householding and continue to receive multiple copies of the proxy materials at the same address, you may do so at any time prior to thirty days before the mailing of the notice ofregarding internet availability or the proxy materials themselves, which are typically mailed in April of each year, by notifying us in writing at: Red Robin Gourmet Burgers, Inc., Attn: Shareholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111, or by contacting us at (303) 846-6000. You also may request additional copies of the proxy materials by notifying us in writing at the same address or contacting us at (303) 846-6000, and we will undertake to deliver such additional copies promptly. If you share an address with another stockholder and currently are receiving multiple copies of the proxy materials, you may request householding by notifying us at the above referenced address or telephone number.
Voting rights. As of March 30, 2015,27, 2017, the record date for the meeting, we had 14,114,02512,864,484 shares of common stock outstanding. Each share of our common stock outstanding on the record date is entitled to one vote on all items being voted on at the meeting. You can vote all of the shares that you owned on the record date. These shares may include: (1) shares held directly in your name as the stockholder of record, and (2) shares held for you as the beneficial owner through a stockbroker, bank, or other nominee.
Voting instructions. We encourage all stockholders to submit votes in advance of the meeting. Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted in advance of the meeting.
If you receive more than one set of proxy materials, it means that you hold shares registered in more than one name or account. You should sign and return each proxy and follow the instructions on each notice ofregarding internet availability that you receive in order to ensure that all of your shares are voted.
Voting in-person. Shares held in your name as the stockholder of record may be voted in person at the annual meeting. Shares held beneficially in street name may be voted in person only if you obtain a legal proxy from the broker, bank, or other holder of record that holds your shares giving you the right to vote the shares.
Counting of votes. Votes will be counted by our transfer agent, American Stock Transfer & Trust Company, LLC, which we have retained to act as the inspector of election for the annual meeting.
Additional meeting matters. We do not expect any matters to be presented for a vote at the meeting other than the matters described in this proxy statement. If you grant a proxy, either of the officers named as proxy holder, Stephen E. CarleyDenny Marie Post or Stuart B. Brown,Guy J. Constant, or their nominee(s) or substitute(s), will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the meeting. If a nominee is not available as a candidate for director, the person named as the proxy holder will vote your proxy for another candidate nominated by our board of directors.
Dissenters' rights. No action is proposed herein for which the laws of the state of Delaware or our bylaws provide a right of our stockholders to dissent and obtain appraisal of or payment for such stockholders' common stock.
Even after you have submitted your proxy, you may change your vote or revoke your proxy at any time before the votes are cast at the meeting by: (1) delivering a written notice of your revocation to our corporate secretary at our principal executive office, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111; or (2) executing and delivering a later dated proxy. In addition, the powers of the proxy holders will be suspended if you attend the meeting in person and so request, although attendance at the meeting will not by itself revoke a previously granted proxy.
All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. If you are not a stockholder of record but hold shares through a broker or bank, you should provide proof of beneficial ownership on the record date, such as your most recent account statement as of March 30, 2015,27, 2017, a copy of the voting instruction card provided by your broker, bank, or other holder of record, or other similar evidence of ownership. Registration and seating will begin at 7:30 a.m. We do not permit cameras, recording devices, or other electronic devices at the meeting.
QUORUM, VOTE REQUIRED, ABSTENTIONS, AND BROKER NON-VOTES
Quorum
The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our common stock outstanding as of the record date will constitute a quorum. There must be a quorum for any action to be taken at the meeting (other than an adjournment or postponement of the meeting). If you submit a properly executed proxy card, even if you abstain from voting, then your shares will be counted for purposes of determining the presence of a quorum. Broker non-votes will be counted for purposes of determining the presence of a quorum at the meeting.
Vote Required
ForProposal 1 (director election), in an uncontested election (such as the election to be held at this annual meeting), each director will be elected by the affirmative vote of the majority of the votes cast. A majority of votes cast means that the number of shares castFOR a director's election exceeds the number of shares castAGAINST that director. If a nominee does not receive a majority of the votes cast for such nominee, then the resulting vacancy will be filled only by a majority vote of the directors then in office, and the director(s) so chosen shall serve for a term expiring at the next annual meeting of stockholders or until such director's successor shall have been duly elected and qualified. Abstentions and broker non-votes are not considered votes cast and therefore will have no effect on the outcome of the vote.
Proposal 2 (say-on-pay) represents an advisory vote and the results will not be binding on the board or the Company. The affirmative vote of a majority of the votes cast for this proposal will constitute the stockholders' non-binding approval with respect to our executive compensation programs. Our board will review the voting results and take them into consideration when making future decisions regarding executive compensation. Abstentions and broker non-votes will have no effect on the outcome of the vote.
ForProposal 3 (cash incentive plan)(say-when-on-pay) represents an advisory vote and the results will not be binding on the board or the Company. The affirmative vote of a majority of the votes cast for this proposal will constitute the stockholders' non-binding approval with respect to the frequency of the advisory vote on executive compensation. Our board will review the voting results and take them into consideration when making future decisions regarding the frequency of the advisory vote on executive compensation. Abstentions and broker non-votes will have no effect on the outcome of the vote.
ForProposal 4 (approval of 2017 Performance Incentive Plan), the affirmative vote of a majority of the votes cast on this proposal will be required to approve such proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.
ForProposal 45 (increase in(approval of amendment to increase shares authorized shares)under ESPP), the affirmative vote of a majority of the outstanding shares of common stock as of the record datevotes cast on this proposal will be required to approve such proposal. Abstentions and broker non-votes will be counted as votes cast against this proposal.have no effect on the outcome of the vote.
ForProposal 56 (ratification of auditors), the affirmative vote of a majority of the votes cast on this proposal will be required to approve such proposal. Abstentions will have no effect on the outcome of the vote.
Broker Non-Votes
Brokers, banks, or other holders of record are no longer permitted to vote on most proxy proposals without specific client instructions. In these cases, the broker can register your shares as being present at the annual meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules. If you are a beneficial owner whose shares are held of record by a broker, bank, or other holder of record, you must instruct the broker, bank, or other holder of record how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
At this annual meeting, your broker, bank, or other holder of record does not have discretionary voting authority to vote on any of the proposals other than Proposal 56 (ratification of auditors) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors, and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and representations that no other reports were required, during fiscal year 2014,2016, all of our officers, directors, and greater than ten percent beneficial owners timely complied with all Section 16(a) filing requirements.
Proposals for Inclusion in 20162018 Proxy Statement. For your proposal or director nomination to be considered for inclusion in our proxy statement for next year's meeting, your written proposal must be received by our corporate secretary at our principal executive office no later than December 8, 2015.5, 2017. If we change the date of next year's meeting by more than 30 days from the date of this year's meeting, then the deadline is a reasonable time before we begin to print and mail our proxy materials. You should also be aware that your proposal must comply with SEC regulations regarding inclusion of stockholder proposals in Company-sponsored proxy materials and our bylaws.
Proposals to be Addressed at 20162018 Annual Meeting (but not included in proxy statement). In order for you to properly bring a proposal (including director nominations) before next year's annual meeting, our corporate secretary must receive a written notice of the proposal no later than February 25, 201621, 2018 and no earlier than January 26, 2016,22, 2018, and it must contain the additional information required by our
bylaws. All proposals received after February 25, 201621, 2018 will be considered untimely. You may obtain a complete copy of our bylaws by submitting a written request to our corporate secretary at our principal executive office. If we change the date of next year's meeting by more than 30 days from the date contemplated at this year's meeting, in order for the proposal to be timely, we must receive your written proposal at least 90 days before the date of next year's meeting or no more than 10 days following the day on which the meeting date is publicly announced.
Proxy Solicitation Costs. The accompanying proxy is being solicited on behalf of the board of directors of our Company. The expense of preparing, printing, and mailing the notice ofregarding internet availability or proxy card and the material used in the solicitation thereof will be borne by the Company. In addition to the use of the mails, proxies may be solicited by telephone, other electronic means, or in person, by our directors, officers, and employees at no additional compensation. Arrangements may also be made with brokerage houses and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and we may reimburse them for reasonable out-of-pocket expenses incurred by them in connection therewith. In addition, Georgeson Inc. has been retained to assist in the solicitation of proxies for the 20152017 annual meeting of stockholders for a fee of approximately $6,500 plus associated costs and expenses.
We filed with the SEC an annual report on Form 10-K on February 20, 201521, 2017 for the fiscal year ended December 28, 2014.25, 2016. A copy of the annual report on Form 10-K has been made available concurrently with this proxy statement to all of our stockholders entitled to notice of and to vote at the annual meeting. In addition, you may obtain a copy of the annual report on Form 10-K, without charge, by writing to Red Robin Gourmet Burgers, Inc., Attn: Shareholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111.
By Order of the Board of Directors, | ||
Michael L. Kaplan Secretary | ||
Greenwood Village, Colorado April |
RED ROBIN GOURMET BURGERS, INC.CASH2017 PERFORMANCE INCENTIVE PLAN
Effective upon Approval by the Stockholders: [ , 2015]
SECTION 1. ESTABLISHMENT; PURPOSE
Red Robin Gourmet Burgers, Inc. (the "Company") hereby establishes the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan (the "Plan") for the benefit of certain members of the Company's senior management team. The purposes of the Plan are to (i) place a significant portion of the compensation of Plan participants at risk by tying such compensation to specific measurable goals designed to drive shareholder value, and (ii) exempt bonuses paid hereunder from the deduction limitations of Code Section 162(m). The Plan is intended to encourage initiative, resourcefulness, teamwork, motivation, and efficiency on the part of the Participants that will result in financial success for both the stockholders of the Company and the Participants.
SECTION 2. CERTAIN DEFINITIONS
1.1 Definitions. Whenever used in the Plan, the masculine pronoun will be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used in the Plan with the meaning thereafter ascribed:
(a) "Affiliate" means:
(1) Any Subsidiary or Parent;
(2) An entity that directly or through one or more intermediaries controls, is controlled by, or is under common control with the Company, as determined by the Committee; or
(3) Any entity in which the Company has such a significant interest that the Company determines it should be deemed an "Affiliate", as determined in the sole discretion of the Committee.
(b) "Award Agreement" means any written or electronic agreement, contract, or other instrument or document as may from time to time be approved by the Committee as evidencing an Award granted under the Plan; provided, however, that Cash Performance Awards described in Section 3.5 need not be evidenced by an Award Agreement.
(c) "Awards" means, collectively, Cash Performance Awards, Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, and Other Stock-Based Awards.
(e) "CauseCash Performance Award" shall have the definition set forthmeans an Award described in any employment, severance, changeSection 3.5 that is settled in control, or similar agreement between the Companycash and the Participant; provided, however, that if the Participant does not have such an agreement, the term Cause shall mean (a) Participant's continual or deliberate neglect in the performance of his or her material duties; (b) Participant's failure to devote substantially all of his or her working time to the businessa value that is derivative of the Company and its subsidiaries; (c) Participant's failurevalue of, determined by reference to follow the lawful directivesa number of the Board in any material respect; (d) Participant's engaging in misconduct in connection with the performanceshares of, any of his duties, including, without limitation, falsifying or attemptingdetermined by reference to falsify documents, books or records of the Company or its subsidiaries, misappropriating or attempting to misappropriate funds or other property, or securing or attempting to secure any personal profit in connection with any transaction entered intodividends payable on, behalf of the Company or its subsidiaries; (e) the violation by Participant, in any material respect, of any policy or of any code or standard of behavior or conduct generally applicable to employees of the Company or its subsidiaries; (f) Participant's breach of any non-competition, non-interference, non-disclosure, confidentiality or other similar agreement executed by Participant with the Company or any of its subsidiaries or other act of disloyalty to the Company or any of its subsidiaries (including, without limitation, aiding a competitor or unauthorized disclosure of confidential information); or (g) Participant's engaging in conduct which is reasonably likely to result in material injury to the reputation of the Company or any of its subsidiaries, including, without limitation, commission of a felony, fraud, embezzlement or other crime involving moral turpitude;provided,however, Participant will not be deemed to have been terminated for Cause in the case of clauses (a), (b), (d) and (e) above, unless any such failure or material breach is not fully corrected prior to the expiration of the ten (10) business day period following delivery to Participant of the Company's written notice that specifies in detail of the alleged Cause event(s) and the Company's intention to terminate his employment for Cause. Notwithstanding the foregoing, the Committee may, coincident with the Committee's establishment of Performance Goals for any Performance Period, establish in writing a different definition of Cause that shall be used for such Performance Period or for any particular Participant for such Performance Period.Stock.
(f) "Change in Control" means, any ofunless otherwise provided in the following:applicable Award Agreement:
(a)(1) The acquisition by any individual, entity or group (a "Person") (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the(a "Exchange ActPerson")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of more than 50% or more of either (1)(A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2)(B) the combined voting power of the then-outstanding voting securities of the CompanyCorporation entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control; (A)(I) any acquisition directly from the Company, (B)(II) any acquisition by the Company, (C)(III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the CorporationCompany or any affiliate of the Company or a successor, or (D)(IV) any acquisition by any entity pursuant to a transaction that complies with subsection (c)(1)Sections (3)(A), (c)(2) or (c)(3)(B) and(C) below;
(b)(2) A majority of the individuals who, as of the date the Plan is adopted (the "Effective Date,"), serve on the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without
counting the member and his predecessor twice) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(c)(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries,Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiariesSubsidiaries (each, a ""Business CombinationCombination"),"), in each case unless, following such Business Combination, (1)(A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the CorporationCompany or all or substantially all of the Corporation's assets directly or through one or more subsidiaries (a(an "ParentAcquiror")) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2)(B) no Person (excluding any entity resulting from such Business Combination or a Parentan Acquiror or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or Parent)Acquiror) beneficially owns, directly or indirectly, more than 50% of, respectively, the then-outstandingthen- outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of more than 50% existed prior to the Business Combination, and (3)(C) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business Combination or a Parentan Acquiror were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(d)(4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.Company other than in the context of a transaction that does not constitute a Change in Control under clause (3) above.
Notwithstanding the foregoing, with respect to any Award that is subject to Code Section 409A, "Change in Control" will mean a "change in control event" under Code Section 409A to the extent Change in Control is either a payment or settlement event under such Award or such definition is otherwise required for the Award to satisfy the requirements of Code Section 409A; provided, however, that the Committee may coincidentprovide a different definition that complies with Code Section 409A in an applicable Award Agreement.
(g) "Code" means the Committee's establishmentInternal Revenue Code of Performance Goals for any Performance Period, establish1986, as amended.
(h) "Committee" means, unless another committee is appointed by the Board of Directors to administer the Plan, the Compensation Committee of the Board of Directors; provided that, if no such committee is appointed, the Board of Directors in writing a differentits entirety shall constitute the Committee. The Board of Directors shall consider the advisability of whether the members of the Committee shall consist solely of two or more members of the Board of Directors who are both "outside directors" as defined in Treas. Reg. § 1.162-27(e) as promulgated by the Internal Revenue Service and "non-employee directors" as defined in Rule 16b-3(b)(3) as promulgated under the Exchange
definitionAct, and if applicable, who satisfy the requirements of the national securities exchange or nationally recognized quotation or market system on which the Stock is then traded. Notwithstanding the foregoing, with respect to Awards granted by an officer or officers of the Company and/or the Chairperson of the Compensation Committee pursuant toSection 2.3(b), the "Committee" as used in the Plan shall mean such officer or officers and/or such Chairperson, unless the context would clearly indicate otherwise.
(i) "Company" means Red Robin Gourmet Burgers, Inc., a Delaware corporation.
(j) "Disability" unless otherwise defined by the Committee in the applicable Award Agreement, means either (i) the Participant has been determined to be disabled under the Company's long-term disability plan or (ii) the Committee has determined that the Participant has a physical or mental infirmity that impairs the Participant's ability to perform substantially his or her duties for a period of ninety (90) days in any 365-day period. If no long-term disability plan or policy was ever maintained on behalf of the Participant, or if the determination of Disability relates to an Incentive Stock Option, Disability means that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such Disability relates.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
(l) "Exercise Price" means the exercise price per share of Stock purchasable under an Option.
(m) "Fair Market Value" refers to the determination of the value of a share of Stock as of a date, determined as follows:
(1) if the shares of Stock are listed on any national securities exchange or any nationally recognized quotation or market system (including, without limitation Nasdaq), Fair Market Value shall mean the closing price of the Stock on such date or, if such date is not a trading day, on the trading day immediately preceding such date, as reported by any such exchange or system selected by the Committee on which the shares of Stock are then traded; or
(2) if the shares of Stock are not listed on any exchange or system on such date or on the business day immediately preceding such date, Fair Market Value shall mean the fair market value of a share of Stock as determined by the Committee taking into account such facts and circumstances deemed to be material by the Committee to the value of the Stock in the hands of the Participant.
Notwithstanding the foregoing, for purposes of Paragraph (1) or (2) above, the Committee may use the closing price as of the indicated date, the average price or value as of the indicated date or for a period certain ending on the indicated date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method which the Committee determines is reasonably indicative of the fair market value of the Stock; provided, however, that for purposes of granting Nonqualified Stock Options or Stock Appreciation Rights, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 409A, and for purposes of granting Incentive Stock Options, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 422.
(n) "Incentive Stock Option" means an incentive stock option within the meaning of Code Section 422.
(o) "Individual Agreement" means an employment, consulting, severance or similar written agreement between a Participant and the Company or one of its Affiliates (but not, for clarity, an Award Agreement).
(p) "Nonqualified Stock Option" means a stock option that is not an Incentive Stock Option.
(q) "Option" means a Nonqualified Stock Option or an Incentive Stock Option.
(r) "Other Stock-Based Award" means an Award described inSection 3.4 that has a value that is derivative of the value of, determined by reference to a number of shares of, or determined by reference to dividends payable on, Stock and that may be settled in cash, in Stock or in a combination thereof. Other Stock-Based Awards may include, but are not limited to, restricted stock, restricted stock units, performance shares, grants of Stock, grants of rights to receive Stock in the future, or dividend equivalent rights.
(s) "Over 10% Owner" means an individual who, at the time an Incentive Stock Option is granted to such individual, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Parent or Subsidiaries, determined by applying the attribution rules of Code Section 424(d).
(t) "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A Parent shall include any entity other than a corporation to the extent permissible under Code Section 424(e) or regulations and rulings thereunder.
(u) "Participant" means an individual who receives an Award under the Plan.
(v) "Performance Goals" means any one or more of the following performance goals, intended by the Committee to constitute objective goals for purposes of Code Section 162(m), either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, or Affiliate (or business unit or division of an Affiliate), either individually, alternatively or in combination, and measured either monthly, quarterly, annually, or over another specified period or cumulatively or averaged over a period of months, quarters, years, or other specified period, on an absolute basis or relative to a pre-established target, to one or more previous periods' results or to a designated comparison group, in each case as specified by the Committee in the Award:
Any of the foregoing may be determined on a per share basis (basic or diluted) as appropriate. The Committee may appropriately adjust any evaluation of performance under a Performance Goal to remove the effect of any one or more of the following: equity compensation expense under ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Code Section 162(m), if applicable.
(w) "Performance Period" means, with respect to an Award, a period of time within which the Performance Goals relating to such Award are to be measured. The Performance Period will be established by the Committee at the time the Award is granted.
(x) "Plan" means the Red Robin Gourmet Burgers, Inc. 2017 Performance Incentive Plan.
(y) "Securities Act" means the Securities Act of 1933, as amended from time to time.
(z) "Separation from Service" means a termination of a Participant's employment or other service relationship with the Company, subject to the following requirements:
(1) in the case of a Participant who is an employee of the Company, a termination of the Participant's employment where either (A) the Participant has ceased to perform any services for the Company and all affiliated companies that, together with the Company, constitute the "service recipient" within the meaning of Code Section 409A (collectively, the"Service Recipient") or (B) the level of bona fide services the Participant performs for the Service Recipient after a given date (whether as an employee or as an independent contractor) permanently decreases (excluding a decrease as a result of military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Service Recipient under an applicable statute or by contract) to no more than twenty percent (20%) of the average level of bona fide services performed for the Service Recipient (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of service if the Participant has been providing services to the Service Recipient for less than 36 months) that, in either case, constitutes a "separation from service" within the meaning of Code Section 409A and the regulations thereunder;
(2) in the case of a Participant who is an independent contractor engaged by the Service Recipient, a termination of the Participant's service relationship with the Service Recipient upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for the Service Recipient if the expiration constitutes a good-faith and complete termination of the contractual relationship that constitutes a "separation from service" within the meaning of Code Section 409A and the regulations thereunder; or
(3) in any case, as may otherwise be permitted under Code Section 409A.
(aa) "Stock" means the Company's common stock.
(bb) "Stock Appreciation Right" means a stock appreciation right described inSection 3.3.
(cc) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. A "Subsidiary" shall include any entity other than a corporation to the extent permissible under Code Section 424(f) or regulations or rulings thereunder.
(dd) "Termination of Employment" means the termination of the employment relationship between a Participant and the Company and its Affiliates, regardless of whether severance or similar payments are made to the Participant for any reason, including, but not limited to, a termination by resignation, discharge, death, Disability or retirement. Further, if an entity ceases to be a Subsidiary, a Termination of Employment will be deemed to have occurred with respect to each Participant in respect of such Subsidiary who does not continue to be eligible to receive Awards under this Plan in respect of such Participant's relationship to the Company or another Subsidiary that remains a Subsidiary after giving effect to the event giving rise to the entity ceasing
to be a Subsidiary. The Committee will, in its absolute discretion, determine the effect of all matters and questions relating to a Termination of Employment as it affects an Award, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Employment.
SECTION 2. THE PERFORMANCE INCENTIVE PLAN
2.1 Purpose of the Plan. The purpose of this Plan is to promote the success of the Company and to increase stockholder value by (a) incentivizing the officers, employees, directors, consultants, and other service providers of the Company and its Affiliates to foster and build upon the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain officers, employees, directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive compensation which is based upon appreciation in the value of Stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance withSection 5.2, the sum of (i) 265,000 shares of Stock plus (ii) the number of shares of Common Stock available for grant under the Red Robin Gourmet Burgers, Inc. Second Amended and Restated 2007 Performance Incentive Plan (the "Maximum Plan Shares") are hereby reserved exclusively for issuance upon exercise, settlement, or payment pursuant to Awards, all or any of which may be pursuant to any one or more Award, including without limitation, Incentive Stock Options. Shares of Stock will not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Award that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan. The following shares, however, may not again be made available for grant in respect of Awards under this Plan: (i) shares not issued or delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right; (ii) shares delivered to or withheld by the Company to pay the Option or Grant Price of or the withholding taxes with respect to an Award, and (iii) shares repurchased on the open market with the proceeds from the payment of the Option Price of an Option. Shares of Stock available for Awards under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
2.3 Administration of the Plan.
(a) The Plan is administered by the Committee. The Committee has full authority in its discretion to determine the officers, employees, directors, consultants, and other service providers of the Company or its Affiliates to whom Awards will be granted and the terms and provisions of Awards, subject to the provisions of the Plan. Subject to the provisions of the Plan, the Committee has full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Award Agreements; and to make all other determinations necessary or advisable for the proper administration of the Plan. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). The Committee's decisions are final and binding on all Participants.
(b) Notwithstanding any other provision of this Plan, the Board of Directors may by resolution authorize one or more officers of the Company and/or the Chairperson of the Compensation Committee of the Board of Directors to do one or both of the following: (1) designate individuals (other than officers or directors of the Company or any Affiliate who are
subject to Section 16 of the Exchange Act) to receive Awards under the Plan, and (2) determine the type of Awards and the terms and conditions and number of shares of Stock or the amount of cash subject to such Awards; provided however, that any such delegation will be subject to such parameters and restrictions consistent with the Plan as the Board of Directors specifies, including, without limitation, the total number of shares of Stock that may be granted subject to such Awards, if applicable.
(c) No member of the Board of Directors or Committee, nor any person to whom authority is delegated under subsection (b), will be liable for any action taken or any determination made in good faith with respect to the Plan or any Award granted under the Plan.
2.4 Eligibility and Limits.
(a) Awards may be granted only to officers, employees, directors, consultants, and other service providers of the Company or any Affiliate of the Company; provided, however, that (1) an Incentive Stock Option may only be granted to an employee of the Company or any Parent or Subsidiary and (2) persons who are not officers, employees, or directors of the Company or an Affiliate of the Company may only be granted an Award under this Plan if such participation would not adversely affect the Company's eligibility to use Form S-8 to register under the Securities Act, the offering and sale of shares issuable under the Plan by the Company, or the Company's compliance with any other applicable laws.
(b) In the case of Incentive Stock Options, (i) the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of Stock with respect to which stock options intended to meet the requirements of Code Section 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Parents and Subsidiaries may not exceed $100,000; provided further, that if the limitation is exceeded, the Incentive Stock Option(s) which cause the limitation to be exceeded will be treated as Nonqualified Stock Option(s); and (ii) the maximum number of shares of Stock that may be delivered pursuant to Incentive Stock Options granted under the Plan is 700,000.
(c) The maximum number of shares of Stock subject to any Options and Stock Appreciation Rights that may be granted under the Plan during any calendar year to any individual other than a non-employee director is 170,000 shares. The maximum number of shares of Stock subject to any Options and Stock Appreciation Rights that may be granted under the Plan during any calendar year to any non-employee director is 25,000 shares, and the maximum value (determined on the grant date) of Full-Value Awards (as defined in Section 3.1(h)) that may be granted under the Plan during any calendar year to any non-employee director is $250,000.
(d) To the extent required under Code Section 162(m) and the regulations thereunder, as applicable, for compensation to be treated as qualified performance-based compensation, subject to adjustment in accordance withSection 5.2, the maximum number of shares of Stock with respect to which (1) Options, (2) Stock Appreciation Rights, or (3) other Awards (other than Other Stock-Based Awards that are payable in cash or Cash Performance Awards), to the extent they are granted with the intent that they qualify as qualified performance-based compensation under Code Section 162(m), may be granted during any calendar year to any employee may not exceed 150,000, and the maximum aggregate dollar amount that may be paid in any calendar year to any employee with respect to Other Stock-Based Awards that are payable in cash and Cash Performance Awards may not exceed $3,000,000 multiplied by the number of years in the performance period. If an Option is cancelled, the cancelled Option will continue to be counted against the maximum number of shares for which options may be granted to an employee as described in thisSection 2.4. If the exercise price of an Option is reduced or the base amount on which a Stock Appreciation Right is calculated is reduced, the transaction will be treated as the cancellation of the Option or the Stock Appreciation Right, as applicable, and the grant of a new
Option or Stock Appreciation Right, as applicable. If an Option or Stock Appreciation Right is deemed to be cancelled as described in the preceding sentence, the Option or Stock Appreciation Right that is deemed to be cancelled and the Option or Stock Appreciation Right that is deemed to be granted will both be counted against the maximum number of shares for which Options or Stock Appreciation Rights may be granted to an employee as described in thisSection 2.4.
3.1 Terms and Conditions of All Awards.
(a) The number of shares of Stock as to which an Award may be granted or the amount of an Award will be determined by the Committee in its sole discretion, subject to the provisions ofSection 2.2 as to the total number of shares available for grants under the Plan and to the limits set forth inSection 2.4.
(b) Each Award will be evidenced by an Award Agreement in such form and containing such terms, conditions and restrictions as the Committee determines to be appropriate, including, without limitation, Performance Goals or other performance criteria, if any, that must be achieved as a condition to the vesting or settlement of the Award. The Committee shall establish applicable Performance Goals, if any, before twenty-five percent (25%) of the Performance Period has elapsed, but in no event later than within ninety (90) days after the first day of the applicable Performance Period. At the time any Performance Goals are established, whether the Performance Goals will be met must be substantially uncertain. If any Performance Goals are established as a condition to vesting or settlement of an Award and such Performance Goal is not based solely on the increase in the Fair Market Value of the Stock, the Committee shall certify in writing that the applicable Performance Goals were in fact satisfied before such Award is deemed to have vested or is settled, as applicable. Each Award Agreement is subject to the terms of the Plan and any provisions contained in an Award Agreement that are inconsistent with the terms of the Plan are null and void. To the extent an Award is subject to Performance Goals and the Committee desires that the Award constitute performance-based compensation under Code Section 162(m), the Committee will comply with all applicable requirements under Code Section 162(m), including the rules and regulations promulgated thereunder, in granting, modifying, and settling such Award. The Committee may, but is not required to, structure any Award so as to qualify as performance-based compensation under Code Section 162(m).
(c) The date as of which an Award is granted will be the first date as of which the Committee (i) has approved the terms and conditions of the Award, (ii) has determined the recipient of the Award and the number of shares, if any, covered by the Award, and (iii) has taken all such other actions necessary to complete the grant of the Award or such later date as may be specified in the approval of such Award.
(d) Any Award may be granted in connection with all or any portion of a previously or contemporaneously granted Award. Exercise or vesting of an Award granted in connection with another Award may result in a pro rata surrender or cancellation of a related Award, as specified in the applicable Award Agreement.
(e) Awards are not transferable or assignable except by will or by the laws of descent and distribution in the State in which the Participant was domiciled at the time of the Participant's death, during the Participant's lifetime, are exercisable only by the Participant; provided that, in the event of the Disability of the Participant, the legal representative of the Participant may exercise the Participant's Award(s). In the event of the death of the Participant, the legal representative of the Participant's estate or, if no legal representative has been appointed within ninety (90) days of the Participant's death, the person(s) taking the Participant's Award(s) under the laws of descent and distribution in the State in which the Participant was domiciled at the time
of the Participant's death may exercise the Participant's Award(s). Notwithstanding the above, the Committee may provide otherwise as to any Awards other than Incentive Stock Options (provided that such transfers shall only be permitted for no consideration to the Participant).
(f) The Committee may, in its sole discretion, modify the terms and conditions of an Award, except to the extent that such modification would materially and adversely affect the rights of a Participant under the Award (except as otherwise permitted under the Plan or Award) or would be inconsistent with other provisions of the Plan.
(g) All Awards granted under the Plan are subject to any clawback or recoupment policy adopted by the Board of Directors or any committee thereof.
(h) With respect to any Full-Value Award issued to a Participant other than a non-employee member of the Board of Directors, the vesting of which is based solely on service with the Company (and not upon, either all or in part, the attainment of any Performance Goals), the minimum period of service required for such Award to vest is three years following the grant of such Award, provided that such Award may vest ratably in no less than equal annual increments over such period. With respect to any Full-Value Award issued to a Participant other than a non-employee member of the Board of Directors, the terms and conditions of which provide for vesting based on Performance Goals, the applicable performance measurement period may not be less than one year. With respect to any other Award issued to a Participant other than a non-employee member of the Board of Directors, the minimum service period required for such Award to vest is one year following the grant of such Award. With respect to any Full-Value Award issued to a non-employee member of the Board of Directors, the minimum period of service required for such Award to vest (or the minimum performance period for any such Award) shall be the period beginning on the date of grant and ending on the sooner of (i) the date of the next annual stockholders meeting and (ii) the one-year anniversary of the grant date of such Award. The Committee may not waive the applicable vesting requirements for an Award except in the case of death, Disability, and Change in Control. The term "Full-Value Award" includes Awards of restricted stock, restricted stock units, performance shares, and other similar Awards granted under this Plan, but does not include Awards pursuant to which the Participant's ultimate remuneration is limited solely to the post-grant appreciation in the value of the shares of the Company's common stock subject to the Award (such as Options or Stock Appreciation Rights having a per share exercise of base price, as applicable, at least equal to the fair market value of a share of the Company's common stock at the time of grant of such Award). This provision shall supersede any contrary provision in the Plan.
3.2 Terms and Conditions of Options. Each Option granted under the Plan must be evidenced by an Award Agreement. At the time an Option is granted, the Committee will determine whether the Option is an Incentive Stock Option described in Code Section 422 or a Nonqualified Stock Option, and the Option must be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option. Incentive Stock Options may only be granted to employees of the Company or any Subsidiary or Parent. At the time any Incentive Stock Option granted under the Plan is exercised, the Company will be entitled to legend the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as representing shares purchased upon the exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company's stockholders. Neither an Option nor the shares of Stock underlying an Option may be eligible for dividends or dividend equivalents.
(a) Option Price. Subject to adjustment in accordance withSection 5.1 and the other provisions of thisSection 3.2, the Exercise Price of any Options will be as set forth in the applicable Award Agreement, but in no event may it be less than Fair Market Value on the date
the Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price may not be less than one hundred and ten percent (110%) of Fair Market Value on the date the Option is granted.
(b) Option Term. No Incentive Stock Option may be exercised after the expiration of ten (10) years from the date the Option is granted. Further, any Incentive Stock Option granted to an Over 10% Owner may not be exercised after the expiration of five (5) years from the date the Option is granted. The term of any Nonqualified Stock Option will be as specified in the applicable Award Agreement but may not exceed ten (10) years from the date the Option is granted; provided, however, that if the term specified in an Award Agreement for a Nonqualified Stock Option would otherwise expire during a period when trading in Stock is prohibited by law or by the Company's insider trading policy, then the term of the Nonqualified Stock Option will be deemed to expire on the thirtieth (30th) day after expiration of the applicable prohibition, notwithstanding any contrary term in the Award Agreement.
(c) Payment. Payment for all shares of Stock purchased pursuant to exercise of an Option may be made in any form or manner authorized by the Committee in the Award Agreement or by amendment thereto, including, but not limited to, and in each case subject to such procedures or restrictions as the Committee may impose:
In the event that the Committee allows a Participant to exercise an Award by delivering shares of Stock owned by such Participant, and unless otherwise expressly provided by the Committee, any shares delivered which were initially acquired by the Participant from the Company (upon exercise of an Option or otherwise) must have been owned by the Participant for at least six months as of the date of delivery. Shares of Stock used to satisfy the Exercise Price will be valued at their Fair Market Value on the date of exercise. The Company is not obligated to deliver any shares of Stock acquired pursuant to the exercise of an Option unless and until it receives full payment of the Exercise Price therefor and any related withholding obligations underSection 6.1 and any other conditions to exercise or purchase, as established from time to time by the Committee, have been satisfied. Unless otherwise expressly provided in the applicable Award Agreement, the Committee may at any time eliminate or limit a Participant's ability to pay the Exercise Price by any method other than cash payment to the Company. The holder of an Option, as such, has none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted under the Plan is exercisable by such person or persons, at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the Award Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may modify the terms of an Option to the extent not prohibited by the terms of the Plan,
including, without limitation, accelerating the time or times at which such Option may be exercised in whole or in part, and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Award Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an Incentive Stock Option, in the event of the Termination of Employment of a Participant, the Option or portion thereof held by the Participant which is unexercised will expire, terminate, and become unexercisable no later than of the date that is three months after the date of Termination of Employment; provided, however, that in the case of a holder whose Termination of Employment is due to death or Disability, one year will be substituted for such three month period; provided, further that such time limits may be extended by the Committee under the terms of the grant, in which case, the Incentive Stock Option will be a Nonqualified Stock Option if it is exercised after the time limits otherwise applicable to Incentive Stock Options. For purposes of this Subsection (e), the Termination of Employment of a Participant will not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options. Notwithstanding anything to the contrary in thisSection 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) or 409A is applicable, may provide for an Exercise Price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby.
(g) No Reload Grants. Options may not be granted under the Plan in consideration for, and may not be conditioned upon the delivery of, shares of Stock to the Company in payment of the Exercise Price and/or tax withholding obligation under any other Option held by a Participant.
(h) No Repricing. Except as provided inSection 5.1, without the approval of the Company's stockholders the exercise price of an Option may not be reduced after the grant of the Option and an Option may not be cancelled or surrendered in consideration of, or in exchange for, (i) the grant of a new Option having an Exercise Price below that of the Option that was surrendered, (ii) Stock, (iii) cash, or (iv) any other Award.
3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock Appreciation Right granted under the Plan must be evidenced by an Award Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of Stock at the time of payment or exercise over (2) a specified or determinable price, which may not be less than the Fair Market Value of such shares of Stock on the date of grant. A Stock Appreciation Right granted in connection with an Option may only be exercised to the extent that the related Option has not been exercised, paid or otherwise settled. Neither a Stock Appreciation Right nor the shares of Stock underlying a Stock Appreciation Right are eligible for dividends or dividend equivalents.
(a) Settlement. Upon settlement of a Stock Appreciation Right, the Company shall pay the appreciation to the Participant in, at the discretion of the Committee, cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Award Agreement or, in the absence of such provision, as the Committee determines.
(b) Term. The term of any Stock Appreciation Right will be as specified in the applicable Award Agreement, but may not exceed ten (10) years after the date the Stock Appreciation Right is granted; provided, however, that if the term specified in an Award Agreement for a Stock Appreciation Right would otherwise expire during a period when trading in Stock is prohibited by law or the Company's insider trading policy, then the term of the Stock Appreciation Right will be deemed to expire on the thirtieth (30th) day after expiration of the applicable prohibition, notwithstanding any contrary term in the Award Agreement.
(c) Conditions to Exercise. Each Stock Appreciation Right granted under the Plan is exercisable or payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the Award Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the Committee may, at any time before complete termination of such Stock Appreciation Right, accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in part.
(d) No Repricing. Except as provided inSection 5.1, without the approval of the Company's stockholders, the price of a Stock Appreciation Right may not be reduced after the grant of the Stock Appreciation Right, and a Stock Appreciation Right may not be cancelled or surrendered in consideration of, or in exchange for, (i) the grant of a new Stock Appreciation Right having a price below that of the Stock Appreciation Right that was surrendered, (ii) Stock, (iii) cash, or (iv) any other Award.
3.4 Terms and Conditions of Other Stock-Based Awards. An Other Stock-Based Award shall entitle the Participant to receive one or more of (i) a specified or determinable number of shares of Stock, (ii) the value of a specified or determinable number of shares of Stock, (iii) a percentage or multiple of the value of a specified number of shares of Stock or (iv) dividend equivalents on a specified, or a determinable number, or a percentage or multiple of a specified number, of shares of Stock. At the time of the grant, the Committee shall determine the specified number of shares of Stock or the percentage or multiple of the specified number of shares of Stock, as applicable; and the Performance Goals or other performance criteria, if any, applicable to the Other Stock-Based Award. The Committee may provide for an alternate percentage or multiple under certain specified conditions.
(a) Payment. Payment in respect of Other Stock-Based Awards may be made by the Company in cash or shares of Stock as provided in the applicable Award Agreement or, in the absence of such provision, as the Committee determines.
(b) Conditions to Payment or Lapse of Restrictions. Each Other Stock-Based Award granted under the Plan will be payable, and restrictions on such Other Stock-Based Award will lapse, at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the applicable Award Agreement; provided, however, that subsequent to the grant of an Other Stock-Based Award, the Committee, at any time before complete termination of such Other Stock-Based Award, may accelerate the time or times at which such Other Stock-Based Award may be paid or such restrictions will lapse, in whole or in part. Dividends (and dividend equivalents granted with respect to shares of Stock subject to an Other Stock-Based Award), will accrue and not be paid until, and will be paid only to the extent, the Award vests and, with respect to Other Stock-Based Awards that are subject to Performance Goals or other performance criteria, is earned.
3.5 Terms and Conditions of Cash Performance Awards. A Cash Performance Award will entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of units (stated in terms of a designated or determinable dollar amount per unit), or (ii) a percentage or multiple of a specified cash amount. At the time of the grant, the Committee shall determine the base value of each unit; the number of units subject to a Cash Performance Award, the specified amount and the percentage or multiple of the
specified amount, as applicable; and the Performance Goals or other performance criteria, if any, applicable to the determination of the ultimate payment value of the Cash Performance Award. The Committee may provide for an alternate base value for each unit or an alternate percentage or multiple under certain specified conditions.
(a) Payment. Payment in respect of Cash Performance Awards will be made by the Company in cash.
(b) Conditions to Payment. Each Cash Performance Award granted under the Plan will be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified by the Committee.
3.6 Treatment of Awards on Termination of Service. Except as otherwise provided by PlanSection 3.2(e), any Award under this Plan to a Participant who has experienced a Termination of Employment, Separation from Service, or termination of some other service relationship with the Company and its Affiliates may be cancelled, accelerated, paid or continued, as provided in the applicable Award Agreement, or, as the Committee may otherwise determine to the extent not prohibited by the Plan. The portion of any Award exercisable in the event of continuation or the amount of any payment due under a continued Award may be adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Employment, Separation from Service or termination of some other service relationship or such other factors as the Committee determines are relevant to its decision to continue the Award.
SECTION 4. RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan will be issued in the Participant's name, but, if the applicable Award Agreement so provides, the shares of Stock will be held by a custodian designated by the Committee (the"Custodian"). Each applicable Award Agreement providing for transfer of shares of Stock to the Custodian may require a Participant to complete an irrevocable stock power appointing the Custodian or the Custodian's designee as the attorney-in-fact for the Participant for the term specified in the applicable Award Agreement, with full power and authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Award Agreement. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided in the applicable Award Agreement, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian must, as provided in the applicable Award Agreement, be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Award Agreement and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.
4.2 Restrictions on Transfer. Except as expressly set forth in thisSection 4.2 or the applicable Award Agreement, all Awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. Any such disposition of an Award of or of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Award Agreement will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Award Agreement, and any shares so transferred will continue to be bound by the Plan and the applicable Award Agreement. Notwithstanding the general prohibition set forth above, the Committee may permit Awards to be transferred to other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Committee establishes in writing (provided that any transfers of Incentive Stock Options may only be made to the extent permitted under the federal tax laws governing Incentive Stock Options). Any permitted transfer will be subject to compliance with applicable federal and state securities laws.
Further, the transfer restrictions of thisSection 4.2 will not apply to:
(a) transfers to the Corporation;
(b) the designation of a beneficiary to receive benefits in the event of the Participant's death or, if the Participant has died, transfers to or exercise by the Participant's beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution of the State in which the Participant was domiciled at the time of the Participant's death;
(c) subject to any applicable limitations on Incentive Stock Options, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by the Committee; and
(d) if the participant has suffered a Disability, permitted transfers or exercises on behalf of the Participant by his or her legal representative.
SECTION 5. ADJUSTMENTS; ACCELERATION
5.1 Adjustments.
(a) The number of shares of Stock reserved for the grant of Options, Stock Appreciation Rights and Other Stock-Based Awards; the number of shares of Stock reserved for issuance upon the exercise, settlement, vesting, grant or payment, as applicable, of each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award (if any); the Exercise Price of each outstanding Option, the threshold price of each outstanding Stock Appreciation Right, the specified number of shares of Stock to which each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award pertains, the total number of shares of Stock that may be subject to Awards granted by one or more officers of the Company and/or the Chairperson of the Compensation Committee of the Board of Directors, and the maximum number of shares as to which Options, Stock Appreciation Rights, and other Awards may be granted during any calendar year or other period, will be proportionately adjusted for any nonreciprocal transaction between the Company and the holders of capital stock of the Company that causes the per share value of the shares of Stock underlying an Award to change (e.g., a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend) (each, an "Equity Restructuring").
(b) In the event of a merger, consolidation, reorganization, extraordinary dividend, sale of substantially all of the Company's assets, other change in capital structure of the Company, tender offer for shares of Stock, or a Change in Control of the Company that, in each case, does not constitute an Equity Restructuring, the Committee may make such adjustments with respect to Awards and take such other action as it deems necessary or appropriate, including, without limitation, the substitution of new Awards, the assumption of Awards not originally granted under the Plan, the adjustment of outstanding Awards, the acceleration of outstanding Awards, the removal of restrictions on outstanding Awards, and/or the termination of outstanding Awards in exchange for the cash value determined in good faith by the Committee of the vested and/or unvested portion of the Award, all as may be provided in the applicable Award Agreement or, if not expressly addressed therein, as the Committee subsequently may determine in its sole discretion. Any adjustment pursuant to thisSection 5.1 may provide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Award, but except as set forth in this Section may not otherwise diminish the then-current value of the Award.
(c) Notwithstanding any other provision of the Plan to the contrary, in taking any action pursuant to clause (a) or (b) with respect to a Nonqualified Stock Option or a Stock Appreciation Right, the Committee shall consider any provisions of Code Section 409A and the regulations
thereunder that are required to be usedfollowed as a condition of the Nonqualified Stock Option and the Stock Appreciation Right not being treated as the grant of a new Option or Stock Appreciation Right or a change in the form of payment. Any adjustment described in the preceding sentence may include a substitution in whole or in part of other equity securities of the issuer and the class involved in such Equity Restructuring in lieu of the shares of Stock that are subject to the Award.
(d) The existence of the Plan and the Awards granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.
5.2 Automatic Acceleration of Awards. Except as otherwise provided inSection 5.3, upon a dissolution of the Company (or other event described inSection 5.1 that the Company does not survive (or does not survive as a public company in respect of its Stock)), each then-outstanding Option and Stock Appreciation Right will become fully vested, each Other Stock-Based Award then outstanding will fully vest free of restrictions, and each other Award, including, without limitation, each Cash Performance Award, granted under this Plan that is then outstanding will become payable to the holder of such Award; provided that such acceleration provision will not apply, unless otherwise expressly provided by the Committee, with respect to any Award to the extent that the Board of Directors or the Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Award, or the Award would otherwise continue in accordance with its terms, in the circumstances.
5.3 Possible Acceleration of Awards. Upon the occurrence of a Change in Control, each outstanding Option and Stock Appreciation Right will become fully vested, each Other Stock-Based Award then outstanding will fully vest free of restrictions, and each other Award, including, without limitation, each Cash Performance Award, granted under this Plan that is then outstanding will vest and become payable to the holder of such Award. However, with respect to a Participant who is designated on the payroll records of the Company as a Tier 1 or Tier 2 executive or above (or comparable designation) or executive officer on the date of the Change in Control, no Award will vest solely on account of such Change in Control unless such Participant's employment with the Company (and its Subsidiaries) is terminated without "cause" (as defined in such Participant's Individual Agreement or the applicable Award Agreement) within the two-year period immediately following the consummation of such Change in Control.
5.4 Early Termination of Awards. Any Award that has been accelerated as required or contemplated bySection 5.2 orSection 5.3 (or would have been so accelerated but forSection 5.5,Section 5.6, orSection 5.7) will terminate upon the related event referred to inSection 5.2 orSection 5.3, as applicable, subject to any provision that has been expressly made by the Committee, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other continuation or settlement of such Award; provided that, in the case of Options and Stock Appreciation Rights that will not survive, be substituted for, assumed, exchanged, or otherwise continued or settled in the transaction, the holder of such Award will be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding Options and Stock Appreciation Rights in accordance with their terms before the termination of such Awards (except that in no case will more than ten (10) days' notice of accelerated vesting and the impending termination be required and any acceleration may be made contingent upon the actual occurrence of the event).
5.5 Other Acceleration Rules. Any acceleration of Awards pursuant to thisSECTION 5. must comply with all applicable legal requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Committee to occur a limited period of time (not greater than thirty (30) days) before the event. Without limiting the generality of the foregoing, the Committee may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an Award if an event giving rise to acceleration does not occur. Notwithstanding any other provision of the Plan to the contrary, the Committee may override the provisions ofSection 5.2,Section 5.3,Section 5.4 and/orSection 5.6 by express provision in an Award Agreement (provided that that the Committee may not, under the authority provided in thisSection 5.5, provide for the acceleration of vesting of an Award in the absence of a Change in Control or an event described inSection 5.1). In addition, the Committee may accord any Participant the right to refuse any acceleration, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve. The portion of any Incentive Stock Option accelerated pursuant toSection 5.3 or any other action permitted hereunder shall remain exercisable as an Incentive Stock Option only to the extent the applicable $100,000 limitation on Incentive Stock Options is not exceeded. To the extent exceeded, the accelerated portion of the Option will be treated as a Nonqualified Stock Option.
5.6 Possible Rescission of Acceleration. If the vesting of an Award has been accelerated expressly in anticipation of an event or upon stockholder approval of an event and the Committee later determines that the event will not occur, the Committee shall rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested Awards.
5.7 Golden Parachute Limitation. Notwithstanding anything else contained in thisSECTION 5. to the contrary, in no event may an Award be accelerated under this Plan to an extent or in a manner that would result in any compensation being paid that is not fully deductible by the Company or one of its Subsidiaries for federal income tax purposes because of Code Section 280G, nor may any payment made under the Plan be accelerated to the extent any portion of such accelerated payment would result in the payment of compensation that is not deductible by the Company or one of its Subsidiaries because of Code Section 280G. If a Participant would be entitled to benefits or payments under the Plan that, together with payments under any other plan or program, would constitute "parachute payments" as defined in Code Section 280G, then any such parachute payments will be reduced or modified on a pro rata basis so that the Company and its Subsidiaries are not denied federal income tax deductions for such Performance Periodpayments because of Code Section 280G. Notwithstanding the foregoing, if a Participant is a party to an Individual Agreement with the Company or one of its Subsidiaries, or is a participant in a severance program sponsored by the Company or one of its Subsidiaries, that contains express provisions regarding Code Section 280G and/or Code Section 4999 (or any similar successor provision), the Code Section 280G and/or Code Section 4999 provisions of such Individual Agreement will control as to any Awards held by that Participant.
6.1 Withholding. The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Award, the Company may require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the issuance or transfer of any such shares or the vesting of such Award. A Participant may satisfy the withholding obligation in cash, cash equivalents, or if and to the extent the applicable Award Agreement or Committee procedure so provides, a Participant may elect to have the number of shares of Stock he or she is to receive reduced by, or tender back to the Company, the number of whole shares of Stock that, when multiplied by the Fair Market Value of the shares of Stock, is sufficient to satisfy federal, state and local, if any,
withholding obligation arising from exercise or payment of an Award. The Company may, with the Committee's approval, accept one or more promissory notes from a Participant in connection with taxes required to be withheld upon the vesting or payment of any Award under the Plan; provided that any such note will be subject to terms and conditions established by the Committee and applicable legal requirements.
6.2 Awards to Non-U.S. Employees. The Committee has the power and authority to determine which Affiliates will be covered by this Plan and which employees outside the United States of America will be eligible to participate in the Plan. The Committee may adopt, amend or rescind rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures, and practices. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures, and sub-plans with provisions that limit or modify rights on death, disability or retirement, or on Separation from Service or Termination of Employment; available methods of exercise or settlement of an Award; payment of income, social insurance contributions and payroll taxes; the withholding procedures and handling of any stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.
6.3 Compliance with Code.
(a) Code Section 422. All Incentive Stock Options to be granted under the Plan are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted under the Plan must be construed in such a manner as to effectuate that intent.
(b) Code Section 409A. Except to the extent provided otherwise by the Committee, Awards under the Plan are intended to satisfy the requirements of Code Section 409A (and the Treasury Department guidance and regulations issued thereunder) so as to avoid the imposition of any additional taxes or penalties under Code Section 409A. If the Committee determines that an Award, Award Agreement, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to any additional taxes or other penalties under Code Section 409A, then unless the Committee provides otherwise, such Award, Award Agreement, payment, distribution, deferral election, transaction or other action or arrangement will not be given effect to the extent it causes such result and the related provisions of the Plan and/or Award Agreement will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Code Section 409A to the extent determined appropriate by the Committee, in each case without the consent of or notice to the Participant. Notwithstanding anything in the Plan, an Award Agreement, or any other agreement (written or oral) to the contrary, if a Participant is a "specified employee" (within the meaning of Code Section 409A) on the date of his or her Separation from Service, any payments made with respect to such Separation from Service under any Award will be delayed to the extent necessary to comply with Code Section 409A(a)(2)(B)(i), and such payments or benefits will be paid or distributed to the Participant during the five-day period commencing on the earlier of: (i) the expiration of the six-month period measured from the date of the Participant's Separation from Service, and (ii) the date of the Participant's death. Upon the expiration of the applicable six-month period under Code Section 409A(a)(2)(B)(i), all payments so deferred will be paid to the Participant (or the Participant's estate, in the event of the Participant's death) in a lump sum payment. Any remaining payments and benefits due under an Award will be paid as otherwise provided in an Award.
6.4 Right to Terminate Employment or Service. Nothing contained in this Plan or any Award Agreement confers upon any Participant any right to continue in the employment or other service of the Company or any of its Subsidiaries, constitutes a contract or agreement of employment or other service, or affects in any way an employee's status as an employee at will, nor may the Plan or any
Award Agreement be construed so as to interfere in any way with the right of the Company and its Subsidiaries to change a person's compensation or other benefits, or to terminate his or her employment or other service, with or without cause; provided that nothing in thisSection 6.4 is intended to adversely affect any express independent right of such person under any Individual Agreement.
6.5 Non-Alienation of Benefits. Other than as provided in the Plan, no benefit under the Plan may be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so is void. No such benefit may, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant.
6.6 Restrictions on Delivery and Sale of Shares; Legends. Each Award is subject to the condition that if at any time the Committee, in its discretion, determines that the listing, registration or qualification of the shares covered by such Award upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Award or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Award may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Awards then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to an Award, that the Participant or other recipient of an Award represent, in writing, that the shares received pursuant to the Award are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company has received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to an Award such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, deems appropriate.
6.7 Listing and Legal Compliance. The Committee may suspend the exercise or payment of any Award if it determines that securities exchange listing or registration or qualification under any securities laws or compliance with any other law is required in connection therewith and has not been completed on terms acceptable to the Committee.
6.8 Termination and Amendment of the Plan. The Board of Directors at any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors shall obtain stockholder approval for any particularamendment to the Plan that, except as provided underSection 5.1 of the Plan, increases the number of shares of Stock available under the Plan, materially expands the classes of individuals eligible to receive Awards, materially expands the type of Awards available for issuance under the Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the Award Agreement explicitly provides otherwise, no such termination or amendment may materially and adversely affect the rights of the Participant under such Award without the consent of the holder of an Award.
6.9 Stockholder Approval. The Company shall submit the Plan to the stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors. If such Performance Period.approval is not obtained, any Award granted under the Plan will be void.
6.10 Choice of Law. The laws of the State of Delaware will govern the Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws.
6.11 Effective Date of Plan; Term of Plan. The Plan will become effective as of the date the Plan is approved by the stockholders (the "Effective Date") pursuant toSection 6.9, regardless of the date the Plan is signed. No Award may be granted more than ten (10) years after the date the Plan was approved by the Company's stockholders.
RED ROBIN GOURMET BURGERS, INC.
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Red Robin Gourmet Burgers, Inc. Amended and Restated Employee Stock Purchase Plan (the "Plan").
1. PURPOSE
The purpose of this Plan is to assist Eligible Employees in acquiring a stock ownership interest in the Corporation, at a favorable price and upon favorable terms, pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code. This Plan is also intended to encourage Eligible Employees to remain in the employ of the Corporation (or a Subsidiary which may be designated by the Committee as "Participating Subsidiary") and to provide them with an additional incentive to advance the best interests of the Corporation.
2. DEFINITIONS
Capitalized terms used herein which are not otherwise defined shall have the following meanings.
"Account" means the bookkeeping account maintained by the Corporation, or by a recordkeeper on behalf of the Corporation, for a Participant pursuant to Section 7(a).
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended.amended from time to time.
"Code Section 162(m)Commission" means Section 162(m) of the CodeUnited States Securities and the applicable Treasury Regulations and other guidance issued thereunder.
"Code Section 409A" means Section 409A of the Code and the applicable Treasury Regulations and other guidance issued thereunder.Exchange Commission.
"Committee" means the committee appointed by the Board to administer this Plan pursuant to Section 12.
"Common Stock" means the Common Stock, par value $0.001 per share, of the Corporation, and such other securities or property as may become the subject of Options pursuant to an adjustment made under Section 17.
"Company" means, collectively, the Corporation, its Parent and its Subsidiaries (if any).
"Compensation" means an Eligible Employee's regular gross pay for a committee comprised40-hour week. Compensation includes any amounts contributed as salary reduction contributions to a plan qualifying under Section 401(k), 125 or 129 of twothe Code. Any other form of remuneration is excluded from Compensation, including (but not limited to) the following: overtime payments, commissions, prizes, awards, relocation or more directors,housing allowances, stock option exercises, stock appreciation rights, restricted stock exercises, performance awards, auto allowances, tuition reimbursement and other forms of imputed income, bonuses, incentive compensation, special payments, fees and allowances. Notwithstanding the foregoing, Compensation shall not include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Company.
"Contributions" means all bookkeeping amounts credited to the Account of whoma Participant pursuant to Section 7(a).
"Corporation" means Red Robin Gourmet Burgers, Inc., a Delaware corporation, and its successors.
"Effective Date" meansJuly 12, 2017.
"Eligible Employee" means any employee of the Corporation or of any Subsidiary which has been designated in writing by the Committee as a "Participating Subsidiary" (including any Subsidiaries
which have become such after the date that this Plan is approved by the stockholders of the Corporation). Notwithstanding the foregoing, "Eligible Employee" shall not include any employee:
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
"Exercise Date" means, with respect to an Offering Period, the last day of that Offering Period.
"Fair Market Value" means, as of any date and unless the Committee determines otherwise, the value of Common Stock determined as follows:
"Grant Date" means the first day of each Offering Period, as determined by the Committee shall beand announced to potential Eligible Employees.
"Offering Period" means the Compensationsix-consecutive month period commencing on each Grant Date; provided, however, that the Committee may declare, as it deems appropriate and in advance of the Board (or if one exists,applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period; provided further that the 162(m) subcommitteeGrant Date for an Offering Period may not occur on or before the Exercise Date for the immediately preceding Offering Period.
"Option" means the stock option to acquire Shares granted to a Participant pursuant to Section 8.
"Option Price" means the per share exercise price of an Option as determined in accordance with Section 8(b).
"Parent" means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation in which each corporation (other than the Corporation) owns stock possessing 50% or more of the Compensation Committee).total combined voting power of all classes of stock in one or more of the other corporations in the chain.
"Participant" means any member of senior management of the Companyan Eligible Employee who is selectedhas elected to participate in thethis Plan forand who has filed a Performance Period in accordance withvalid and effective Subscription Agreement to make Contributions pursuant to Section 4, below.6.
"DisabilityPlan" shall have the definition set forth in any employment, severance, change in control, or similar agreement between the Companymeans this Red Robin Gourmet Burgers, Inc. Amended and the Participant; provided, however, that if the Participant does not have such an agreement, the term Disability shall mean a physical or mental impairment which substantially limits a major life activity of the Participant and which renders Participant unableRestated Employee Stock Purchase Plan, as amended from time to perform the essential functions of his position, even with reasonable accommodation which does not impose an undue hardship on the Company. The Company reserves the right, in good faith, to make the determination of Disability under this Plan based upon information supplied by Participant and/or his medical personnel, as well as information from medical personnel (or others) selected by the Company or its insurers. Notwithstanding the foregoing, the Committee may, coincident with the Committee's establishment of Performance Goals for any Performance Period, establish in writing a different definition of Disability that shall be used for such Performance Period or for any particular Participant for such Performance Period.time.
"Performance GoalsRule 16b-3" means the specific, measurable goals setRule 16b-3 as promulgated by the Committee for any given Performance Period. Performance Goals may include multiple goals and may be based on one or more operational or financial criteria. In setting the Performance Goals for any Performance Period, the Committee may include one or any combinationCommission under Section 16 of the following criteria in either absolute or relative terms, for the Company or any subsidiary or business unit thereof: (a) stock price, (b) total shareholder return, (c) return on assets, return on equity, return on capital employed, or economic value added, (d) measures of growth suchExchange Act, as number of units or comparable sales, (e) measures of profitability including, but not limitedamended from time to earnings per share, corporate or business unit net income, net income before extraordinary or one-time items, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization, (f) cash flow from operations, (g) levels of operating expense or other expense items reported on the Company's income statement, (h) core and non-core product development and growth, (i) infrastructure development for business units or administrative departments (such as marketing, IT, and human resources), (j) measures of efficiency, (k) satisfactory completion of a major project or organizational initiative set in advance by the Committee, (l) measures of safety or quality, (m) revenue and/or sales, (n) market share, including, but not limited to, guest count or traffic count, (o) customer satisfaction, (p) employee engagement, including, but not limited to, employee retention and measures of employee satisfaction, and (q) strategic sales or acquisitions in compliance with specific criteria set forth in advance by the Committee.time.
"Performance PeriodShare" means one or more periodsa share of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to, and the payment of, a bonus award granted under the terms of the Plan.Common Stock.
"RetirementSubscription Agreement" means the voluntary termination of employmentwritten agreement filed by Participant from the Company if at the date of termination the Participant is at least 60 years of age and has completed at least five years of servicean Eligible Employee with the Company. Notwithstanding the foregoing, the Committee may, coincident with the Committee's establishment of Performance Goals for any Performance Period, establishCorporation pursuant to Section 6 to participate in writing a different definition of Retirement that shall be used for such Performance Period or for any particular Participant for such Performance Period.this Plan.
"Treasury RegulationsSubsidiary" means any corporation (other than the Treasury Regulations promulgatedCorporation) in an unbroken chain of corporations (beginning with the Corporation) in which each corporation (other than the last corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
3. ELIGIBILITY
Any person employed as an Eligible Employee as of a Grant Date shall be eligible to participate in this Plan during the Offering Period in which such Grant Date occurs, subject to the Eligible Employee satisfying the requirements of Section 6.
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
In the event that all of the Shares made available under this Plan are subscribed prior to the expiration of this Plan, this Plan shall terminate at the end of that Offering Period and the Shares available shall be allocated for purchase by Participants in that Offering Period on a pro-rata basis determined with respect to Participants' Account balances.
5. OFFERING PERIODS
During the term of this Plan, the Corporation will offer Options to purchase Shares in each Offering Period to all Participants in that Offering Period. Unless otherwise specified by the Committee in advance of the Offering Period, an Offering Period that commences on or about July 1 will end the following December 31 and an Offering Period that commences on or about January 1 will end the following June 30. Each Option shall become effective on the Grant Date. The term of each Option shall be the duration of the related Offering Period and shall end on the Exercise Date. The first Offering Period shall commence as of a date determined by the Board or Committee, but no earlier than the Effective Date. Offering Periods shall continue until this Plan is terminated in accordance with Section 18 or 19, or, if earlier, until no Shares remain available for Options pursuant to Section 4.
6. PARTICIPATION
prior to the start of the Offering Period with respect to which it is to become effective, and must set forth a whole percentage (or, if the Committee so provides, a stated amount) of the Eligible Employee's Compensation to be credited to the Participant's Account as Contributions each pay period.
(i) the 5% ownership and the $25,000 annual purchase limitations set forth in Section 8(c);
(ii) a Participant may not elect to contribute more than 15% of his or her Compensationeach pay period as Plan Contributions; and
(iii) such other limits, rules, or procedures as the Committee may prescribe.
7. METHOD OF PAYMENT OF CONTRIBUTIONS
8. GRANT OF OPTION
(i) it would, if exercised, cause the person to own "stock" (as such term is defined for purposes of Section 423(b)(3) of the Code) possessing 5% or more of the total combined voting power or value of all classes of stock of the Corporation, or of any Parent, or of any Subsidiary; or
(ii) such Option would cause such individual to have rights to purchase stock under this Plan (and any other plan of the Corporation, any Parent, or any Subsidiary which is qualified under Section 423 of the Code) that accrue at a rate that exceeds $25,000 of the fair market value of the stock of the Corporation, of any Parent, or of any Subsidiary (determined at the time the right to purchase such Stock is granted, before giving effect to any discounted purchase price under any such plan) for each calendar year in which such right is outstanding at any time.
For purposes of the foregoing, a right to purchase stock accrues when it first become exercisable during the calendar year. In determining whether the stock ownership of an Eligible Employee equals or exceeds the 5% limit set forth above, the rules of Section 424(d) of the Code (relating to attribution of stock ownership) shall apply, and stock which the
Eligible Employee may purchase under outstanding options shall be treated as stock owned by the Eligible Employee.
SECTION 3. ADMINISTRATION
9. EXERCISE OF OPTION
Unless a Participant's Plan participation is terminated as provided in Section 11, his or her Option for the purchase of Shares shall be exercised automatically on the Exercise Date for that Offering Period, without any further action on the Participant's part, and the maximum number of whole Shares subject to such Option (subject to the Individual Limit set forth in Section 4(b) and the limitations contained in Section 8(c)) shall be purchased at the Option Price with the balance of such Participant's Account.
If any amount which is not sufficient to purchase a whole Share remains in a Participant's Account after the exercise of his or her Option on the Exercise Date: (i) such amount shall be credited to such Participant's Account for the next Offering Period, if he or she is then a Participant; or (ii) if such Participant is not a Participant in the next Offering Period, or if the Committee so elects, such amount shall be refunded to such Participant as soon as administratively practicable after such date. If the Share limit of Section 4(a) is reached, any amount that remains in a Participant's Account after the exercise of his or her Option on the Exercise Date to purchase the number of Shares that he or she is allocated shall be refunded to the Participant as soon as administratively practicable after such date.
If an amount which exceeds the Individual Limit established pursuant to Section 4(b) or one of the limitations set forth in Section 8(c) remains in a Participant's Account after the exercise of his or her Option on the Exercise Date, such amount shall be refunded to the Participant as soon as administratively practicable after such date.
10. DELIVERY
As soon as administratively practicable after the Exercise Date, the Corporation shall deliver to each Participant a certificate representing the Shares purchased upon exercise of his or her Option. The Corporation may make available an alternative arrangement for delivery of Shares to a recordkeeping service. The Committee (or its delegate), in its discretion, may either require or permit Participants to elect that such certificates representing the Shares purchased or to be purchased under the Plan be delivered to such recordkeeping service. In the event the Corporation is required to obtain from any commission or agency authority to issue any such certificate, the Corporation will seek to obtain such authority. If the Corporation is unable to obtain from any such commission or agency authority which counsel for the Corporation deems necessary for the lawful issuance of any such certificate, or if for any other reason the Corporation cannot issue or deliver Shares and satisfy Section 21, the Corporation shall be relieved from liability to any Participant except that the Corporation shall return to each Participant the amount of the balance credited to his or her Account.
11. TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS
Participant is an employee of the Company or on such leave as of the applicable Exercise Date, such Participant's Contributions shall cease (subject to Section 7(d)), and the Contributions previously credited to the Participant's Account for that Offering Period shall be used to exercise the Participant's Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely election to terminate Contributions in accordance with Section 7(c), in which case such Participant's Account shall be paid to him or her in cash in accordance with the foregoing paragraph).
12. ADMINISTRATION
SECTION 4. PERFORMANCE PERIODS; ELIGIBILITY
beneficiaries. The Committee may but needdelegate ministerial non-discretionary functions to third parties, including individuals who are officers or employees of the Corporation.
the Company, shall be liable for any action, omission or decision under the Plan taken, made or omitted in good faith.
13. DESIGNATION OF BENEFICIARY
SECTION 5. ESTABLISHMENT OF PERFORMANCE GOALS; DETERMINATION OF AWARDS
5.1 Establishment of Performance Goals; Bonus Formulas. Within ninety (90) days after the beginning of a Performance Period, but in no event after twenty-five (25) percent of the Performance Period has lapsed, the Committee shall establish in writing (i) the Performance Goals and the underlying performance criteria applicable to the Performance Period, and (ii) the formula or methodology for determining the bonus award payable (if any) to each Participant for such Performance Period upon attainment of the specified Performance Goals. Performance Goals must be objective and must satisfy the third-party objectivity standards under Code Section 162(m). Notwithstanding the foregoing,is living at the time of such Performance Goals are established,Participant's death, the CommitteeCorporation shall deliver all Shares and/or cash payable pursuant to the terms hereof to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed, the Corporation, in its discretion, may determine thatdeliver such Shares and/or cash to the Performance Goalsspouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Corporation, then to such other person as the Corporation may designate.
14. TRANSFERABILITY
Neither Contributions credited to a Participant's Account nor any Option or rights with respect to the exercise of any Option or right to receive Shares under this Plan may be anticipated, alienated, encumbered, assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 13) by the Participant. Any such attempt at anticipation, alienation, encumbrance, assignment, transfer, pledge or other disposition shall be adjustedwithout effect and all amounts shall be paid and all Shares shall be delivered in accordance with the provisions of this Plan. Amounts payable or Shares deliverable pursuant to accountthis Plan shall be paid or delivered only to the Participant or, in the event of the Participant's death, to the Participant's beneficiary pursuant to Section 13.
15. USE OF FUNDS; INTEREST
All Contributions received or held by the Corporation under this Plan will be included in the general assets of the Corporation and may be used for any unusual itemscorporate purpose. Notwithstanding anything else contained herein to the contrary, no interest will be paid to any Participant or specified eventscredited to his or occurrences during the Performance Period. In addition, unless otherwise provided by the Committee at the time the Performance Goals are established, the Performance Goals shall be adjusted to exclude the effecther Account under this Plan (in respect of anyAccount balances, refunds of the following events that occur during the Performance Period: (i) asset write-downs, (ii) extraordinary litigation, claims, judgments,Account balances, or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) material changes to invested capital from pension and post-retirement benefits-related items and similar non-operational items, and (vi) any other extraordinary, unusual, non-recurring or non-comparable items (A) as described in management's discussion and analysis of financial condition and results of operations appearing in the Company's Annual Report to stockholders, (B) as described in Accounting Standards Codification Topic 225 (or successor guidance thereto) or (C) as publicly announced by the Company in a press release orotherwise).
conference call relating16. REPORTS
Statements shall be provided to Participants as soon as administratively practicable following each Exercise Date. Each Participant's statement shall set forth, as of such Exercise Date, that Participant's Account balance immediately prior to the Company's resultsexercise of operationshis or financial condition for a completed quarterly or annual fiscal period.
5.2 Certification of Results; Calculation of Bonuses. As soon as reasonably practicable afterher Option, the close of the Performance Period, the Committee shall determine bonus awards to be paid under the terms of the Plan. Any payments made under this Plan shall be contingent upon achieving the Performance Goals set in advance for the Performance Period in question. The Committee shall certify in writing prior to approval of any awards that such Performance Goals have been satisfied (a unanimous written consent or approved minutes of the Committee may be used for this purpose).
5.3 Committee Discretion to Reduce Awards. The Committee may, in its sole and absolute discretion, reduce the bonus awards to which any Participant is otherwise due for any Performance Period if it believes that such reduction is in the best interest of the Company and its stockholders, but any reduction cannot result in any increase in the bonus award of one or more other Participants for such Performance Period. The Committee has no discretion to increase the bonus award otherwise payable to any Participant for any Performance Period.
5.4 Maximum Awards. The maximum bonus award that may be paid to any Participant for any Performance Period shall be (x) 3,000,000, multiplied by (y)Option Price, the number of years (or portion thereof) in the Performance Period.whole Shares purchased and his or her remaining Account balance, if any.
SECTION 6. PAYMENT17. ADJUSTMENTS OF AWARDS
AND CHANGES IN THE STOCK
Coincident with the Committee's establishmentUpon or in contemplation of Performance Goals for any Performance Period, the Committee shall also establish in writing when bonus awards for such Performance Period (if any) shall be paid, including (but not limited to) the effect thatreclassification, recapitalization, stock split (including a Participant's death, Disability, or termination without Cause, or a Change of Control of the Company, may have on the payment of such awards. All payment terms shall be intended to comply with Code Section 409A. Payment may be madestock split in the form of a stock dividend), or reverse stock split, any merger, combination, consolidation, or other reorganization, any split-up, spin-off, or similar extraordinary dividend distribution in respect of the Common Stock (whether in the form of securities or property), any exchange of Common Stock or other securities of the Corporation, any similar, unusual or extraordinary corporate transaction in respect of the Common Stock, or any sale of substantially all the assets of the Corporation as an entirety occurs; the Committee shall, in such manner, to such extent (if any), and at such time as it deems appropriate and equitable in the circumstances:
The Committee may adopt such valuation methodologies for outstanding Options as it deems reasonable in the event of a cash or property settlement and, without limitation on other methodologies, may base such settlement solely upon the excess (if any) of the amount payable upon or in respect of such event over the exercise or strike price of the Option.
In any combination thereof, as determined byof such events, the Committee in its sole and absolute discretion.
7.1 Nonassignability. A Participant shall have no rightmay take such action sufficiently prior to assign or transfer any interest under this Plan.
7.2 No Contract of Employment. Nothing in this Plan shall confer uponsuch event to the extent that the Committee deems the action necessary to permit the Participant to realize the rightbenefits intended to maintain his relationship with the Company or any affiliate as an employee, nor shall it interfere in any way with any right of the Company, or any such affiliate, to terminate its relationship with the Participant at any time for any reason whatsoever, with or without Cause.
7.3 Amendment and Termination. The Board may from time to time alter, amend, suspend, or discontinue the Plan, including, where applicable, any modifications or amendments as it shall deem advisable in order that the Plan not be subject to the limitations on deductibility contained in Code Section 162(m), or to conform to any regulation or to any change in law or regulation applicable thereto; provided, however, that no such action shall adversely affect the rights and obligations of the Participantsconveyed with respect to the bonus amount payable underunderlying shares in the same manner as is or will be available to stockholders generally.
18. POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS
Upon a dissolution of the Corporation, or any other event described in Section 17 that the Corporation does not survive, the Plan atand, if prior to the timelast day of such alteration, amendment, suspension,an Offering Period, any outstanding Option granted with respect to that Offering Period shall terminate, subject to any provision that has been expressly made by the Board for the survival, substitution, assumption, exchange or discontinuance, except as may be required in order to comply with the requirements of Code Section 162(m) or Code Section 409A.
7.4 Section 409Aother settlement of the Code.Plan and Options. In the event a Participant's Option is terminated pursuant to this Section 18 without a provision having been made by the Board for a substitution, exchange or other settlement of the Option, such Participant's Account shall be paid to him or her in cash without interest.
19. TERM OF PLAN; AMENDMENT OR TERMINATION
terminate as of the later of (i) the tenth anniversary of the Effective Date and (ii) the Exercise Date of the last Offering Period commenced on or prior to the day before the tenth anniversary of the Effective Date, unless sooner terminated pursuant to Section 4, Section 18, or this Section 19.
20. NOTICES
All notices or other communications by a Participant to the Corporation contemplated by this Plan shall be deemed to have been duly given when received in the form and manner specified by the Committee (or its delegate) at the location, or by the person, designated by the Committee (or its delegate) for that purpose.
21. CONDITIONS UPON ISSUANCE OF SHARES
This Plan, the granting of Options under this Plan and the offer, issuance and delivery of Shares are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws) and to such approvals by any bonus amount payablelisting, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation and as a condition precedent to the exercise of his or her Option, provide such assurances and representations to the Corporation as the Committee may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
22. PLAN CONSTRUCTION
23. EMPLOYEES' RIGHTS
7.5 Tax Withholding. The Company shall withhold all applicable taxes fromby reason of any bonus awards payable hereunder, includingOption hereunder. Neither the provisions of this Plan (or of any foreign, federal, state,related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company and local taxes.any Participant or other person. To the extent that a Participant or other person acquires a right to receive payment pursuant to this Plan, such right will be no greater than the right of any unsecured general creditor of the Corporation. No special or separate reserve, fund or deposit will be made to assure any such payment.
24. MISCELLANEOUS
Company, except where the Committee or the Board expressly otherwise provides or authorizes in writing. 25. EFFECTIVE DATE Notwithstanding anything else contained herein to the contrary, the effectiveness of this Plan is subject to the approval of this Plan by the stockholders of the Corporation within twelve months after the Effective Date. Notwithstanding anything else contained herein to the contrary, no Shares shall be issued or delivered under this Plan until such stockholder approval is obtained and, if such stockholder approval is not obtained within such twelve month period of time, all Contributions credited to a Participant's Account hereunder shall be refunded to such Participant (without interest) as soon as practicable after the end of such 7.6 Applicable Law. provisions of the laws of the State of Colorado, without regardsDelaware. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.conflictssections of laws provisionsthis Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any way material or relevant to the construction of interpretation of this Plan or any provision hereof.state.
SECTION 8. EFFECTIVE DATE
26. TAX WITHHOLDING
This Red Robin Gourmet Burgers, Inc. Cash IncentiveNotwithstanding anything else contained in this Plan was adopted byherein to the Boardcontrary, the Company may deduct from a Participant's Account balance as of Directors on October 29, 2014, and shall become effective upon approval byan Exercise Date, before the stockholderexercise of the Company. Once approved byParticipant's Option is given effect on such date, the Company's stockholders,amount of any taxes which the Company reasonably determines it shall remain in effect,may be required to withhold with respect to such exercise. In such event, the maximum number of whole Shares subject to amendmentsuch Option (subject to the other limits set forth in this Plan) shall be purchased at the Option Price with the balance of the Participant's Account (after reduction for the tax withholding amount).
Should the Company for any reason be unable, or elect not to, satisfy its tax withholding obligations in the manner described in the preceding paragraph with respect to a Participant's exercise of an Option, or should the Company reasonably determine that it has a tax withholding obligation with respect to a disposition of Shares acquired pursuant to the exercise of an Option prior to satisfaction of the holding period requirements of Section 423 of the Code, the Company shall have the right at its option to (i) require the Participant to pay or provide for payment of the amount of any taxes which the Company reasonably determines that it is required to withhold with respect to such event or (ii) deduct from timeany amount otherwise payable to time.or for the account of the Participant the amount of any taxes which the Company reasonably determines that it is required to withhold with respect to such event.
27. NOTICE OF SALE
Any person who has acquired Shares under this Plan shall give prompt written notice to the Corporation of any sale or other transfer of the Shares if such sale or transfer occurs (i) within the two-year period after the Grant Date of the Offering Period with respect to which such Shares were acquired, or (ii) within the twelve month period after the Exercise Date of the Offering Period with respect to which such Shares were acquired.
ANNUAL MEETING OF STOCKHOLDERS OF
RED ROBIN GOURMET BURGERS, INC.
May 28, 2015
18, 2017 NOTICE OFREGARDING INTERNET AVAILABILITY OF PROXY MATERIALS:
MATERIALS: The Notice of Meeting, Proxy Statement, FormF orm of Proxy Card, and 20142016 Annual Report on Form 10-K
are available at
http://www.redrobin.com/eproxy
Please sign, date, and mail your proxy card in the
envelope provided as soon as possible.
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Please detach along perforated line and mail in the envelope provided. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2, 3, 4, 5, AND 5.
6. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR “1 YEAR” FREQUENCY FOR PROPOSAL 3. PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
X 1. The election of nine (9) directors for one-year terms: FOR AGAINST ABSTAIN (a) Rob e rt B. Aiken (b) Cambria W. Dunaway (c) Kalen F. Holmes (d) Ric ha rd J. Howell (e) Glenn B. Kaufman (f) Steven K. Lumpkin (g) Pattye L. Moore (h) Stuart I. Oran (i) Denny Marie Post 2 . Approval, on an advisory basis, of the Company’s executive compensation. 3. Approval, on an advisory basis, of the frequency of holding an advisory vote on executive compensation. 1 Year 2 Years 3 Years Abstain 4. Approval of 2017 Performance Incentive Plan. 5. Approval of Amended and Restated Employee Stock Purchase Plan. 6. Ratification of the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending December 31, 2017. 7 . Such other business as may properly come before the meeting or any adjournment thereof. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee, or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, BUT NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” PROPOSALS 1, 2, 3, 4, 5, AND 5.
6, AND “1 YEAR” FREQUENCY FOR PROPOSAL 3. SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCEACCOR-DANCE WITH THE STOCKHOLDER’S SPECIFICATIONS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS TO THE UNDERSIGNED.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RED ROBIN GOURMET BURGERS, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
The undersigned hereby acknowledges receipt of the notice of annual meeting of stockholders, proxy statement, and 20142016 annual report on Form 10-K.
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RED ROBIN GOURMET BURGERS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen E. CarleyDenny Marie Post and Stuart B. Brown,Guy J. Constant, and each of them, as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all the shares of Common Stock of Red Robin Gourmet Burgers, Inc. held of record by the undersigned on March 30, 201527, 2017 at the Annual Meeting of Stockholders to be held at our corporate headquarters, located at 6312 South Fiddler’s Green Circle, Suite 200N, Greenwood Village, Colorado 80111 at 8:00 a.m. MDT on May 28, 2015,18, 2017, or any adjournment or postponement thereof.
This proxy authorizes each of the persons named above to vote at his or her discretion on any other matter that may properly come before the meeting or any postponement or adjournment thereof. If this card is properly executed and returned, but contains no specific voting instructions, these shares will be voted in accordance with the recommendation of the Board of Directors.
(Continued (Continued and to be signed on the reverse side)