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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. )
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
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o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
Texas Roadhouse, Inc. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
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(4) | Date Filed: |
April 6, 2018
3, 2020
To our Shareholders:
You are cordially invited to attend the 20182020 Annual Meeting of Shareholders of Texas Roadhouse, Inc. on Thursday, May 17, 2018.14, 2020. The meeting will be held at the Texas Roadhouse Support Center located at 6040 Dutchmans Lane, Louisville, Kentucky at 9:00 a.m. eastern daylight time.
The official Notice of Annual Meeting, Proxy Statement and Proxy Card are enclosed with this letter.
Please take the time to read carefully each of the proposals for shareholder action described in the accompanying proxy materials. Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly completing, signing and dating your proxy card and returning it in the enclosed postage-paid envelope. Shareholders of record can also vote by touch-tone telephone from the United States, using the toll-free number on the proxy card, or by the Internet, using the instructions on the proxy card. If you attend the meeting, then you may revoke your proxy and vote your shares in person.
Your interest and participation in the affairs of the Company are greatly appreciated. Thank you for your continued support.
Sincerely, | ||
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W. Kent Taylor Chairman, Chief Executive Officer, President |
TEXAS ROADHOUSE, INC.
6040 Dutchmans Lane
Louisville, Kentucky 40205
NOTICE OF 20182020 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 201814, 2020
To the Shareholders:
The 20182020 Annual Meeting of Shareholders (the "Annual Meeting") of Texas Roadhouse, Inc. (the "Company") will be held at the Texas Roadhouse Support Center located at 6040 Dutchmans Lane, Louisville, Kentucky on Thursday, May 17, 201814, 2020 at 9:00 a.m. eastern daylight time.
At the Annual Meeting, you will be asked to:
A Proxy Statement describing matters to be considered at the Annual Meeting is attached to this notice. Only shareholders of record at the close of business on March 19, 201816, 2020 are entitled to receive notice of and to vote at the meeting.Annual Meeting.
By Order of the Board of Directors, | ||
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Louisville, Kentucky
April 6, 20183, 2020
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SUBMIT YOUR VOTE USING ONE OF THE VOTING METHODS DESCRIBED IN THE ATTACHED MATERIALS. IF YOU ATTEND THE ANNUAL MEETING, THEN YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 20182020 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 2018:14, 2020: Our Annual Report containing our Proxy Statement related to our 20182020 Annual Meeting of Shareholders our Annual Report onand Form 10-K for the fiscal year ended on December 26, 2017 and our Annual Report to Shareholders for the fiscal year ended on December 26, 2017 are31, 2019 is available on our website atwww.texasroadhouse.com in the Investors section.
SUMMARY OF MATTERS REQUIRING SHAREHOLDER ACTION | 1 | |||
Proposal 1—Election of Directors | 1 | |||
Proposal 2—Ratification of Independent Auditors | 1 | |||
Proposal 3—Advisory Vote on Approval of Executive Compensation | 1 | |||
Other Matters | 2 | |||
INFORMATION ABOUT PROXIES AND VOTING | 3 | |||
Record Date and Voting Securities | 3 | |||
Revocability of Proxies | 3 | |||
Solicitation of Proxies | 3 | |||
Other Voting Considerations | 3 | |||
CORPORATE GOVERNANCE AND OUR BOARD | 5 | |||
Director | 5 | |||
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Meetings of the Board | ||||
Leadership Structure of the Board and the Role of the Board in Risk Oversight | 7 | |||
Committees of the Board | ||||
Policy Regarding Consideration of Candidates for Director | ||||
Compensation of Directors | ||||
Code of Conduct | ||||
Stock Ownership Guidelines | ||||
Succession Planning | 14 | |||
Mandatory Retirement Age for Board Service | 15 | |||
STOCK OWNERSHIP INFORMATION | ||||
Delinquent Section 16(a) | ||||
EXECUTIVE COMPENSATION | ||||
2019 Executive Summary | 18 | |||
Compensation Discussion and Analysis | ||||
Summary Compensation Table | ||||
Grants of Plan-Based Awards in Fiscal Year | ||||
Outstanding Equity Awards | ||||
Options Exercised and Stock Vested | ||||
Termination, Change of Control and Change of Responsibility Payments | ||||
CEO Pay Ratio | 36 | |||
AUDIT COMMITTEE REPORT | ||||
Related Party Transactions | ||||
PRESENTATION OF PROPOSALS | ||||
Proposal 1—Election of Directors | ||||
Proposal 2—Ratification of Independent Auditors | ||||
Proposal 3—Advisory Vote on Approval of Executive Compensation | ||||
SHAREHOLDER PROPOSALS | ||||
SHAREHOLDERS' COMMUNICATIONS WITH THE BOARD | ||||
FORM 10-K | ||||
OTHER BUSINESS |
PROXY STATEMENT
2020 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 2020
TEXAS ROADHOUSE, INC.
6040 Dutchmans Lane
Louisville, Kentucky 40205PROXY STATEMENT2018 ANNUAL MEETING OF SHAREHOLDERSTO BE HELD MAY 17, 2018
This proxy statement and accompanying proxy card are being furnished in connection with the solicitation of proxies by the board of directors (the "Board") of Texas Roadhouse, Inc., a Delaware corporation, to be voted at the 20182020 Annual Meeting of Shareholders (the "Annual Meeting") and any adjournments thereof. In this proxy statement, references to the "Company," "we," "us" or "our" refer to Texas Roadhouse, Inc. This proxy statement and accompanying proxy card are first being mailed to shareholders on or about April 6, 2018.3, 2020.
The Annual Meeting will be held at the Texas Roadhouse Support Center located at 6040 Dutchmans Lane, Louisville, Kentucky on Thursday, May 17, 201814, 2020 at 9:00 a.m. eastern daylight time, for the purposes set forth in this proxy statement and the accompanying notice of the Annual Meeting.
SUMMARY OF MATTERS REQUIRING SHAREHOLDER ACTION
Proposal 1—Election of Directors
The affirmative vote of a plurality of the votes entitled to be cast by the holders of the Company's common stock present in person or represented by proxy is required to elect each nominee. Election by a plurality means that the director nominee with the most votes for the available slot is elected for that slot. You may vote "FOR" each nominee or you may "WITHHOLD AUTHORITY" to vote for each nominee. Unless you "WITHHOLD AUTHORITY" to vote for a nominee, your proxy will be voted "FOR" the election of the individuals nominated as directors.
Our Board has adopted a majority voting policy for uncontested director elections. Under this policy, any nominee who receives fewer "FOR" votes than "WITHHOLD" votes is required to offer his or her resignation. Our nominating and corporate governance committee would then consider the offer of resignation and make a recommendation to our independent directors as to the action to be taken with respect to the offer.
The Board recommends that you vote "FOR" the nominees.THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES.
Proposal 2—Ratification of Independent Auditors
The proposal to ratify the appointment of KPMG LLP as the Company's independent auditors for the fiscal year ending December 25, 201829, 2020 must be approved by the affirmative vote of a majority of the shares present (in person or by proxy) and entitled to vote. You may vote "FOR" or "AGAINST" the ratification, or you may "ABSTAIN" from voting on this proposal. A vote to "ABSTAIN" will have the same effect as a vote "AGAINST" this proposal.
The Board recommends that you vote "FOR" this proposal.THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
Proposal 3—Advisory Vote on Approval of Executive Compensation
The outcome of the advisory vote on whether to approve the executive compensation detailed in this proxy statement (including the Compensation Discussion and Analysis, the Executive Compensation section and the other related executive compensation tables and related discussions) will be determined by
the affirmative vote of a majority of the shares present (in person or by proxy) and entitled to vote.
You may vote "FOR" or "AGAINST" approval of the executive compensation, or you may "ABSTAIN" from voting on this proposal. A vote to "ABSTAIN" will have the same effect as a vote "AGAINST" approval of the executive compensation.
The Board recommends that you vote "FOR" this proposal.THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
As of the date of this proxy statement, the Board knows of no matters that will be presented for consideration at the Annual Meeting other than those matters discussed in this proxy statement. If any other matters should properly come before the Annual Meeting and call for a vote of shareholders, then validly executed proxies in the enclosed form returned to us will be voted in accordance with the recommendation of the Board, or, in the absence of such a recommendation, in accordance with the judgment of the proxy holders. Any such additional matter must be approved by an affirmative vote of a majority of the shares present (in person or by proxy) and entitled to vote at the Annual Meeting.
INFORMATION ABOUT PROXIES AND VOTING
Record Date and Voting Securities
The Board has fixed the record date (the "Record Date") for the Annual Meeting as the close of business on March 19, 2018.16, 2020. Only shareholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting and at any adjournment or postponement thereof. At the close of business on the Record Date, there were outstanding 71,412,46969,355,085 shares of common stock, each of which is entitled to one vote per share on all matters to be considered at the Annual Meeting.
The presence in person or by proxy of the holders of a majority of the shares of common stock will constitute a quorum for the transaction of business at the Annual Meeting. Shares of common stock represented by properly executed proxies received before the close of voting at the Annual Meeting will be voted as directed by such shareholders, unless revoked as described below.
A shareholder who completes and returns the proxy card that accompanies this proxy statement may revoke that proxy at any time before the closing of the polls at the Annual Meeting. A shareholder may revoke a proxy by voting at a later date by one of the methods described on the proxy card or by filing a written notice of revocation with, or by delivering a duly executed proxy bearing a later date to, the Corporate Secretary of the Company at the Company's main office address located at 6040 Dutchmans Lane, Louisville, Kentucky 40205 at any time before the Annual Meeting. Shareholders may also revoke proxies by delivering a duly executed proxy bearing a later date to the inspector of election at the Annual Meeting before the close of voting or by attending the Annual Meeting and voting in person. You may attend the Annual Meeting even though you have executed a proxy, but your presence at the Annual Meeting will not automatically revoke your proxy.
The cost of solicitation of proxies being solicited on behalf of the Board will be borne by us. In addition to solicitation by mail, proxies may be solicited personally, by telephone or other means by our directors, officers or employees, who receive no additional compensation for these solicitation activities. We will, upon request, reimburse brokerage houses and persons holding common stock in the names of their nominees for their reasonable out-of-pocket expenses in sending materials to their principals.
Broker Non-VotesNon-Votes.
Under rules of the New York Stock Exchange, matters subject to shareholder vote are classified as "routine" or "non-routine." In the case of routine matters, brokers may vote shares held in "street name" in their discretion if they have not received voting instructions from the beneficial owner. In the case of non-routine matters, brokers may not vote shares unless they have received voting instructions from the beneficial owner ("broker non-votes"); therefore, it is important that you complete and return your proxy early so that your vote may be recorded.
The election of directors (Proposal 1) is a non-routine matter under the applicable rules so broker non-votes may occur. However, broker non-votes do not count as shares entitled to vote. Because the election is decided by a plurality of shares present (in person or by proxy) and entitled to vote at the Annual Meeting, and because our majority voting policy for directors only considers "FOR" votes and "WITHHOLD" votes, any broker non-votes will not affect the outcome of this proposal.
The ratification of the appointment of the Company's independent auditors (Proposal 2) is a routine matter under the applicable rules so broker non-votes should not occur. In addition, because
this matter is routine and brokers may vote as stated above, the number of votes cast, plus the number of abstentions, on Proposal 2 will be used to establish whether a quorum is present.
The advisory vote on the approval of executive compensation (Proposal 3) and any other matters that may properly come before the Annual Meeting are also non-routine matters under the applicable rules so broker non-votes may occur. Because broker non-votes do not count as shares entitled to vote, they do not affect the outcome of the vote on Proposal 3.
Abstentions Abstentions.
Abstentions will be counted for purposes of calculating whether a quorum is present. The effect of an abstention on each proposal where "ABSTAIN" is a voting choice is discussed above.
Executed but Unmarked ProxiesProxies.
If no instructions are given, then shares represented by properly executed but unmarked proxies will be voted in accordance with the recommendation of the Board, or, in the absence of such a recommendation, in accordance with the judgment of the proxy holders.
CORPORATE GOVERNANCE AND OUR BOARD
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Gregory N. Moore | | Business Experience: | ||||||
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Director Since: 2005 Age: 70 Board Committees / Leadership: Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee; Independent Lead director and International Liaison; Chairperson of Audit Committee and Nominating & Corporate Governance Committee Public Boards: None | | Mr. Moore served as the Senior Vice President and Controller of Yum! Brands, Inc. until he retired in 2005. Yum! Brands is the worldwide parent company of Taco Bell, KFC and Pizza Hut. Prior to becoming Yum! Brands' Controller, Mr. Moore was the Vice President and General Auditor of Yum! Brands. Before that, he was with PepsiCo, Inc. and held the position of Vice President, Controller of Taco Bell and Controller of PepsiCo Wines & Spirits International, a division of PepsiCola International. Before joining PepsiCo, he was an Audit Manager with Arthur Young & Company in its New York, New York and Stamford, Connecticut offices. Mr. Moore is a certified public accountant in the States of New York and California. In July 2011, Mr. Moore joined the board of Newegg, Inc., a privately held on-line retailer specializing in computer and computer-related equipment, and serves as the chair of both the audit and compensation committees. Mr. Moore also serves on the board of EF&TRH Restaurants (HK) Holding Limited, a Texas Roadhouse, Inc. joint-venture in China. | ||||||
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| | | Reason for Nomination: Mr. Moore is being nominated as a non-employee director because of his extensive financial, accounting and international experience in the restaurant industry. As a result of these and other professional experiences, Mr. Moore possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience. | |||||
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Gregory N. Moore. Mr. Moore, 68, served as the Senior Vice President and Controller of Yum! Brands, Inc. until he retired in 2005. Yum! Brands is the worldwide parent company of Taco Bell, KFC and Pizza Hut. Prior to becoming Yum! Brands' Controller, Mr. Moore was the Vice President and General Auditor of Yum! Brands. Before that, he was with PepsiCo, Inc. and held the position of Vice President, Controller of Taco Bell and Controller of PepsiCo Wines & Spirits International, a division of PepsiCola International. Before joining PepsiCo, he was an Audit Manager with Arthur Young & Company in its New York, New York and Stamford, Connecticut offices. Mr. Moore is a certified public accountant in the States of New York and California. In July 2011, Mr. Moore joined the board of Newegg, Inc., a privately held on-line retailer specializing in computer and computer-related equipment, and serves as the chair of the audit committee. Mr. Moore also serves on the board of EF&TRH Restaurants (HK) Holding Limited, a Texas Roadhouse, Inc. joint venture in China. Mr. Moore has served as a director since 2005 and was nominated as a director because of his extensive financial and accounting experience in the restaurant industry. As a result of these and other professional experiences, Mr. Moore possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience.
James F. Parker. Mr. Parker, 71, retired as Chief Executive Officer and Vice-Chairman of the Board of Southwest Airlines Co., a position he held from June 2001 through July 2004. Before serving at Southwest Airlines as Chief Executive Officer, Mr. Parker served as General Counsel of that company from 1986 until June 2001, and was previously a shareholder in the San Antonio, Texas law firm of Oppenheimer, Rosenberg, Kelleher and Wheatley. Mr. Parker serves as a member of the board of directors of Sammons Enterprises, Inc. and the board of directors of two wholly owned subsidiaries of Sammons Enterprises, Inc., Midland Life Insurance Company and North American Company for Life and Health Insurance, all private companies. Mr. Parker also serves as the chairman of the compensation committee for Sammons Enterprises, Inc. and on the audit committees for Sammons Enterprises, Inc., Midland Life Insurance Company and North American Company for Life and Health Insurance. Mr. Parker has served as a director since 2004 and was nominated as a director because of his chief executive experience, his knowledge of the value-based service industry and the similarity of cultures between Southwest Airlines and Texas Roadhouse. As a result of these and other professional experiences, Mr. Parker possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience.
W. Kent Taylor. Mr. Taylor, 62, is our founder, Chairman, and Chief Executive Officer, a position he resumed in August 2011. Mr. Taylor previously served as Chief Executive Officer from 2000 until 2004, at which time Mr. Taylor became Chairman of the Company, an executive position. Before his founding of our concept in 1993, Mr. Taylor founded and co-owned Buckhead Bar and Grill in Louisville, Kentucky. Mr. Taylor was appointed to the Board of Directors of Papa John's International, Inc. in May 2011. Mr. Taylor has served as a director since 2004 and is being nominated as a director because of his chief executive experience, his knowledge of the restaurant industry and his intimate knowledge of the Company as its founder. As a result of these and other professional experiences, Mr. Taylor possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience.
Kathleen M. Widmer. Ms. Widmer, 56, is the President of the Johnson & Johnson Consumer OTC division, which provides healthcare solutions through well-known and trusted over the counter medicines and products, a position she has held since August 2015. She was previously with Johnson & Johnson for 21 years, until 2009, where she held numerous positions, including serving as Vice President, Marketing, McNeil Consumer Healthcare. Prior to re-joining Johnson & Johnson, she served as Executive Vice President and Chief Marketing Officer at Elizabeth Arden, Inc. from 2009 to 2015, and was responsible for the global growth strategy and marketing execution of the Elizabeth Arden Brand as well as the
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W. Kent Taylor | | Business Experience: | ||||||
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Director Since: 2004 Age: 64 Board Committees / Leadership: Chairman of the Board; Company's Chairman, Chief Executive Officer, and President Public Boards: None | | Mr. Taylor is our founder, Chairman, and Chief Executive Officer, a position he resumed in August 2011. Mr. Taylor previously served as Chief Executive Officer from 2000 until 2004, at which time Mr. Taylor became Chairman of the Company, an executive position. Additionally, Mr. Taylor assumed the position of President of the Company on June 24, 2019, a position he previously served as from 1993 until 2000. Before his founding of our concept in 1993, Mr. Taylor founded and co-owned Buckhead Bar and Grill in Louisville, Kentucky. Mr. Taylor previously served on the Board of Directors of Papa John's International, Inc. (Nasdaq: PZZA) from 2011 until 2018. | ||||||
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| | | Reason for Nomination: Mr. Taylor is being nominated as an employee director because of his chief executive experience, his knowledge of the restaurant industry and his intimate knowledge of the Company as its founder. As a result of these and other professional experiences, Mr. Taylor possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience. | |||||
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company's extensive portfolio
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Curtis A. Warfield | | Business Experience: | ||||||
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Director Since: 2018 Age: 51 Board Committees / Leadership: Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee Public Boards: None | | Mr. Warfield is a certified public accountant and is currently the President and Chief Executive Officer of Windham Advisors LLC, a management and strategic advisory firm that offers innovative business solutions for companies in the healthcare, BPO (business process outsourcing) and insurance industries. He served as part of the senior leadership team of Anthem, Inc. one of the nation's largest health insurers with over $100 billion in revenues from 2017 to 2019. As a senior executive at HCA, the largest healthcare provider in the country, from 1997 to 2016 he served in a variety of roles. He began as the Chief Financial Officer of the Columbia Healthcare Network with a majority of his tenure serving as the Chief Executive Officer of NPAS, a healthcare services company. | ||||||
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| | | Reason for Nomination: Mr. Warfield is being nominated as a non-employee director because of his extensive financial and accounting experience, his executive management experience, and his information technology experience. As a result of these and other professional experiences, Mr. Warfield possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience. | |||||
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Kathleen M. Widmer | | Business Experience: | ||||||
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Director Since: 2013 Age: 58 Board Committees / Leadership: Compensation Committee and Nominating & Corporate Governance Committee Public Boards: None | | Ms. Widmer is the Company Group Chairman for Consumer North America with Johnson & Johnson, a position she has held since December 2018. Prior to this position, she served as the President of the Johnson & Johnson Consumer OTC division, which provides healthcare solutions through well-known and trusted over-the-counter medicines and products, a position she held from August 2015. She was previously with Johnson & Johnson for 21 years, until 2009, where she held numerous positions, including serving as Vice President, Marketing, McNeil Consumer Healthcare. Prior to re-joining Johnson & Johnson, she served as Executive Vice President and Chief Marketing Officer at Elizabeth Arden, Inc. from 2009 to 2015, and was responsible for the global growth strategy and marketing execution of the Elizabeth Arden Brand. In 2017, she was appointed to the board of directors for the Wounded Warrior Project. She is a graduate of the U.S. Military Academy in West Point, N.Y. and served for five years as a U.S. Army officer. | ||||||
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| | | Reason for Nomination: Ms. Widmer is being nominated as a non-employee director because of her extensive marketing experience in the retail sector and her knowledge of the global retail industry. As a result of these and other professional experiences, Ms. Widmer possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience. | |||||
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James R. Zarley. Mr. Zarley, 73, has served as chairman, chief executive officer and chairman of the board of Conversant, a single-source provider of media, technology and services across major interactive marketing channels which previously operated under the name ValueClick, Inc., and was a member of Conversant's board of directors from 1999 until his retirement in 2014. Mr. Zarley shaped the company into a global leader in online marketing solutions. Prior to joining Conversant, Mr. Zarley was chief operating officer of Hiway Technologies, where he was a leading member of the management team that closed the merger with Verio in 1999. Prior to that, Mr. Zarley was chairman and chief executive officer of Best Internet until it merged with Hiway Technologies in 1998. Mr. Zarley also founded and later sold Quantech Information Services, now an ADP company. In addition, he spent 19 years at RCA in various senior management roles. Currently, he serves on the board of directors of several private companies. Mr. Zarley has served as a director since 2004 and is being nominated as a director because of his chief executive experience in a developing industry, his information technology experience and his experience in acquisitions. As a result of these and other professional experiences, Mr. Zarley possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience.Contents
Historically, the Board was divided into three separate classes of directors. After careful consideration and review of past votes of our shareholders on Board declassification in prior years, together with prior communications with our investors and shareholders, the Board determined that a shareholder proposal to eliminate the classification of the Board was in the best interest of the Company and its shareholders and elected to recommend that the shareholders of the Company vote to declassify the Board beginning at the 2017 annual meeting. Following receipt of the majority of votes at the 2016 annual meeting to declassify the Board, the Company memorialized the declassification of the Board in the Amendment to Amended and Restated Articles of Incorporation for the Company dated May 19, 2016. Each director will continue to serve for the remainder of their respective term until the 2019 annual meeting at which all of the directors will be eligible for re-election for one-year terms. Messrs. Taylor and Zarley are currently nominated for re-election for a term of one year. The term for each of Messrs. Moore and Parker and Ms. Widmer is scheduled to expire at the 2019 annual meeting.
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James R. Zarley | | Business Experience: | ||||||
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Director Since: 2004 Age: 75 Board Committees / Leadership: Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee; Chairperson of Compensation Committee Public Boards: None | | Mr. Zarley has served as Chairman, Chief Executive Officer and Chairman of the Board of Conversant, a single-source provider of media, technology and services across major interactive marketing channels which previously operated under the name ValueClick, Inc., and was a member of Conversant's board of directors from 1999 until his retirement in 2014. Mr. Zarley shaped the company into a global leader in online marketing solutions. Prior to joining Conversant, Mr. Zarley was chief operating officer of Hiway Technologies, where he was a leading member of the management team that closed the merger with Verio in 1999. Prior to that, Mr. Zarley was Chairman and Chief Executive Officer of Best Internet until it merged with Hiway Technologies in 1998. Mr. Zarley also founded and later sold Quantech Information Services, now an ADP company. In addition, he spent 19 years at RCA in various senior management roles. Currently, he serves on the board of directors of several private companies. | ||||||
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| | | Reason for Nomination: Mr. Zarley is being nominated as a non-employee director because of his chief executive and information technology experience in a developing industry, his technology experience and his transactional experience. As a result of these and other professional experiences, Mr. Zarley possesses particular knowledge and experience that strengthens the Board's collective qualifications, skills and experience. | |||||
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The Board met on sixeight occasions and its standing committees (audit committee, compensation committee, and nominating and corporate governance committee) met on 24 occasions during our fiscal year ended December 26, 2017.31, 2019. Each incumbent director attended at least 75% of the aggregate number of meetings of the Board and its committees on which such director served during his or her period of service. In addition, the Company expects all members of the Board to attend the Annual Meeting. All incumbent directors attended the 20172019 annual meeting. Four regular Board meetings are currently scheduled for the 2020 fiscal year 2018.year. Executive sessions of non-employee directors, without management directors or employees present, are typically scheduled in conjunction with each regularly scheduled Board meeting. The role of each standing committee is more fully discussed below.
Leadership Structure of the Board and Role of the Board in Risk Oversight
Leadership Structure. The Board currently includes four independent directors and one employee director, and the positions of Chairman and Chief Executive Officer are occupied by the same individual. As noted above, Mr. Taylor was named Chairman of the Board in recognition of his founding and continuing leadership role in the Company and has held that position since 2004. Mr. Taylor also resumed the position of Chief Executive Officer in August 2011. Mr. Taylor previously served as Chief Executive Officer from 2000 until 2004. We believe that the Company and its shareholders are best served by having Mr. Taylor serve in both positions because he is the person most familiar with our unique culture, business model, and the challenges we face in the current macro-economic environment. Mr. Taylor's wealth of knowledge regarding Company operations and the industry in which we compete positions him to best identify matters for Board review and deliberation. Additionally, the combined role of Chairman and Chief Executive Officer unifies the Board with management and eliminates conflict between two leaders.management. We believe that the Company can more effectively execute its current strategy and business plans to maximize shareholder value if our Chairman is also a member of the management team.
While the Board considers all of its members equally responsible and accountable for oversight and guidance of its activities, they also have designated a Lead Independent director, who is elected annually by a majority of the Board. Mr. Moore currently serves as the Lead Independent director. The responsibility and authority of the independent Lead DirectorIndependent director are delineated in our Corporate Governance Guidelines, which can be found on the Company's website atwww.texasroadhouse.com. but include, without limitation:
(i) providing leadership to the Board in any situation where the Chairman is not present;
(ii) presiding at all executive sessions of the Board and advising the Chairman and Chief Executive Officer on any decisions arising from such executive sessions;
(iii) approving in advance agendas and schedules for Board meetings and the information that is to be provided to the other directors;
(iv) upon request by any major shareholders, being available for consultations and direct communication;
(v) regularly meeting with the Chairman and serving as a liaison between the Chairman and the other independent directors;
(vi) overseeing the Board's annual self-assessment process; and
(vii) calling any additional Board meetings as needed.
Risk Oversight. The Board is responsible for overseeing the Company's risk management strategies, including the Company's implementation of appropriate processes to administer day-to-day risk management. The Board is informed about risk management matters as part of its role in the general oversight and approval of corporate matters. The Board gives clear guidance to the Company's management on the risks it believes face the Company, such as the matters disclosed as risk factors in the Company's Annual Report on Form 10-K. Furthermore, the Board has delegated certain risk management responsibilities to its audit committee and compensation committees.committee.
Through the audit committee's charter, the Board has authorized itthe audit committee to oversee the Company's risk assessment and risk management policies. The audit committee, in fulfilling its oversight responsibilities, regularly and comprehensively reviews specific risk matters which have been identified by management. The Company's internal auditors regularly report directly to the audit committee on the results of internal audits, the scope and frequency of which are based on comprehensive risk assessments which have been approved by the audit committee. Additionally, a risk committee comprised of Company management regularly updates the audit committee on the results of its risk management activities, which are based on the Company's prioritized risk overview that is updated at least annually and reviewed with the audit committee. The audit committee is routinely advised of operational, financial, legal, and cybersecurity risks both during and outside of regularly scheduled meetings, and the audit committee reviews and monitors specific activities to manage these risks, such as insurance plans, hedging strategies and internal controls.controls (as and if applicable).
Through the compensation committee's charter, the Board has authorized itthe compensation committee to oversee officerthe compensation programs for the Company's executive officers and director compensation programs.non-employee directors on the Board. The compensation committee, in fulfilling its oversight responsibilities, designs the compensation packages applicable to the Company's executive officers and Board members. The compensation committee also consults with management on the payments of bonuses and grants of stock awards to key employees on a quarterly basis.employees.
The audit committee and the compensation committee jointly perform an annual risk assessment of our compensation programs for all employees to determine whether these programs encourage unnecessary or excessive risk taking. In conducting this review, each of our compensation programs is evaluated on a number of criteria aimed at identifying any incentive programs that deviate from our risk management objectives. Based on this review in 2019, both the audit committee and the compensation
management objectives. Based on this review in 2017, both the audit committee and the compensation committee concluded that we have the right combination of rewards and incentives to drive company performance, without encouraging unnecessary or excessive risk taking by our employees. Specifically, the audit and compensation committees identified the following components of our compensation programs that mitigate the likelihood of excessive risk taking to meet performance targets: equity incentive compensation in the form of restricted stock units; long term contracts and a financial buy-in requirement for restaurant management; a guaranteed base salary within our support center management personnel; minimums and maximums on profit sharing compensation within our support center management personnel; robust internal controls; operational focus on top line sales growth; and, a business model which focuses on a strong balance sheet, relatively low debt, prudent growth, and sustainable long-term profitability.
The Board's oversight roles, including the roles of the audit committee and the compensation committee, combined with the leadership structure of the Board to include Company management, allow the Board to effectively administer risk management policies while also effectively and efficiently addressing Company objectives.
Strategic Planning and Initiatives. The Board also plays an instrumental oversight role in the strategic planning and initiatives of the Company. As a part of this role, the Board has periodic strategic planning sessions with management to ensure that the Company and the Board are aligned on the long-term goals and initiatives of the Company. Additionally, the Board conducts periodic asset management reviews of the Company's assets to ensure that the Board and the management of the Company are in agreement on how the Company is managing its asset portfolio. Finally, the Board provides direct oversight over certain other strategic initiatives or transactions implemented by the Company, including franchise acquisitions and the Company's share repurchase activities.
Sustainability Initiatives. Both the Board and the Company take great pride in our environmental, social and governance efforts—specifically our sustainability program and our appreciation for and commitment to our employees and for the community. Our commitment is evident from our long history of dedication to corporate citizenship and the manner in which we often consider sustainability as part of our decision-making process. In furtherance of the foregoing, the Board reviews the Company's sustainability initiatives as a part of their oversight role of the Company's business strategy and risk management. In particular, the Board receives periodic updates, at least annually, of the Company's sustainability initiatives from management. Additionally, the Company includes a sustainability update in the Company's Annual Report.
The Board has three standing committees:
(i) the audit committee,committee;
(ii) the compensation committee,committee; and
(iii) the nominating and corporate governance committee.
The Board has adopted a written charter for each of these committees, which sets out the functions and responsibilities of each committee. The charters of these committees are available in their entirety on the Company's website,www.texasroadhouse.com. Please note, however, that the information contained on the website is not incorporated by reference in, nor considered to be a part of, this proxy statement.
The Board has also designated one of its members as an international liaison, responsible forInternational Liaison, which is elected annually by a majority of the Board. Mr. Moore currently serves as the Board's International Liaison. The duties and responsibilities of International Liaison include, without limitation, (i) overseeing the Company's efforts in international expansion and reporting to the Board on those efforts.efforts, (ii) traveling with certain members of management to proposed international locations and markets (as needed) and to meet proposed international business partners where appropriate, (iii) meeting with the Company's compliance team regarding the required anti-bribery and corruption due diligence review on any proposed international business partner, and (iv) reviewing on behalf of the Board all new proposed international development or franchise agreements.
Audit Committee. As described in its charter, the primary purpose of the audit committee is to assist ourthe Board in fulfilling its oversight responsibility relating to:
(i) the integrity of the Company's consolidated financial statements,statements;
(ii) the Company's compliance with legal and regulatory requirements,requirements;
(iii) the independence and performance of the Company's internal and external auditors,auditors; and
(iv) the Company's internal controls and financial reporting practices.
The audit committee is also directly responsible for the following: (a) pre-approving all audit and permitted non-audit related services provided by our independent auditors, (b) the appointment, compensation, retention, and oversight of the Company's independent auditors, and (c) periodically evaluating whether or not the Company should rotate the independent auditors utilized by the Company. In connection with the audit committee's appointment of the Company's independent auditors, the audit committee evaluates the service level of the incumbent independent auditor on an annual basis, which includes criteria such as prior year quality of service, industry and technical expertise, independence, resource availability, and reasonableness and competitiveness of fees, as well as solicits the input of key management employees during its evaluation. The audit committee reviews all of the Company's earnings press releases and Quarterly and Annual Reports on Form 10-Q and Form 10-K, respectively, prior to filing with the Securities and Exchange Commission ("SEC"(the "SEC"). The audit committee is also responsible for producing an annual report on its activities for inclusion in this proxy statement. All of the members of the audit committee are "independent," as that term is defined in the listing standards under NASDAQ Marketplace Rule 5605(a)(2) and meet the criteria for independence under the Sarbanes-Oxley Act of 2002 and the rules adopted by the SEC. The audit committee is currently comprised of Messrs. Moore, Parker,Warfield, and Zarley. Mr. Moore chairs the audit committee. The Board evaluated the credentials of and designated Mr.Messrs. Moore and Warfield as an audit committee financial expert.experts. The audit committee met 1514 times during fiscal year 2017.2019, which were comprised of six regular meetings of the audit committee, and two meetings per quarter relating to the audit committee's review of the Company's filings with the SEC.
Compensation Committee. As described in its charter, the compensation committee:
(i) assists the Board in fulfilling its responsibilities relating to the design, administration and oversight of employee compensation programs and benefit plans of the Company's executive officers,officers;
(ii) discharges the Board's duties relating to the compensation of the Company's executive officers and directors,non-employee directors; and
(iii) reviews the performance of the Company's executive officers.
The compensation committee is also responsible for reviewing and discussing with management the "Compensation Discussion and Analysis"
in this proxy statement and recommending its inclusion in this proxy statement to the Board. All of the members of the compensation committee are "independent" under all applicable rules, including the listing standards under NASDAQ Marketplace Rule 5605(a)(2) and the requirements of the SEC. The current members of the compensation committee are Ms. Widmer
and Messrs. Moore, Parker,Warfield, and Zarley. Mr. ParkerZarley currently chairs the compensation committee. The compensation committee met six times during fiscal year 2017.2019.
Nominating and Corporate Governance Committee. As described in its charter, the nominating and corporate governance committee assists ourthe Board in:
(i) identifying individuals qualified to become Board members and recommending nominees to the Board either to be presented at the annual meeting or to fill any vacancies,vacancies;
(ii) considering and reporting periodically to the Board on matters relating to the identification, selection and qualification of director candidates,candidates;
(iii) developing and recommending to the Board a set of corporate governance principles,principles; and
(iv) overseeing the evaluation of the Board, its committees, and its incumbent members.
The nominating and corporate governance committee routinely evaluates the size and composition of the Board and the variety of professional expertise represented by the Board members in relation to the Company's business. To assist in this process, the nominating and corporate governance committee has identified certain interpersonal skills and professional skills desirable for some and/or all of the directors on the Board. The interpersonal skills are personal attributes that each director should possess and include ethics and integrity, leadership skills, negotiation skills and crisis management skills. The professional skills are an assessment of governance and industry based skill areas which should be held collectively by the Board but not necessarily by each director and contain skills relating to (i) financial, risk and compliance skills, (ii) governance and management skills, and (iii) sector and industry specific skills. All of the members of the nominating and corporate governance committee are "independent" under all applicable rules, including the listing standards under NASDAQ Marketplace Rule 5605(a)(2) and the requirements of the SEC. The current members of the nominating and corporate governance committee are Ms. Widmer and Messrs. Moore, Parker,Warfield, and Zarley. Mr. Moore chairs the nominating and corporate governance committee. The nominating and corporate governance committee met threefour times during fiscal year 2017.2019.
Policy Regarding Consideration of Candidates for Director
Shareholder recommendations for Board membership should include, among other items,at a minimum, the name of the candidate, age, contact information, present principal occupation or employment, qualifications and skills, background, last five years' employment and business experience, a description of current or previous service as director of any corporation or organization, other relevant biographical information, and the nominee's consent to service on the Board. A shareholder nominee will be requested to complete a detailed questionnaire in the form that current non-employee directors and executive officers of the Company complete.
The nominating and corporate governance committee may consider such other factors as it may deem are in the best interest of the Company and its shareholders. The Board has adopted corporate governance guidelines which provide that, if and when the Board determines that it is necessary or desirable to add or replace a director, the nominating and corporate governance committee will seek diverse candidates, taking into account diversity in all respects (including gender, race, age, board service, background, education, skill set, and financial acumen, along with knowledge and experience in areas that are relevant to the Company's business), when forming the nominee pool. The nominating and corporate governance committee has reviewed the process used in the selection of director candidates and concluded that the pool contained a diverse group of candidates. The manner in which the nominating and corporate governance committee evaluates a potential nominee will not differ based on whether the nominee is recommended by a shareholder of the Company.
The Company currently retains a corporate recruiter to assist in identifying candidates for open positions at the Company. Upon request, this recruiter also assists in identifying and evaluating candidates for director, but the Company does not pay an additional fee for this service.
As further discussed in the "Compensation Discussion and Analysis," the compensation committee engaged Willis Towers Watson as an independent compensation consultant in 2017 to advise the compensation committee on the compensation for our executive officers and non-employee director compensation.directors. Specifically, the compensation
committee asked the compensation consultant to provide market data, review the design of the compensation packages for our executive officers and non-employee director compensation packages,directors, and provide recommendationsguidance on cash and equity compensation for our executive officers and non-employee directors.directors, including, without limitation, the issuance of restricted stock units to our non-employee directors and executive officers as more particularly described in this proxy statement. Similar to our compensation philosophy for our executive officers, we believe that issuing restricted stock units to our non-employee directors aligns their interests with those of our shareholders. Specifically, since the bulk of each non-employee director's compensation lies in the value of the restricted stock units granted, the non-employee directors are motivated to continually improve the Company's performance in the hope that the performance will be reflected by the stock price on the vesting date of their restricted stock units. Moreover, we believe that the restricted stock unit awards drive director alignment with maximizing shareholder value because the value of the restricted stock units varies in response to investor sentiment regarding overall Company performance at the time of vesting.
As described more fully below, the following table summarizes the total compensation earned for fiscal year 20172019 for each of the non-employee directors.
20172019 Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Grant Date Fair Value of Stock Awards ($)(1) | Total ($) | Fees Earned or Paid in Cash ($) | Grant Date Fair Value of Stock Awards ($)(1) | Total ($) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gregory N. Moore | 97,000 | (2) | — | 97,000 | | 113,500 | (2) | | 346,416 | | 459,916 | ||||||||
James F. Parker | 48,000 | (3) | — | 48,000 | 4,833 | (4) | 293,835 | 298,668 | |||||||||||
James R. Ramsey | 13,750 | (4) | — | 13,750 | |||||||||||||||
Curtis A. Warfield | | 51,500 | | 284,556 | | 336,056 | |||||||||||||
Kathleen M. Widmer | 31,000 | — | 31,000 | 39,500 | 275,277 | 314,777 | |||||||||||||
James R. Zarley | 38,000 | — | 38,000 | | 59,306 | (4) | | 293,771 | | 353,077 |
In addition to the foregoing, Mr. Zarley received a grant of 143 restricted stock units on February 13, 2019 relating to his partial year service as the chairperson of the compensation committee, which vest concurrently with the restricted stock units granted in the immediately preceding paragraph.
For the restricted stock units described in this footnote (1), fair value is equal to the closing price of the Company's common stock on the trading day immediately preceding the date of the grant, which was $61.86 for the grants to the non-employee directors on January 8, 2019 and $64.44 for the additional grant to Mr. Zarley on February 13, 2019. The amounts listed above represent the grant date fair value determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC 718") of restricted stock compensation will beunits granted under the Company's 2013 Long-Term Incentive Plan. Detailed information under ASC 718 is set forth in Note 14 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for services rendered bythe fiscal year ended December 31, 2019. No other equity awards were granted to the non-employee directors during the three year period of time covered by this table nor were any outstanding at the end of the 2019 fiscal year. The Company cautions that the amounts reported in the Director Compensation Table for these awards may not represent the amounts that the non-employee directors will actually realize from 2015 through 2017. Further,the awards. Whether, and to what extent, a non-employee director realizes value will depend on fluctuation in the Company's stock price and the non-employee director's continued service on the Board.
Additionally, in January 2018, the compensation committee agreed that beginning with the 2018 fiscal year, the total compensation for any non-employee director may not exceed $500,000, which amount shall be calculated by adding (i) the total cash compensation to be paid for services rendered by a non-employee director in any given fiscal year to (ii) the grant date value of any restricted stock units granted to such non-employee director in that fiscal year.
Further, in November 2019, the compensation committee and the Board elected to restructure the equity component for each non-employee director's total compensation. Accordingly and in lieu of the restricted stock unit schedule set forth in the table above for board and committee service, the compensation committee and the Board agreed that with respect to each non-employee director's 2020 fiscal year service, each shall receive an annual grant of restricted stock units equal to $185,000 divided by the closing sales price of the Company's common stock on the Nasdaq Global Select Market on the trading day immediately preceding the date of the grant, with such quotient rounded up or down to the nearest 100 shares. With respect to each non-employee director's 2020 fiscal year service, the Company made the annual grant on January 8, 2020.
Non-employeeAll non-employee directors each received the following cash compensation relating to their 2019 fiscal year service:
In January 2015, the non-employee directors were each granted 25,500 restricted stock units, which vest in one-third increments of 8,500 restricted stock units each year over three years, subject to the non-employee director's continued service on the Board. Similar to our compensation philosophy for our Named Executive Officers, we believe that issuing these restricted stock units to our non-employee directors aligns their interests with those of our shareholders. Specifically, since the bulk of each non-employee director's compensation lies in the value of the restricted stock units granted, the non-employee directors are motivated to continually improve the Company's performance in the hope
that the performance will be reflected by the stock price on the vesting date of their restricted stock units. Moreover, because the restricted stock unit awards for our non-employee directors vest over a period of time and their value varies in response to investor sentiment regarding overall Company performance at the time of vesting, we believe that these restricted stock unit awards drive director alignment with maximizing shareholder value.
The Board has approved and adopted a Code of Conduct that applies to all directors, officers and employees, including the Company's principal executive officer and the principal financial officer. The Code of Conduct is available in its entirety on the Company's website,www.texasroadhouse.com. The Company intends to post amendments to, or waivers from, its Code of Conduct, if any, that apply to the principal executive officer and the principal financial officer on its website.
Our Board has adopted stock ownership guidelines to further align the financial interests of the Company's executive officers and non-employee directors with the interests of our shareholders. The guidelines provide that our Chief Executive Officer should own, at a minimum, the lesser of 100,000 shares or $2,500,000 in then-current market value, our President should own, at a minimum, the lesser of 40,000 shares or $1,000,000 in then-current market value, and our other named executive officers and non-employee directors should own, at a minimum, the lesser of 10,000 shares or $500,000 in then-current market value. The executive officers and non-employee directors are expected to achieve the stock ownership levels under these guidelines within five years of assuming their respective positions.
All named executive officers and non-employee directors who have been in their role for five years are in compliance with the guidelines. We anticipate that any people who are new to their roles within the last five years will, to the extent they are not currently in compliance, be in compliance with the guidelines within the required time frame.
The Board and the Company recognize the importance of continuity of leadership to ensure a smooth transition for its employees, customers, and shareholders. In furtherance of the foregoing and as described in its charter, the nominating and corporate governance committee is responsible for periodically reporting to the Board the status of succession planning for senior management, including policies and principles regarding succession in the event of an emergency and/or retirement and the evaluation of potential successors to the executive officers and other key members of senior management. As a part of this process, both the Board and the nominating and corporate governance committee meet with certain members of management to review the top and emerging talent internally, their level of readiness and development needs.
Mandatory Retirement Age for Board Service
In November 2019, the Board and the nominating and corporate governance committee determined that it is advisable and in the best interest of the Company to establish a mandatory retirement age for the non-employee directors on the Board. In furtherance of the foregoing, in no event shall any non-employee be elected, re-elected and/or appointed to the Board if such non-employee is 75 years or older at the time of such election, re-election and/or appointment; provided, however, any director who began serving on the Board prior to 2006 shall be permitted to be re-elected to the Board so long as he is not 80 years or older at the time of such re-election.
The following table sets forth as of March 1, 20182020 certain information with respect to the beneficial ownership of the Company's common stock of (i) each executive officer named in the Summary Compensation Table (the "Named Executive Officers"), (ii) each non-employee director or nominee for director of the Company, (iii) all non-employee directors nominees and current Named Executive Officersexecutive officers as a group, and (iv) each shareholder known by the Company to be the owner of 5% or more of the Company's common stock.
| Common Stock(1) | Common Stock(1) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Common Stock Ownership(2) | Percent | Common Stock Ownership(2) | Percent | ||||||||||
Directors, Nominees and Named Executive Officers: | ||||||||||||||
W. Kent Taylor | 3,779,473 | 5.29 | % | | 3,898,101 | | 5.61 | % | ||||||
Scott M. Colosi | 63,202 | * | 12,063 | * | ||||||||||
Celia P. Catlett | 12,429 | * | ||||||||||||
S. Chris Jacobsen | 16,533 | * | | 27,787 | | * | ||||||||
Gregory N. Moore | 87,650 | * | 75,850 | * | ||||||||||
James F. Parker | 92,060 | * | ||||||||||||
Tonya R. Robinson | | 14,560 | | * | ||||||||||
Doug W. Thompson | 66,276 | * | ||||||||||||
Curtis A. Warfield | | 6,263 | | * | ||||||||||
Kathleen M. Widmer | 18,950 | * | 16,850 | * | ||||||||||
James R. Zarley | 136,300 | * | | 160,543 | | * | ||||||||
Directors, Nominees and All Named Executive Officers as a Group (8 Persons) | 4,206,597 | 5.89 | % | |||||||||||
Directors and All Executive Officers as a Group (9 Persons) | 4,278,293 | 6.16 | % | |||||||||||
Other 5% Beneficial Owners** | ||||||||||||||
Capital Research Global Investors(4) | 5,439,698 | 7.6 | % | |||||||||||
333 South Hope Street | ||||||||||||||
Los Angeles, California 90071 | ||||||||||||||
Blackrock, Inc.(5) | 7,530,702 | 10.6 | % | |||||||||||
Blackrock, Inc.(4) | | 9,354,330 | | 13.5 | % | |||||||||
55 East 52nd Street | | | ||||||||||||
New York, New York 10022 | | | ||||||||||||
The Vanguard Group(6) | 5,376,002 | 7.56 | % | |||||||||||
The Vanguard Group(5) | 6,135,997 | 8.84 | % | |||||||||||
100 Vanguard Boulevard | ||||||||||||||
Malvern, Pennsylvania 19355 |
pursuant to our long-term incentive plan; these shares are included in the totals above as described in footnote(1):
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Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file with the SEC initial reports of stock ownership and reports of changes in stock ownership and to provide the Company with copies of all such filed forms. Based solely on its review of such copies or written representations from reporting persons, the Company believes that all reports were filed on a timely basis during the fiscal year ended December 26, 2017.31, 2019, with the exception of a Form 4 for Mr. Jacobsen that was filed on August 2, 2019 reporting the sale of 2,500 shares on July 30, 2019 pursuant to a written non-discretionary Rule 10b5-1 plan.
The following is an executive summary of our compensation program for our 2019 fiscal year:
Compensation Philosophy
Pay Objectives
Key Pay Components
Setting Compensation
Compensation Discussion and Analysis
The Company's compensation committee reviews and establishes executive compensation in connection with each Named Executive Officer'sexecutive officer's employment agreement.
We entered into new employment agreements (individually, the "2018 Employment Agreement", and collectively, the "2018 Employment Agreements") with W. Kent Taylor, Scott M. Colosi, Celia P. Catlett, and S. Chris Jacobsen, each a Named Executive Officer, on December 26, 2017, each of which has an effective date of January 8, 2018 and expires on January 7, 2021. During fiscal year 2017, each of Messrs. Taylor and Colosi and Ms. Catlett were party to employment agreements dated January 8, 2015, each of which expired on January 7, 2018 (individually, the "2015 Employment Agreement", and collectively, the "2015 Employment Agreements"), and Mr. Jacobsen was a party toWe entered into an employment agreement dated Februarywith Tonya R. Robinson, also a Named Executive Officer, on June 11, 2016,2018 and having an effective date of May 18, 2018, and with Doug W. Thompson,
also a Named Executive Officer, on August 23, 2018, each of which expires on January 7, 2019 (the "2016 Employment Agreement"). Notwithstanding2021. In connection with Ms. Robinson's appointment to Chief Financial Officer, the initial termsCompany and conditions of the 2016 Employment Agreement, theMr. Colosi entered into an amendment to his 2018 Employment Agreement for Mr. Jacobsen supersedes and replaceson May 17, 2018 to reflect his 2016 Employment Agreement effectiveresignation as Chief Financial Officer of January 8, 2018.the Company while still remaining as President of the Company. As used herein, the 2015 Employment Agreementsemployment agreements, as amended (as and the 2016 Employment Agreementif applicable), with Messrs. Taylor, Colosi, Jacobsen, and Thompson, and Ms. Robinson shall be referred to collectively as the "Prior"2018 Employment Agreements" and with respect to any Named Executive Officer, as a "Prior"2018 Employment Agreement". As more particularly described below, on July 3, 2019, the Company entered into a Consulting Agreement and General Release of Claims (the "Colosi Consulting Agreement") with Mr. Colosi relating to Mr. Colosi's retirement as President of the Company effective as of June 20, 2019.
To assist in setting compensation under the 2018 Employment Agreements and pursuant to the authority granted under its charter, the compensation committee engaged Willis Towers Watson as an independent compensation consultant in 2017 to advise the compensation committee on compensation for the executive officers and director compensation,the non-employee directors, together with analysis and services related to such executive and director compensation. Specifically, the compensation committee asked the consultant to provide market data, review the design of the executive and director compensation packages, and provide recommendationsguidance on cash and equity compensation for ourthe Company's executive officers and the non-employee directors. Willis Towers Watson does not currently provide any other services to the Company, and the compensation committee has determined that Willis Towers Watson has sufficient independence from us and our executive officers to allow it to offer objective information and advice. All fees paid to Willis Towers Watson during fiscal year 2017 were in connection with their engagement by the compensation committee for the above services.
Similar to the Prior Employment Agreements, eachEach 2018 Employment Agreement establishes a base salary throughout the term of the agreement, and a cash incentive bonus amount based on the achievement of defined goals to be established by the compensation committee. UnlikeIn addition to cash compensation, the Prior2018 Employment Agreements also provide the compensation committee with an opportunity to make annual stock awards to the Named Executive Officers, the types and amounts of which granted restrictedare subject to the compensation committee's discretion based on their annual review of the performance of the Company and of the individual Named Executive Officers. The types of stock units over a three year period, eachawards contemplated by the 2018 Employment Agreement for Ms. Catlett and Messrs. Colosi and Taylor provides for an annual grant ofAgreements are (i) restricted stock units, which grantsgrant the officersNamed Executive Officers the conditional right to receive shares of our common stock that vest after a defined period of service, (ii) "retention" restricted stock units, which vest upon vesting; however, the grants to our Chiefcompletion of the term of an individual Named Executive OfficerOfficer's agreement or such longer date as determined by the compensation committee, and our President(iii) performance stock units, which are bifurcated into grants whichcalculated based on the achievement of certain Company performance targets established by the compensation committee and vest over a period of serviceservice. As of the date of this proxy statement and grants which are based on the achievement of defined goals to be established by the compensation committee. Because Mr. Jacobsen's 2016 Employment Agreement included aas more particularly described below, each Named Executive Officer has received an annual grant of restricted stock units relating to histheir 2018 year service his(which were granted in 2017 or 2018 Employment Agreement does not include an initial grant of restricted stock units. In addition,[as applicable]), their 2019 year service (which were granted in 2019), and their 2020 year service (which were granted in 2020). Additionally, each of Mr. Jacobsen'sMessrs. Taylor, Colosi, Jacobsen, and Thompson, and Ms. Catlett'sRobinson have received grants of performance stock units relating to their 2018, Employment Agreements provides for a2019 and/or 2020 year service (as applicable). Moreover, each of Messrs. Colosi, Jacobsen, and Thompson, and Ms. Robinson have received "retention" grantgrants of restricted stock units under their respective 2018 Employment Agreements, which vest upon the completion of the term of the agreement on the condition that the officerapplicable Named Executive Officer is still serving the Company on the vesting date. Finally, Mr. Taylor's 2018 Employment Agreement also provides for a long-term "retention" grant of restricted stock units, which vest on January 8, 2023 on the condition that Mr. Taylor is still serving the Company on the vesting date. Moreover,
Under the 2018 Employment Agreements, each officerNamed Executive Officer has agreed not to compete with us during the term of his or her employment and for a period of two years following his or her
termination of employment, unless the officer'sNamed Executive Officer's employment is terminated without cause following a change in control, in which case the officerNamed Executive Officer has agreed not to compete with us through the date of the last payment of the officer'sNamed Executive Officer's severance payments. Finally, the
2018 Employment Agreements also contain a "clawback" provision that enables the Company to seek reimbursement to the Company of any compensation paid to any Named Executive Officer which is required to be recovered by any law, governmental regulation or order, or stock exchange listing requirement.
The compensation packages for our Named Executive Officers offer base salaries and target cash bonus amounts which are modest within the casual dining restaurant sector and feature restricted stock unit awards, the value of which is dependent upon the performance of the Company and the price of our common stock. The underlying philosophy reflected by this approach is that, because a significant amountcompensation committee evaluates the stock compensation for each specific Named Executive Officer on an annual basis to determine the right combination of each officer's compensation lies inrewards and incentives through the valueissuance of theservice based restricted stock units granted,and/or performance based restricted stock units to drive company performance without encouraging unnecessary or excessive risk taking by all of the officers are motivated to continually improveNamed Executive Officers as a whole. Under this approach, the Company's performance in the hope that the performance will be reflected by the stock price on the vesting dateNamed Executive Officers receive a combination of theirservice based restricted stock units and beyond. In addition, byperformance based restricted stock units, with a significant portion of some of the Named Executive Officer's compensation being tied to the grant of such performance based restricted stock units. By conditioning a significant portion of our Chiefthe Named Executive Officer's and our President'sperformance based restricted stock unit grants upon the achievement of defined performance goals to be established by the compensation committee, combined with the stock ownership guidelines for our executive officersNamed Executive Officers more particularly described above, we have created a more direct relationship between the compensation of our top executives and shareholder value, while also achieving what we believe is the right combination of rewards and incentives to drive company performance without encouraging unnecessary or excessive risk taking.value. Additionally, by only providing one year's worth of restricted stock units to our Named Executive Officers in the 2018 Employment Agreements, the compensation committee has the opportunity to adjust a significant portion of the compensation for the Named Executive Officers on an annual basis to more accurately reflect the overall performance of the Company.Company, which may include the issuance of service based restricted stock units and/or performance based restricted stock units. Overall, we believe this approach provides the Named Executive Officers with a compensation package which promotes the sustained profitability of the Company and aligns the interests of our executive officersNamed Executive Officers with those of our shareholders. The compensation packages also reflect a pragmatic response to external market conditions; that is, total compensation that is competitive with comparable positions in similar industries, including the casual dining sector of the restaurant industry, but which is reasonable and in the best interests of our shareholders.
We believe that the overall design of the compensation packages, along with the culture and values of our Company, allows us to attract and retain top talent, while also keeping the Named Executive Officers focused on both long-term business development and short-term financial growth.
In deciding to continue and modify many of our existing executive compensation practices, our compensation committee considered that the holders of over 83%approximately 82% of the votes cast at our 20172019 annual meeting on an advisory basis approved the compensation of our Named Executive Officers as disclosed in the proxy statement for the 20172019 annual meeting. While the compensation committee consulted with each of the Named Executive Officers in advance of the final approval of the 2018 Employment Agreements, noneNone of the Named Executive Officers, including Mr. Taylor, participated in the creation of their own compensation packages.
Elements of Compensation
Base SalarySalary.
Base salaries for our Named Executive Officers are designed to provide a secure base of compensation which will be effective in motivating and retaining key executives.
Each officer's Prior Employment Agreement established an annual salary for the years shown in the table below.
| 2015 (through January 7, 2016) ($) | 2016 (through January 7, 2017) ($) | 2017 (through January 7, 2018) ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 525,000 | 525,000 | 525,000 | |||||||
Chairman, Chief Executive Officer | ||||||||||
Scott M. Colosi | 450,000 | 450,000 | 450,000 | |||||||
President, Chief Financial Officer | ||||||||||
Celia P. Catlett | 250,000 | 275,000 | 300,000 | |||||||
General Counsel, Corporate Secretary | ||||||||||
S. Chris Jacobsen | — | 300,000 | 300,000 | |||||||
Chief Marketing Officer |
Each officer'sNamed Executive Officer's 2018 Employment Agreement establishes an annual salary for the years shown in the table below.
| 2018 (through January 7, 2019) ($) | 2019 (through January 7, 2020) ($) | 2020 (through January 7, 2021) ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor(i) | | 525,000 | | 525,000 | | 525,000 | ||||
Chairman, Chief Executive Officer, President | | | | |||||||
Scott M. Colosi(ii) | 450,000 | 450,000 | 450,000 | |||||||
Former President | ||||||||||
S. Chris Jacobsen | | 300,000 | | 315,000 | | 325,000 | ||||
Chief Marketing Officer | | | | |||||||
Tonya R. Robinson | 275,000 | 300,000 | 325,000 | |||||||
Chief Financial Officer | ||||||||||
Doug W. Thompson | | 450,000 | | 450,000 | | 450,000 | ||||
Chief Operating Officer | | | |
| 2018 (through January 7, 2019) ($) | 2019 (through January 7, 2020) ($) | 2020 (through January 7, 2021) ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 525,000 | 525,000 | 525,000 | |||||||
Chairman, Chief Executive Officer | ||||||||||
Scott M. Colosi | 450,000 | 450,000 | 450,000 | |||||||
President, Chief Financial Officer | ||||||||||
Celia P. Catlett | 315,000 | 315,000 | 325,000 | |||||||
General Counsel, Corporate Secretary | ||||||||||
S. Chris Jacobsen | 300,000 | 315,000 | 325,000 | |||||||
Chief Marketing Officer |
Incentive BonusBonus.
Incentive bonuses are designed to reward our Named Executive Officers for the success of the Company, as measured by growth in the Company's earnings per diluted share ("EPS") and overall pre-tax profit, and for each officer'sNamed Executive Officer's individual contribution to that success. It is our belief that a significant amount of each officer'sNamed Executive Officer's compensation should be tied to the performance of the Company.
Pursuant to the terms of the Texas Roadhouse, Inc. Cash Bonus Plan (the "Cash Bonus Plan"), the compensation committee may award an annual cash incentive to the Named Executive Officers, which is the grant of a right to receive a payment of cash that is subject to targets and maximums, and that is contingent on achievement of performance objectives during the Company's fiscal year. These cash incentives are also subject to the terms and conditions of the Prior2018 Employment Agreements and reflect each Named Executive Officer's job responsibilities and individual contribution to the 2018 Employment Agreements.success of the Company.
Under the Cash Bonus Plan, the compensation committee established a two-pronged approach to tying the incentive compensation to the Company's performance. Under this approach, 50% of the target incentive bonus is awarded based on whether the Company achieves an annual EPS growth target of 10% (the "EPS Performance Goal"). The other 50% is based on a profit sharing pool (the "Profit Sharing Pool") comprised of 1.5% of the Company's pre-tax profits (income before taxes minus income attributable to non-controlling interests, as reported in our audited consolidated financial statements), which pool is distributed among our Named Executive Officers and certain other members of the Company's director-level management based on a pre-determined percentage interest in the pool and subject to certain pre-determined maximum amounts. After the end of the fiscal year, the
compensation committee determines whether and to what extent the EPS Performance Goal has been met, and the
portion of the Profit Sharing Pool to which each officerNamed Executive Officer is entitled. Depending on the level of achievement of the EPS Performance Goal each year, 50% of the incentive bonus may be reduced to a minimum of $0 or increased to a maximum of two times the target amount. Each 1% change from the EPS Performance Goal results in an increase or decrease of 10% of the portion of the target bonus amount attributable to the achievement of the EPS Performance Goal. For example, if we achieve 11% EPS growth, the bonus payable would be 110% of the portion of the target bonus attributable to the achievement of the EPS Performance Goal. Conversely, if we achieve 9% EPS growth, the bonus payable would be 90% of the portion of the target bonus attributable to the achievement of the EPS Performance Goal. The remaining 50% of the officers'Named Executive Officers' incentive bonus will fluctuate directly with Company pre-tax profits at fixed participation percentages and maximum amounts which are determined within 60 days following the commencement of the Company's fiscal year and while the pre-tax profits are not yet determined.year. The annual profit sharing component allows the Named Executive Officers to participate in a profit sharing pool with other members of the Company's director-level management team. By allowing this level of participation in the Company's overall profits, the compensation committee encourages responsible growth and aligns the interests of the officersNamed Executive Officers with those of other management employees of the Company. This portion of the incentive bonus may be reduced to a minimum of $0 if the Company ceases to be profitable or for other reasons that the compensation committee determines, and may be increased to a maximum of two times the target amount established for each individual participant. Both portions of the incentive bonus can be adjusted downward (but not upward) by the compensation committee in its discretion. Cash incentive bonuses with respect to fiscal year 20172019 were paid at 135.3%124.6% of the total target amount for all or a portion of the fiscal year in which a Named Executive Officer served in such role, based on actual EPS growth of 13.0%11.9% and aan actual Profit Sharing Pool of $3,102,743 calculated on fiscal year 2019 pre-tax profit (Profit Sharing Pool) of $180,106,845 during fiscal year 2017.$206,849,534.
The actual amounts earned by each Named Executive Officer for fiscal year 20172019 are more fully described in "Executive Compensation." The target bonus amount, along with the minimum and maximum bonus amounts, are set forth below:
Executive Incentive Compensation for the Fiscal Year 20172019
| Target Bonus ($) | Minimum Bonus ($) | Maximum Bonus ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | | 525,000 | | 0 | | 1,050,000 | ||||
Chairman, Chief Executive Officer, President | | | | |||||||
Scott M. Colosi(i) | 350,000 | 0 | 700,000 | |||||||
Former President | ||||||||||
S. Chris Jacobsen | | 200,000 | | 0 | | 400,000 | ||||
Chief Marketing Officer | | | | |||||||
Tonya R. Robinson | 200,000 | 0 | 400,000 | |||||||
Chief Financial Officer | ||||||||||
Doug W. Thompson | | 480,000 | | 0 | | 960,000 | ||||
Chief Operating Officer | | | |
| Target Bonus ($) | Minimum Bonus ($) | Maximum Bonus ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 525,000 | 0 | 1,050,000 | |||||||
Chairman, Chief Executive Officer | ||||||||||
Scott M. Colosi | 350,000 | 0 | 700,000 | |||||||
President, Chief Financial Officer | ||||||||||
Celia P. Catlett | 125,000 | 0 | 250,000 | |||||||
General Counsel, Corporate Secretary | ||||||||||
S. Chris Jacobsen | 175,000 | 0 | 350,000 | |||||||
Chief Marketing Officer |
Stock AwardsAwards.
We make equity awards in the form of restricted stock units, which represent the conditional right to receive one share of our common stock upon satisfaction of the vesting requirements. Restricted stock units offer the Named Executive Officers a financial interest in the Company and align their interests with those of our shareholders. We also believe that the market price of our publicly traded
common stock represents the most appropriate metric for determining the value of the equity portion of our Named Executive Officers' compensation packages. The overall compensation packages for our Named Executive Officers offer base salaries and target cash bonus amounts which are modest within the casual dining restaurant sector and feature restricted stock unit awards, the value of which is dependent
upon the performance of the Company and the price of our common stock. The underlying philosophy reflected by this approach is that, because a significant amountcompensation committee evaluates the stock compensation for each specific Named Executive Officer on an annual basis to determine the right combination of each officer's compensation lies inrewards and incentives through the valueissuance of theservice based restricted stock units granted,and/or performance based restricted stock units to drive company performance without encouraging unnecessary or excessive risk taking by all of the officers are motivated to continually improveNamed Executive Officers as a whole. Under this approach, the Company's performance in the hope that the performance will be reflected by the stock price on the vesting dateNamed Executive Officers receive a combination of theirservice based restricted stock units and beyond. Because theperformance based restricted stock unit awards for ourunits, with a significant portion of some of the Named Executive Officers vest over a periodOfficer's compensation being tied to the grant of time andsuch performance based restricted stock units. We believe that the service based restricted stock awards are inherently performance based since their value varies in response to investor sentiment regarding overall Company performance at the time of vesting, we believe that these service based awards are inherently performance based. Byvesting. Moreover, by only providing one year's worth of restricted stock units to our Named Executive Officers in the 2018 Employment Agreements, the compensation committee has the opportunity to adjust a significant portion of the total compensation for the Named Executive Officers on an annual basis to more accurately reflect the overall performance of the Company. The PriorCompany, which may include the issuance of service based restricted stock units and/or restricted stock units based on the achievement of defined goals to be established by the compensation committee for any and/or all of our Named Executive Officer. Additionally, each 2018 Employment AgreementsAgreement for Messrs. Colosi, and Jacobsen and Ms. Catlett also provide for a "retention" grant of restricted stock units, which vest upon completion of the term of the agreement on the condition that the officer is still serving the Company on the vesting date. Additionally, each of Mr. Jacobsen'sThompson, and Ms. Catlett's 2018 Employment Agreements provides��Robinson provide for a "retention" grant of restricted stock units, which vest upon completion of the term of their 2018 Employment Agreement on the condition that the officerapplicable Named Executive Officer is still serving the Company on the vesting date, and Mr. Taylor's 2018 Employment Agreement provides for a long-term "retention" grant of restricted stock units, which vest on January 8, 2023 on the condition that Mr. Taylor is still serving the Company on the vesting date.
In addition, both the Prior Employment Agreements and the 2018 Employment Agreements for Messrs. Taylor, Colosi, Thompson, and ColosiJacobsen and Ms. Robinson contain bifurcated awards of service based restricted stock units and performance based restricted stock units. Whileunits for all or a portion of the term of their respective 2018 Employment Agreements for Messrs. Taylor and Colosi contain an annual grant of service based restricted stock units which vest over a one year period of service (as opposed to a three year grant of service based restricted stock units that vest over a three year period in their respective Prior Employment Agreements), both the Prior Employment Agreements and the 2018 Employment Agreements contain grants of performance based restricted stock units which are based on the achievement of defined goals to be established by the compensation committee.Agreements. For the performance based awards, the compensation committee has established a two-pronged approach which mirrors the approach used for annual cash incentive bonuses. Under this approach, a percentage of the target equity award is based on whether the Company achieves the annual EPS Performance Goal, and a percentage is based on the Profit Sharing Pool comprised of 1.5% of the Company's pre-tax profits (income before taxes minus income attributable to non-controlling interests, as reported in our audited financial statements). After the end of the fiscal year, the compensation committee determines whether and to what extent the EPS Performance Goal has been met, and the portion of the Profit Sharing Pool to which each officer is entitled. Each 1% change from the EPS Performance Goal results in an increase or decrease of 10% of the portion of the target amount attributable to the achievement of the EPS Performance Goal. For example, if we achieve 11% EPS growth, the number of shares awarded would be 110% of the portion of the target amount attributable to the achievement of the EPS Performance Goal. Conversely, if we achieve 9% EPS growth, the award would be 90% of the portion of the target amount attributable to the achievement of the EPS Performance Goal. The remaining percentage of the officers'Named Executive Officers' equity award will fluctuate directly with Company pre-tax profits at fixed participation percentages and maximum amounts which are determined within 60 days following the commencement of the Company's fiscal year and while the pre-tax profits are not yet determined.year. Both portions of the performance based equity award may be reduced to a minimum of 0$0 or increased to a maximum of two times the target amount for each individual participant. Both portions of the performance based equity award can also be adjusted downward (but not upward) by the compensation committee in its discretion. Performance based equity awards with respect to fiscal year 20172019 were paid at 135.3%124.6% of the total target amount for all or a portion of the fiscal year in which a Named Executive Officer served in such role, based on actual EPS growth of 13.0%11.9% and aan actual Profit Sharing Pool of $3,102,743 calculated on fiscal year 2019 pre-tax profit (Profit Sharing Pool) of $180,106,845 during fiscal year 2017.$206,849,534. For discussion of
the percentages assigned by the compensation committee to each component of the performance based equity awards for Messrs. Taylor, Colosi, Jacobsen, and Colosi,Thompson, and Ms. Robinson, refer to the associated tables below.
The number of restricted stock units granted to each officerNamed Executive Officer reflects each officer'sNamed Executive Officer's job responsibilities and individual contribution to the success of the Company.
Service Based Restricted Stock Units
The number of service based restricted stock units granted under the Prior Employment Agreements are shown in the table below. Except as noted, the grants vest in one-third increments for Messrs. Taylor and Colosi and Ms. Catlett each January 8 over a three-year period beginning on January 8, 2016 and ending on January 8, 2018, while Mr. Jacobsen's grants vest in one-third increments each January 8 over a three-year period beginning on January 8, 2017 and ending on January 8, 2019.
| Service Based Restricted Stock Units vesting on January 8, 2016 pursuant to Prior Employment Agreements | Service Based Restricted Stock Units vesting on January 8, 2017 pursuant to Prior Employment Agreements | Service Based Restricted Stock Units vesting on January 8, 2018 pursuant to Prior Employment Agreements(1) | Service Based Restricted Stock Units vesting on January 8, 2019 pursuant to Prior Employment Agreements(2) | Total Service Based Restricted Stock Units granted pursuant to Prior Employment Agreements | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 15,000 | 15,000 | 15,000 | — | 45,000 | |||||||||||
Chairman, Chief Executive Officer | ||||||||||||||||
Scott M. Colosi | 20,000 | 20,000 | 40,000 | — | 80,000 | |||||||||||
President, Chief Financial Officer | ||||||||||||||||
Celia P. Catlett | 10,000 | 10,000 | 20,000 | — | 40,000 | |||||||||||
General Counsel, Corporate Secretary | ||||||||||||||||
S. Chris Jacobsen | — | 10,000 | 10,000 | 15,000 | 35,000 | |||||||||||
Chief Marketing Officer |
Units.Table of Contents
Except as noted below, the number of service based restricted stock units granted under the 2018 Employment Agreements are shown in the table below.below and are subject to the Named Executive Officer still serving the Company on the vesting date.
| Service Based Restricted Stock Units vesting on January 8, 2019 pursuant to 2018 Employment Agreements | Service Based Restricted Stock Units vesting on January 8, 2021 pursuant to 2018 Employment Agreements(1) | Service Based Restricted Stock Units vesting on January 8, 2023 pursuant to 2018 Employment Agreements(2) | Total Service Based Restricted Stock Units granted pursuant to 2018 Employment Agreements | Service Based Restricted Stock Units vesting on January 8, 2019 pursuant to 2018 Employment Agreements | Service Based Restricted Stock Units vesting on June 11, 2019 pursuant to 2018 Employment Agreements | Service Based Restricted Stock Units vesting on August 27, 2019 pursuant to 2018 Employment Agreements | Service Based Restricted Stock Units vesting on January 8, 2020 pursuant to 2018 Employment Agreements | Service Based Restricted Stock Units vesting on January 8, 2021 pursuant to 2018 Employment Agreements(1) | Service Based Restricted Stock Units vesting on January 8, 2023 pursuant to 2018 Employment Agreements(2) | Total Service Based Restricted Stock Units granted pursuant to 2018 Employment Agreements | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 10,000 | — | 75,000 | 85,000 | | 10,000 | | — | | — | | 10,000 | | 10,000 | | 75,000 | | 105,000 | |||||||||||||||||
Chairman, Chief Executive Officer | |||||||||||||||||||||||||||||||||||
Chairman, Chief Executive Officer, President | | | | | | | | ||||||||||||||||||||||||||||
Scott M. Colosi | 10,000 | — | — | 10,000 | 10,000 | — | — | 10,000 | (3) | 15,000 | (3) | — | 35,000 | ||||||||||||||||||||||
President, Chief Financial Officer | |||||||||||||||||||||||||||||||||||
Celia P. Catlett | 10,000 | 10,000 | — | 20,000 | |||||||||||||||||||||||||||||||
General Counsel, Corporate Secretary | |||||||||||||||||||||||||||||||||||
Former President | |||||||||||||||||||||||||||||||||||
S. Chris Jacobsen | — | 10,000 | — | 10,000 | | — | (4) | | — | | — | | 5,000 | | 15,000 | | — | | 20,000 | ||||||||||||||||
Chief Marketing Officer | | | | | | | | ||||||||||||||||||||||||||||
Tonya R. Robinson | — | 7,000 | — | 10,000 | 20,000 | — | 37,000 | ||||||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||||||||||
Doug W. Thompson | | — | | — | | 2,000 | | 10,000 | | 22,500 | | — | | 34,500 | |||||||||||||||||||||
Chief Operating Officer | | | | | | | |
Performance Based Restricted Stock UnitsUnits.
The number of performance based restricted stock units granted to Messrs. Taylor, Colosi, Thompson and ColosiJacobsen for 2017the 2019 fiscal year under their respective Prior 2018
Employment Agreement, and the number of shares of common stock which actually vested based on the Company's performance, are shown in the table below:
| Target Number of Performance Based Restricted Stock Units Granted for 2017 pursuant to Prior Employment Agreements | Minimum Number of Performance Based Restricted Stock Units pursuant to Prior Employment Agreements | Maximum Number of Performance Based Restricted Stock Units pursuant to Prior Employment Agreements | Actual Number of Shares Issued for 2017 following Certification of 2017 Performance Goals(1) | Target Number of Performance Based Restricted Stock Units Granted for 2019 pursuant to 2018 Employment Agreements | Minimum Number of Performance Based Restricted Stock Units pursuant to 2018 Employment Agreements | Maximum Number of Performance Based Restricted Stock Units pursuant to 2018 Employment Agreements | Actual Number of Shares Issued for 2019 following Certification of 2019 Performance Goals(1) | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 85,000 | 0 | 170,000 | 114,991 | | 50,000 | | 0 | | 100,000 | | 62,303 | ||||||||||||||
Chairman, Chief Executive Officer | ||||||||||||||||||||||||||
Chairman, Chief Executive Officer, President | | | | | ||||||||||||||||||||||
Scott M. Colosi | 30,000 | 0 | 60,000 | 40,585 | 40,000 | 0 | 80,000 | 0 | (2) | |||||||||||||||||
President, Chief Financial Officer | ||||||||||||||||||||||||||
Former President | ||||||||||||||||||||||||||
Doug W. Thompson | | 20,000 | | 0 | | 40,000 | | 24,921 | ||||||||||||||||||
Chief Operating Officer | | | | | ||||||||||||||||||||||
S. Chris Jacobsen | 7,000 | 0 | 14,000 | 8,722 | ||||||||||||||||||||||
Chief Marketing Officer |
the percentage payout of 1.5% of pre-tax earnings divided by the bonus pool target set by the compensation committee for the performance period.
The number of performance based restricted stock units granted in 2020 to Messrs. Taylor, Thompson, and ColosiJacobsen, and Ms. Robinson under their respective 2018 Employment Agreements for the 2020 fiscal year is shown in the table below. The actual number of shares that will be issued to each of Messrs. Taylor, Thompson, and ColosiJacobsen, and Ms. Robinson for fiscal year 20182020 based on achievement of the performance goals assigned to these grants by the compensation committee will not be calculated until the first quarter of 2019.2021.
| Target Number of Performance Based Restricted Stock Units vesting on January 8, 2019 pursuant to 2018 Employment Agreements(1) | Minimum Number of Performance Based Restricted Stock Units pursuant to 2018 Employment Agreements | Maximum Number of Performance Based Restricted Stock Units pursuant to 2018 Employment Agreements | Target Number of Performance Based Restricted Stock Units vesting on January 8, 2021 pursuant to 2018 Employment Agreements(1) | Minimum Number of Performance Based Restricted Stock Units pursuant to 2018 Employment Agreements | Maximum Number of Performance Based Restricted Stock Units pursuant to 2018 Employment Agreements | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 50,000 | 0 | 100,000 | | 50,000 | | 0 | | 100,000 | |||||||||||
Scott M. Colosi | 40,000 | 0 | 80,000 | |||||||||||||||||
Doug W. Thompson | 20,000 | 0 | 40,000 | |||||||||||||||||
S. Chris Jacobsen | | 7,000 | | 0 | | 14,000 | ||||||||||||||
Tonya R. Robinson | 2,000 | 0 | 4,000 |
The 2018 Employment Agreements further provide that the compensation committee may, in its discretion, grant additional performance based restricted stock units to Messrs. Taylor, Thompson, and ColosiJacobsen, and Ms. Robinson with respect to future performance periods.
Separation and Change in Control Arrangements
Except in the event of a change in control, the Prior2018 Employment Agreement with Mr. Taylor provides that no severance would be paid to him upon termination of employment, but he would be entitled to receive a gift of a crisp $100 bill if his employment were to be terminated by the Company without cause before the end of the term. Mr. Taylor'sThe 2018 Employment Agreement contains the same provision. The Prior Employment Agreement for each of Messrs. Colosi, and Jacobsen, and Thompson, and Ms. CatlettRobinson provides that, except in the event of a change in control, if the Company terminates their employment without cause before the end of the term and the applicable executive officerNamed Executive Officer signs a release of all claims against the Company, then the Company will pay a severance payment equal to any bonus for a year already ended (even if not yet paid at termination), plus the officer'sNamed Executive Officer's base salary for a period of 180 days, and payment of a fixed sum ($175,000 for Mr. Colosi, $87,500 for Mr. Jacobsen and $62,500 for Ms. Catlett). The 2018 Employment Agreement for each of Messrs. Colosi and Jacobsen and Ms. Catlett contains the same provision, except that the fixed sum payments are the following: $175,000 for Mr. Colosi, $100,000 for Mr. Jacobsen, $225,000 for Mr. Thompson, and $92,500$100,000 for Ms. Catlett.Robinson). Similar payments are due to the officersNamed Executive Officers under both the Prior Employment Agreements and the 2018 Employment Agreements if employment was or is terminated by reason of death or disability before the end of the term. The Company provides these severance payments to allow for a period of transition and in exchange for a full release of claims against the Company. The salary component of the severance payments is subject to deductions and withholdings and is to be paid to the officersNamed Executive Officers in periodic installments in accordance with
our normal payroll practices. The fixed sum is paid in a single lump sum, and any bonus component of the severance payments for a performance period that ended before termination is to be paid on the same date as the payment would have been made had his or her employment not been terminated.
Both the Prior Employment Agreements and theThe 2018 Employment Agreements also provide that if the officer'sNamed Executive Officer's employment is terminated other than for cause following a change in control, or if the officerNamed Executive Officer resigns for good reason following a change in control because he or she is required to relocate, and the Company's successor does not agree to be bound by the agreement, or the officer'sNamed Executive Officer's responsibilities, pay or total benefits are reduced, then in such an event each such officerNamed Executive Officer will receive severance payments in an amount equal to the officer'sNamed Executive Officer's base salary
and incentive bonus through the end of the term of the agreement but not less than one year. In addition, the officer'sNamed Executive Officer's unvested stock awards, if any, will become vested as of the date of termination. Moreover, with respect to each of the officersNamed Executive Officers under their respective 2018 Employment Agreement,Agreements, if his or her employment is terminated under such circumstances and the officerNamed Executive Officer has not yet been granted service-basedservice based restricted stock units or performance-basedperformance based restricted stock units, as applicable under the respective officer'sNamed Executive Officer's 2018 Employment Agreements, for either or both of the second and third years of his or her employment agreement, the officerNamed Executive Officer will be issued the target number of service based restricted stock units and/or performance based restricted stock units (as applicable) set forth above for each of these years, and, in the case of Mr. Jacobsen, 10,000 restricted stock units.years. The payments and acceleration of vesting of the stock awards are contingent upon the officerNamed Executive Officer signing a full release of claims against the Company. The salary component of the severance payments is subject to deductions and withholdings and is to be paid to the officersNamed Executive Officers in periodic installments in accordance with our normal payroll practices or in a lump sum at the discretion of the compensation committee and in compliance with Section 409A of the Internal Revenue Code. The bonus component of the severance payments to the officersNamed Executive Officers is to be paid on the same date as the payment would have been made had his or her employment not been terminated.
According to the terms of both the Prior Employment Agreements and the 2018 Employment Agreements, a change in control means that one of the following events has taken place: (1) the shareholders of the Company approve (a) a merger or statutory plan of exchange involving the Company ("Merger") in which the Company is not the continuing or surviving corporation or pursuant to which the Common Stock, $0.001 par value ("Common Stock") would be converted into cash, securities or other property, other than a Merger involving the Company in which the holders of Common Stock immediately prior to the Merger have substantially the same proportionate ownership of common stock of the surviving corporation after the Merger, or (b) a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or the adoption of any plan or proposal for the liquidation or dissolution; (2) during any period of 12 months or less, individuals who at the beginning of such period constituted a majority of the Board cease for any reason to constitute a majority thereof unless the nomination or election of such new directors was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; (3) a tender or exchange offer (other than one made by (a) the Company, or (b) Mr. Taylor or any corporation, limited liability company, partnership, or other entity in which Mr. Taylor owns a direct or indirect ownership of 50% or more, or controls 50% or more of the voting power [collectively, the "Taylor Parties"]) is made for the Common Stock (or securities convertible into Common Stock) and such offer results in a portion of those securities being purchased and the offeror after the consummation of the offer is the beneficial owner (as determined pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]), directly or indirectly, of securities representing in excess of the greater of at least 20% of the voting power of outstanding securities of the Company or the percentage of the voting power of the outstanding securities of the Company collectively held by all of the Taylor Parties; or (4) any person other than a Taylor Party becomes the beneficial owner of securities representing in excess of the greater of 20% of the aggregate voting power of the outstanding securities of the Company as disclosed in a report on Schedule 13D of the Exchange Act or the percentage of the voting power of the outstanding securities of the Company collectively held by all of the Taylor Parties. No change of
control will be deemed to have occurred for purposes of either an individual Prior Employment Agreement or an individual 2018 Employment Agreement by virtue of any transaction which results in the affected Named Executive Officer, or a group of persons which includes the affected Named Executive Officer, acquiring, directly or indirectly, securities representing 20% or more of the voting power of outstanding securities of the Company.
The estimated amounts that would have been payable to a Named Executive Officer under both the Prior Employment Agreements and the 2018 Employment Agreements are more fully described in "Termination, Change of Control and Change of Responsibility Payments."
Additionally, on June 20, 2019, Mr. Colosi and the Company announced that Mr. Colosi would be retiring as President of the Company effective as of June 20, 2019. On July 3, 2019, the Company entered into the Colosi Consulting Agreement with Mr. Colosi. Under the Colosi Consulting Agreement, which expired on March 1, 2020, the Company agreed to pay Mr. Colosi an aggregate sum of $500,000 in bi-weekly installments over the term of the Colosi Consulting Agreement. In addition, the Company agreed to pay Mr. Colosi an aggregate sum of $1,400,000, payable on March 1, 2020. Under the terms of the Colosi Consulting Agreement, Mr. Colosi agreed to be available upon reasonable notice to consult on matters assigned by the Company. The Colosi Consulting Agreement also provided a general release of claims through June 20, 2019. Finally, the Colosi Consulting Agreement reaffirmed certain obligations of Mr. Colosi under his 2018 employment agreement, including, without limitation, obligations pertaining to non-competition, non-hire, and non-solicitation.
Hedging and Pledging Policies
The Company has an insider trading policy that, among other things, prohibits all of our employees (including our executive officers) and our directors from engaging in speculative trading in the Company's shares, which prohibition includes any arrangement by which a shareholder or option holder changes his or her economic exposure to changes in the price of the stock. Prohibited arrangements include buying standardized put or call options, writing put or call options, selling stock short, buying or selling securities convertible into other securities, or merely engaging in a private arrangement where the value of the agreement varies in relation to the price of the underlying security. Such arrangements are prohibited because these transactions may give the appearance of improper trades and look disloyal. In addition, our insider trading policy strongly discourages employees (including our executive officers) and our directors from holding the Company's securities in a margin account or otherwise pledging these securities as collateral for a loan. As of the date of this proxy statement, none of our Named Executive Officers and non-employee directors hold the Company's securities in a margin account or have otherwise pledged them as collateral for a loan.
Compensation Committee Report
The compensation committee has reviewed and discussed the "Compensation Discussion and Analysis" required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the compensation committee recommended to the Board that the "Compensation Discussion and Analysis" be included in this proxy statement and incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 26, 2017.31, 2019.
All members of the compensation committee concur in this report.
James F. Parker,R. Zarley, Chair
Gregory N. Moore
Curtis A. Warfield
Kathleen M. WidmerJames R. Zarley
The following table sets forth the total compensation earned with respect to the fiscal years 2017, 2016,2019, 2018, and 20152017 for Mr. Taylor, our Chairman, and Chief Executive Officer, and Mr. Colosi, our President, and Ms. Robinson, our Chief Financial Officer. It also includes such information for each of our three other most highly compensated executive officers during fiscal year 2017,2019, as and if applicable.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Grant Date Fair Value of Stock Awards ($)(2) | Non-equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($)(3) | Actual Compensation for Fiscal Year Using Vesting Date Share Price ($)(4) | Actual Compensation for Fiscal Year Using Grant Date Share Price ($)(5)(6) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 2017 | 525,000 | — | 7,314,300 | 710,240 | 8,670 | 8,558,210 | 8,674,196 | (i) | 6,351,301 | (i) | |||||||||||||||||
Chairman, Chief | 2016 | 525,000 | — | 3,389,800 | 859,342 | 8,949 | 4,783,091 | 8,437,123 | (i) | 6,660,634 | (i) | |||||||||||||||||
Executive Officer | 2015 | 525,000 | — | 7,419,450 | 632,949 | 8,679 | 8,586,078 | 5,358,564 | (i) | 5,388,923 | (i) | |||||||||||||||||
Scott M. Colosi | 2017 | 450,000 | 200 | 2,709,000 | 473,494 | 8,670 | 3,641,364 | 5,538,603 | (ii) | 3,941,694 | (ii) | |||||||||||||||||
President, Chief | 2016 | 450,000 | 200 | 1,196,400 | 572,895 | 8,949 | 2,228,444 | 4,190,143 | (ii) | 3,402,416 | (ii) | |||||||||||||||||
Financial Officer | 2015 | 450,000 | 200 | 4,848,000 | 421,966 | 8,679 | 5,728,845 | 2,867,989 | (ii) | 2,882,380 | (ii) | |||||||||||||||||
Celia P. Catlett | 2017 | 300,000 | 200 | 1,083,600 | 169,105 | 8,670 | 1,561,575 | 1,621,175 | (iii) | 1,173,375 | (iii) | |||||||||||||||||
General Counsel, | 2016 | 275,000 | 200 | — | 204,605 | 8,949 | 488,754 | 945,754 | (iii) | 836,454 | (iii) | |||||||||||||||||
Corporate Secretary | 2015 | 250,000 | 200 | 1,390,800 | 150,702 | 8,679 | 1,800,381 | 754,781 | (iii) | 757,281 | (iii) | |||||||||||||||||
S. Chris Jacobsen | 2017 | 300,000 | 200 | 541,800 | 236,747 | 8,670 | 1,087,417 | 1,117,217 | (iv) | 902,317 | (iv) | |||||||||||||||||
Chief Marketing Officer | 2016 | 300,000 | 200 | 1,338,911 | 204,605 | 8,949 | 1,852,665 | 1,060,472 | (iv) | 960,915 | (iv) |
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Grant Date Fair Value of Stock Awards ($)(2)(3) | Non-equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($)(3) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | | 2019 | | 525,000 | | — | | 3,711,600 | | 654,181 | | 8,961 | | 4,899,742 | ||||||||
Chairman, Chief Executive | | 2018 | | 525,000 | | — | | — | | 829,316 | | 8,782 | | 1,363,098 | ||||||||
Officer, President | | 2017 | | 525,000 | | — | | 7,314,300 | | 710,240 | | 8,670 | | 8,558,210 | ||||||||
Tonya R. Robinson | 2019 | 298,077 | 200 | 1,237,200 | 249,212 | 1,161 | 1,785,850 | |||||||||||||||
Chief Financial Officer | 2018 | 250,633 | 200 | 626,775 | 208,601 | 982 | 1,087,191 | |||||||||||||||
Scott M. Colosi | | 2019 | | 219,808 | | — | | 4,020,900 | | — | | 1,727,455 | (4) | | 5,968,163 | |||||||
Former President | | 2018 | | 450,000 | | 200 | | — | | 552,877 | | 8,782 | | 1,011,859 | ||||||||
| 2017 | | 450,000 | | 200 | | 2,709,000 | | 473,494 | | 8,670 | | 3,641,364 | |||||||||
S. Chris Jacobsen | 2019 | 314,481 | 200 | 742,320 | 249,212 | 8,961 | 1,315,174 | |||||||||||||||
Chief Marketing Officer | 2018 | 300,000 | 200 | — | 315,930 | 8,782 | 624,912 | |||||||||||||||
2017 | 300,000 | 200 | 541,800 | 236,747 | 8,670 | 1,087,417 | ||||||||||||||||
Doug W. Thompson | | 2019 | | 450,000 | | 200 | | 2,629,050 | | 598,108 | | 8,961 | | 3,686,319 | ||||||||
Chief Operating Officer | | 2018 | | 450,000 | | 200 | | 1,271,240 | | 659,430 | | 8,782 | | 2,389,652 |
The Company cautions that the amounts reported in the Summary Compensation Table for these awards may not represent the amounts that the Named Executive Officers will actually realize from the awards. Whether, and to what extent, a Named Executive Officer realizes value will depend on the Company's actual operating performance, stock price fluctuations and the Named Executive Officer's continued service with the Company. Additional information on all outstanding stock and option awards is reflected in the "Grants of Plan-Based Awards Table" and the "Outstanding Equity Awards at Fiscal Year End Table."
With respect to Mr. Taylor is still serving the Company on the vesting date. Additionally, the amount set forth in the Summary Compensation TableColosi, (i) amounts for the 20152019 fiscal year lists a value representinginclude (a) the performance based restricted stock units and service based restricted stock units granted to Mr. Colosi during the 2019 fiscal year relating to his 2019 year service, and (b) the "retention" restricted stock units granted to Mr. Colosi during the 2019 fiscal year, and (ii) amounts for the 2017 fiscal year include the performance based restricted stock units and service based restricted stock units granted to
Mr. Colosi during the 2017 fiscal year relating to his 2018 year service. With respect to the restricted stock units granted to Mr. Colosi for the 2019 fiscal year, upon his retirement, he forfeited his right to receive such units which had a grant date fair value of $4,020,900.
With respect to Mr. Jacobsen, (i) amounts for the entirety of2019 fiscal year include the performance based restricted stock units and/or service based restricted stock units (as and if applicable) granted to the Named Executive Officers, even though Messrs. Taylor and Colosi only received the value of the one-third increment of service based restricted stock units and first grant of performance based restricted stock units, and Ms. Catlett only received the value of the one-third increment of service based restricted stock units. Amounts relating to these performance based restricted stock units and service based restricted stock units are not amounts paidgranted to or received by the Named Executive OfficersMr. Jacobsen during the time periods reflected in2019 fiscal year relating to his 2019 year service, and (ii) amounts for the table.2017 fiscal year include the "retention" restricted stock units granted to Mr. Jacobsen under his 2018 Employment Agreement as more particularly described above.
With respect to Mr. Jacobsen,Ms. Robinson, (i) amounts for the grants made during2019 fiscal year 2016 reflect service based restricted stock units that vest in one-third increments each January 8 over a three-year period beginning on January 8, 2017 and ending on January 8, 2019, subject to Mr. Jacobsen's continued service toinclude (a) the Company. Amounts reported in the column titled "Grant Date Fair Value of Stock Awards" and the column titled "Total" are not amounts paid to or received by Mr. Jacobsen during fiscal year 2016.
The per unit grant date value was calculated using the closing price of the Company's common stock on the last trading day immediately preceding the granting date, as follows:
With respect to Mr. Thompson, (i) amounts for the 2019 fiscal year include (a) the performance based restricted stock units granted on November 19, 2015 at $34.11; and for Mr. Taylor in 2015, 15,000 service based restricted stock units granted on January 8, 2015 at $34.77,to Mr. Thompson during the 2019 fiscal year relating to his 2019 year service, and 106,435 performance based(b) the "retention" restricted stock units granted on January 8, 2015 at $34.77.
Grants of Plan-Based Awards in Fiscal Year 20172019
The following table presents information with respect to grants of stock awards to the applicable Named Executive Officers during fiscal year 2017.2019.
Grants of Plan-Based Awards Table
| | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | Grant Date Fair Value of Stock and Option Awards ($)(3) | |||||||||||||||
Name | Grant Date | Minimum | Target | Maximum | ||||||||||||||
W. Kent Taylor | ||||||||||||||||||
Service Based RSUs vesting January 8, 2019 | December 26, 2017 | — | — | — | 10,000 | 541,800 | ||||||||||||
Performance Based RSUs vesting January 8, 2019 | December 26, 2017 | 0 | 50,000 | (4) | 100,000 | — | 2,709,000 | |||||||||||
Service Based RSUS vesting January 8, 2023 | December 26, 2017 | — | — | — | 75,000 | 4,063,500 | ||||||||||||
Scott M. Colosi | ||||||||||||||||||
Service Based RSUs vesting January 8, 2019 | December 26, 2017 | — | — | — | 10,000 | 541,800 | ||||||||||||
Performance Based RSUs vesting January 8, 2019 | December 26, 2017 | 0 | 40,000 | (4) | 80,000 | — | 2,167,200 | |||||||||||
Celia Catlett | ||||||||||||||||||
Service Based RSUs vesting January 8, 2019 | December 26, 2017 | — | — | — | 10,000 | 541,800 | ||||||||||||
Service Based RSUs vesting January 8, 2021 | December 26, 2017 | — | — | — | 10,000 | 541,800 | ||||||||||||
S. Chris Jacobsen | ||||||||||||||||||
Service Based RSUs vesting January 8, 2021 | December 26, 2017 | — | — | — | 10,000 | 541,800 |
| | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | | Grant Date Fair Value of Stock and Option Awards ($)(3) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | All Other Stock Awards: Number of Shares of Stock or Units(2) | ||||||||||||||||
Name | Grant Date | Minimum | Target | Maximum | ||||||||||||||
W. Kent Taylor | | | | | | |||||||||||||
Service Based RSUs vesting on January 8, 2020 | January 8, 2019 | | — | | — | | — | | 10,000 | | 618,600 | |||||||
Performance Based RSUs vesting on January 8, 2020 | January 8, 2019 | | — | | 50,000 | (4) | | 100,000 | | — | | 3,093,000 | ||||||
Scott M. Colosi | ||||||||||||||||||
Service Based RSUs vesting on January 8, 2020 | January 8, 2019 | — | — | — | 10,000 | 618,600 | ||||||||||||
Service Based RSUs vesting on January 8, 2021 | January 8, 2019 | — | — | — | 15,000 | 927,900 | ||||||||||||
Performance Based RSUs vesting on January 8, 2020 | January 8, 2019 | — | 40,000 | (4) | 80,000 | — | 2,474,400 | |||||||||||
S. Chris Jacobsen | | | | | | |||||||||||||
Service Based RSUs vesting on January 8, 2020 | January 8, 2019 | | — | | — | | — | | 5,000 | | 309,300 | |||||||
Performance Based RSUs vesting on January 8, 2019 | January 8, 2019 | | — | | 7,000 | (4) | | 14,000 | | — | | 433,020 | ||||||
Tonya R. Robinson | ||||||||||||||||||
Service Based RSUs vesting on January 8, 2020 | January 8, 2019 | — | — | — | 10,000 | 618,600 | ||||||||||||
Service Based RSUs vesting on January 8, 2021 | January 8, 2019 | — | — | — | 10,000 | 618,600 | ||||||||||||
Doug W. Thompson | | | | | | |||||||||||||
Service Based RSUs vesting on January 8, 2020 | January 8, 2019 | | — | | — | | — | | 10,000 | | 618,600 | |||||||
Service Based RSUs vesting on January 8, 2021 | January 8, 2020 | | — | | — | | — | | 12,500 | | 773,250 | |||||||
Performance Based RSUs vesting on January 8, 2020 | January 8, 2019 | | — | | 20,000 | (4) | | 40,000 | | — | | 1,237,200 |
of the fiscal year in which a Named Executive Officer served in such role, based on actual EPS growth of 13.0%11.9% and aan actual Profit Sharing Pool of $3,102,743 calculated on fiscal year 2019 pre-tax profit (Profit Sharing Pool) of $180,106,845 during fiscal year 2017.$206,849,534.
The following table presents information with respect to outstanding stock option awards, stock awards, and equity incentive plan awards as of December 26, 201731, 2019 by the Named Executive Officers.Officers (other than Mr. Colosi).
Outstanding Equity Awards at Fiscal Year End Table
| Option Awards | Stock Awards | Equity Incentive Plan Awards | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | |||||||||||||||
W. Kent Taylor | — | — | NA | NA | 100,000 | (2) | 5,408,000 | 135,000 | (3) | 7,300,800 | |||||||||||||
Chairman, Chief Executive | |||||||||||||||||||||||
Officer | |||||||||||||||||||||||
Scott M. Colosi | — | — | NA | NA | 50,000 | (4) | 2,704,000 | 70,000 | (5) | 3,785,600 | |||||||||||||
President, Chief Financial | |||||||||||||||||||||||
Officer | |||||||||||||||||||||||
Celia P. Catlett | — | — | NA | NA | 40,000 | (6) | 2,163,200 | — | — | ||||||||||||||
General Counsel, | |||||||||||||||||||||||
Corporate Secretary | |||||||||||||||||||||||
S. Chris Jacobsen | — | — | NA | NA | 35,000 | (7) | 1,892,800 | — | — | ||||||||||||||
Chief Marketing Officer |
| Stock Awards | Equity Incentive Plan Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | |||||||||
W. Kent Taylor | | 85,000 | (2) | | 4,787,200 | | 50,000 | (3) | | 2,816,000 | |||
Chairman, Chief Executive Officer, President | | | | | |||||||||
S. Chris Jacobsen | 15,000 | (4) | 844,800 | 7,000 | (5) | 394,240 | |||||||
Chief Marketing Officer | |||||||||||||
Tonya R. Robinson | | 20,000 | (6) | | 1,126,400 | | — | | — | ||||
Chief Financial Officer | | | | | |||||||||
Doug W. Thompson | 22,500 | (7) | 1,267,200 | 20,000 | (8) | 1,126,400 | |||||||
Chief Operating Officer |
See the "Compensation Discussion and Analysis" for the conditions of accelerated vesting upon termination of employment other than for cause.
Options Exercised and Stock Vested
The following table presents information with respect to stock options exercised and stock awards vested during the fiscal year ended December 26, 201731, 2019 by the Named Executive Officers.
Option Exercises and Stock Vested Table
| 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 Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||
W. Kent Taylor | — | — | 154,132 | 7,043,832 | (i) | | 88,983 | | 5,504,488 | (i) | ||||||||||
Chairman, Chief Executive Officer | ||||||||||||||||||||
Chairman, Chief Executive Officer, President | | | ||||||||||||||||||
Scott M. Colosi | — | — | 69,105 | 3,158,099 | (ii) | 73,186 | 4,527,286 | (ii) | ||||||||||||
President, Chief Financial Officer | ||||||||||||||||||||
Celia P. Catlett | — | — | 10,000 | 457,000 | (iii) | |||||||||||||||
General Counsel, Corporate Secretary | ||||||||||||||||||||
Former President | ||||||||||||||||||||
S. Chris Jacobsen | — | — | 12,125 | 546,718 | (iv) | | 15,000 | | 927,900 | (iii) | ||||||||||
Chief Marketing Officer | | | ||||||||||||||||||
Tonya R. Robinson | 10,000 | 563,310 | (iv) | |||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||
Doug W. Thompson | | 22,000 | | 1,338,860 | (v) | |||||||||||||||
Chief Operating Officer | | |
Termination, Change of Control and Change of Responsibility Payments
If a Named Executive Officer had resigned or been terminated for cause prior to the expiration of the term of his or her Prior Employment Agreement or 2018 Employment Agreement, the officerNamed Executive Officer would have received payment of his or her annual base salary then in effect through the date of resignation or termination.
If a Named Executive Officer had been terminated prior to the expiration of the term of his or her Prior2018 Employment Agreement as a result of death or disability, such officer'sNamed Executive Officer's beneficiary or estate would have been entitled to receive an amount equal to such officer's annual base salary then in effect through the date of termination due to death or disability, plus any earned but unpaid bonus, plus the amount of such officer'sNamed Executive Officer's annual base salary then in effect for
180 days following the termination, plus a fixed bonus amount as follows: for Mr. Taylor, $262,500; for Mr. Colosi, $175,000; for Mr. Jacobsen, $100,000; for Ms. Catlett, $62,500;Robinson, $100,000; and, for Mr. Jacobsen, $87,500.
Table of ContentsThompson, $225,000.
If a Named Executive Officer had been terminated priorExcept as otherwise noted with respect to the expiration of the term of his or her 2018 Employment Agreement as a result of death or disability, such officer's beneficiary or estate would have been entitled to receive an amount equal to such officer's annual base salary then in effect through the date of termination due to death or disability, plus any earned but unpaid bonus, plus the amount of such officer's annual base salary then in effect for 180 days following the termination, plus a fixed bonus amount as follows: for Mr. Taylor, $262,500; for Mr. Colosi, $175,000; for Ms. Catlett, $92,500; and for Mr. Jacobsen, $100,000.
Thethe following table lists the estimated amounts payable to a Named Executive Officer pursuant to the Prior2018 Employment Agreements if his or her employment had been terminated without cause unrelated to a change of control on December 26, 2017,31, 2019, the last day of our fiscal year, provided that each officerNamed Executive Officer signed a full release of all claims against us.
Name | Estimated Cash Payments ($)(1) | Estimated Value of Newly Vested Stock Awards ($)(2) | Total ($) | Total Estimated Cash Payments ($)(1) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 100 | 5,408,000 | 5,408,100 | | 100 | |||||||||
Chairman, Chief Executive Officer | ||||||||||||||
Chairman, Chief Executive Officer, President | | |||||||||||||
Scott M. Colosi | 870,412 | 3,785,600 | 4,656,012 | 1,900,000 | (2) | |||||||||
President, Chief Financial Officer | ||||||||||||||
Celia P. Catlett | 379,550 | 1,081,600 | 1,461,150 | |||||||||||
General Counsel, Corporate Secretary | ||||||||||||||
Former President | ||||||||||||||
S. Chris Jacobsen | 472,192 | 1,352,000 | 1,824,192 | | 504,554 | |||||||||
Chief Marketing Officer | | |||||||||||||
Tonya R. Robinson | 497,157 | |||||||||||||
Chief Financial Officer | ||||||||||||||
Doug W. Thompson | | 1,045,026 | ||||||||||||
Chief Operating Officer | |
The following table lists the estimated amounts payable to a Named Executive Officer (other than Mr. Colosi) if his or her employment had been terminated without cause following a change of control, or if any of the officers had resigned his or her position for good reason following a change of control, on December 26, 2017,31, 2019, the last day of our fiscal year, provided that each officerNamed Executive Officer signed a full release of claims against us.
Change in Control, Change in Responsibilities Payments Table
Name | Estimated Cash Payments ($)(1) | Estimated Value of Newly Vested Stock Awards ($)(2) | Total ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 1,754,487 | 5,408,000 | 7,162,487 | |||||||
Chairman, Chief Executive Officer | ||||||||||
Scott M. Colosi | 1,268,562 | 3,785,600 | 5,054,162 | |||||||
President, Chief Financial Officer | ||||||||||
Celia P. Catlett | 590,817 | 1,081,600 | 1,672,417 | |||||||
General Counsel, Corporate Secretary | ||||||||||
S. Chris Jacobsen | 890,857 | 1,352,000 | 2,242,857 | |||||||
Chief Marketing Officer |
Name | Estimated Cash Payments ($)(1) | Estimated Value of Newly Vested Stock Awards ($)(2) | Total ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | | 1,714,249 | | 10,982,400 | | 12,696,649 | ||||
Chairman, Chief Executive Officer, President | | | | |||||||
S. Chris Jacobsen | 770,253 | 1,914,880 | 2,685,133 | |||||||
Chief Marketing Officer | ||||||||||
Tonya R. Robinson | | 754,965 | | 1,689,600 | | 2,444,565 | ||||
Chief Financial Officer | | | | |||||||
Doug W. Thompson | 1,536,738 | 4,083,200 | 5,629,938 | |||||||
Chief Operating Officer |
The table below details the estimated payment for each officer.Named Executive Officer.
Name | Salary ($) | Bonus ($) | Total Estimated Payments ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | 519,247 | 1,235,240 | 1,754,487 | |||||||
Chairman, Chief Executive Officer | ||||||||||
Scott M. Colosi | 445,068 | 823,494 | 1,268,562 | |||||||
President, Chief Financial Officer | ||||||||||
Celia P. Catlett | 296,712 | 294,105 | 590,817 | |||||||
General Counsel, Corporate Secretary | ||||||||||
S. Chris Jacobsen | 304,110 | 586,747 | 890,857 | |||||||
Chief Marketing Officer |
Name | Salary ($) | Bonus ($) | Total Estimated Payments ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
W. Kent Taylor | | 535,068 | | 1,179,181 | | 1,714,249 | ||||
Chairman, Chief Executive Officer, President | | | | |||||||
S. Chris Jacobsen | 321,041 | 449,212 | 770,253 | |||||||
Chief Marketing Officer | ||||||||||
Tonya R. Robinson | | 305,753 | | 449,212 | | 754,965 | ||||
Chief Financial Officer | | | | |||||||
Doug W. Thompson | 458,630 | 1,078,108 | 1,536,738 | |||||||
Chief Operating Officer |
Under Section 953(b) of the Dodd Frank Wall Street Reform and Consumer Protection Act, a U.S. publicly traded corporation is required to disclose the ratio between their Chief Executive Officer's annual total compensation to the total compensation of such corporation's median employee after excluding the Chief Executive Officer's compensation. To identify our median employee, we used the 2019 total cash
compensation for all individuals (other than Mr. Taylor, our CEO) who were employed by us as of December 31, 2019, the last day of our 2019 fiscal year. For the purposes of calculating our employee's total cash compensation, we used our employee's base wages identified on our employees' W-2 forms. As a part of our calculation, we included all employees, whether employed by us on a full-time or part-time basis, and we annualized the compensation of any employee whom we hired during our 2019 fiscal year and who was working for us at the end of our fiscal year. As of December 31, 2019, approximately 72% of our employees were part-time employees and our average employee worked approximately 23 hours per week.
We identified our median employee as a part-time server in Bismarck, North Dakota who worked an average of 15 hours per week. After identifying our median employee, we calculated the annual total compensation for such employee as $13,483, which is determined using the same methodology we used for our Named Executive Officers as set forth in the 2019 Summary Compensation Table described above.
As more particularly described in the 2019 Summary Compensation Table, the annual total compensation for Mr. Taylor, our CEO, for our 2019 fiscal year is $4,900,645 and the ratio between the compensation for our CEO and the compensation for our median employee is 363 to 1. Note that since the SEC rules allow companies to use various methodologies and assumptions, apply certain exclusions, and make reasonable estimates relating to a specific company's employee base when identifying the median employee, the CEO pay ratio disclosed by other companies may not be comparable with the CEO pay ratio disclosed in this paragraph. Additionally, the pay ratio between our CEO and our median employee may vary year to year based, in part, on the grant date value of any restricted stock units granted to our CEO in any given year.
The audit committee of the Board (the "Committee") is currently composed of three directors, all of whom meet the criteria for independence under the applicable NASDAQ and SECSecurities & Exchange Commission (the "SEC") rules and the Sarbanes-Oxley Act. The audit committeeCommittee acts under a written charter adopted by the Board, a copy of which is available on the Company's website atwww.texasroadhouse.com.
The audit committeeCommittee has prepared the following report on its activities and with respect to the Company's audited consolidated financial statements for the fiscal year ended December 26, 201731, 2019 (the "Audited Financial Statements").
All members of the audit committeeCommittee concur in this report.
Gregory N. Moore, ChairJames F. ParkerCurtis A. Warfield
James R. Zarley
The audit committee'sCommittee's charter provides that the audit committeeCommittee will review and approve any transactions between us and any of our executive officers, non-employee directors, and 5% shareholders, or any members of their immediate families, in which the amount involved exceeds the threshold limits established by the regulations of the SEC. In reviewing a related-party transaction, the audit committeeCommittee considers the material terms of the transaction, including whether the terms are generally available to an unaffiliated third party under similar circumstances. Unless specifically noted, the transactions described below were entered into before our initial public offering and the subsequent formation of the audit committee.Committee.
Grants of Franchise or License Rights
We have licensed or franchised restaurants to companies owned in part by current executive officers.certain Named Executive Officers. The licensing or franchise fees paid by these companies to us range from 0.0% to 4.0% of restaurant sales, which is less than the amount we typically charge to franchisees. We believe that allowing certain executive officersNamed Executive Officers with ownership interests in our restaurants that pre-dated our initial public offering to continue to maintain those ownership interests adds an ongoing benefit to the Company by making the executive officersthose Named Executive Officers more invested in the overall success of the brand. Ownership of franchised restaurants by our current executive officers is listed below.
franchised restaurants by our current and/or former Named Executive Officers as of the end of the 2019 fiscal year is listed below.
Restaurant | Name and Ownership | Initial Franchise Fee | Royalty Rate | Royalties Paid to Us in Fiscal Year 2017 ($) | Management or Supervision Fees Paid to Us in Fiscal Year 2017 ($) | Name and Ownership | Initial Franchise Fee | Royalty Rate | Royalties Paid to Us in Fiscal Year 2019 ($) | Management, Supervision or Accounting Fees Paid to Us in Fiscal Year 2019 ($) | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Billings, MT | W. Kent Taylor (27.5%) | — | 4.0 | % | 197,909 | 24,739 | W. Kent Taylor (27.5%) | | — | | 4.0 | % | | 222,294 | | 27,787 | ||||||||||||||
Scott M. Colosi (2.0%) | Scott M. Colosi (2.0%) | | | | | | | | | |||||||||||||||||||||
Everett, MA | W. Kent Taylor (28.75%) | — | 4.0 | % | 260,220 | 32,528 | W. Kent Taylor (28.75%) | — | 4.0 | % | 277,760 | 34,720 | ||||||||||||||||||
Fargo, ND | Scott M. Colosi (5.05%) | — | 4.0 | % | 190,316 | 23,540 | Scott M. Colosi (5.05%) | | — | | 4.0 | % | | 204,383 | | 25,548 | ||||||||||||||
Lexington, KY | W. Kent Taylor (5.0%) | — | 2.0 | % | 104,941 | — | W. Kent Taylor (3.33%) | — | 2.0 | % | 112,338 | 23,724 | ||||||||||||||||||
McKinney, TX | Scott M. Colosi (2.0%) | — | 4.0 | % | 259,071 | 32,384 | Scott M. Colosi (2.0%) | | — | | 4.0 | % | | 286,599 | | 35,825 | ||||||||||||||
Melbourne, FL | W. Kent Taylor (17.0%) | — | — | — | 113,338 | |||||||||||||||||||||||||
Muncie, IN | W. Kent Taylor (4.91%) | — | — | 50,000 | — | W. Kent Taylor (4.91%) | — | — | 50,000 | — | ||||||||||||||||||||
Omaha, NE | Scott M. Colosi (10.99%) | — | 4.0 | % | 191,384 | 25,253 | Scott M. Colosi (10.99%) | | — | | 4.0 | % | | 231,165 | | 28,896 | ||||||||||||||
Port Arthur, TX | W. Kent Taylor (15.0%) | — | 4.0 | % | 213,113 | 26,639 | W. Kent Taylor (15.0%) | — | 4.0 | % | 236,302 | 29,538 | ||||||||||||||||||
Scott M. Colosi (3.0%) | Scott M. Colosi (3.0%) | |||||||||||||||||||||||||||||
Wichita, KS | W. Kent Taylor (24.05%) | — | 4.0 | % | 336,873 | 41,252 | W. Kent Taylor (24.05%) | | — | | 4.0 | % | | 330,413 | | 41,302 | ||||||||||||||
Scott M. Colosi (4.0%) | Scott M. Colosi (4.0%) | | | | | | | | |
For the 20172019 fiscal year, the total amount of distributions received by Mr. Taylor and Mr. Colosi relating to their ownership interests in the above-referenced franchised restaurants were $1,578,407$1,525,985 and $160,537,$192,308, respectively. These amounts do not reflect compensation paid by the Company to Mr. Taylor and/or Mr. Colosi during the 20172019 fiscal year; rather, these amounts were paid by the applicable franchise entity and reflect a return on investment in these separate restaurant locations.
On March 19, 2004, we entered into a preliminary franchise agreement with a company which is 95% owned by Mr. Taylor to develop a restaurant at a location which is to be determined. The terms of the preliminary franchise agreement provide for no initial franchise fees and royalties of 3.5% of restaurant sales. During fiscal year 2017,2019, we received no payment from this franchise restaurant, as none was due.
The franchise agreements and preliminary franchise agreement that we have entered into with our executive officersNamed Executive Officers contain the same terms and conditions as those agreements that we enter into with our other domestic franchisees except, in some instances, the initial franchise fees and the royalty rates, which are currently $40,000 and 4.0%, respectively, for our other domestic franchisees. We have the contractual right, but not the obligation, to acquire the restaurants owned by our executive officersNamed Executive Officers based on a pre-determined valuation formula which is the same as the formula contained in the domestic franchise agreements that we have entered into with other franchisees with whom we have such rights. A preliminary agreement for a franchise may be terminated if the franchisee does not identify and obtain our approval of its restaurant management personnel, locate and obtain our approval of a suitable site for the restaurant or does not demonstrate to us that it has secured necessary capital and financing to develop the restaurant. Once a franchise agreement has been entered into, it may be terminated if the franchisee defaults in the performance of any of its obligations under the agreement, including its obligations to operate the restaurant in strict accordance with our standards and specifications. A franchise agreement may also be terminated if a franchisee becomes insolvent, fails to make its required payments, creates a threat to the public health or safety, ceases to operate the restaurant or misuses the Texas Roadhouse trademarks.
Ownership Interest in Majority-Owned Joint Venture Entities
Upon his appointment to Chief Operating Officer, Mr. Thompson held an ownership interest in the Texas Roadhouse restaurant in Gilbert-East, AZ, which is a restaurant that is owned by an entity that the
Company controls and in which the Company holds a 52.5% ownership interest. The Company believes that allowing certain Named Executive Officers to have ownership interests in restaurants provides an ongoing benefit to the Company by making these persons more invested in the overall success of the brand. As of the end of the 2019 fiscal year, Mr. Thompson held a 35.5% ownership interest in the Gilbert-East, AZ restaurant, which entity paid $260,055 to us for management and supervision fees. Additionally, for the 2019 fiscal year, the total amount of distributions received by Mr. Thompson relating to his ownership interest in the Gilbert-East, AZ restaurant was $476,090. These amounts do not reflect compensation paid by the Company to Mr. Thompson during the 2019 fiscal year; rather, these amounts were paid by the applicable entity and reflect a return on investment in this restaurant location.
Other Related Transactions
We entered into real estate lease agreements for franchise restaurants located in Everett, MA, of which Mr. Taylor beneficially owns 28.75%, and Fargo, ND, of which Mr. Colosi owns 5.05%, before our granting franchise rights for those restaurants. We have subsequently assigned the leases to the
franchisees, but we remain contingently liable if a franchisee defaults under the terms of a lease. The Everett lease expires in February 2023, and the Fargo lease expires in July 2021.
In 2016, Mr. Taylor loaned $300,000We previously entered into real estate lease agreements for the Company restaurants located in Gilbert-East, AZ. We subsequently assigned the lease to Texas Roadhouse of Billings, LLC for capital improvements, which loan was paid off on December 19, 2017. We own 5.0%a joint venture operating entity, but we remain contingently liable if the entity defaults under the terms of the franchise entity, Mr. Taylor beneficially owns 27.5% of the franchise entity, and Mr. Colosi beneficially owns 2.0% of the franchise entity.lease. The loan had a maturity date of January 15, 2018 and had an interest rate of LIBOR plus 0.44%.Gilbert-East lease expires in July 2023.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's bylaws provide for not less than one and not more than 15 directors. Our Board currently consists of five directors. At the Annual Meeting, we are electing twofive directors forto hold office until the Annual Meeting of Shareholders in 2021 and until a term of one year each.successor is elected and qualified. Although it is not anticipated that any of the nominees listed below will decline or be unable to serve, if that should occur, the proxy holders may, in their discretion, vote for a substitute nominee.
NomineeNominees for Election as a DirectorDirectors
Set forth below are the Board members who will stand for re-election at the Annual Meeting, together with their age, all Company positions and offices they currently hold, and the year in which they joined the Board.
Name | Age | Position or Office | Director Since | Age | Position or Office | Director Since | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gregory N. Moore | 70 | Director | | 2005 | |||||||||||||
W. Kent Taylor | 62 | Director; Chairman & CEO | 2004 | 64 | Director; Chairman & CEO | 2004 | |||||||||||
Curtis A. Warfield | 51 | Director | | 2018 | |||||||||||||
Kathleen M. Widmer | 58 | Director | 2013 | ||||||||||||||
James R. Zarley | 73 | Director | 2004 | 75 | Director | | 2004 |
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR""FOR" THE ELECTION OF THE NOMINEES FOR THE DIRECTORS OF THE COMPANY SET FORTH ABOVE FOR ONE YEAR EACH.ABOVE.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
As more particularly described in this proxy statement, the audit committee is directly responsible for managing the Company's independent auditors, which includes, without limitation, (i) pre-approving all audit and permitted non-audit services provided by our independent auditors, and (ii) the appointment, compensation, retention and oversight of the Company's independent auditors. In connection with the audit committee's appointment of the Company's independent auditors, the audit committee evaluates the service level of the incumbent independent auditor on an annual basis, which includes criteria such as prior year quality of service, industry and technical expertise, independence, resource availability, and reasonableness and competitiveness of fees, as well as solicits the input of key management employees during its evaluation.
In connection with the same and pursuant to its charter, the audit committee has appointed the firm of KPMG LLP to serve as the independent auditors to audit the consolidated financial statements and the internal control over financial reporting of the Company for the fiscal year which ends on December 25, 2018.29, 2020. The Board and the audit committee jointly agree that the continued retention of KPMG LLP is in the best interest of the Company and its shareholders. Accordingly, a resolution will be presented at the Annual Meeting to ratify the appointment of KPMG LLP. If the shareholders fail to ratify the appointment of KPMG LLP, the audit committee will take this result into account when appointing an independent auditor for the 2020 fiscal year 2018.year. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm as the Company's independent auditors at any time during the year if the audit committee believes that such a change would be in the best interests of the Company and its shareholders. One or more representatives of KPMG LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
Fees Paid to the Independent Auditors
We paidincurred the following fees to KPMG LLP for fiscal years 20172019 and 2016:2018:
| 2017($) | 2016($) | 2019($) | 2018($) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees | 685,000 | 780,000 | | 761,380 | | 789,676 | ||||||||
Audit-related Fees | 50,664 | — | — | 7,375 | ||||||||||
Tax Fees | 55,632 | 64,534 | | 24,938 | | 20,903 | ||||||||
All Other Fees | — | 24,279 | 1,500 | 1,500 | ||||||||||
| | | | | | | | | | | | | | |
791,296 | 868,813 | | 787,818 | | 819,454 |
Audit Fees
KPMG LLP charged $685,000$761,380 in fiscal year 20172019 and $780,000$789,676 in fiscal year 20162018 for audit fees. These include professional services in connection with the audit of the Company's annual consolidated financial statements and its internal control over financial reporting. They also include reviews of the Company's consolidated financial statements included in the Company's Quarterly and Annual Reports on Form 10-Q and Form 10-K and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years shown. Additionally, the fees for fiscal years 2019 and 2018 contain approximately $41,380 and $55,676, respectively, related to statutory audits. Finally, the fees for fiscal years 20172019 and 20162018 contain $15,000approximately $20,000 and $140,000,$69,000, respectively, relatingrelated to the adoption of new accounting software conversions.pronouncements.
Audit-related Fees Audit-Related Fees.
KPMG LLP charged the Company $50,664$7,375 in fiscal year 2018 for audit-related services in fiscal year 2017. These include professional services in connection with statutory audits.
Tax Fees2018.
KPMG LLP charged $55,632 for tax consulting services in fiscal year 2017 and $65,534 for tax consulting services in fiscal year 2016.
All Other Fees Tax Fees.
KPMG LLP charged $24,279 for permissible non-audit services$24,938 in fiscal year 2016. These include professional services2019 and $20,903 in connection with the preparationfiscal year 2018 for consulting and delivery of training materials on global anti-briberycompliance services.
All Other Fees. KPMG LLP charged $1,500 in each fiscal year 2019 and anti-corruption policies.fiscal year 2018 for access to their Accounting Research Online tool.
Pre-approval Policies and Procedures
The audit committee pre-approved all audit, audit-related and permissible non-audit services provided to the Company by KPMG LLP before management engaged the auditors for those purposes. The policy of the audit committee is to review all engagement letters for accounting firms for non-audit services.
THE BOARD RECOMMENDS A VOTE "FOR""FOR" THE RATIFICATION OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE 20182020 FISCAL YEAR.
PROPOSAL 3
ADVISORY VOTE ON APPROVAL OF EXECUTIVE COMPENSATION
The Board requests shareholder approval of the compensation of the Company's Named Executive Officers as described in the "Compensation Discussion and Analysis," the Executive Compensation section and the other related executive compensation tables and related discussions in this proxy statement. As an advisory vote, the outcome of the voting on this proposal is not binding upon the Company; however, the compensation committee, which is responsible for establishing and administering the Company's executive compensation program, values the opinions expressed by shareholders on this proposal and will consider the outcome of the vote when making future compensation decisions for Named Executive Officers.the Company's executive officers. Additionally, the compensation committee invites shareholders to express any questions or concerns regarding the Company's compensation philosophy for Named Executive Officersour executive officers by correspondence addressed to Texas Roadhouse, Inc. Compensation Committee, 6040 Dutchmans Lane, Louisville, Kentucky 40205.
The objective of the compensation committee in setting and evaluating the compensation of our Named Executive Officersexecutive officers is to promote the sustained profitability of the Company. Compensation for the Named Executive Officers is divided into three key components: (1) base salary, which provides a secure base of compensation and serves to motivate and retain our Named Executive Officers; (2) a cash bonus, which rewards our Named Executive Officers for the success of the Company as measured by growth in the Company's earnings per diluted share and its overall pre-tax profit, and for each officer'sNamed Executive Officer's individual contribution to that success; and (3) grants of restricted stock units, which offer the Named Executive Officers a financial interest in the long-term success of the Company and align their interests with those of our shareholders. The types of restricted stock units are (i) restricted stock units, which grant the Named Executive Officers the conditional right to receive shares of our common stock that vest after a defined period of service, (ii) "retention" restricted stock units, which vest upon the completion of the term of an individual Named Executive Officer's agreement or such longer date as determined by the compensation committee, and (iii) performance stock units, which are calculated based on the achievement of certain Company performance targets established by the compensation committee and vest over a period of service. The compensation packages for our Named Executive Officers offer base salaries and target cash bonus amounts which are modest within the casual dining restaurant sector and feature restricted stock unit awards, the value of which is dependent upon the performance of the Company and the price of our common stock.
The underlying philosophy reflected by this approach is that, because a significant amountcompensation committee evaluates the stock compensation for each specific Named Executive Officer on an annual basis to determine the right combination of each officer's compensation lies inrewards and incentives through the valueissuance of theservice based restricted stock units granted,and/or performance based restricted stock units to drive company performance without encouraging unnecessary or excessive risk taking by all of the officers are motivated to continually improveNamed Executive Officers as a whole. Under this approach, the Company's performance in the hope that the performance will be reflected by the stock price on the vesting dateNamed Executive Officers receive a combination of theirservice based restricted stock units and beyond. In addition, byperformance based restricted stock units, with a significant portion of some of the Named Executive Officers' compensation being tied to the grant of such performance based restricted stock units. By conditioning a significant portion of our Chiefcertain Named Executive Officer's and our President'sperformance based restricted stock unit grants upon the achievement of defined performance goals to be established by the compensation committee, combined with the stock ownership guidelines for our executive officersNamed Executive Officers more particularly described above, in this proxy statement, we have created a more direct relationship between the compensation of our top executives and shareholder value, while also achieving what we believe is the right combination of rewards and incentives to drive Company performance without encouraging unnecessary or excessive risk taking.value. Additionally, by only providing one year's worth of restricted stock units to our Named Executive Officers, in the 2018 Employment Agreements, the compensation committee has the opportunity to adjust a significant portion of the total compensation for the Named Executive Officers on an annual basis to more accurately reflect the overall performance of the Company.Company, which may include the issuance of service based restricted stock units and/or performance based restricted stock units. Overall, we believe this approach provides the Named Executive Officers with a compensation package which promotes the sustained profitability of the Company and aligns the interests of our executive officersNamed Executive Officers with those of our shareholders. The compensation packages also reflect a pragmatic response to external market conditions; that is, total compensation that is competitive with comparable
positions in similar industries, including the casual dining sector of the restaurant industry, but which is reasonable and in the best interests of our shareholders.
This structure, along with the culture and values of our Company, allows the Company to attract and retain top talent, while also encouraging our officersNamed Executive Officers to keep their focus on both long-term business development and short-term financial growth. The Board was pleased to receive shareholder
approval of the compensation packages of our Named Executive Officers in the advisory vote at the 20172019 annual meeting and again requests approval of the compensation packages of our Named Executive Officers.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR""FOR" THE EXECUTIVE COMPENSATION DETAILED IN THIS PROXY STATEMENT.
Under Rule 14a-8 promulgated under the Exchange Act, shareholders may present proposals to be included in the Company proxy statement for consideration at the next annual meeting of its shareholders by submitting their proposals to the Company in a timely manner. Any such proposal must comply with Rule 14a-8.
The Company's bylaws, a copy of which is available on the Company's website,www.texasroadhouse.com, require shareholders who intend to propose business for consideration by shareholders at the 20192021 annual meeting, other than shareholder proposals that are included in the proxy statement, to deliver written notice to the principal executive offices of the Company on or before December 7, 2018.4, 2020 (reflecting 120 calendar days prior to the one year anniversary of the date of the Company's proxy statement issued in connection with the prior year's annual meeting). This notice must include a description of the business desired to be brought before the annual meeting, the name and address of the shareholder proposing such business and of the beneficial owner, if any, on whose behalf the business is being brought, the class, series and number of shares of the Company which are beneficially owned by the shareholder and such other beneficial owner and any material interest of the shareholder and such other beneficial owner in such business. Similar requirements are set forth in the Company's bylaws with respect to shareholders desiring to nominate candidates for election as director. Exchange Act rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with these deadlines, and in certain other cases notwithstanding the shareholder's compliance with these deadlines. If a shareholder submitting a matter to be raised at the Company's next annual meeting desires that such matter be included in the Company's proxy statement for that meeting, such matter must be submitted to the Company no later than December 7, 2018.4, 2020.
The rules of the SEC set forth standards for what shareholder proposals the Company is required to include in a proxy statement for an annual meeting.
SHAREHOLDERS' COMMUNICATIONS WITH THE BOARD
Shareholders that want to communicate in writing with the Board, or specific directors individually, may send proposed communications to the Company's General Counsel and Corporate Secretary, Celia Catlett,Christopher C. Colson, at 6040 Dutchmans Lane, Louisville, Kentucky 40205. The proposed communication will be reviewed by Ms. CatlettMr. Colson and by the audit committee. If the communication is appropriate and serves to advance or improve the Company or its performance, then it will be forwarded to the Board or the appropriate director.
The Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2017,31, 2019, accompanies this proxy statement. The Company's Annual Report does not form any part of the material for solicitation of proxies.
Any shareholder who wishes to obtain, without charge, a copy of the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2017,31, 2019, which includes financial statements, and is required to be filed with the SEC, may access it atwww.texasroadhouse.com in the Investors section or may send a written request to Celia Catlett, General Counsel andChristopher C. Colson, Corporate Secretary, Texas Roadhouse, Inc., 6040 Dutchmans Lane, Louisville, Kentucky 40205.
The Board is not aware of any other matters to be presented at the Annual Meeting other than those set forth herein and routine matters incident to the conduct of the meeting. If any other matters should properly come before the Annual Meeting or any adjournment or postponement thereof, the persons
persons named in the proxy, or their substitutes, intend to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors, | ||
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Louisville, Kentucky
April 6, 20183, 2020
Please vote your shares through any of the methods described on the proxy card as promptly as possible, whether or not you plan to attend the Annual Meeting in person. If you do attend the Annual Meeting, you may still vote in person, since the proxy may be revoked at any time before its exercise by delivering a written revocation of the proxy to the Company's Corporate Secretary.
MMMMMMMMMMMM . MMMMMMMMMMMMMMM C123456789 Texas Roadhouse, Inc. 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Eastern Time, on May 17, 2018. Vote by Internet • Go to www.investorvote.com/TXRH • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proposals — The Board recommends a vote FOR the nominees and FOR Proposals 2 and 3. + ForAgainst Abstain 1. Election of Directors: For Withhold For Withhold For Withhold 01 - Gregory N. Moore 02 - W. Kent Taylor For Withhold For Withhold 0203 - Curtis A. Warfield 04 - Kathleen M. Widmer 05 - James R. Zarley For Against Abstain For Against Abstain 2. Proposal to ratify the appointment of KPMG LLP as Texas Roadhouse’s independent public accounting firmauditors for 2018.2020. 3. Say on Pay - An advisory vote on the approval of executive compensation. Non-Voting Items Change of Address — Please print your new address below. Comments — Please print your comments below. Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X3 6 3 9 5 6 1 02R81A MMMMMMMMM C B A Annual Meeting Proxy Card1234 5678 9012 345 X IMPORTANT ANNUAL MEETING INFORMATION
. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Texas Roadhouse, Inc. Notice of 2018 Annual Meeting of Shareholders 6040 Dutchmans Lane, Louisville, Kentucky 40205 Proxy Solicited by Board of Directors for Annual Meeting – May 17, 2018 Celia Catlett or Scott Colosi, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Texas Roadhouse, Inc. to be held on May 17, 2018 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR the nominees and FOR Proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.)
MMMMMMMMMMMM . Texas Roadhouse, Inc. Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proposals — The Board recommends a vote FOR the nominees and FOR Proposals 2 and 3. + ForAgainst Abstain 1. Election of Directors: 01 - W. Kent Taylor For Withhold For Withhold 02 - James R. Zarley For Against Abstain 2. Proposal to ratify independent public accounting firm for 2018. 3. Say on Pay - An advisory vote on the approval of executive compensation. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 1 U P X 3 6 3 9 5 6036XVA B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. A Proposals — The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 02R84A MMMMMMMMM B Aand 3. 2020 Annual Meeting Proxy Card X IMPORTANT ANNUAL MEETING INFORMATION
. q PLEASE FOLD ALONG THE PERFORATION,IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Texas Roadhouse, Inc. Notice of 20182020 Annual Meeting of Shareholders 6040 Dutchmans Lane, Louisville, Kentucky 40205 Proxy Solicited by Board of Directors for Annual Meeting –— May 17, 2018 Celia Catlett or Scott Colosi,14, 2020 Christopher Colson and Tonya Robinson, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Texas Roadhouse, Inc. to be held on May 17, 201814, 2020 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR the nomineeselection of the Board of Directors and FOR Proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.)side) Texas Roadhouse, Inc.
Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 1:00 a.m. Eastern Time on May 14, 2020. Online Go to www.investorvote.com/TXRH or scan the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at Using a black ink pen, mark your votes with an X as shown in this example. www.investorvote.com/TXRH Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + 1. Election of Directors: For Withhold For Withhold For Withhold 01 - Gregory N. Moore 02 - W. Kent Taylor 03 - Curtis A. Warfield 04 - Kathleen M. Widmer 05 - James R. Zarley For Against Abstain For Against Abstain 2. Proposal to ratify the appointment of KPMG LLP as Texas Roadhouse’s independent auditors for 2020. 3. Say on Pay - An advisory vote on the approval of executive compensation. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 5 2 A V 036XUA B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. A Proposals — The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 and 3. 2020 Annual Meeting Proxy Card
q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Notice of 2020 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 14, 2020 Christopher Colson and Tonya Robinson, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Texas Roadhouse, Inc. to be held on May 14, 2020 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors and FOR Proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side) Change of Address — Please print new address below. + C Non-Voting Items Texas Roadhouse, Inc. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/TXRH