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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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RED ROBIN GOURMET BURGERS, INC. | ||||
(Name of the Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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RED ROBIN GOURMET BURGERS, INC.
6312 South Fiddler's Green Circle, Suite 200N
Greenwood Village, CO 80111
(303) 846-6000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 30, 201821, 2020
To our Stockholders:
The annual meeting of stockholders of Red Robin Gourmet Burgers, Inc. will be held atWhen: 8:00 a.m. MDT, on Wednesday,Thursday May 30, 2018, at our corporate headquarters,21, 2020
Where: Red Robin's Yummm U, located at 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village,10000 East Geddes Avenue, Unit 500, Englewood, Colorado 80111,80112 for the following purposes:
Items of Business:
We direct your attentionintend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19) pandemic and we are sensitive to the proxy statement,public health and travel concerns our stockholders may have and protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as soon as practicable, which includes information aboutmay include holding the mattersmeeting solely by means of remote communication. Please monitor our annual meeting website at http://www.redrobin.com/eproxy for updated information. If you are planning to be considered atattend our annual meeting, please check the website one week prior to the annual meeting and certain other important information and whichdate. As always, we encourage you to review carefully. Our boardvote your shares prior to the annual meeting.
Record Date: Stockholders as of directors recommends that youMarch 30, 2020 are entitled to vote
FORAnnual Report: We filed with the board's nomineesU.S. Securities and Exchange Commission ("SEC") an annual report on Form 10-K on February 25, 2020 for director,FOR approvalthe fiscal year ended December 29, 2019. A copy of the annual report on Form 10-K has been made available concurrently with this proxy statement to all of our executive compensation, andFOR ratification of the independent auditor. Your vote is important.
Stockholders of record at the close of business on April 2, 2018 arestockholders entitled to notice of and to vote at the annual meetingmeeting. In addition, you may obtain a copy of the annual report on Form 10-K, without charge, by writing to Red Robin Gourmet
Burgers, Inc., Attn: Stockholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111.
Who Can Attend: All stockholders as of the record date, or any postponement or adjournment thereof.their duly appointed proxies, may attend the meeting
Date of Mailing: This Notice of Annual Meeting of Stockholders and related proxy materials are being distributed or made available to stockholders beginning on or about April 13, 2018.
This year, we have again elected to provide access to our proxy materials on the Internet under the U.S. Securities and Exchange Commission's "notice and access" rules. Our proxy materials are available at the following website:10, 2020
http://www.redrobin.com/eproxy>YOUR VOTE IS IMPORTANT
We cordially invite you to attend the annual meeting. Whether or not you plan to attend, it is important that your shares be voted at the meeting. Please refer to your proxy card or Notice Regarding the Availability of Proxy Materials for more information on how to vote your shares at the meeting and return your voting instructions as promptly as possible.
Thank you for your support.continued support of Red Robin.
By Order of the Board of Directors, | ||
Greenwood Village, Colorado
April 10, 20188, 2020
Neither the Securities and Exchange Commission nor any state securities regulatory agency has passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
A MESSAGE FROM OUR INDEPENDENT CHAIRMAN
Dear Fellow Stockholders,
Red Robin has proudly been serving our Guests for over 50 years and operates in over 550 locations today. The Company has achieved this longevity not by staying the same, but rather by continuing to evolve and build our brand to serve our Guests, stockholders, and communities.
2019 was a year of foundational change for Red Robin. Led by Paul Murphy, our new CEO, with the full support of our board, we outlined and began executing on a strategic plan that we are confident will accelerate our turnaround, enhance our competitive positioning, deliver for our Guests, improve our financial performance, and drive value for all stockholders.
During 2019 and early 2020, decisive actions were taken to reposition Red Robin for disciplined growth, substantial value creation, and responsible governance. These actions included:
o Recapture the Soul of Red Robin
o Deliver the Promise to Our Guests
o Tell Our Story
o Accelerate Profitable Growth
The foundational work initiated in the business in 2019 to reset the course of Red Robin has been positive and sustainable as we enter 2020, and was driving steady stock price appreciation prior to the recent coronavirus (COVID-19) impact on the market. While the impact of COVID-19 is still evolving, we are confident that Red Robin's plan will deliver significant long-term value for all our stockholders. As the environment continues to shift, we will continue to engage with our stockholders and remain open to all input on how additional value can be created.
We look forward to providing you updates on our continued progress.
Sincerely,
David A. Pace,
Chairman of the Board of Directors
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This summary is intended to provide an overview of the items that you will find elsewhere in this proxy statement about our Company and the upcoming 2018 annual meeting of stockholders. As this is only a summary, we encourage you to read the entire proxy statement for more information about these topics before voting.
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Proposal | Proposal | Board's Voting Recommendation | Page References (for more detail) | Proposal | Board's Voting Recommendation | Page Reference (for more detail) | ||||||
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1 | Election of Directors | FOR EACH NOMINEE | 7 | Election of Directors | FOR All nominees | 7 | ||||||
2 | Advisory Vote to Approve Executive Compensation | FOR | 62 | Advisory Vote to Approve Executive Compensation | FOR | 71 | ||||||
3 | Ratification of Independent Auditor | FOR | 64 | Amendment to the Company's Amended and Restated Employee Stock Purchase Plan, to increase shares available for issuance | FOR | 72 | ||||||
4 | Amendment to the Company's 2017 Performance Incentive Plan, as amended, to increase shares available for issuance | FOR | 77 | |||||||||
5 | Ratification of Independent Auditor | FOR | 86 |
Our director nominees are listed in the following table. In 2018, seven2020, ten of our eight current directors are standing for election. Of those ten, five are new Independent Directors appointed in 2019 and 2020 as part of a board refreshment. As previously announced, Director Stuart I. Oran has decided not to stand for re-election along with one new director nominee,at the 2020 annual meeting of stockholders. Following Mr. Aylwin B. Lewis. One of our current directors, Mr. Richard Howell, will retire and conclude hisOran's retirement from the board service upon the conclusionas of the date of the 2020 annual meeting and is therefore not standing for re-election.of stockholders, we expect that the board size will be reduced to ten members. Mr. HowellOran will continue his service as chaira member of the audit committee and a member of the compensationnominating and governance committee until his retirement.
The board recommends a vote FOR all director nominees. All directors and director nominees except our CEO, Ms. Post, are independent. Therefore 87.5% of our board is independent. Our directors bring a diverse set of backgrounds, experience, and skills to their board service. Directors are elected by a majority of votes cast. See "Proposal 1 – Election of Directors – Directors and Nominees" in this proxy statement for more information about our director nominees. In 2017, each director attended at least 75% of the aggregate number of board and applicable committee meetings.
9 of 10 nominees areindependent | 30% of nominees arewomen | 50% of Board committees arechaired by women | 7 of 10 nominees haveCEO or CFO experience | 5 of 10 nominees haveturnaround experience |
Director Nominee | Age | Director Since | Principal Occupation | Independent | Current Committee Assignments | Anticipated Committee Assignments after Annual Meeting | Age | Director Since | Principal Occupation | Independent | Committee Assignments | |||||||||||||
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Anthony S. Ackil | | 45 | 2020 | CEO of Streetlight Ventures, a retail support platform for small business and real estate brokers | ✓ | (1) | ||||||||||||||||||
Thomas G. Conforti | 61 | 2019 | Former Senior Advisor, Executive Vice President and CFO, Wyndham Worldwide | ✓ | *FC, AC | |||||||||||||||||||
Cambria W. Dunaway | | 55 | 2014 | Former U.S. President, Global Chief Marketing Officer, Kidzania | X | *NGC, CC | *NGC, CC | | 57 | 2014 | Chief Marketing Officer, Duolingo | ✓ | *NGC, CC | |||||||||||
G.J. Hart | 62 | 2019 | Chief Executive Officer, Torchy's Tacos | ✓ | CC, FC | |||||||||||||||||||
Kalen F. Holmes | 51 | 2016 | Former Executive Vice President (Human Resources), Starbucks | X | *CC, NGC | *CC, NGC | | 53 | 2016 | Former Executive Vice President (Human Resources), Starbucks | ✓ | *CC, NGC | ||||||||||||
Glenn B. Kaufman | | 50 | 2010 | Managing Member, D Cubed Group investment firm | X | CC | CC, NGC | 52 | 2010 | Managing Member, D Cubed Group investment firm | ✓ | FC, NGC | ||||||||||||
Aylwin B. Lewis | 63 | N/A | Former Chairman, CEO and President of Potbelly Corporation | X | N/A | AC, CC | ||||||||||||||||||
Steven K. Lumpkin | | 63 | 2016 | Consultant, Former Executive Vice President, CFO and director, Applebee's | X | AC | *AC | | 65 | 2016 | Consultant, Former Executive Vice President, CFO and director, Applebee's | ✓ | *AC, FC | |||||||||||
Pattye L. Moore | 60 | 2007 | Former President and Director, Sonic Corp. | X | (C), AC, NGC | (C), AC | ||||||||||||||||||
Stuart I. Oran | | 67 | 2010 | Partner, Liberty Hall Capital Partners private equity firm | X | AC | AC, NGC | |||||||||||||||||
Denny Marie Post | 60 | 2016 | President and CEO, Red Robin | — | — | |||||||||||||||||||
Paul J.B. Murphy III | 65 | 2019 | President and Chief Executive Officer, Red Robin | |||||||||||||||||||||
David A. Pace | | 60 | 2019 | Former Chief Executive Officer, Jamba Juice | ✓ | (C), CC | ||||||||||||||||||
Allison Page | 35 | 2020 | Co-Founder and President, SevenRooms | ✓ | NGC |
AC | Audit Committee | (C) | Denotes Chair of the Board | |||
CC | Compensation Committee | * | Denotes Chair of the Committee | |||
NGC | Nominating and Governance Committee | |||||
FC | Finance Committee |
Director Nominee Highlights:Independence, Diversity of Background, Expertise, and Skills
Key Corporate Governance Highlights BOARD LEADERSHIP SKILLS
The board of directors recognizes the connection between good corporate governance and the creation of sustainable stockholder value and is committed to practices that promote the long-term
Experience / Skills | David A. Pace (Chairman) | Paul J.B. Murphy III (CEO) | Anthony S. Ackil | Thomas G. Conforti | Cambria W. Dunaway | G.J. Hart | Kalen F. Holmes | Glenn B. Kaufman | Steven K. Lumpkin | Allison Page | ||||||||||
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Public C-Suite Experience | ✓ | ✓ | ¨ | ✓ | ¨ | ✓ | ¨ | ¨ | ✓ | ¨ | ||||||||||
Restaurant / Hospitality Executive Leadership | ✓ | ✓ | ✓ | ✓ | ¨ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Accounting / Financial Expertise | ✓ | ✓ | ✓ | ✓ | ¨ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Business Transformation | ✓ | ✓ | ¨ | ✓ | ¨ | ✓ | ✓ | ¨ | ¨ | ¨ | ||||||||||
Technology Strategy | ✓ | ¨ | ✓ | ✓ | ¨ | ✓ | ¨ | ¨ | ✓ | ✓ | ||||||||||
Marketing / Consumer Insights | ✓ | ✓ | ¨ | ✓ | ✓ | ✓ | ¨ | ✓ | ✓ | ✓ | ||||||||||
M&A Experience | ¨ | ¨ | ¨ | ✓ | ¨ | ¨ | ¨ | ✓ | ✓ | ✓ | ||||||||||
Value Creation | ✓ | ✓ | ✓ | ✓ | ¨ | ✓ | ¨ | ✓ | ✓ | ✓ | ||||||||||
Diversity | ¨ | ¨ | ¨ | ¨ | ✓ | ¨ | ✓ | ¨ | ¨ | ✓ | ||||||||||
Governance / Legal | ✓ | ¨ | ¨ | ¨ | ✓ | ¨ | ✓ | ✓ | ¨ | ¨ |
interests of the Company, accountability of management, and stockholder trust. To this end, we continually evolve our practices to ensure alignment with our stockholders.
Highlights include: CORPORATE GOVERNANCE HIGHLIGHTS
STOCKHOLDER INTERESTS AND RIGHTS
We believe that strong corporate governance includes engagement with our stockholders and considering their views. This past year, we reached out to or held meetings and discussions with stockholders representing more than 90% of our institutional stockholder base. We greatly value the feedback received from our stockholders, which is promptly shared with the board. This engagement provides valuable insight that informs the work of both management and the board.
RRGB Participants | Types of Engagement | Topics Covered | ||
• Independent Directors • Executive Management | • Stockholders (portfolio managers and corporate governance departments) • Investor conferences • Earnings conference calls • Proxy advisory firms • Prospective stockholders | • Key value drivers and competitive differentiators • Capital structure and capital allocation priorities • Key strategic initiatives and opportunities • Financial performance and goals • Board composition: qualifications, diversity, skills, and leadership structure • ESG risks and opportunities • Risk management • Executive compensation policies and design • Shareholder rights plan |
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Over the past year, our board has taken decisive actions to ensure we have the right leadership team and board members in place to position the Company for long-term success. In October 2019, Paul J.B. Murphy III was appointed as President and Chief Executive Officer. Mr. Murphy is a highly
accomplished restaurant executive with significant turnaround and brand repositioning experience. During the past six months, the Company has appointed six new highly qualified directors to the board, five of whom are independent—Anthony S. Ackil, Thomas G. Conforti, G.J. Hart, David A. Pace, and Allison Page—along with Mr. Murphy. These individuals possess significant restaurant, consumer, and retail experience relevant to the Company's business, as well as track records of leading successful business transformations to create stockholder value.
At the same time, the board and management team have remained focused on executing our strategic plan, accelerating Red Robin's turnaround, and transforming the business to drive value for all stockholders. We continue to make progress toward our goals, as demonstrated by 2019 improvements in comparable restaurant revenue, customer satisfaction scores, manager staffing levels, and hourly turnover, among other key metrics.
During fourth quarter 2019, we delivered our second consecutive quarter of comparable restaurant revenue growth, despite significant discounting practices from the prior-year period. We attribute these positive results to benefits reaped from our focused execution of the early stages of our turnaround plan in 2019, including staffing, operational, and marketing improvements.
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SUSTAINABILITY |
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We are requesting that stockholders approve, on an advisory basis,Red Robin's strategy is closely tied to the compensationcommunities in which it operates. Our ability to deliver long-term value for all of our named executive officers as disclosed in this proxy statement. The board recommends a vote FOR Proposal No. 2 because it believes the Company's executive compensation programstockholders is designed to link incentives and rewards for our executivesloosely connected to the achievementstrength and long-term sustainability of specificeach state and the overall economy and environment. This is why our board and management team are focused on collaborating with our communities to further a sustainable financial and strategic goals, which are expected to result in increased stockholder value. In 2017, our executive compensation advisory vote proposal was supported by approximately 98.5% of the votes cast. Highlights of our executive compensation program, pay for performance compensation structure, 2017 performance, and 2017 compensation are set forth below. Please see "Compensation Discussion and Analysis" in this proxy statement for a full discussion of the items below.future.
Executive Compensation Program Corporate Responsibility: Environmental, Social, and Governance (ESG)
Listed belowRed Robin's sustainability practices are highlightsfocused on environmental stewardship, our Team Members, supply chain integrity, and supplier initiatives. Each year we track our progress, review our performance, and set new targets to achieve our long term goals.
EXECUTIVE COMPENSATION HIGHLIGHTS |
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PayPerformance
Our compensation program is designed to pay our executives for performance. Our short-term annual cash incentive program uses performancechange in control related situations
2017 Performance and Compensation Highlights
Our 2017 performance improved year-over-year and we achieved some of our expectations and performance goals. In our fiscal fourth quarter 2017, we outperformed the casual dining industry on Guest traffic for the sixth consecutive quarter and ended 2017 with positive same store sales, while making considerable progress on the critical changes we believe will make Red Robin successful2017-2019 long-term incentive program resulted in 2018 and beyond. Highlights of our 2017 performance are set forth below.
Based on our 2017 performance, our named executive officers met the performance goals necessary to achieve a partial (but below target)33% payout of the annual corporate bonus. The long-term incentive compensation program that coveredbased on slightly above threshold achievement of the last three fiscal years did not pay out because the long-term EBITDA and ROIC threshold performance goals were not met. See "Compensation Discussion and Analysis—Key Components of our Executive Compensation Program—Incentive Based Compensation" for further information and discussion on the annual corporate incentive and long-term incentive program.
2017 Compensation
The table below sets forth the 2017 compensation for our named executive officers:
Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||
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Denny Marie Post | ||||||||||||||
President & Chief Executive Officer | 744,237 | - | 1,434,957 | 769,990 | 653,777 | 18,901 | 3,621,862 | |||||||
Guy J. Constant | ||||||||||||||
EVP & Chief Financial Officer | 500,000 | - | 599,941 | 399,989 | 254,247 | 13,397 | 1,767,574 | |||||||
Carin L. Stutz | ||||||||||||||
EVP & Chief Operating Officer | 466,355 | - | 119,991 | 239,985 | 258,787 | 13,257 | 1,098,375 | |||||||
Jonathan A. Muhtar | ||||||||||||||
EVP & Chief Concept Officer | 383,854 | - | 104,998 | 209,987 | 195,770 | 13,845 | 908,454 | |||||||
Michael L. Kaplan | ||||||||||||||
SVP & Chief Legal Officer | 353,842 | - | 62,087 | 124,194 | 180,515 | 14,147 | 734,785 |
See "Compensation Discussion and Analysis—2017 Executive Compensation Tables" and accompanying footnotes and narratives for additional information about the 2017 compensation for each named executive officer.
The board of directors recommends a vote FOR the ratification of the appointment of KPMG LLP ("KPMG") as the Company's independent auditor for the fiscal year ending December 30, 2018. See "Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm" in this proxy statement for more information about this proposal.
The Board of Directors ("board" or "board of directors") of Red Robin Gourmet Burgers, Inc. ("Red Robin" or the "Company") is providing this proxy statement to stockholders in connection with the solicitation of proxies on its behalf to be voted at the annual meeting of stockholders. The meeting will be held on Wednesday,Thursday, May 30, 2018,21, 2020, beginning at 8:00 a.m. MDT, at our corporate headquarters,Red Robin's Yummm U, located at 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village,10000 East Geddes Avenue, Unit 500, Englewood, Colorado 80111.80112. The proxies may be voted at any time and date to which the annual meeting may be properly adjourned or postponed.
PROPOSAL 11:
ELECTION OF DIRECTORS
GeneralHOW OUR DIRECTORS ARE SELECTED, QUALIFIED, AND ELECTED
Because Company board meetings are rarely conducted in public, it is sometimes difficult for stockholders to assess the strength of a board's decision-making and actions. But that is not the case for Red Robin's directors; their leadership has been made apparent via many actions, including:
As of the date of this proxy statement, our board of directors consists of eighteleven directors, all of whom are independent except our CEO. Therefore, currently, 87.5%91% of our board is independent. Following the annual meeting, if all director nominees are elected, all ten continuing directors will be independent, except our CEO.
On February 6, 2020, we increased the size of our board of directors to ten members and appointed Allison Page to fill the resulting vacancy and on March 26, 2020, we increased the size of our board of directors to eleven members and appointed Anthony S. Ackil to fill the resulting vacancy. As previously announced, Director Stuart I. Oran has decided not to stand for re-election at the 2020 annual meeting. Following Mr. Lloyd Hill retired and concluded hisOran's retirement from the board service on May 18, 2017,as of the date of the 20172020 annual meeting of stockholders, and Mr. Robert B. Aiken resigned fromwe expect that the board effective June 23, 2017. Following Mr. Hill's retirement and Mr. Aiken's resignation, the size of the board waswill be reduced fromto ten directors to eight directors during fiscal 2017. Mr. Richard Howell will retire and conclude his board service upon the conclusion of the annual meeting. A new independent director nominee, Mr. Aylwin B. Lewis, has been nominated for election. Mr. Lewis was identified as a potential director candidate by the nominating and governance committee.members. The board may decide at a later time to add one or more directors who possess skills and experience that may be beneficial to our board and the Company. All of our directors are elected on an annual basis for a one-year term.
The directors elected at this annual meeting will serve in office until our 20192021 annual meeting of stockholders or until their successors have beenare duly elected and qualified, or until the earlierqualified. Each of their respective deaths, resignations, or retirements. Each nomineeour nominees has consented to serve if elected and we expect each of them will be able to serve if elected. If any nomineeof our nominees should become unavailable to serve as a director, our board of directors can name a substitute nominee, and the persons named as proxies in the proxy card, or their nominees or substitutes, will vote your shares for such substitute nominee unless an instruction to the contrary is written on your proxy card.
The board recommends that you voteFOR all of the board's nominees to serve as directors of the Company.
Selecting Nominees for Director
Our board has delegated to the nominating and governance committee the responsibility for reviewing and recommending nominees for director. The board determines which candidates to nominate or appoint, as appropriate, after considering the recommendation of the committee.
In evaluating a director candidate, the nominating and governance committee considers the candidate's independence, character, corporate governance skills and abilities, business experience, industry specific experience, training and education, commitment to performing the duties of a director, and other skills, abilities, or attributes that fill specific needs of the board or its committees. While there is no policy for consideration of diversity in identifying director nominees, our board is committed to diversity and the nominating and governance committee considers diversity in business experience, professional expertise, gender, and ethnic background, along with various other factors when evaluating director nominees. The nominating and governance committee will use the same criteria in evaluating candidates suggested by stockholders.
The nominating and governance committee is authorized under its charter to retain, at our expense, outside search firms and any other professional advisors it deems appropriate to assist in identifying or evaluating potential nominees for director.
Below, you can find the principal occupation and other information about each of theour director nominees standing for election at the annual meeting. Information related to each of our director nominee's key attributes, experience, and skills, as well as their recent public company board service is included with each director's biographical information. Our board is comprised of a highly diverse array of leaders with relevant experience and leadership in each of the key areas of greatest importance to our financial and more general sustainability. Our board has a shorter average tenure and a younger average age than the mean. Our board is also steadily refreshed, has an independent board chair, and has three women among its ten director nominees. In a steadily evolving sector such as ours, these are attributes that are core to our ability to be nimble and take advantage of opportunities as they arise.
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Director Since: Other Board Project Bread (2018-present) b.good Family Foundation (2014-present) |
Currently serves as • From 2004 to 2018, served as CEO of B.Good, a healthy fast casual brand that grew to over 80 locations under his leadership. • Earlier in his career, he worked as a consultant for IBM, focusing on internet strategy and •
• Holds a • Based on the foregoing, our board of directors has concluded | |||||
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Director Since: August Current ■ |
From 2017 to • From 2009 to • From 2002 to 2008, served as • Earlier in his career, he held leadership positions at PepsiCo, Inc., KB Home, and •
• Based on the foregoing, our board of directors has concluded | |||||
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Director ■ ■ Compensation Other Public Company Board Service: Other Board Service: Go Health (2017-present) Recent Past Public Company Board Service: Marketo (2015-2016) Brunswick Corporation |
Since 2018, has served as • Since 2017, has served as a Director of Planet Fitness, during which time the company's TSR has significantly outperformed the market. • Previously was a private consultant supporting organizations with strategic initiatives to accelerate growth and innovation, and coached leaders on how to achieve maximum results, impact, and enjoyment. • From 2010 to 2014, served as the U.S. President and Global Chief Marketing Officer of KidZania, an international location-based entertainment concept focused on children's role-playing activities. • From 2007 to 2010, served as Executive Vice President for Nintendo, with oversight of all sales and marketing activities for the company in the United States, Canada, and Latin America. • From 2003 to 2007, was Chief Marketing Officer for Yahoo! • Previously at Frito-Lay for 13 years in various leadership roles in sales and marketing, including serving as the company's Chief Customer Officer and as Vice President of • Holds a •
• Based on the foregoing, our board of directors has concluded | |||||
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Director Since: August Current ■ ■Finance Other Portillo's (2014-Present) Recent Past Public Company Board Service: |
Since 2018, has served as • From 2011 to 2018, served as Executive • From 2000 to 2011, served as President of Texas Roadhouse Holdings, LLC, and as Chief • Earlier in his career, held leadership positions at TriFoods International, •
• Based on the foregoing, our board of directors has concluded | |||||
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Director Since: August Current ■ ■ Nominating and Governance Other Public Company Board 1Life Healthcare, Inc. (2017-Present) Other Board |
Since 2017, has served as a • From 2009 until retirement in 2013, served as Executive Vice President • From 2003 to 2009, held a variety of leadership roles with human resources responsibilities for Microsoft Corporation. • Previously held leadership roles in a variety of industries, including high-tech, energy, pharmaceuticals, and • Holds a B.A. in Psychology from the University of Texas and •
• Based on the foregoing, our board of directors has concluded | |||||
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Director Since: Current ■ Other Board | • Since 2011, • From 2009 to 2010, consulted for boards and senior executives of operating businesses and private investment firms. • Previously spent 11 years as a Managing Director at • Previously served as Chairman or a • Spent four years as an attorney at Cravath, Swaine & Moore and worked in the small business consulting group of • Holds a B.S. in Economics from the Wharton School of Business of the University of Pennsylvania and •
• Has approximately 20 years of experience as an active, engaged, private market investor and extensive restaurant, food service, franchising, healthcare, and retail expertise, as well as legal and business • Based on the foregoing, our board of directors has concluded | |||||
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| Steven K. Lumpkin, 65 Director Since: August 2016 Current Committees: ■Audit (Chair) ■Finance Other Board Service: Hodgdon Powder Company (2015-Present) Trading Company Holdings, LLC (2015-Present) Trabon Companies (2013-Present) Fiorella Jack's Stack Restaurant Group (2009-Present) Recent Past Public Company Board Service: Applebee's International, Inc. (2004-2007) | • Currently serves as Principal of Rolling Hills Capital Partners, a consulting firm. • From 1995 until retirement in 2007, served in various executive positions at Applebee's International, Inc., including as Chief Financial Officer and Treasurer from 2002 to 2007, during which time the company's TSR outperformed the market, and Director from 2004 to 2007. • Previously served as Executive Vice President and Director at Kimberly Quality Care, Inc. • Holds a B.S. in Accounting from the University of Missouri—Columbia and is a CPA. • Brings to the board of directors more than 30 years of experience in the management consulting, health care, and restaurant industries, among other skills and qualifications. • Has extensive M&A and management experience for franchise operations and an accounting and finance background. • Based on the foregoing, our board of directors has concluded Mr. Lumpkin should continue as a member of our board. | ||||
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Director Since: Recent Past Public Company Board Service: Del Taco Restaurants, Inc. (2014-2017) |
Since October 2019, has served as our President, Chief Executive Officer, • From 2017 to • From 2009 to 2017, served as CEO and a member of the • From 1996 to 2008, held various roles with Einstein Noah Restaurant Group, Inc.; joined • Has significant experience in both operational and •
• Based on the foregoing, our board of directors has concluded | |||||
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| David A. Pace, 60 Director Since: August 2019 (Board Chair since November 2019) Current Committee: ■Compensation Other Board Service: Dallas Stars Ownership Advisory Board (2017-Present) Recent Past Public Company Board Service: Jamba Juice (2012-2018) | • From 2012 to 2018, served as Director of Jamba Juice and as CEO from 2016 to 2018, during which the company delivered 8 consecutive quarters of comparable store sales growth that exceeded the industry benchmark, exited non-core and underperforming business units and successfully merged with Focus Brands. • From 2014 to 2016, served as President of Carrabba's Italian Grill, and as Executive Vice President and Chief Resource Officer of Bloomin' Brands from 2010 to 2014. • Previously held executive positions with Starbucks Coffee Company, PepsiCo, and Yum! Brands, Inc. • Brings to the board of directors more than 30 years of leadership and turnaround experience in a range of industries including food and beverage retail, consumer products, entertainment, and ecommerce, among other skills and qualifications. • Based on the foregoing, our board of directors has concluded Mr. Pace should continue as a member of our board. | ||||
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Allison Page, 35 Director Since: February 2020 Current Committee: ■Nominating and Governance Other Board Service: SevenRooms, Inc. Pillsbury Institute of Hospitality Entrepreneurship at Cornell University | • Co-Founder and President of SevenRooms, a data-driven operations, marketing, and guest engagement platform that empowers hospitality operators to maximize revenue, build brand loyalty, and enable personalized experiences across the guest journey. • Since SevenRooms' founding in 2011, has been responsible for driving product innovation, defining the company's product roadmap, vision and strategic positioning, growing the company to over 150 employees across 4 global offices and scaling the platform to over 250 cities worldwide. • From 2009 to 2011, served as an Associate at Hodes Weill & Associates, and was a founding member of the independent real estate and advisory business. • Began career in investment banking at Credit Suisse. • Holds a B.S. in Finance and Real Estate from The Wharton School, University of Pennsylvania. • Brings to the board of directors more than 10 years of leadership experience as an entrepreneur in the hospitality industry and in launching, building, and commercializing high-growth technology platforms at scale across global restaurant, hotel, and entertainment brands, among other skills and qualifications. • Brings extensive knowledge in the areas of technology, guest experience, guest engagement, CRM, marketing, loyalty, data analytics, and consumer trends; was named one ofHospitality Technology's 2019 "Top Women in Restaurant Technology." • Based on the foregoing, our board of directors has concluded Ms. Page should continue as a member of our board. | |||||
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Proposal No. 1 requires the approval of a majority of the votes cast for each director. Abstentions and broker non-votes are not considered votes cast and therefore will have no effect on the outcome of the vote.
Our board of directors recommends that you vote OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR the election of each of the nominees for director." ALL OF THE DIRECTOR NOMINEES.
CORPORATE GOVERNANCE AND BOARD MATTERS
Governance PrinciplesGOVERNANCE PRINCIPLES
The board of directors seeks to ensure that good governancehas created and responsible business practices are part of our culture and values. To ensure that we achieve this goal, the board of directors has previously establishedoversees corporate governance guidelines it follows with respect to corporate governance matters, which are availablecan be viewed on the investor relations section of our website atwww.redrobin.com. The board of directors reviews the governanceThese guidelines annually to ensure that they are timely, effective, and supportive of the board's oversight and other responsibilities.include:
Executive Development and Management Succession
Executive development and succession is an important responsibility of the board of directors. Under the Company's corporate governance guidelines, the board maintains an ongoinga policy and plan for the development and succession of the CEO and other senior officers. The board has delegated some of this responsibility to the nominating and governance committee. As provided in our corporate governance guidelines, the succession policy and plan has a multi-year focusmanagement that encompasses, among other things, the following attributes:includes:
The nominating and governance committee andcommittee:
Ms. Post regularly meets with the full board on her performance,reports; and her annual performance evaluation is conducted under the oversight of the compensation committee. Ms. Post conducts annual and interim performance and development evaluations of the other senior executives and reviews these evaluations with the compensation committee or full board.
At
Mr. Murphy regularly meets with the full board on his performance, and the CEO's annual performance evaluation is conducted under the oversight of the compensation committee. Our CEO conducts annual and interim performance and development evaluations of the other senior executives and reviews these evaluations with the compensation committee or full board.
Stockholder EngagementCommunication with our Board
The board and management believe that the Company's relationships with our stockholders and other stakeholders are an important part of our corporate governance responsibility and recognize the value of continuing communications. Among other things, engagementIn 2019, we reached out to engage with all of our top 20 stockholders, helps us to:
Table of Contentsoutstanding shares.
This approach has resulted in our receiving essentialimportant input and additional perspectives fromthat have informed our stockholders. We regularlydecision making and resulted in the addition of new independent directors. Throughout the year, we proactively engage with our stockholders directly, through individual meetings, attendance at investor conferences, issuance of press releases, and quarterly conference calls, as well as other stockholder communications,communications. We discuss topics of importance to both our Company and individual meetings throughoutstockholders, including value creation, strategy and performance, board refreshment and leadership changes, capital structure and allocation, and governance matters.
The board values stockholder communication and provides many means for it to occur, including attending the year. We spoke to holders of more than 68% of our outstanding shares since the last annual meeting, voting, engaging, and writing, by sending a letter to discuss our business and solicit feedback.
We also recognize the connection between good corporate governance and our ability to create and sustain value for our stockholders. In response to evolving governance practices, regulatory changes, and concerns of our stockholders, the Company has made a number of changes to our corporate governance practices over the past several years.
Highlights of our governance program include:
With respect to issues arising under the Company's Code of Ethics, you may also communicate directly with the chair of the audit committee, director self-evaluation process completed annually instead of ageinternal audit, or term limits
Table of Company securities by executive officers and directors
Red Robin follows the Investor Stewardship Group's (ISG)
Corporate Governance Framework for U.S. Listed Companies
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ISG Principle | | Red Robin Practice | | |||||
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Principle 1: Boards are accountable to stockholders. | • Declassified board structure with all directors standing for election annually • Majority voting in uncontested director elections, plurality voting in contested elections, and directors not receiving majority support must tender their resignation for consideration by the board | |||||||
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Principle 2: Stockholders should be entitled to voting rights in proportion to their economic interest. | • No dual class structure; each stockholder gets one vote per share | |||||||
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Principle 3: Boards should be responsive to stockholders and be proactive in order to understand their perspectives. | • Management and board members engaged directly with investors owning approximately 70% of shares outstanding in 2019 • Engagement topics included value creation, Company strategy and performance, board refreshment and leadership changes, capital structure and allocation, compensation philosophy and goal setting, and governance | |||||||
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Principle 4: Boards should have a strong, independent leadership structure. | • Strong independent board chair • Board considers appropriateness of its leadership structure at least annually • Strong independent committee chairs • Proxy discloses why board believes current leadership structure is appropriate | |||||||
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Principle 5: Boards should adopt structures and practices that enhance their effectiveness. | • Board members have diverse backgrounds, expertise, and skills • Currently, 91% of board members are independent • Robust board annual evaluation process and regular board education instead of arbitrary age or term limits • Active board refreshment plan; five new independent board members through refreshment in last year • Directors attended over 75% of combined total board and applicable committee meetings in 2019, and all directors attended the 2019 annual meeting • Limits on outside board service for board members • Independent directors meet regularly in board and committee executive session without members of management present • Annual review of succession plan and talent development plan • Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors | |||||||
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Principle 6: Boards should develop management incentive structures that are aligned with the long-term strategy of the company. | • Executive compensation program received approximately 90.7% stockholder support in 2019 • Compensation committee annually reviews and approves incentive program design, goals and objectives for alignment with compensation and business strategies • Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives | |||||||
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The board recognizes that one of its key responsibilities is to evaluate and determine the optimal leadership structure so as to provide independent oversight of management. Accordingly, at this time, we believe it is appropriate for our board to maintain the separation of the roles of board chair and chief executive officer. Pattye L. MooreDavid Pace currently serves as chair of the board due to,because of his significant leadership experience, especially in the food and beverage retail industry, among other things, her prior experience on public company boards of directors, as well as her extensive leadership experience within the restaurant industry.reasons.
We believe that having a non-executive, independent board chair is in the best interests of the Company and our stockholders at this time. The separation of the roles of board chair and chief executive officer allows Ms. Postour chief executive officer to focus on managing the Company's business and operations, and allows Ms. MooreMr. Pace to focus on board matters, which we believe is especially important in light of the high level of regulation and scrutiny of public company boards. Further, we believe that the separation of these roles ensures the independence of the board in its oversight role of evaluating and assessing the chief executive officer and management generally.
Table In 2019, our prior board chair, Ms. Moore, was appointed as our interim president and chief executive officer. She temporarily served in that position until the board appointed Mr. Murphy as president and chief executive officer. Mr. Pace succeeded Ms. Moore as chair of Contentsthe board in November 2019. Ms. Moore retired from the board in December 2019.
Our executive officers have the primary responsibility for enterprise risk management within our Company. Our board actively oversees the Company's risk management and regularly engages in discussions of the most significant risks that the Company faces and how these risks are being managed. The board receives regular reports on enterprise risk areas from senior officers of the Company, including the areas of food safety and data security. The board delegates certain risk oversight functions to the audit committee. Under its charter, the audit committee is responsible for oversight of the enterprise risk assessment and management process framework and ensures that the board or a designated committee is monitoring the identification, assessment, and mitigation of all significant enterprise risks. The audit committee oversees policies and guidelines that govern the process by which major financial and accounting risk assessment and management may be undertaken by the Company. The audit committee also oversees our corporate compliance programs and the internal audit function. In addition, the other board committees receive reports and evaluate risks related to their areas of focus. The committees regularly report to the full board on the assessment and management of these risks. The board believes that the work undertaken by the audit committee, together with the work of the other committees, the full board, and the senior officers of the Company, enables the board to effectively oversee the Company's risk management.
Selection of Nominees for the Board
A key role of the board is to ensure that it has the skills, expertise, and attributes needed in light of the Company's strategy, challenges, and opportunities. The board believes that there are skill sets, qualities, and attributes that should be represented on the board as a whole but do not necessarily need to be possessed by each director. The nominating and governance committee thus considers the qualifications and attributes of incumbent directors and director candidates both individually and in the aggregate in light of the current and future needs of the Company. The nominating and governance committee assists the board in identifying and evaluating persons for nomination or renomination for board service or to fill a vacancy on the board. The nominating and governance committee's evaluation process does not vary based on whether a candidate is recommended by a stockholder, a board member, a member of management, or self-nomination. Once a person is identified as a potential director candidate, the committee may review publicly available information to assess whether the
candidate should be further considered. If so, a nominating and governance committee member or designated representative for the nominating and governance committee will contact the person. If the person is willing to be considered for nomination, the person is asked to provide additional information regarding his or her background; his or her specific skills, experience and qualifications for board service; and any direct or indirect relationships with the Company. In addition, one or more interviews may be conducted with nominating and governance committee and board members, and nominating and governance committee members may contact one or more references provided by the candidate or others who would have first-hand knowledge of the candidate's qualifications and attributes.
The board considers the recommendations of the nominating and governance committee and then makes the final decision whether to renominate incumbent directors and whether to approve and extend an invitation to a candidate to join the board upon appointment or election, subject to any approvals required by law, rule or regulation.
The Board's Role in Management Succession Planning
The board, led by its nominating and governance committee, is actively engaged in succession planning and talent development, with a focus on the CEO and senior management of the Company. The board and the nominating and governance committee consider talent development programs and succession candidates through the lens of Company strategy and anticipated future opportunities and challenges. At its meetings throughout the year, the nominating and governance committee reviews progress of talent development and succession programs and discusses internal and external succession candidates, including their capabilities, accomplishments, goals, and development plans. The full board also reviews and discusses talent strategy and evaluations of potential succession candidates. In addition, potential leaders are given frequent exposure to the board, which enables the board to select successors for the senior executive positions when appropriate.
Board Membership and Director Independence
Our board of directors has determined that each of our directors, except our CEO, Ms. Post,Mr. Murphy, qualifies as an independent director under the rules promulgated by the U.S. Securities and Exchange Commission ("SEC")SEC and The Nasdaq Stock Market® ("Nasdaq") listing standards. Therefore, 87.5%91% of our current directors and director nominees are independent. Pursuant to these rules and standards, only independent directors may serve on the board's audit committee, compensation committee, and nominating and governance committee. Currently, allAll members of each of theseall board committees are independent in accordance with SEC rules and Nasdaq listing standards. There are no family relationships among any of our executive officers, directors, or nominees for directors.
Our board is committed to diversity and includes three women and directors with a diverse set of backgrounds, experience, and skills, including.
✓ Executive leadership ✓ Business transformation ✓ Technology strategy ✓ Marketing and consumer insights ✓ Governance | ✓ Accounting ✓ Talent and organizational development ✓ Finance, investor relations, strategic transactions, and M&A ✓ Restaurant executive leadership ✓ Value creation |
The board of directors held teneighteen meetings in 2017,2019, including eightfour in-person meetings. Each of our current directors who served in 2019 attended at least 75% of the aggregate total of meetings of the board of directors and committees during their period of service in 2017.2019. The non-management directors of the Company meet at least quarterly throughout the year and as necessary or appropriate in executive sessions at which members of management are not present.
The board of directors strongly encourages each of the directors to attend the annual meeting of stockholders. All of our directors serving at the time attended our 20172019 annual meeting.
Committees of the Board of Directors
Our board of directors currently has threefour standing committees: an audit committee, a compensation committee, a finance committee, and a nominating and governance committee. We added the finance committee in 2019 to provide guidance on long-range planning, budget and capital allocation, and extraordinary stockholder engagement, among other matters. Each of our standing committeescommittee generally meets at least once each quarter. In addition, other regular and special meetings are scheduled as necessary and appropriate depending on the responsibilities of the particular committee. Each committee regularly meets in executive session without management present.
Each board committee operates pursuant to a written charter. The charter for each committee is available on the corporate governance section of the investor relations tab of our website at
www.redrobin.com. The committeeCommittee charters are reviewed at least annually by the respective committee to revise and update the committeeits duties and responsibilities as necessary.
In 2017, we also had a finance committee that provided principal oversight of, and made recommendations to the board and management on, the Company's financial plan and strategies,
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Name of Committee and Principal Functions | | Current Members and Number of Meetings in 2019 | | |||||
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Audit Committee | Committee Members: | |||||||
• Oversees our financial reporting activities, including our annual report and the accounting standards and principles followed. • Reviews earnings releases and annual and quarterly reports, including use of any non-GAAP disclosures. • Oversees the disclosure process, including understanding and monitoring of the Company's disclosure committee. • Selects and retains the independent auditor. • Participates in the process to rotate and select the lead audit partner at least every five years. • Reviews scope and results of audit to be conducted by the independent auditor. • Evaluates performance and monitors independence, commitment to objectivity, and skepticism of selected independent auditor. • Approves the budget for fees to be paid to the independent auditor for audit services and non-audit services; evaluates fees for reasonableness and fairness based on benchmarking. • Oversees the Company's internal audit function, scope and plan, and the Company's disclosure and internal controls. • Oversees the Company's ethical and regulatory compliance. • Provides oversight of the Company's enterprise risk management. • Regularly meets with independent auditor in executive session. • Participates in the evaluation of independent auditor and lead audit partner. | Steven K. Lumpkin Thomas G. Conforti Stuart I. Oran Chairperson Determined by the board to be an audit committee financial expert as defined under SEC rules Number of Meetings in 2019: The audit committee held eight meetings in 2019, of which two were in-person meetings. | |||||||
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budget and long range plan, capital allocation, financial and analytic aspectsTable of operations, the Company's financial policies and goals, and material transactions involving capital structure. The dutiesContents
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Name of Committee and Principal Functions | | Current Members and Number of Meetings in 2019 | | |||||
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Compensation Committee | Committee Members: | |||||||
• Develops and performs an annual performance evaluation of our chief executive officer. • Approves salary, short-term, and long-term incentive compensation programs for the CEO and all executive officers. • Reviews and adopts employee benefit plans. • Reviews and approves compensation for directors. • May engage, at our expense, compensation consulting firms or other professional advisors to assist in discharging its responsibilities, as necessary. | Kalen F. Holmes Cambria W. Dunaway G.J. Hart David A. Pace Chairperson Number of Meetings in 2019: The compensation committee held six meetings in 2019, of which two were in-person meetings. | |||||||
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Nominating and Governance Committee | Committee Members: | |||||||
• Identifies, evaluates, and recommends to the board of directors, candidates for appointment or election to the board and their independence. • Determines whether to recommend to the board to include the nomination of incumbent directors in the proxy statement. • Considers candidates to fill any vacancies that may occur. • At least once a year, considers whether the number of directors and skill sets is appropriate for the Company's needs and recommends to the board any changes in the composition of the board. • Evaluates and recommends to the board committee structure and membership. • Develops and oversees the Company's corporate governance policies. • Oversees the Company's litigation and insurance coverage. • Oversees the process to assess the performance of the board and its committees. | Cambria W. Dunaway Kalen F. Holmes Glenn B. Kaufman Stuart I. Oran Allison Page Chairperson Number of Meetings in 2019: The nominating and governance committee held six meetings in 2019, of which three were in-person meetings. | |||||||
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Mr. Howell will conclude his board and committee service upon the conclusion of the annual meeting. It is anticipated that Mr. Lewis will join the audit and compensation committees upon his election to the board and Mr. Lumpkin will assume the duties of chair of the audit committee.
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Name of Committee and Principal Functions | | Current Members and Number of Meetings in 2019 | | |||||
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Finance Committee | Committee Members: | |||||||
• Participates in and provides guidance to the board of directors and management on: o material acquisitions and dispositions; o long range planning; o annual budget; o capital allocation (including share repurchase programs and 10b5-1 plan); o adjustments to capital structure; and o extraordinary stockholder engagement. | Thomas G. Conforti G.J. Hart Glenn B. Kaufman Steven K. Lumpkin Chairperson Number of Meetings in 2019: The finance committee held five meetings in 2019, of which one was an in-person meeting. | |||||||
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Limits on Outside Board Service
As provided in our corporate governance guidelines, without specific approval from our board, no director of the Company may serve on more than four public company boards (including the Company's board) and no member of the audit committee may serve on more than three public company audit committees (including the Company's audit committee). Any audit committee member's service on more than three public company audit committees will be subject to the board's determination that the member is able to effectively serve on the Company's audit committee.
Stockholder Submission of Director Nominees
A stockholder may submit the name of a director candidate for consideration by the nominating and governance committee by writing to: Nominating and Governance Committee of the Board of Directors, Red Robin Gourmet Burgers, Inc., 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111.
The stockholder must submit the following information in support of the candidate: (a) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner, (ii) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of such stockholder's notice by, or on behalf of, such stockholder and such beneficial owner, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Company, the effect or intent of which is to mitigate loss to, manage risk of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of the Company, and (iv) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the
percentage of the Company's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company's voting shares to elect such nominee or nominees.
Communications with our Board of Directors
You may communicate with any director, the entire board of directors, the independent directors, or any committee by sending a letter to the director, the board of directors, or the committee addressed to: Board of Directors, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village,
CO 80111, or by sending an e-mail to:Board@redrobin.com. The Company's chief legal officer will review all communications, categorize them, and forward them to the appropriate board member(s). Messages pertaining to administrative matters, ordinary business matters, personal grievances, and similar issues will be forwarded to the appropriate member of management.
With respect to issues arising under the Company's Code of Ethics, you may also communicate directly with the chair of the audit committee, vice president of internal audit, or the compliance officer in the manner provided in the Company's Problem Resolution and Whistleblower Policy and Reporting Procedures. Both the Code of Ethics and the Problem Resolution and Whistleblower Policy and Reporting Procedures may be found on the corporate governance section of the investor relations tab of our website at:www.redrobin.com.
Certain Relationships and Related Transactions
Transactions with Related Persons
For 2017,2019, we had no material related party transactions which were required to be disclosed in accordance with SEC regulations.
Review, Approval, or Ratification of Transactions with Related Persons
The board of directors recognizes that transactions between the Company and certain related persons present a heightened risk of conflicts of interest. To ensure that the Company acts in the best interest of our stockholders, the board has delegated the review and approval of related party transactions to the audit committee. Pursuant to our Code of Ethics and the audit committee charter, any related party transaction required to be disclosed in accordance with applicable SEC regulations must be reviewed and approved by the audit committee. In reviewing a proposed transaction, the audit committee must:
After its review, the audit committee will only approve or ratify transactions that are fair to the Company and not inconsistent with the best interests of the Company and our stockholders.
Compensation Committee Interlocks and Insider Participation
During the last completed fiscal year, Robert B. Aiken, Cambria W. Dunaway, G.J. Hart, Kalen F. Holmes, Richard J. Howell, and Glenn B. Kaufman, Aylwin B. Lewis, and David A. Pace each served as members of the Company's compensation committee for all or a portion of such period. None of the members of the compensation committee is, or at any time was has been, an officer or employee of the Company. None of our current executive officers serves as a director of another entity that has an executive officer who serves on our Board.board.
Director CompensationDIRECTOR COMPENSATION
The compensation ofprogram for our directors was determinedis set forth in the table below. The director compensation program is evaluated annually by the compensation committee after reviewing market data and analyses from itscommittee's independent consultant to assess the program's alignment with the market. As a result of the analysis, no changes to the compensation consultant. Set forth below are the elements of our director compensation for 2017.program were made in 2019.
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Annual Retainer | | Each non-employee director of the Company | ||||||||||
| | Chair of the board | $85,000 | |||||||||
| | Chair of audit committee | $15,000 | |||||||||
| | Chair of compensation committee | $12,500 | |||||||||
| | Chair of nominating and governance committee | $7,500 | |||||||||
| | Chair of the finance committee | $10,000 | |||||||||
| In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee decided to take certain additional actions with respect to the board of directors 2020 compensation in order to meaningfully reduce costs. In March 2020, the Company temporarily reduced the annual cash retainer and committee chair fees by 20%. | |||||||||||
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20172019 Director Compensation
The following table sets forth a summary of the compensation earned by our non-employee directors in fiscal 2017.2019.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | |||||||||
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Current Directors | ||||||||||||||||||
Current Directors* | ||||||||||||||||||
Thomas G. Conforti(3) | 51,829 | 91,642 | - | 143,471 | ||||||||||||||
Cambria W. Dunaway | 77,500 | - | 109,992 | - | 187,492 | 77,500 | 109,995 | - | 187,495 | |||||||||
G.J. Hart(3) | 47,274 | 91,667 | - | 138,941 | ||||||||||||||
Kalen F. Holmes | 84,255 | - | 109,992 | - | 194,247 | 82,500 | 109,995 | - | 192,495 | |||||||||
Richard J. Howell | 85,000 | - | 109,992 | - | 194,992 | |||||||||||||
Glenn B. Kaufman | 80,000 | - | 109,992 | - | 189,992 | 70,000 | 109,995 | - | 179,995 | |||||||||
Steven K. Lumpkin | 70,000 | - | 109,992 | - | 179,992 | 85,000 | 109,995 | - | 194,995 | |||||||||
Pattye L. Moore | 155,000 | - | 109,992 | - | 264,992 | |||||||||||||
Stuart I. Oran | 70,000 | - | 109,992 | - | 179,992 | 70,000 | 109,995 | - | 179,995 | |||||||||
David A. Pace(3) | 83,113 | 91,642 | 174,755 | |||||||||||||||
Former Directors |
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Robert B. Aiken(3) | 15,745 | - | - | - | 15,745 | |||||||||||||
Lloyd Hill(4) | 8,966 | - | - | - | 8,966 | |||||||||||||
Pattye L. Moore(4) | 24,544 | 109,994 | - | 134,538 | ||||||||||||||
Aylwin B. Lewis(5) | 41,250 | 109,995 | - | 151,245 |
Table of last year's annual meeting.Contents
As of the end of the fiscal year 2017,2019, the aggregate number of options and restricted stock units outstanding for each non-employee director is set forth below. Options are considered outstanding until exercised and restricted stock units are considered outstanding until vested and paid.
Director | Options | Restricted Stock Units | Options | Restricted Stock Units | ||||
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Thomas G. Conforti | - | 2,788 | ||||||
Cambria W. Dunaway | 5,000 | 1,547 | 5,000 | 3,562 | ||||
G.J. Hart | - | 2,811 | ||||||
Kalen F. Holmes | 5,000 | 1,547 | 5,000 | 3,562 | ||||
Richard J. Howell | 2,000 | 1,547 | ||||||
Glenn B. Kaufman | 0 | 1,547 | - | 3,562 | ||||
Steven K. Lumpkin | 5,000 | 1,547 | 5,000 | 3,562 | ||||
Stuart I. Oran | 5,000 | 3,562 | ||||||
David A. Pace | - | 2,788 | ||||||
Former Directors | ||||||||
Pattye L. Moore | 1,500 | 1,547 | - | 3,373 | ||||
Stuart I. Oran | 5,000 | 1,547 | ||||||
Aylwin B. Lewis | 3,542 | - |
Table Board Meetings in 2019
In 2019, there were six regular meetings and twelve special meetings of Contentsthe board. All directors who served on the board in 2019 attended at least 75% of the combined total number of meetings of the board and board committees on which they served during the year.
Board Attendance at Annual Meetings
All of the Company's incumbent directors who served on the board at the time of the 2019 annual meeting attended the 2019 annual meeting. The Company encourages all directors to attend each year's annual meeting.
The board conducts annual evaluations to determine whether it and its committees are functioning effectively. As part of the evaluation process, each member of the audit, compensation, nominating and governance, and finance committees annually evaluates the performance of each committee on which he or she serves. Each director up for reelection also evaluates his or her own performance. The directors also periodically complete peer evaluations of the other directors. The evaluation process is overseen by the nominating and governance committee, in consultation with the board chair.
Director Stock Ownership Guidelines
The compensation committee has had stock ownership guidelines in place for non-employee directors since March 2009 (see "Compensation Discussion and Analysis—Executive Compensation Policies and Guidelines – Executive Stock Ownership Guidelines" for discussion of the ownership guidelines for executive officers). The current ownership guidelineswhich require non-employee directors to own Company securities with a cumulative cost basis of at least five times the director's annual retainer. Based on the current annual retainer for non-employee directors, that dollar amount is $350,000. The value of the director's holdings is based on the cumulative cost basis of securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. New non-employee directors have five years from the time the director joins the board to reach the minimum ownership threshold. Non-employee directors may not sell, transfer, or otherwise dispose of common stock that would
decrease such director's cumulative cost basis below the ownership guideline amount. All of our directors are currently in compliance or on track to be in compliance with the minimum ownership threshold.
The following table sets forth the ownership guidelinesguidelines. In addition, a majority of directors have not sold any of their awarded shares and the holdingsa majority of the non-employee directors ashave purchased shares of March 16, 2018, valued at the acquisition dates pursuant to our director stock ownership guidelines:Company stock.
Director | Ownership Guideline | Current Dollar Value of Guideline | Cumulative Cost Basis | |||
---|---|---|---|---|---|---|
Cambria W. Dunaway | 5x Retainer | $350,000(1) | $430,968 | |||
Kalen F. Holmes | 5x Retainer | $350,000(2) | $235,861 | |||
Richard J. Howell | 5x Retainer | $350,000 | $833,305 | |||
Glenn B. Kaufman | 5x Retainer | $350,000 | $958,910 | |||
Steven K. Lumpkin | 5x Retainer | $350,000(2) | $235,861 | |||
Pattye L. Moore | 5x Retainer | $350,000 | $937,296 | |||
Stuart I. Oran | 5x Retainer | $350,000 | $606,758 |
The Company has entered into agreements to indemnify its directors, executive officers, and certain other key employees. Under these agreements, the Company is obligated to indemnify its directors and officers to the fullest extent permitted under the Delaware General Corporation Law for expenses, including attorneys' fees, judgments, fines, and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or officer. The Company believes that these agreements are necessary in attracting and retaining qualified directors and officers.
STOCK OWNERSHIP INFORMATIONCOMPENSATION DISCUSSION AND ANALYSIS
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and except for community property laws where applicable, the persons named in the tables below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership for each table is based on 12,971,479 shares of common stock outstanding as of March 16, 2018.
Stock Ownership of Certain Beneficial Owners
The following table sets forth information regarding beneficial owners of more than 5% of our common stock as of March 16, 2018 (unless otherwise indicated). All information is taken from or based upon ownership filings made by such persons with the SEC or upon information provided by such persons to the Company.
| Shares Beneficially Owned | ||||
---|---|---|---|---|---|
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||
T. Rowe Price Associates, Inc.(1) | 2,002,006 | 15.43% | |||
BlackRock, Inc.(2) | 1,612,905 | 12.43% | |||
Dimensional Fund Advisors LP(3) | 1,090,245 | 8.40% | |||
Daruma Capital Management, LLC(4) | 935,933 | 7.22% | |||
Ameriprise Financial, Inc.(5) | 727,500 | 5.61% | |||
The Vanguard Group(6) | 717,903 | 5.53% |
1,040,691 shares and sole dispositive power over 1,090,245 shares. The filing also reports that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the shares and that, to the knowledge of Dimensional, no one person's interest in the shares is greater than five percent (5%) of the total number of outstanding shares. For the purposes of the reporting requirements of the Exchange Act, Dimensional is deemed to be a beneficial owner of such securities; however, Dimensional disclaims that it is, in fact, the beneficial owner of such securities. The address for Dimensional's principal business office is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
Stock Ownership of Directors and Management
The following table contains information about the beneficial ownership (unless otherwise indicated) of our common stock as of March 16, 2018 by:
| Shares Beneficially Owned(1) | ||||
---|---|---|---|---|---|
Name of Beneficial Owner | Amount and Nature of Ownership | Percent of Class | |||
Denny Marie Post(2) | 61,421 | * | |||
Guy J. Constant(3) | 13,249 | * | |||
Carin L. Stutz(4) | 12,102 | * | |||
Jonathan A. Muhtar(5) | 18,991 | * | |||
Michael L. Kaplan(6) | 11,837 | * | |||
Cambria W. Dunaway(7) | 10,006 | * | |||
Kalen F. Holmes(8) | 6,156 | * | |||
Richard J. Howell(9) | 17,352 | * | |||
Glenn B. Kaufman(10) | 21,440 | * | |||
Aylwin B. Lewis | — | * | |||
Steven K. Lumpkin(11) | 6,156 | * | |||
Pattye L. Moore(12) | 24,848 | * | |||
Stuart I. Oran(13) | 11,123 | * | |||
Directors and executive officers as a group (13 persons)(14) | 214,681 | 1.64% |
Equity Compensation Plan Information
We maintain three equity-based compensation plans—the Second Amended and Restated 2007 Performance Incentive Plan (the "2007 Plan"), the 2017 Performance Incentive Plan (the "2017 Plan") and the Amended and Restated Employee Stock Purchase Plan (the "ESPP"). Our stockholders have approved each of these plans.
The following table sets forth our equity compensation plans in the aggregate, the number of shares of our common stock subject to outstanding options and rights under these plans, the weighted
average exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 31, 2017:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||
---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | ||||||
2007 Plan | 468,657 | $54.60 | - | |||
2017 Plan (1) | 3,591 | – | 663,688 | |||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||
| | | | | | |
Total | 472,248 | $54.60 | 663,688(2) |
(1) Shares reported in column (a) under the 2017 plan include shares underlying performance share units (PSUs) awarded to our chief executive office and chief financial officer in 2017. The PSU awards cliff-vest at the end of a three-year performance cycle, generally subject to executive's continued employment through the applicable vesting date, with the number of PSUs determined based on achievement of performance goals as approved by the compensation committee. Column (b) does not take such shares into account.
(2) Of the aggregate number of shares that remained available for future issuance as of December 31, 2017, 92,393 shares were available for issuance under the ESPP and 571,295 shares were available for issuance under the 2017 Plan. No new awards will be granted under the 2007 Plan.
COMPENSATION DISCUSSION AND ANALYSISNAMED EXECUTIVE OFFICERS
In this Compensation Discussion and Analysis, we provide an analysis and explanation of our executive compensation program and the compensation derived from this program by our executive officers, including our "named executive officers." For 2017,2019, our named executive officers were:
Former officers included as Named Executive Officer for 2019 as required by SEC rules are:
Over 2019, we achieved Adjusted EBITDA of $101 million, off-premises sales of almost $160 million, overall guest satisfaction of 67.7%, and 17.52% of cash return on invested capital (CROIC).
Our board and management team have remained focused on executing our strategic plan, accelerating Red Robin's turnaround, and transforming the business to drive value for all stockholders. We continue to make progress toward our goals, as demonstrated by 2019 improvements in comparable restaurant revenue, customer satisfaction scores, manager staffing levels and hourly turnover, among other key metrics.
During fourth quarter 2019, we delivered our second consecutive quarter of comparable restaurant revenue growth, despite significant discounting practices carried over from the prior-year. We attribute these positive results to benefits reaped from our focused execution of the early stages of our turnaround plan in 2019, including staffing, operational, and marketing improvements.
Our incentive programs demonstrate our commitment to a pay for performance compensation philosophy. The Company's 2019 performance impacted the named executive officer's compensation as follows:
See "Compensation Discussion and Analysis—Key Components of our Executive Compensation Program—Incentive-Based Compensation" for further information on the annual corporate incentive and long-term incentive program.
As informed by the addition of two new Independent Directors to the compensation committee in November 2019, the Company made multiple positive changes to its compensation program beginning in 2020:
In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee decided to take certain additional actions with respect to the 2020 compensation program in order to meaningfully reduce costs and to select a metric for the PSU awards that was most appropriate given the uncertainty and challenges in projecting other metrics at this time.
Red Robin Gourmet Burgers, Inc., together with its subsidiaries, primarily develops, operates, franchises, and franchisesdevelops full-service restaurants in North America and focuses onis famous for serving an imaginative selection of high quality gourmetmore than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to guestsGuests of all ages.
As of December 29, 2019, we owned and operated 454 restaurants (and another 102 were owned and operated by franchisees); these restaurants stretch across 44 states and one Canadian province. On that date, we had 24,586 employees, of whom 24,228 were Team Members at company-owned restaurants.
Red Robin's goal is to differentiate itself from typicalRobin at a Glance
Significant Brand Affinity and varied selection of highly craveable and customizable burgers. To differentiate on service, our goal is to be highly attentive to guests of all ages, serving food and beverages quickly so they can spend more time enjoying their food and less time waiting. We also strive to deliver tremendous value by providing delicious food at a range of price points, accompanied with our bottomless steak fries and other sides with every meal. Red Robin guests give us credit for these key points of differentiation and we seek to build on them every day by living our B.U.R.G.E.R. values: Bottomless Fun, Unwavering Integrity, Relentless Focus on Improvement, Genuine Spirit of Service, Extraordinary People, and Recognized Burger Authority.
To ensure the continued success of Red Robin in a rapidly evolving marketplace, we focus on five strategic areas:Value Proposition
Our strategy 2019 LEADERSHIP APPOINTMENTS
Over the past year, our board has taken decisive actions to ensure we have the right leadership team and board members in regaining operational edge includes delivering consistently great burgers, accurately customized,place to position the Company for long-term success.
attractive prices wherever
These individuals possess significant restaurant, consumer, and retail experience relevant to enhance value through a balance of quality, quantity, price, and experience. This includes providing high quality core menu items,the Company's business, as well as delivering value through new products at everyday value pricestrack records of leading successful business transformations to create stockholder value.
In the third quarter 2019, and abundance through bottomless sidesfollowing Mr. Murphy's appointment as President and beverages. We are enhancing loyalty offerings via ourChief Executive Officer, we commissioned comprehensive Guest-led studies that provided data-driven, actionable information that identified opportunities to better align the Red Robin Royalty™ programexperience to our Guest's expectations. We identified clear opportunities to strengthen our brand, improve our service model, and clarify our messaging. Under new leadership, we developed a compelling plan to quickly drive improved Guest traffic. Additionally, we are focused on drivingexperiences, business performance, and stockholder value. Our plan includes the following four fundamental elements:
Recapture our Soul. Delivering memorable moments of connection for our Guests through guest preference byengagement and sharable foods like our all-you-can-eat Bottomless Steak Fries®, and offering our products through alternate modesGuests the "The Gift of access. As partTime" to determine the pace of this strategy, we offer online ordering for carry-out, delivery access in limited locations via multiple third-party services,their experience based on their occasion while enjoying our family friendly and catering. We are also currently testing self-delivery for potential deployment in future years.playful atmosphere.
Rapidly reinventing Red Robin. Facing rapidly increasing labor costs and changing guest needs, we are also working to transform our existing assets as needed with new service models and to craft entirely new Red Robin prototypes which will enable future unit growth. We are dedicating resources to defining Deliver the "Red Robin of the Future."
Tell Our Story. Our new "All the Fulls" Omni-channel brand campaign launched in the third quarter 2019 which emphasizes the emotional appeal of our brand promise of driving memorable moments of connection, and reinforces key aspects of our brand, including Americana, family friendly atmosphere, and shareable menu items. This has aligned our messaging from price driven to optimizebrand driven, and we expect this to drive continued growth of Guest engagement and grow restaurant traffic.
Accelerate Profitable Growth. We seek to accelerate profitable sales growth through our capital structure, pace development activities,focus on the initiatives that will drive significant top and improvebottom line results. These initiatives include growth of our EBITDA margin through revenue growthoff-premise and targeted cost savings.catering business, including the launch of our "last mile" delivery where Guests order directly from Red Robin and have the ability to utilize our loyalty program; menu enhancement, including the rollout of Donatos®, a high quality pizza brand "nested" inside of Red Robin restaurants that we expect to drive incremental top-line sales and gross margin.
We believe these strategic initiatives will provide the foundations for scalablea turnaround of the business and sustainable long-term growth, profitability, and increased stockholder value.
2019 COMPANY OPERATIONAL AND PERFORMANCE HIGHLIGHTS
Our updated strategy, enhanced focus on store-level operations, and increased attention on our Team Members has yielded benefits. The turnaround that we have been executing over several quarters began taking hold, leading to significant improvements in our business. In 2019, these improvements included:
eligibility to participate in the Company's standard benefit plans for senior executives, all of which is aligned with market data and his level of experience.
Following is an executive summary of our 2017 executive compensation program:
Compensation Philosophy PAY FOR PERFORMANCE ALIGNMENT
Our executive compensation program is designed to pay for performance and link incentives to currentis comprised of performance-based short-term and long-term sustained achievementawards. Such compensation varies in value and is at-risk of Company strategic goals. It encouragesforfeiture or reduced payout if performance goals are not achieved or our executive officers to thinkstock price declines. Financial measures used for the annual and act like owners, because theylong-term cash incentive grants are ownersreviewed and as such are compensatedapproved by the compensation committee. Restricted stock units and stock options vest ratably over multiple years, the value of which is dependent, in significantwhole or in part, based on an increase in the performance of the Company.
COMPENSATION DECISION PROCESSES
Governance Standards and Compensation Best Practices Currently in Effect
2017 Performance and Impact on Pay
Under Ms. Post's leadership, the Company continues to pursue improvement in performance designed to drive top-line growth in sales and lay the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value. Our compensation objectives are designed to link incentives and rewards with current and long-term sustained achievement of these goals.
Our 2017 performance improved year-over-year and we were able to achieve some of our expectations and performance goals. Based on this performance, our named executive officers met the performance goals necessary to achieve partial payout of the annual cash incentive. The long-term incentive program that covered the last three fiscal years did not pay out because the long-term performance goals were not met.
Executive Compensation Decision-makingCOMPENSATION SETTING
The compensation committee determinesapproves target total direct compensation levels for named executive officers by establishing base salaries and setting annual and long-term incentive compensation targets.
When appropriate, the committee also approves special awards and relatively modest perquisites. When determining target total direct compensation, the committee considers the following:The Company makes pay decisions based on a variety of factors, including:
Pay for Performance Alignment CONSIDERATION OF PRIOR SAY-ON-PAY VOTES
OurAt our 2019 annual meeting of stockholders, 90.7% of votes were cast to approve the advisory "say on pay" vote on the 2018 compensation programof our named executive officers. This is designedthe third consecutive year of over 90% support for our "say on pay" proposal, with 99.3% of stockholders voting to approve our "say on pay" proposal in 2018 and 98.5% in 2017.
We believe the level of support we received from stockholders for the last three years was driven in part by our commitment to a pay for performance philosophy and linkour linking incentives to current and long-term sustained achievement of Company strategic goals. Accordingly, aThe compensation committee did not make significant portion ofstructural changes to our named executive officers' compensation excluding base salary, is incentive based, and is comprised of performance-based short-term and long-term awards. Suchprogram for 2019. The compensation therefore varies in value and is at-risk of forfeiture or reduced payout if performance goals are not achieved for cash-based incentives, or loss of value if our performance does not drive increases in our stock price. Financial measures such as EBITDA (earnings before interest, taxes, depreciation, and amortization) and ROIC (return on invested capital) used forcommittee considered the annual bonus and cash incentive grants are linked to the Company's strategic business plans that are reviewed and approved by our board of directors. Minimum financial targets must be achieved for any payouts of cash to be made under both the annual bonus and long-term incentive grants. Restricted stock units and stock options vest ratably over four years, the value of which is dependent, in whole or in part, on an increase in the Company's stock price.
The annual cash incentives and the long-term incentives place a large portionresults of the executive's pay at risk because such pay will fluctuate or vary in value based upon the level of performance achieved by the Company. Because incentive awards are performance-based, they are at risk of forfeiture or reduced payout if performance goals are not achieved. Moreover, long-term equity awards are at risk of forfeiture if theadvisory vote when setting executive does not remain with the Company until the equity vests and are at risk of reduced realized value based upon Company stock price at the date of exercise.
2017 Named Executive Officer At-Risk Compensation. In 2017, "at-risk" or "variable" pay (subject to forfeiture or partial or complete loss of value) comprised 80% of total target compensation for CEO2019 and will continue to do so in future executive compensation policies and 68% of total target compensation for the other named executive officers as a group and included short-term and long-term incentives. The charts below reflect the portion of our named executive officers' 2017 total target compensation that is considered at risk or variable.
Table of Contentsdecisions.
Other Named Executive Officers
Benchmarking Restaurant Peer Group
Restaurant Peer Group. Restaurant peer group companies were selected and approved by the compensation committee upon the recommendation of management and itsthe committee's independent compensation consultant Aon Hewitt, and are based on their similarity to us with respect to several criteria, including revenue, size, business model, and scope. Specifically, peers include U.S. public companies within the restaurant industry that have similar revenue and market value. The peer group used for 20172019 compensation benchmarking consists of the 2017 restaurant companies identified in the chart below. The Company ranked in the 54th percentile for its peer group in sales and 40th percentile in market value based on Aon Hewitt compensation analysis conducted in 2017.
In 2017,2019, the compensation committee evaluated and updated its peers to the "New Peer Group" identified in the chart below. Bob Evans Farms,The Company's compensation consultant recommended adding two restaurant companies to the peer group to increase the robustness of market data and with the expectation that there could be further consolidation within the industry. Dave & Buster's Entertainment, Inc. was removed fromand Chuy's Holdings, Inc. were added to the Company's peer group because it is no longer a public reporting company. Ignite Restaurant Group, Inc.of similarities in revenues and restaurant operations that include company-owned models. In addition, Sonic Corp. was also removed due to bankruptcy. Jack in the Box, Inc. was added based on similarities to the Company's
removed from the Company's peer group revenue and market capitalization criteria.due to its 2018 acquisition. No other changes were made to the Company's peer group in 2017.2019. The New Peer Group will be used for setting 20182020 compensation.
2020 New Peer Group | ||
---|---|---|
Biglari Holdings, Inc. | ||
BJ's Restaurants, Inc. | ||
Brinker International, Inc. | ||
Carrols Restaurant Group, Inc. | ||
The Cheesecake Factory, Inc. | ||
Cracker Barrel Old Country Store, Inc. | ||
Denny's Corporation | ||
Dave & Buster's Entertainment, Inc. | ||
Domino's Pizza, Inc. | Denny's Corporation | |
Fiesta Restaurant Group, Inc. | Dine Brands Global, Inc. | |
Jack in the Box, Inc. | Domino's Pizza, Inc. | |
Fiesta Restaurant Group, Inc. | ||
Jack in the Box, Inc. | ||
Noodles & Company | ||
Papa John's International, Inc. | ||
Ruth's Hospitality Group, Inc. | ||
Texas Roadhouse, Inc. | ||
The Wendy's Company | ||
20172019 Compensation Setting. The compensation committee uses competitive compensation data from the annual total compensation study of peer and other restaurant companies and other relevant survey sources to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the compensation committee uses multiple reference points when establishing targeted compensation levels. The committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business unit, and individual performance, scope of responsibility, critical needs and skill sets, leadership potential, and succession planning.
Independent Compensation Consultant INDEPENDENT COMPENSATION CONSULTANT
In 2017,2019, Meridian Compensation Partners, LLC ("Meridian") again served as the compensation committee retained Aon Hewitt as itscommittee's independent compensation consultant. The independent compensation consultant assists with the compensation committee's annual review of our executive compensation program, cash and equity compensation practices, ongoing development of our executive compensation philosophy, and acts as an advisor to the compensation committee on compensation matters as they arise. The compensation consultant also advises the compensation committee on compensation for the board of directors. The compensation committee evaluated Aon Hewitt'sMeridian's independence as its compensation consultant by considering each of the independence factors adopted by Nasdaq and the SEC. Based on such evaluation, the compensation committee believes that no conflict of interest exists that would prevent Aon HewittMeridian from independently representing the compensation committee. The compensation committee has retained Meridian Compensation Partners, LLC as its new independent compensation consultant in 2018. The compensation committee determined Meridian's independence pursuant to the Nasdaq and SEC requirements.
Risk Mitigation RISK MITIGATION
The compensation committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking. The factors considered by the committee include:
The compensation committee believes that it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them because:
The compensation committee completes this evaluation annually. Accordingly, based upon the foregoing, the Company believes that the risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Consideration of Prior Say-on-Pay Advisory Votes OVERVIEW
AtOur 2019 executive compensation program was comprised of three primary elements: (i) base salaries, (ii) annual performance-based cash incentives, and (iii) long-term incentives that include performance share units (PSUs) based on three-year performance intervals and restricted stock units. We believe financial metrics used for both the annual performance-based cash incentive and long-term incentive grants drive stockholder value. The goals for our 2017 annual meetingincentive plans are linked to the Company's financial and strategic business plans.
By design, "at-risk" pay (incentive pay subject to forfeiture or partial or complete loss of stockholders, holdersvalue) comprised 82% of approximately 98.5%total target compensation for the CEO, Paul Murphy, and 64% of total target compensation for the other named executive officers who were employed at the end of the votes cast on such proposal approvedyear as a group. The amount of compensation "at risk" for the advisory vote ("say-on-pay") onCEO was calculated by annualizing Mr. Murphy's 2019 compensation because we think it is more representative of CEO total target compensation. The charts below reflect the 2016 compensationportion of our named executive officers, which was consistent with the level of support we received in 2016 and 2015, when 98.2% and 99.0% of stockholders voted for our "say-on-pay" proposal.officers' 2019 total target compensation that is considered at risk.
We believe the level of support we received from stockholders for the last three years was driven in part by our continued improvement in performance and our commitment to pay for performance and link incentives to current and long-term sustained achievement of Company strategic goals. The compensation committee did not make significant structural changes to our executive compensation program for 2017. The compensation committee considered the results of the advisory vote when setting executive compensation for 2017 and will continue to do so in future executive compensation policies and decisions.
CEO
Other Named Executive Officers
Key Components of our Executive Compensation ProgramKEY COMPONENTS
Base salary provides a minimum level of remuneration to our named executive officers for their efforts. The compensation committee sets base salaries for our executives to reflect the scope of each executive's responsibilities, experience, and performance. The compensation committee reviews base salaries annually as part of the benchmarking process and adjusts them from time to time to account for relevant factors such as market changes, as documented by the compensation consultant.changes. The compensation committee also considers the CEO's evaluation of each executive's performance and reviews herthe CEO's salary recommendations for our executives.
For our incentive-based compensation, the compensation committee utilizes a mix of performance metrics and time and tenure. Each type of metric serves a different purpose. The short-term (annual bonus) and the cash (and PSU) component of the long-term incentive awards are performance-based and require achievement of certain financial targets, measured over either one or three years. If the financial metrics are not achieved at a minimum threshold level at the end of the performance period, no payment (or shares) is earned or made. The equity portion of the grants vests ratably over four years. The time-based vesting of the restricted stock units, a comparatively lesser portion of the total long-term incentive awards, is used primarily for retention purposes and to encourage stock ownership by executives, thereby aligning their interests with our stockholders. The stock options vest over time but require improved stock price performance to realize value.
Annual Performance-Based Incentive (Cash Bonus).Incentive. Annual performance-based cash bonusesincentives are intended to reward achievement of short-term operating goals andannual financial performance that are incremental todrives long-term, sustained creation of stockholder value. Our annual bonusesincentive goals are established with reference to the annual portion of our multi-year strategic plan and, although measured in one-year increments, are designed to tie each year's results into a long-term target. As the Company's business evolves and develops, the long-term targets may be revised with concurrent impact on each year's annual planning.plan. The annual performance metrics are financial-based measures that the compensation committee believes are aligned with our strategic goals described above. The compensation committee continually evaluates the measures against which we gauge our performance and may incorporate additional or alternative metrics to incentivize executives to achieve appropriate performance targets and respond to industry changes or market forces.
Each of our executives participates in the annual incentive plan under which the compensation committee uses earnings before interest, taxes, depreciation, and amortization, or EBITDA, as the primary metric. EBITDA may be further adjusted under the 2017 Plan to remove the effect of any one or more of the following: equity compensation expense under ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring, or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Code Section 162(m), if applicable, and is eligiblereferred to receive an annual cash bonus based on achievement of certain performance objectives, based on annualherein as "Adjusted EBITDA." The Adjusted EBITDA (70% weight) measure was selected because we believe it best captures our operating results without reflecting the impact of decisions related to our growth, non-operating factors, and other matters. In addition, in 2019, the annual performance-based incentive plan included off-premise sales (15% weight), and overall guest satisfaction (15% weight) to incentivize and reward improvements in these strategically important areas. The EBITDA goal is intended to be a "stretch" goal, or challenging target,Company grants annual performance-based incentive awards and is meant to encourage superior performance.cash incentive awards, if any, under the 2017 Plan.
The 2017 Plan and the Cash Incentive Plan permit the compensation committee to adjust, in its discretion, EBITDA for non-cash, non-recurring, or unusual items. The compensation committee approves any payouts earned under the annual bonusincentive program based on achievement of a predetermined range of minimum threshold, target, and maximum-level EBITDA and approves payout of the bonuses, if any, following review of actual results. Bonuses are based on a percentageresults at the end of the executive's salary and are set based on market and peer comparisons, and internal equity among other factors.year. The corresponding dollar payout value varies up or down depending on the actual EBITDA performance level. Bonuseslevel versus threshold, target, and maximum goals that are not payableset at all if the minimum thresholdbeginning of EBITDA is not achieved.the year. The compensation committee sets the EBITDAtarget ranges each year based on performance expectations and other factors. The compensation
Table of ContentsWe believe our performance goals require "stretch" performance and encourage superior performance.
committee may add or substitute performance measures in future years. No payouts are earned if the threshold goals are not achieved. The compensation committee may also use various factors to exercise negative discretion when evaluating performance for purposes of awarding annual incentive compensation. Through fiscal year 2017, cash incentive awards were awarded and paid pursuant to the Cash Incentive Plan. Beginning in fiscal year 2018, the Company intends to grant all cash incentive awards, including annual bonus awards, under the 2017 Plan.
In addition, the compensation committee may approve special bonuses on an individual or group basis in recognitionTable of extraordinary achievements, or to address other special situations. No such awards were made in 2017.Contents
Long-Term Performance-Based Incentives. The compensation committee determines the long-term incentive grants for the executive officers, including the named executive officers, by referencing toreviewing peer group and market data and analysis from its compensation consultant, impact of share usage and affordability, internal equity, and recommendations from the CEO.CEO, among other factors. The compensation committee believes that athe current mix of performance and time-basedservice-based incentives provides an element of performance risk for executives and encourages equity ownership, thereby aligningaligns the interests of executive officers with our stockholders.stockholders and was appropriate for 2019.
Long-termThe 2019 long-term incentive grants consistfor named executive officers consisted of a mix of equity awards typically in the form of restricted stock units and stock options, and a long-term performance-based incentive component (the "LTIP"), payable in cash for participants other than the CEOperformance stock units, or CFO or in PSUs in the case of the CEO(67%), and CFO. Theyrestricted stock units (33%). These awards are designed to focus management on our strategy of driving consistent, sustainable, achievement of long-term goals, both incrementally and over long performance periods. The annual granting of multi-year performance compensation (including performance targets measured annually over a three-year period)period beginning in 2017) is designed to ensure that the execution of our evolving strategic plan, considersconsider appropriate risks and returns and allowsallow for initiatives that span several fiscal years.
Currently, except as described below,Beginning in 2017, the long-term performance-based incentive awards for executives consist of an equity component comprised of 40% stock options and 20% restricted stock units (both of which vest ratably over four years), and a 40% LTIP. 2017 was the first year our LTIP component was payable in shares as PSUs for the CEO and CFO. We use stock options to align the interests of our executive officers with stockholders because value is realized only if the stock price appreciates (stock price performance) from the grant date. We use restricted stock units to help retain our executives and further align their interests with our stockholders.
The LTIP component isbecame payable if annual EBITDA or ROIC targets selected by the committee are achieved each yearfor that tranche within athe three-year performance period. When the performance measure has been met and approved by the compensation committee for a particular fiscal yeartranche during the three-year period of the award, that portion of units is determined or "banked,but remains subject to a service-vesting requirement until the three-year period has concluded. That determined portion of units is considered "earned," but is not considered "earned" or vested and will not be delivered until the applicable three-year period has concluded.concluded subject to continued employment on such date. The annual EBITDA and ROIC LTIP metrics are independent of each other. TheFor the third tranche of the 2017 long-term incentive grant, the second tranche of the 2018 grant, and the first tranche of the 2019 grant, the compensation committee selected an earnings metric (EBITDA)(Adjusted EBITDA) and a cash return on investment capital metric (CROIC) in the design to achieve a balance between earnings and return on investment and to effectively reward both. For the second tranche of the 2017 long-term incentive grant and the first tranche of the 2018 long-term incentive grant, the compensation committee selected an earnings metric (Adjusted EBITDA) and an operational metric (Relative Guest Traffic) in the design to achieve a balance between earnings, growth, and driving Guest traffic relative to the restaurant industry (not limited to casual dining) and to effectively reward both. For the first tranche of the 2017 long-term incentive grant, the compensation committee selected Adjusted EBITDA and a return on investmentinvested capital metric (ROIC) in the design of the LTIP to achieve a balance between earnings, growth, and return on investment and to effectively reward both. BothLike the goals in our annual performance-based plan, the goals used in our long-term performance-based incentive component (Adjusted EBITDA, goalCROIC, ROIC, and the ROIC goalRelative Guest Traffic) are intended to be "stretch" goals, or challenging targets, and are meant to encourage superior performance.
The temporary transition to annual goals measured and assessed over a three-year period reflects the challenges of multi-year forecasting in the current volatile restaurant operating environment, which continues to be impacted by changes in traditional consumer dining behavior, including a shift from traditional dine-in consumption to increased off-premise dining activity and the use of technology-based food ordering systems. Beginning in 2020, the compensation committee is returning to setting goals over a multi-year period.
The 2007 Plan, 2017 Plan and the Cash Incentive Plan permitpermits the compensation committee to adjust,make adjustments, in its discretion, EBITDA or ROIC for non-cash, non-recurring, or unusual items. While there is overlap with one of the metrics in our annual performance-based cash bonuses and LTIP
long-term performance-based incentive awards (EBITDA)(Adjusted EBITDA), the compensation committee believedbelieves this wasis appropriate because the annual performance-based cash bonusincentive is focused on earnings in a particular year, whereas the individual annual Adjusted EBITDA targets within LTIPlong-term performance-based incentive are focused on year-to-year progress over the three-year performance period. The compensation committee believes that the longer-term nature of the LTIPPSUs links performance to our multi-year strategic plan, stockholders and growth objectives while encouraging management's collaboration on strategic initiatives. In 2017, equity2019, all long-term performance-based incentive awards were granted under the terms2017 Plan.
We also provide certain other customary retirement and health and welfare benefits and other ancillary compensation to executives, which are in line with those offered to other groups of our employees, and which comprise a modest portion of our named executive officer compensation.
We offer a limited number of modest perquisites to our named executive officers, which include a car allowance, phone allowance, and in-restaurant meal discounts. In addition, where appropriate, we offer usual and customary relocation expense reimbursements including related tax reimbursements on relocation. We review the perquisites we offer to our executives and compare them to those offered by our competitors from time to time.
Summary of 20172019 Compensation Activity
Named executive officer salaries for 2017,2019, along with any corresponding increases from their 20162018 salaries, are set forth below. The compensation committee considers various factors when setting base salaries including peer compensation practices, market competitiveness, the Company's performance, individual contributions, growth in roles, retention, CEO recommendations for herthe CEO's direct reports, and other relevant matters. Amounts below are annualized for those that served in role for partial year.
Named Executive Officer | 2016 Salary | 2017 Salary | % Change | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Denny Marie Post, President and Chief Executive Officer | $ | 700,000 | $ | 750,000 | 7.14 | % | ||||
Guy J. Constant, Executive Vice President and Chief Financial Officer | $ | 500,000 | $ | 500,000 | - | |||||
Carin L. Stutz, Executive Vice President and Chief Operating Officer | $ | 400,000 | $ | 475,000 | 18.75 | % | ||||
Jonathan A. Muhtar, Executive Vice President and Chief Concept Officer | $ | 375,000 | $ | 385,000 | 2.67 | % | ||||
Michael L. Kaplan, Senior Vice President and Chief Legal Officer | $ | 345,000 | $ | 355,000 | 2.90 | % |
Named Executive Officer | 2018 Salary | 2019 Salary | % Change | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Paul J.B. Murphy III | (1) | $ | 900,000 | 0 | % | |||||
Lynn S. Schweinfurth | (1) | $ | 450,000 | 0 | % | |||||
Jonathan A. Muhtar | $ | 425,000 | $ | 425,000 | 0 | % | ||||
Michael L. Kaplan | $ | 365,000 | $ | 400,000 | 9.5 | % | ||||
Dean Cookson | $ | 340,000 | $ | 340,000 | 0 | % | ||||
Denny Marie Post | $ | 800,000 | $ | 800,000 | 0 | % | ||||
Pattye L. Moore | (2) | (2) | 0 | % | ||||||
Guy J. Constant | $ | 515,000 | $ | 515,000 | 0 | % |
Each of
20172019 Annual Performance-Based Cash Incentives. For 2017,the primary component (70% weight) of our 2019 annual performance-based cash bonusesincentive program, actual payouts were contingent upondetermined by comparing the Company's fiscal year Adjusted EBITDA to a target level of Adjusted EBITDA for the year established by our compensation committee. Potential payout amounts ranged from 0% to 200% of the executive's target opportunity based on achievement of anAdjusted EBITDA ranging from 80% to 115% of the target level of Adjusted EBITDA for the year. In early 2019, at the time performance targets were set, the compensation committee temporarily extended the EBITDA threshold achievement level from 90% to 80% of target. The Committee made this change because the threshold requirement of 90% of target was more requiring than typical market practices as well as the fact that the committee desired to engage participants and drive EBITDA performance in the face of declining business conditions. The committee believes the 2019 EBITDA goals were rigorous and demonstrated our commitment to a pay for performance philosophy. We believe the overall stretch of our 2019 performance goals is reflected in the below target payout as further discussed below.
| | | | | | | | | | | | |
Adjusted EBITDA Target and Preliminary Annual Incentive % | ||||||||||||
| | | | | | | | | | | | |
Proportion of Adjusted EBITDA Target Achieved | Payout as a % of Target | |||||||||||
| | | | | | | | | | | | |
Minimum | 80% | 25% | ||||||||||
| | | | | | | | | | | | |
Target | 100% | 100% | ||||||||||
| | | | | | | | | | | | |
Maximum | ³115% | 200% | ||||||||||
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In addition, in 2019, the annual Companyperformance-based incentive plan included secondary metrics of off-premise sales (15% weight), with potential payout amounts determined using the same payout scale that applies for Adjusted EBITDA target to focus our efforts on continuing to improve performance, and maximizing stockholder returns. In fiscal year 2017, we continuedoverall guest satisfaction, or OSAT, (15% weight), with potential payout amounts ranging from 25% to realize significant progress toward these goals, reporting increased revenues200% based on achievement, each of which is earned only if the target goal is achieved.
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Off-Premise Sales Target and Preliminary Annual Incentive % | ||||||||||||
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Proportion of Off-Premise Target Achieved | Payout as a % of Target | |||||||||||
| | | | | | | | | | | | |
Minimum | 80% | 25% | ||||||||||
| | | | | | | | | | | | |
Target | 100% | 100% | ||||||||||
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Maximum | ³115% | 200% | ||||||||||
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OSAT Target and Preliminary Annual Incentive % | ||||||||||||
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Proportion of OSAT Target Achieved | Payout as a % of Target | |||||||||||
| | | | | | | | | | | | |
Minimum | 97% | 25% | ||||||||||
| | | | | | | | | | | | |
Target | 100% | 100% | ||||||||||
| | | | | | | | | | | | |
Maximum | ³106% | 200% | ||||||||||
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For 2019, named executive officers achieved slightly above minimum Adjusted EBITDA threshold and sustainable cost reductions. We view these achievements as progress toward establishing best in class operations, profitability, and brand value.just below target for off premise sales. Achievement for overall guest satisfaction was
Targetbelow the minimum threshold. Based on actual performance during fiscal 2019, the total annual corporate bonus opportunities under our annual performance-based cash incentive program are equal to a pre-established percentage of the employee's base salary. Actual bonuses are determined by comparing the Company's fiscal year EBITDA to a target level of EBITDA for the year establishedearned by our compensation committee. Actual bonus amounts can range from 0% to 200% of the executive's target bonus opportunity based on achievement of EBITDA ranging from 90% to 120% of the target level of EBITDA for the year. For 2017, the EBITDA targetNEOs was $149.0 million, and we achieved 94.5% of the EBITDA target based on our 2017 EBITDA of approximately $140.9 million which resulted in a payout of 72.6% of each named executive officer target bonus opportunity.33.04%.
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EBITDA Target and Preliminary Bonus % | ||||||||||||||||||||||||||||||||||||||||||||||
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EBITDA Target Achieved | Bonus Payout as a % of Target | 2019 Annual Performance-Based Cash Incentive Goal, Achievement, and Payout | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Minimum | 90% | 50% | Bonus Component | | Target Performance (dollars in thousands) | | Actual Performance (dollars in thousands) | | Achievement Percentage | | Payout Achieved (before weighting) | | Weighting % | | Actual Bonus Percentage Earned | | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | 94.5% | | 72.6% | | Adjusted EBITDA | | $ | 125,812.0 | $ | 101,291.5 | 80.51 | % | 26.91 | % | 70 | % | 18.84 | % | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Target | 100% | 100% | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | Off-Premise Sales | | $ | 161,900.0 | $ | 159,600.0 | 98.58 | % | 94.67 | % | 15 | % | 14.20 | % | ||||||||||||||||||||
Maximum | ³120% | 200% | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Overall Guest Satisfaction Indexed to Target | | 100 | % | 96.71 | % | 96.71 | % | 0 | % | 15 | % | 0.00 | % | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| Total | | 100 | % | 33.04 | % | ||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Each of our named executive officers has a target opportunity expressed as a percentage of the executive's salary and is set based on, among other factors, market and peer comparisons, and internal equity. The actual amounts of our 20172019 annual performance-based cash incentives paid to our named executive officers in March 20182020 for fiscal 20172019 performance are as follows.follows:
Named Executive Officer(1) | 2019 Annualized Salary | Target (% of Actual Salary) | $ Amount at Target | 2019 Actual Payout | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
L. Schweinfurth | $ | 450,000 | 70 | % | $ | 315,000(2) | $ | 211,000 | |||||
J. Muhtar | $ | 425,000 | 75 | % | $ | 318,750 | $ | 105,315 | |||||
M. Kaplan | $ | 387,885 | 70 | % | $ | 271,520 | $ | 90,021 | |||||
D. Cookson | $ | 340,000 | 60 | % | $ | 204,000 | $ | 67,402 | |||||
Former Executives | |||||||||||||
D. Post | $ | 800,000 | 120 | % | $ | 960,000 | $ | 81,910(3) | |||||
G. Constant | $ | 515,000 | 75 | % | $ | 386,250 | $ | 127,617(4) |
Named Executive Officer | 2017 Annualized Salary | Bonus at Target (% of Actual Salary) | $ Bonus at Target | 2017 Actual Bonus | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
D. Post | $ | 750,000 | 120 | % | $ | 900,000 | $ | 653,777 | |||||
G. Constant | $ | 500,000 | 70 | % | $ | 350,000 | $ | 254,247 | |||||
C. Stutz. | $ | 475,000 | 75 | % | $ | 356,250 | $ | 258,787 | |||||
J. Muhtar | $ | 385,000 | 70 | % | $ | 269,500 | $ | 195,770 | |||||
M. Kaplan | $ | 355,000 | 70 | % | $ | 248,500 | $ | 180,515 |
20172019 Long-Term Incentive ("LTI") Program. The 20172019 LTI grants made to named and other executive officers followed the same program mix implementedconsisted of 67% payable in 2011PSUs and used through 2016. For our executives, the program consists33% payable in RSUs.
20172019 Long-Term Incentive Grants. In February 2017,March 2019, the Company made the following annual grants to our named executive officersofficers:
Named Executive Officer(1) | Total Long-Term Incentive Target Value ($) | Long-Term Incentive PSUs ($) | Time-Based Restricted Stock Units ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
L. Schweinfurth | 540,000 | 361,800 | 178,200(2) | |||||||
J. Muhtar | 595,000 | 398,650 | 196,350 | |||||||
M. Kaplan | 328,500 | 220,095 | 108,405 | |||||||
D. Cookson | 238,000 | 159,460 | 78,540 | |||||||
Former Executives | ||||||||||
D. Post | 2,320,000 | 1,554,400 | 765,600 | |||||||
G. Constant | 849,750 | 569,332 | 280,418 |
comprised of 40% long-term performance-based cash or PSUs (depending on the executive), 40% stock options, and 20% restricted stock units.
Named Executive Officer | Total Long-Term Incentive Target Value ($) | Long-Term Incentive PSUs ($) | Long-Term Incentive Cash ($) | Non-Qualified Stock Options ($) | Time-Based Restricted Stock Units ($) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
D. Post | 2,205,000 | 1,050,000 | - | 770,000 | 385,000 | |||||||||||
G. Constant | 1,000,000 | 400,000 | - | 400,000 | 200,000 | |||||||||||
C. Stutz | 600,000 | - | 240,000 | 240,000 | 120,000 | |||||||||||
J. Muhtar | 525,000 | - | 210,000 | 210,000 | 105,000 | |||||||||||
M. Kaplan | 310,500 | - | 124,200 | 124,200 | 62,100 |
The estimated fairamounts listed in the table above represent the target intended value of each option granted is calculated using the Black-Scholes multiple option-pricing model.grant and amounts may differ from the accounting values provided in the Summary Compensation Table below. The fair value of the restricted stock units and performance stock units is based on the grant date market value of the common shares.
Long-Term Cash Portion (for Executive Officers other than CEO and CFO)Performance-Based PSUs. In 2017, for our executive officers other than our chief executive officer and chief financial officer,2019, the LTIP portion of the performance plan is focused on the achievement of important operational metrics over a three-year period. The awards consist of three distinct tranches measured annually over a three-year performance cycle. Performance is measured annually based on a range of minimum threshold, target, and maximum level. In 2017, there are two independent metrics used that provide an appropriate balance between capital efficiency and operational results. The first metric is EBITDA, which allows progress toward the EBITDA goal to be established and measured annually over a three-year performance period. The second metric is ROIC, which recognizes that capital-related returns may take time to manifest. The goals are equally weighted, and the payouts will depend upon the achievement level of each metric. When the performance measure has been met and approved by the compensation committee for a particular fiscal year during the three-year period of the award, that portion of units is determined or "banked," but is not considered "earned" or vested and will not be delivered until the three-year period has concluded. The move towards annual measures over the three-year performance period provides flexibility for the compensation committee in establishing appropriate goals during uncertain times as the industry continues to adapt to changing consumer habits.
The same LTI cash award metrics and methodology were implemented for years 2011 through 2017. In 2018, the compensation committee shifted the structure of the67% long-term incentive component for the remainder of our named and other executive officers to include more equity and less cash, similar to the approach adopted for our chief executive officer and chief financial officer. See "—2018 Compensation Program" below.
Long-Term Performance-Based Equity Portion (for CEO and CFO). In 2017, we shifted the 40% long-term incentive component for our chief executive officer and chief financial officer compensation from cash towas comprised of equity grants in the form of PSUs, with the other components otherwise remaining the same, as follows:
Named Executive Officer(1) | Long-Term Incentive PSUs | Grant Date Fair Value ($)(2) | |||||
---|---|---|---|---|---|---|---|
L. Schweinfurth | 12,306 | 361,796 | |||||
J. Muhtar | 13,559 | 398,635 | |||||
M. Kaplan | 7,486 | 220,088 | |||||
D. Cookson | 5,423 | 159,436 | |||||
Former Executives | |||||||
D. Post | 52,870 | 1,554,378 | |||||
G. Constant | 19,365 | 569,331 |
In 2019, the long-term performance-based incentive metrics for the PSUs were Adjusted EBITDA and CROIC. No PSUs are earned if threshold performance objectives are not met and up to 200% of the Company's common stock (at target), which hadtarget number of PSUs will be earned if maximum performance objectives are achieved. From 2017 to 2019, the long-term performance-based incentive targets were set annually as a grant date fair value (at target)result of $1,050,000. Ms. Post received additional PSUs pursuant to her employment agreement related to her promotion to CEO in 2016.
three-year performance period. In 2020, the long-term performance-based incentive targets are contemplated to be set over a PSU grant representing 7,332 sharesmulti-year time period.
For purposes of the Company's common stock (at target), which had a grant date fair value (at target)fiscal 2019 component or tranche of $400,000.
The PSU awards cliff-vest atunder our long-term performance-based incentive, potential payout amounts ranged from 0% to 200% of the end of a three-year performance cycle, generally subject to executive's continued employment through the applicable vesting date, with the number of PSUs determinedtarget opportunity based on achievement of threshold, target or maximum performance objectives approved by the compensation committee and that are consistent with the long-term cash program for executive officers described below. In 2017 the metrics wereAdjusted EBITDA and ROIC. The CEO and CFO will earn no PSUs if threshold performance objectives are not met and will earn 200%CROIC ranging from 80% to 115% of the target numberlevel of PSUs if maximumAdjusted EBITDA for the year.
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2019 Tranche Payout Scale: Adjusted EBITDA & CROIC Target and Preliminary Payout % | | |||||||||||
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Target Achieved | Payout as a % of Target | |||||||||||
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Below Minimum | <80% | 0% | ||||||||||
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Minimum | 80% | 25% | ||||||||||
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Target | 100% | 100% | ||||||||||
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Maximum | ³115% | 200% | ||||||||||
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Based on actual performance objectives are achieved.during fiscal 2019, the long-term performance-based incentive percentage earned in respect of the fiscal 2019 component or tranche of outstanding long-term performance-based incentive awards was 13.46%.
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| 2019 Tranche Long-Term Incentive Performance-based Incentive Goal, Achievement, and Payout | | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LTI Component | | Target Performance Goal (in thousands) | | Actual Performance (in thousands) | | Achievement Percentage | | Payout Achieved (before weighting) | | Weighting % | | Actual Bonus Percentage Earned | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | $ | 125,812.0 | $ | 101,291.5 | 80.51 | % | 26.91 | % | 50 | % | 13.46 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CROIC | | 22.19 | % | 17.52 | % | 78.95 | % | 0.00 | % | 50 | % | 0.00 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | 100 | % | 13.46 | % | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2015-2017 LTI Cash2017-2019 Long-Term Performance-Based Incentives. At the end of 2017,2019, the Company completed a three-year performance cycle for the long-term cash incentive portion of the LTI plan. The performance period covered fiscal 20152017 through fiscal 2017. The 2015 LTI cash awards represented 40% of the executive's total 2015 LTI award.2019, with targets set annually. Based on Adjusted EBITDA and ROIC performance in 2017, Adjusted EBITDA and relative guest traffic in 2018, and Adjusted EBITDA and CROIC performance in 2019, our executive officers did not earn an LTI cashearned a minimal payout, as reflected in the tablestable below.
For the 2015-2017 LTI cash incentive, our target (100%) level EBITDA objective was approximately $484.9 million. The range of EBITDA objectives to achieve a LTI cash payout based on EBITDA was 90% of target EBITDA for the minimum threshold level, and 120% of target EBITDA for the maximum level (which corresponds to a 50% to 200% target payout range). Our EBITDA achievement for 2015-2017 was $415.9 million, which was 85.8% of the target EBITDA level, which was below minimum of the target EBITDA level, and therefore generated no corresponding payout.
| | | | | | | | | | | | |
EBITDA Target and Preliminary Payout % | ||||||||||||
| | | | | | | | | | | | |
EBITDA Target Achieved | Payout as a % of Target | |||||||||||
| | | | | | | | | | | | |
| Actual | | 85.8% | | 0% | | ||||||
| | | | | | | | | | | | |
Minimum | 90% | 50% | ||||||||||
| | | | | | | | | | | | |
Target | 100% | 100% | ||||||||||
| | | | | | | | | | | | |
Maximum | ³120% | 200% | ||||||||||
| | | | | | | | | | | | |
Our target (100%) level ROIC objective for the 2015-2017 performance period was approximately 12.1%. The range of ROIC objectives to achieve a LTI cash payout based on ROIC was 87.7% of target ROIC for the minimum threshold level, and 109.9% of target ROIC for the maximum level, with a corresponding multiple range that decreased or increased the payout of the executive's target LTI cash incentive. Our ROIC achievement for 2015-2017 was 70.5%, which was below minimum of the target ROIC level, and therefore generated no corresponding payout.
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ROIC Target and Preliminary Payout % | 2017-2019 Cumulative Long-Term Incentive Performance Achievement | | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ROIC Target Achieved | Payout as a % of Target | Tranche | | | Weight | | Metrics/ Weighting | | | Award (% of Target) | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | 70.5% | | 0% | | Tranche #1 (Fiscal 2017) | | 33.33 | % | Adjusted EBITDA (50%) ROIC (50%) | 36.25 | % | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Minimum | 87.7% | 1% | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | Tranche #2 (Fiscal 2018) | | 33.33 | % | Adjusted EBITDA (50%) Rel. Guest Traffic (50%) | 43.25 | % | |||||||||||
Target | 100% | 100% | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Maximum | ³109.9% | 180% | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | Tranche #3 (Fiscal 2019) | | 33.33 | % | Adjusted EBITDA (50%) CROIC (50%) | 13.46 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||
| Total | | 100.00 | % | 30.99 | % | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | |
Stock Options. The stock options that were granted As illustrated in 2017 vest ratably over four years onthe table above, the compensation committee varied the performance metrics for each anniversary dateyear of the grant, which is designed2017-2019 Long-Term Performance-Based Incentives. This decision was made to align incentiveskeep executives focused on key metrics that aligned with longer-term achievement of objectives.the business objectives for that year. EBITDA and profitability has been a steady and key metric to measure management performance and create stockholder value. The exercise priceother metrics were identified key initiatives for that particular year. We believe all of the stock options was set atchosen metrics support our closing share price onmanagement team's alignment with stockholders. Further, we believe the date of grant. This means the stock options will have no value unlessbelow target payouts demonstrate requiring goal setting and our share price on the date the option is exercised is greater than the exercise price.commitment to a pay for performance philosophy.
Restricted Stock Units. The restricted stock units granted in 20172019 vest ratably over four years on each anniversary date of the grant.
2018 Compensation Program Retention Awards to Executive Officers
Our 2018Because of the uncertainty created by the CEO transition and in order to retain the executive leadership believed to be critical to the ongoing operation of the Company during the CEO transition, on March 30, 2019, the compensation program has substantiallycommittee considered and approved the award of one-time cash retention awards (each, a "Retention Bonus") to each of Messrs. Constant, Muhtar, Kaplan, and Cookson in the following amounts: $250,000, $200,000, $200,000, and $150,000, respectively. Payment of the Retention Bonuses is subject to the executives' continued employment with the Company in good standing through the final payroll date of the 2019 fiscal year. In addition, the executives will also be entitled to their Retention Bonuses if the executive's employment is terminated without Cause (as defined in the Change in Control Plan) prior to the end of the 2019 fiscal year.
The compensation committee also considered and approved a retention award of RSUs to Ms. Schweinfurth on April 3, 2019 for the same key components as our 2017 program except for the shift to increase the portionpurpose. The award consisted of compensation paid in equityRSUs having a grant date fair value of $100,000 and baseda three-year vesting schedule of one-third on performance to all executive officers by making equity grants in the form of PSUs instead of cash for that portioneach anniversary of the long-term incentive program, as described above.date of grant.
Deductibility of Executive Compensation
The compensation committee considers the tax impacts of material elements of our executive compensation program. These factors alone do not drive our compensation decisions, but rather they are considered along with other factors such as the cash and non-cash impact of the program, and whether the program is consistent with our compensation objectives.
TheHistorically, compensation committee has historically generally intended to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m) of the Internal Revenue Code, provided additional requirements are satisfied. The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers in excess of $1 million will notwould no longer be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.deductible.
Despite the compensation committee's efforts in the past to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m), because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)'s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) in fact will. Further, while we consider deductibility as one factor in determining executive compensation, in some cases we may decide that it is either not possible or desirable to satisfy all of the conditions of Section 162(m) for deductibility and still meet our compensation needs. Accordingly, we may pay compensation that is not deductible under Section 162(m) from time to time.
Executive Compensation Policies and Guidelines
Executive Employment Agreements
Each of Ms. Post, Mr. Constant, Mr. Muhtar, Ms. Stutz, and Mr. Kaplan has an employment agreement with the Company, described below under "Executive Employment Agreements." The employment agreements have indefinite terms, terminating on discontinuance of employment in accordance with the terms of the agreements. The agreements provide for severance payments upon certain terminations of employment (both before and after a change in control of the Company). The compensation committee believes that the terms of these agreements are in line with market standards
The Company continually assesses our compensation program to ensure it supports our business strategy and are an important meanssituation. The board added two new Independent Directors to allow managementthe compensation committee in 2019, which led to continuepositive changes to focusthe Company's compensation program beginning in 2020.
For 2020, the annual incentive plan includes performance targets related to major strategic initiatives in addition to the Adjusted EBITDA goal. The long-term incentive program mix was adjusted to consist of 50% weighted in PSUs, 25% weighted in non-qualified stock options, and 25% weighted in RSUs for the named executive officers, which further increases the portion of executive compensation based on runningstockholder return. The long-term incentive program was revised to include the businesssetting of pre-established performance target goals for a multi-year performance period, instead of setting targets annually for each year of that period. In addition, the target for the two remaining tranches of the 2019 PSU award have been set to align with the achievement of Adjusted EBITDA for 2020 and 2021.
In light of the impact of COVID-19 on the global business environment and on the Company's stock price, the compensation committee decided to take certain additional actions with respect to the 2020 compensation program in order to meaningfully reduce costs and to select a metric for the PSU awards that was most appropriate given the uncertainty and challenges in projecting other metrics at this time.
GOVERNANCE OF EXECUTIVE COMPENSATION
Executive Stock Ownership Guidelines
Stock ownership guidelines have been in effect for the Company's executive officers and directors since March 2009. (See "Corporate Governance and Board Matters—Director Stock Ownership Guidelines" in this proxy statement for ownership guidelines for directors). The compensation committee believes that executive stock ownership requirements increase alignment of executive interests with those of stockholders with respect to long-term ownership risk. The guidelines require executive officers to achieve and maintain during the term of the executive's employment a dollar value of Company's securities based on a multiple of base salary. In 2017, theThe current ownership guideline values were adjustedguidelines require our CEO to own five times base salary, for our CEO, three times base salary for executive vice presidents, and two times base salary for senior vice presidents. Pursuant to the guidelines, the value of the executive's holdings is based on the cumulative cost basis of Company securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. The executive officers have five years to achieve the guidelines from their effective date of employment or promotion date. An executive officer may receive additional time to achieve his or her minimum requirement if the officer's requirement is increased, calculated based on the additional incremental amount. The compensation committee periodically reviews the guidelines and receives guidance and market data from its advisors.
The following table sets forth the ownership guidelinesamount, and the holdingscommittee may otherwise exercise discretion in extending the time for compliance in other circumstances. All of the namedour executive officers asare currently in compliance or on track to be in compliance with their guidelines.
Named Executive Officer | Ownership Guideline | Current Dollar Value of Guideline | Cumulative Cost Basis | ||||||
---|---|---|---|---|---|---|---|---|---|
D. Post | 5x salary | $ | 3,750,000 | $ | 2,086,959(1 | ) | |||
G. Constant | 3x salary | $ | 1,500,000 | $ | 763,672(2 | ) | |||
C. Stutz | 3x salary | $ | 1,425,000 | $ | 703,902(3 | ) | |||
J. Muhtar | 3x salary | $ | 1,155,000 | $ | 534,554(4 | ) | |||
M. Kaplan | 2x salary | $ | 710,000 | $ | 284,803(5 | ) |
In March 2012, theThe Company's board of directors adoptedmaintains a compensation clawback policy for its executive officers that provides for the recoupment by the Company of certain excess incentive compensation paid to the officers under certain circumstances. In the event of a restatement of the Company's previously issued financial statements as a result of either (i) material non-compliance with financial reporting requirements under the securities law or (ii) intentional misconduct by an executive,
the Company may recover, to the extent permitted by law, certain incentive compensation, including equity and cash awards, received by the executive that was in excess of what would have been paid in the absence of the incorrect financial statements. If additional clawback rules are approved by the SEC, the Company would be required towill review and revise its clawback policy to comply with the new rules.
Pledging and Hedging Transactions in Company Securities
In 2014, theThe board adoptedhas a formal policy prohibiting hedging and pledging of Company securities by executive officers and directors. The policy is set forth
Hedging transactions may permit an executive officer or director to continue to own the Company's securities obtained through an employee benefit plan or otherwise, but without the full risks and rewards of ownership. When this occurs, the executive officer or director may no longer have the same objectives as the Company's other stockholders. Therefore, executive officers and directors are prohibited from engaging in any hedging transactions with respect to the Company's securities, including, without limitation, through the use of financial instruments, such as prepaid variable forward contracts, equity swaps, collars, and exchange funds.
Pledging of Company securities by an executive officer or director as collateral for a loan or holding such securities in a margin account may result in the executive officer or director having interests that are no longer aligned with the long-term interests of the Company's other stockholders because of such executive officer or director potentially being immune to the economic exposure to the pledged securities. Additionally, if pledged securities were forced to be sold, potentially without the consent of an executive officer or director due to a failure to meet a margin call or the default on a loan, there may be a violation of the Company's Insider Trading Policy. All directors andPolicy if the foreclosure or margin sale happens at a time that the executive officer or director is aware of material non-public information or otherwise prohibited from trading. Also, any such sale may result in a possible violation of Section 16 of the Securities Exchange Act of 1934, as amended, as well as subject the Company to negative publicity. Accordingly, executive officers have confirmed that theyand directors are currentlyprohibited from making pledges of Company securities as collateral for a loan, or otherwise holding Company securities in compliancea margin account.
Executive Employment Agreements
Each of Mr. Murphy, Ms. Schweinfurth, Mr. Muhtar, and Mr. Kaplan has an employment agreement with the policy.Company, described below under "Executive Employment Agreements." Except for Mr. Murphy's, the employment agreements have indefinite terms, terminating on discontinuance of employment in accordance with the terms of the agreements. The agreements provide for severance payments upon certain terminations of employment. The compensation committee believes the terms of these agreements together with the Change in Control Plan are in line with market standards and are an important means to allow management to continue to focus on running the business of the Company in the event of a pending or actual change in control event or other event potentially
affecting their employment. More detailed information concerning these severance payments appears below under the caption "Potential Payments upon Termination or Change in Control."
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the Company's management. Based on this review and discussion, the compensation committee recommended to the Company's board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE
Kalen F. Holmes, Chair
Cambria W. DunawayRichard J. Howell
Glenn B. Kaufman
G.J. Hart
David A. Pace
2017 Executive Compensation Tables2019 EXECUTIVE COMPENSATION TABLES
The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to the Company in all capacities by our principal executive officer, principal financial officer, and each of our three other most highly compensated executive officers who were serving as executive officers at the end of fiscal year 20172019 (collectively, the named executive officers), for fiscal years 20152017 through 2017:2019:
Name and Principal Position | Year | Salary ($)(4) | Bonus ($)(5) | Stock Awards ($)(6) | Option Awards ($)(7) | Non-Equity Incentive Plan Compensation ($)(8) | All Other Compensation ($)(9) | Total ($) | Year | Salary ($)(6) | Bonus ($)(7) | Stock Awards ($)(8) | Option Awards ($)(9) | Non-Equity Incentive Plan Compensation ($)(10) | All Other Compensation ($)(11) | Total ($) | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Denny Marie Post | 2017 | 744,237 | 1,434,957 | 769,690 | 653,777 | 18,901 | 3,621,862 | |||||||||||||||||||||||||
President and Chief | 2016 | 539,544 | - | 217,565 | 435,281 | 51,408 | 15,916 | 1,259,714 | ||||||||||||||||||||||||
Executive Officer | 2015 | 392,700 | - | 98,143 | 196,330 | 548,728 | 13,309 | 1,249,210 | ||||||||||||||||||||||||
Guy J. Constant(1) | 2017 | 500,000 | 599,941 | 399,989 | 254,247 | 13,397 | 1,767,574 | |||||||||||||||||||||||||
Paul J.B. Murphy III(1) | 2019 | 180,000 | 275,000 | 1,599,996 | - | - | 8,162 | 2,063,158 | ||||||||||||||||||||||||
President and Chief Executive Officer | ||||||||||||||||||||||||||||||||
Lynn S. Schweinfurth(2) | 2019 | 398,077 | 311,000 | 939,934 | - | - | 110,570 | 1,759,581 | ||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2016 | 15,385 | 200,000 | - | - | - | 516 | 215,901 | ||||||||||||||||||||||||
Carin L. Stutz(2) | 2017 | 466,355 | - | 119,991 | 239,985 | 258,787 | 13.257 | 1,098,375 | ||||||||||||||||||||||||
Executive Vice President and Chief Operating Officer | 2016 | 246,156 | 172,308 | 137,494 | 137,664 | - | 21,825 | 715,447 | ||||||||||||||||||||||||
Jonathan A. Muhtar(3) | 2017 | 383,854 | - | 104,998 | 209,987 | 195,770 | 13,845 | 908,454 | ||||||||||||||||||||||||
Jonathan A. Muhtar | 2019 | 425,000 | 200,000 | 594,968 | - | 170,424 | 24,610 | 1,415,002 | ||||||||||||||||||||||||
Executive Vice President and | 2016 | 375,000 | 200,000 | 354,934 | 460,298 | - | 133,894 | 1,524,126 | 2018 | 416,059 | - | 356,904 | 237,985 | - | 13,388 | 1,024,336 | ||||||||||||||||
Chief Concept Officer | 2015 | 14,423 | - | - | - | 262,500 | 415 | 277,338 | 2017 | 383,854 | - | 104,998 | 209,987 | 195,770 | 13,845 | 908,454 | ||||||||||||||||
Michael L. Kaplan | 2017 | 353,842 | - | 62,087 | 124,194 | 180,515 | 14,147 | 734,785 | 2019 | 387,885 | 200,000 | 328,486 | - | 128,531 | 13,274 | 1,058,176 | ||||||||||||||||
Senior Vice President and | 2016 | 343,850 | - | 60,246 | 120,592 | 31,908 | 14,183 | 570,779 | ||||||||||||||||||||||||
Executive Vice President and | 2018 | 355,865 | - | 197,041 | 131,384 | - | 14,070 | 698,360 | ||||||||||||||||||||||||
Chief Legal Officer | 2015 | 335,000 | - | 53,562 | 107,192 | 288,615 | 13,455 | 797,824 | 2017 | 353,842 | - | 62,087 | 124,194 | 180,515 | 14,147 | 734,785 | ||||||||||||||||
Dean Cookson | 2019 | 340,000 | 150,000 | 487,963 | - | 67,402 | 12,956 | 1,058,321 | ||||||||||||||||||||||||
Senior Vice President and Chief Information Officer | ||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||
Denny Marie Post(3) | 2019 | 240,000 | - | 2,319,954 | - | 81,910 | 581,182 | 3,223,046 | ||||||||||||||||||||||||
Former President and Chief | 2018 | 774,040 | - | 1,391,968 | 927,977 | - | 18,345 | 3,112,330 | ||||||||||||||||||||||||
Executive Officer | 2017 | 744,237 | - | 1,434,957 | 769,690 | 653,777 | 18,901 | 3,621,862 | ||||||||||||||||||||||||
Pattye L. Moore(4) | 2019 | 1,009,708 | - | - | - | - | 7,802 | 1,017,510 | ||||||||||||||||||||||||
Former Interim President and Chief Executive Officer | ||||||||||||||||||||||||||||||||
Guy J. Constant(5) | 2019 | 515,000 | 250,000 | 849,748 | - | 127,617 | 24,517 | 1,766,882 | ||||||||||||||||||||||||
Former Executive Vice President | 2018 | 501,924 | - | 1,359,742 | 339,878 | - | 13,126 | 2,214,670 | ||||||||||||||||||||||||
and Chief Operating Officer | 2017 | 500,000 | - | 599,941 | 399,989 | 254,247 | 13,397 | 1,767,574 |
salary of $167,000 per month. Prior to Ms. Moore's appointment as an executive on April 3, 2019, she received compensation for her role as a director on our board of directors.
objectives, the values in 2017 would for Ms. Post $1,995,000; and for Mr. Constant: $760,000.2017. See "Outstanding Equity Awards at 20172019 Fiscal Year-End" below for a listing of restricted stock unit and PSU awards outstanding for each named executive officer as of December 31, 2017.
Named Executive Officer | 2019 Annual Performance-Based Cash Incentive Payout ($) | 2017 LTI Cash Award Payout ($) | Total ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Paul J. B. Murphy III(1) | - | - | - | |||||||
Lynn S. Schweinfurth(2) | - | - | - | |||||||
Jonathan A. Muhtar | 105,315 | 65,109 | 170,424 | |||||||
Michael L. Kaplan | 90,021 | 38,510 | 128,531 | |||||||
Dean Cookson | 67,402 | - | 67,402 | |||||||
Former Executives | ||||||||||
Denny Marie Post | 81,910 | 81,910 | ||||||||
Pattye L. Moore | - | - | - | |||||||
Guy J. Constant | 127,617 | - | 127,617 |
Name | Year | Car Allowance ($)(a) | Phone Allowance (b) | Meal Discounts ($)(c) | Life Insurance/ LT Disability Premium Payments ($)(d) | Total ($) | Year | Car Allowance ($)(a) | Phone Allowance (b) | Meal Discounts ($)(c) | Life Insurance/ LT Disability Premium Payments ($)(d) | Company Match under 401(k) Plan ($) | Moving Expenses & Other Payments ($)(e) | Separation of Service Agreement payments ($)(f) | Total ($) | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Denny Marie Post | 2017 | 15,000 | 1,620 | 1,301 | 980 | 18,901 | ||||||||||||||||||||||||||||||||||
Guy J. Constant | 2017 | 10,200 | 1,620 | 705 | 872 | 13,397 | ||||||||||||||||||||||||||||||||||
Carin L. Stutz | 2017 | 10,200 | 1,620 | 571 | 866 | 13,257 | ||||||||||||||||||||||||||||||||||
Paul J.B. Murphy III | 2019 | 3,461 | 374 | - | 104 | 4,223 | - | - | 8,162 | |||||||||||||||||||||||||||||||
Lynn S. Schweinfurth | 2019 | 9,023 | 1,433 | 33 | 433 | - | 99,648 | - | 110,570 | |||||||||||||||||||||||||||||||
Jonathan A. Muhtar | 2017 | 10,200 | 1,620 | 1,193 | 832 | 13,845 | 2019 | 10,200 | 1,620 | 1,111 | 479 | 11,200 | - | - | 24,610 | |||||||||||||||||||||||||
Michael L. Kaplan | 2017 | 10,200 | 1,620 | 1,507 | 820 | 14,147 | 2019 | 10,200 | 1,620 | 989 | 465 | - | - | - | 13,274 | |||||||||||||||||||||||||
Dean Cookson | 2019 | 10,200 | 1,620 | 691 | 445 | - | 12,956 | |||||||||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||||||||
Denny Marie Post | 2019 | 4,615 | 499 | 334 | 170 | 4,892 | - | 570,672 | 581,182 | |||||||||||||||||||||||||||||||
Pattye L. Moore | 2019 | - | - | - | 302 | 7,500 | - | - | 7,802 | |||||||||||||||||||||||||||||||
Guy J. Constant | 2019 | 10,200 | 1,620 | 981 | 516 | 11,200 | - | - | 24,517 |
The following table provides additional information about equity awards and non-equity incentive plan awards granted to our named executive officers during fiscal 2017:2019:
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock (#) | Grant Date Fair Value of Option and Stock Awards ($)(4) | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name(1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#)(3) | Maximum (#) | |||||||||||||||||||||||||||
Paul J.B. Murphy III | 10/10/2019 | - | - | - | - | - | - | 52,980(5) | 1,599,996 | |||||||||||||||||||||||||
Lynn S. Schweinfurth | 78,750 | 315,000 | 630,000 | - | - | - | - | - | ||||||||||||||||||||||||||
2/4/2019 | - | - | - | - | - | - | 3,594(6) | 114,972 | ||||||||||||||||||||||||||
| | | | | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | 2/4/2019 | - | - | - | - | - | - | 5,783(5) | 184,998 | |||||||||||||||||
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Grant Date Fair Value of Option and Stock Awards ($)(3) | 2/4/2019 | - | - | - | - | - | - | 5,570(7) | 178,184 | |||||||||||||||||||||
| | All Other Option Awards: Number of Securities Underlying Options (#) | 3/19/2019 | - | - | - | 3,077 | 12,306 | 24,612 | 361,796 | ||||||||||||||||||||||||
| Grant Date | Threshold ($) | Target ($) | Maximum ($) | 4/3/2019 | - | - | - | - | - | - | 3,543(6) | 99,983 | |||||||||||||||||||||
Denny Marie Post | 2/24/2017(1) | 450,000 | 900,000 | 1,800,000 | - | 45,997(4) | 769,990 | |||||||||||||||||||||||||||
Jonathan A. Muhtar | 79,688 | 318,750 | 637,500 | - | - | - | - | - | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | - | - | - | 6,678(7) | 196,333 | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | 3,390 | 13,559 | 27,118 | - | 398,635 | ||||||||||||||||||||||||||
Michael L. Kaplan | 67,880 | 271,520 | 543,039 | - | - | - | - | - | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | - | - | - | 3,687(7) | 108,398 | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | 1,872 | 7,486 | 14,972 | - | 220,088 | ||||||||||||||||||||||||||
Dean Cookson | 51,000 | 204,000 | 408,000 | - | - | - | - | - | ||||||||||||||||||||||||||
3/1/2019 | - | - | - | - | - | - | 7,977(5) | 249,999 | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | - | - | - | 2,671(7) | 78,527 | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | 1,356 | 5,423 | 10,846 | 159,436 | |||||||||||||||||||||||||||
Former Executives | ||||||||||||||||||||||||||||||||||
Denny Marie Post(8) | 240,000 | 960,000 | 1,920,000 | - | - | - | - | - | ||||||||||||||||||||||||||
3/19/2019 | - | - | - | - | - | - | 26,040(7) | 765,576 | ||||||||||||||||||||||||||
8,191(5) | - | - | 384,977 | 3/19/2019 | - | - | - | 13,218 | 52,870 | 105,740 | 1,554,378 | |||||||||||||||||||||||
22,340(7) | 1,049,980 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Guy J. Constant | 1/03/2017(1) | 175,000 | 350,000 | 700,000 | - | 20,695(6) | 54.55 | 399,989 | 96,562 | 386,250 | 772,500 | - | - | - | - | - | ||||||||||||||||||
3,666(6) | - | - | 199,980 | 3/19/2019 | - | - | - | - | - | - | 9,538(7) | 280,417 | ||||||||||||||||||||||
7,332(7) | 399,961 | 3/19/2019 | - | - | - | 4,841 | 19,365 | 38,730 | - | 569,331 | ||||||||||||||||||||||||
Carin L. Stutz | 2/24/2017(1) | 178,125 | 356,250 | 712,500 | - | 14,336(4) | 47.00 | 239,985 | ||||||||||||||||||||||||||
2/24/2017(2) | 60,006 | 240,024 | 456,045 | 2,553(5) | - | - | 119,991 | |||||||||||||||||||||||||||
Jonathan A. Muhtar | 2/24/2017(1) | 134,750 | 269,500 | 539,000 | - | 12,544(4) | 47.00 | 209,986 | ||||||||||||||||||||||||||
2/24/2017(2) | 52,504 | 210,015 | 399,028 | 2,234(5) | - | - | 104,998 | |||||||||||||||||||||||||||
Michael L. Kaplan | 2/24/2017(1) | 124,250 | 248,500 | 497,000 | - | 7,419(4) | 47.00 | 124,194 | ||||||||||||||||||||||||||
2/24/2017(2) | 31,055 | 124,219 | 236,016 | 1,321(5) | - | - | 62,087 |
stock. The units are scheduled to vest 25% on each of the first, second, third, and fourth anniversaries of the date of grant subject to continuing employment or service with the Company.
Outstanding Equity Awards at 2017 Fiscal Year-End
| Option Awards | Stock Awards | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | | | | | ||||||
| Option Exercise Price ($) | | Number of Shares That Have Not Vested | Market Value of Shares That Have Not Vested ($)(22) | ||||||||
| Option Expiration Date | |||||||||||
Name | Exercisable | Unexercisable | ||||||||||
Denny Marie Post | 8,551 | - | 32.29 | 8/2/21(1) | 300(12) | 16,920 | ||||||
7,620 | - | 35.46 | 2/21/22(2) | 918(13) | 51,775 | |||||||
8,482 | - | 42.07 | 2/26/23(3) | 600(14) | 33,840 | |||||||
3,795 | 1,265 | 71.99 | 2/19/24(4) | 1,614(16) | 91,030 | |||||||
3,234 | 3,235 | 81.65 | 2/18/25(5) | 1,320(18) | 74,448 | |||||||
3,042 | 9,128 | 63.82 | 2/17/26(7) | 8,191(20) | 461,972 | |||||||
2,613 | 7,840 | 45.52 | 10/3/26(9) | 22,340(21) | 1,259,976 | |||||||
- | 45,997 | 47.00 | 2/24/27(11) | |||||||||
Guy J. Constant | - | 20,695 | 54.55 | 1/3/27(10) | 3,666(19) | 206,762 | ||||||
7,332(21) | 413,525 | |||||||||||
Carin Stutz | 2,346 | 4,692 | 61.99 | 5/16/26(8) | 1,478(17) | 83,359 | ||||||
- | 14,336 | 47.00 | 2/24/27(11) | 2,553(20) | 143,989 | |||||||
Jonathan A. Muhtar | 4,255 | 8,510 | 59.94 | 1/4/26(6) | 2,780(15) | 156,792 | ||||||
2,324 | 6,973 | 63.82 | 2/17/26(7) | 1,233(16) | 69,541 | |||||||
- | 12,544 | 47.00 | 2/24/27(11) | 2,234(20) | 125,998 | |||||||
Michael L. Kaplan | 2,354 | 785 | 71.99 | 2/19/24(4) | 186(12) | 10,490 | ||||||
1,766 | 1,766 | 81.65 | 2/18/25(5) | 328(14) | 18,499 | |||||||
1,334 | 4,005 | 63.82 | 2/17/26(7) | 708(16) | 39,931 | |||||||
- | 7,419 | 47.00 | 2/24/27(11) | 1,321(20) | 74,504 |
Outstanding Equity Awards at 2019 Fiscal Year-End
| Option Awards | Stock Awards | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(25) | ||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||
| Option Exercise Price ($) | | Number of Shares That Have Not Vested | Market Value of Shares That Have Not Vested ($)(25) | ||||||||||||
| Option Expiration Date | |||||||||||||||
Name | Exercisable | Unexercisable | ||||||||||||||
Paul J.B. Murphy III | - | - | - | - | 52,980(20) | 1,643,969 | - | - | ||||||||
Lynn S. Schweinfurth | - | - | - | - | 3,594(13) | 111,522 | - | - | ||||||||
- | - | - | - | 5,783(14) | 179,446 | - | - | |||||||||
- | - | - | - | 5,570(15) | 172,837 | - | - | |||||||||
- | - | - | - | 3,543(19) | 109,939 | - | - | |||||||||
- | - | - | - | 552(18) | 17,129 | 8,204(26) | 254,570 | |||||||||
Jonathan A. Muhtar | 12,765 | - | 59.94 | 1/4/26(3) | - | - | - | - | ||||||||
6,972 | 2,325 | 63.82 | 2/17/26(4) | 411(8) | 12,753 | - | - | |||||||||
6,272 | 6,272 | 47.00 | 2/24/27(6) | 1,116(9) | 34,629 | - | - | |||||||||
2,540 | 7,620 | 61.25 | 3/15/28(7) | 1,456(11) | 45,180 | - | - | |||||||||
- | - | - | - | 734(12) | 22,776 | 1,295(27) | 40,184 | |||||||||
- | - | - | - | 6,678(17) | 207,218 | - | - | |||||||||
- | - | - | - | 608(18) | 18,866 | 9,040(26) | 280,511 | |||||||||
Michael L. Kaplan | 3,139 | - | 71.99 | 2/19/24(1) | - | - | - | - | ||||||||
3,532 | - | 81.65 | 2/18/25(2) | 236(8) | 7,323 | - | - | |||||||||
4,004 | 1,335 | 63.82 | 2/17/26(4) | 660(9) | 20,480 | - | - | |||||||||
3,709 | 3,710 | 47.00 | 2/24/27(6) | 804(11) | 24,948 | - | - | |||||||||
1,402 | 4,207 | 61.25 | 3/15/28(7) | 405(12) | 12,567 | 715(27) | 22,186 | |||||||||
- | - | - | - | 3,687(17) | 114,408 | - | - | |||||||||
- | - | - | - | 335(18) | 10,395 | 4,990(26) | 154,840 | |||||||||
Dean Cookson | 1,016 | 3,048 | 61.25 | 3/15/28(7) | 742(10) | 23,024 | - | - | ||||||||
- | - | - | - | 582(11) | 18,059 | - | - | |||||||||
- | - | - | - | 293(12) | 9,092 | 518(27) | 16,074 | |||||||||
- | - | - | - | 7,977(16) | 247,526 | - | - | |||||||||
- | - | - | - | 2,671(17) | 82,881 | - | - | |||||||||
- | - | - | - | 243(18) | 7,540 | 3,616(26) | 112,204 | |||||||||
Former Executives | - | - | - | - | - | - | - | - | ||||||||
Denny Marie Post(23) | - | - | - | - | 2,360 | 73,231 | - | - | ||||||||
- | - | - | - | 612 | 18,990 | - | - | |||||||||
- | - | - | - | - | - | |||||||||||
Pattye L. Moore(24) | - | - | - | - | - | - | - | - | ||||||||
- | - | |||||||||||||||
Guy J. Constant | 10,347 | 10,348 | 54.55 | 1/3/27(5) | 1,832(21) | 56,847 | - | - | ||||||||
3,627 | 10,883 | 61.25 | 3/15/28(7) | 2,080(11) | 64,542 | - | - | |||||||||
- | - | - | - | 1,048(12) | 32,519 | 1,849(27) | 57,374 | |||||||||
- | - | - | - | 16,881(22) | 523,817 | - | - | |||||||||
- | - | - | - | 9,538(17) | 295,964 | - | - | |||||||||
- | - | - | - | 868(18) | 26,934 | 12,910(26) | 400,597 |
Options Exercises and Stock Vested
The following table contains information with respect to the named executive officers concerning option exercises and vesting of restricted stock units during fiscal year 2017:2019:
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(2) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(2) | ||||||||
Denny Marie Post | - | - | 2,874 | 162,889 | ||||||||||||
Guy J. Constant | - | - | - | - | ||||||||||||
Carin L. Stutz | - | - | 740 | 42,920 | ||||||||||||
Paul J.B. Murphy III | - | - | - | - | ||||||||||||
Lynn S. Schweinfurth | - | - | - | - | ||||||||||||
Jonathan A. Muhtar | - | - | 1,802 | 94,823 | - | - | 2,846 | 84,845 | ||||||||
Michael L. Kaplan | - | - | 653 | 32,418 | - | - | 998 | 31,058 | ||||||||
Dean Cookson | - | - | 566 | 17,750 | ||||||||||||
Former Executives | ||||||||||||||||
Denny Marie Post | - | - | 10,962 | 336,920 | ||||||||||||
Pattye L. Moore(3) | - | - | 2,184 | 67,441 | ||||||||||||
Guy J. Constant | - | - | 3,883 | 115,464 |
Non-qualified Deferred Compensation
The following table shows information about the amount of contributions, earnings, and balances for each named executive officer under the Company's Deferred Compensation Plan as of December 31, 2017.29, 2019.
Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings in Last Fiscal Year ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings (Loss) in Last Fiscal Year ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Denny Marie Post | - | - | 28,506 | - | 283,994 | |||||||||||||||
Guy J. Constant | - | - | - | - | - | |||||||||||||||
Carin L. Stutz | - | - | 1,949 | - | 13,711 | |||||||||||||||
Paul J.B. Murphy III | - | - | - | - | - | |||||||||||||||
Lynn S. Schweinfurth | - | - | - | - | - | |||||||||||||||
Jonathan A. Muhtar | - | - | - | - | - | - | - | - | - | - | ||||||||||
Michael L. Kaplan | - | - | 4,031 | - | 22,357 | - | - | 6,395 | - | 27,042 | ||||||||||
Dean Cookson | - | - | - | - | - | |||||||||||||||
Former Executives | ||||||||||||||||||||
Denny Marie Post | - | - | 47,062 | (103,866) | 207,913 | |||||||||||||||
Pattye L. Moore | 520,270 | - | 52,757 | - | 573,027 | |||||||||||||||
Guy J. Constant | - | - | - | - | - |
Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan. Company employees who are generally considered "highly compensated" pursuant to Internal Revenue Code Section 414(q) are not permitted to participate in the Company's 401(k) program. To permit these employees to save for retirement, the Company has established theThe Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan. The planPlan permits executives and other eligible employees to defer portions of their compensation. Under this plan, eligible employees may elect to defer up to 75% of their base salary and up to 100% of incentive compensation and commissions each plan year. The Company may make matching contributions in an amount determined by the compensation committee. For the 20172019 plan year, the compensation committee authorizedCompany did not make matching contributions equalbecause the Red Robin 401(k) plan was amended in 2019 to 50% ofallow highly compensated employees to participate and receive Company matching contributions under the first 4% of compensation that is deferred by the participant. The Company match for named executive officers and other members of the executive team was capped at $3,000 for the 2017 plan year.401(k) plan.
The Company contributes all amounts deferred under the plan to a rabbi trust. Assets in the rabbi trust are invested in certain mutual funds that cover an investment spectrum ranging from equities to money market instruments. All rabbi trust assets remain available to satisfy the claims of the Company's creditors in the event of the Company's bankruptcy or insolvency.
When participants elect to defer amounts into the plan, they also select when the amounts ultimately will be distributed. Participants can elect to have deferrals for a particular year paid in a future year if the participant is still employed at that time. Such in-service distributions are made in the form of a lump sum or if the participant's total account balance at the time of the in-service distribution is at least $25,000, the participant can elect to receive payment in up to 15 annual
installments. Otherwise, payment of a participant's account is made a minimum of six months from participant's termination of employment in the form of a lump sum or up to 15 annual installments if the participant so elected at the time of deferral and if the participant's total account balance is at least $25,000.$50,000. A participant can elect to change a prior distribution election to further delay distribution provided that such new election must be provided at least 12 months before the date the previously scheduled distribution would have occurred and provided that the new distribution date is at least 5five years from the originally scheduled distribution date. A participant may obtain a withdrawal prior to the date otherwise scheduled or elected by the participant if the participant incurs an "unforeseeable emergency" (generally including illness, casualty losses, etc.).
In December 2017, we amended the plan to remove the threshold requirement for in-service distributions (such that a participant can elect to receive payment in up to 15 annual installments regardless of the total account balance at the time of distribution). In addition, we increased the minimum total account balance to $50,000 for participants that elected to receive payment in installments for deferral elections made in connection with a termination of employment. Such amendments were effective as of January 1, 2018.
With respect to deferrals after 2004, the plan is intended to comply with the requirements of section 409A of the Internal Revenue Code, which was enacted as part of the American Jobs Creation Act of 2004. The plan is a "non-qualified" plan for federal tax purposes, meaning that the arrangements are deemed to be unfunded and an employee's interest in the plan is no greater than that of an unsecured general creditor of the Company.
Employment Agreements and Change in Control AgreementsEMPLOYMENT AGREEMENTS, SEPARATION ARRANGEMENTS, AND CIC PLAN
Executive Employment Agreements
Denny Marie Post Amended Paul Murphy Employment Agreement. Our employment agreement with Mr. Murphy, our President and RestatedChief Executive Officer, dated September 2, 2019, has a term commencing on October 3, 2019 and continuing until December 31, 2022, unless terminated earlier in accordance with the employment agreement. The employment agreement shall only be renewed upon written confirmation by both parties of their intent to renew. Mr. Murphy's employment agreement provides him with an annual base salary of $900,000, a target bonus of 120% of his base salary for fiscal 2020 (which may be subject to adjustment thereafter, but which shall not exceed 200%) and a target long-term incentive award value of $3,000,000. Mr. Murphy also received a sign-on bonus equal to $500,000, of which $275,000 was paid at the time of the board's approval of the annual plan for the fiscal year 2020 and the remaining $225,000 will be paid on October 3, 2020, provided that, on a termination by us for cause or by him without good reason within 36 months after his start date, Mr. Murphy agrees to repay $225,000 of the sign-on bonus, less $6,250 for each full month of employment completed after his start date. Mr. Murphy also received a sign-on award of RSUs with a grant date fair value of $1,600,000 that vests on the third anniversary of the grant date. Mr. Murphy's employment agreement also provides for a monthly car allowance of $1,250, and reimbursement of legal fees incurred in connection with the employment agreement up to $10,000.
The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment not related to a change in control. If the Company terminates Mr. Murphy's employment without cause, or Mr. Murphy terminates his employment for good reason, Mr. Murphy will receive, among other things (a) continued payment of his annual base salary for a period of two years following the effective date of his termination of employment; (b) payment of a pro rata share of his annual bonus; (c) immediate vesting of his sign-on equity award; and (d) upon his timely election under COBRA, a cash payment equal to eighteen months of the Company portion of his health insurance premiums, including coverage for his dependents.
Good reason is defined in Mr. Murphy's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the location prior to such relocation, any breach of
a material provision contained in the employment agreement, or a significant reduction in the responsibilities of the chief executive officer; provided that the Company has 30 days to cure any such condition following Mr. Murphy's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Cause is defined in Mr. Murphy's employment agreement as (a) his continual and deliberate gross neglect in the performance of his material duties; (b) his failure to devote substantially all of his working time to the business of the Company and its subsidiaries (other than as expressly permitted in the employment agreement); (c) his failure to follow the lawful directives of the board in any material respect; (d) his engaging in misconduct in connection with the performance of any of his duties, including, without limitation, falsifying or attempting to falsify documents, books or records of the Company or its subsidiaries, misappropriating or attempting to misappropriate funds or other property, or securing or attempting to secure any personal profit in connection with any transaction entered into on behalf of the Company or its subsidiaries; (e) his violation, in any material respect, of any policy or of any code or standard of behavior or conduct generally applicable to employees of the Company or its subsidiaries; (f) his breach of the material provisions of the employment agreement or any other non-competition, noninterference, non-disclosure, confidentiality or other similar agreement executed by him with the Company or any of its subsidiaries or other act of disloyalty to the Company or any of its subsidiaries (including, without limitation, aiding a competitor or unauthorized disclosure of confidential information); or (g) his engaging in conduct which is reasonably likely to result in material injury to the reputation of the Company or any of its subsidiaries, including, without limitation, commission of a felony, fraud, embezzlement or other crime involving moral turpitude;provided, that a termination for cause by the Company of any of the events described in clauses (a), (b), (d) and (e) above shall only be effective on 30 days advance written notification, providing him the opportunity to cure, if reasonably capable of cure within;provided, however, that no such notification is required if the cause event is not reasonably capable of cure or the board determines that its fiduciary obligation legally requires it to effect a termination of him for Cause immediately.
Lynn S. Schweinfurth Employment Agreement. Our employment agreement with Ms. Post,Schweinfurth, our chief executive officer,Chief Financial Officer, dated August 8, 2016,December 31, 2018, and amended effective July 25, 2017,June 11, 2019, has an indefinite term. Ms. Schweinfurth's employment agreement provides her with an annual base salary of $450,000, a target bonus of 70% of her base salary for fiscal 2019 (which may be subject to adjustment thereafter, but which shall not be less than $211,000 for fiscal year 2019) and, for fiscal year 2019 a target long-term incentive award of 120% of her base salary. Ms. Schweinfurth also received a one-time cash sign on bonus equal to $100,000, provided that on a termination for cause or without good reason within 24 full months after her start date, Ms. Schweinfurth agrees to repay the sign on bonus, less $4,166.67 for each full month of employment completed after the start date. Ms. Schweinfurth also received sign-on awards of RSUs with a grant date fair value of $115,000 that vests in equal installments on the first three anniversaries of the grant date and with a grant date fair value of $185,000 that cliff vests on the third anniversary of the grant date. Ms. Schweinfurth's employment agreement also provides for a monthly car allowance of $850 and reimbursement of relocation expenses incurred in connection with her relocation to Denver, Colorado of up to $190,000.
The employment agreement provides that she is entitled to receive certain benefits upon termination of her employment.employment not related to a change in control. If the Company terminates Ms. Post'sSchweinfurth's employment without cause, or Ms. Schweinfurth terminates her employment for good reason, Ms. Schweinfurth will receive, among other things, payment of an amount equal to one time her annual base salary.
Good reason is defined in Ms. Schweinfurth's employment agreement as a reduction in her compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material
provision contained in the employment agreement, or a significant reduction in her then effective responsibilities; provided that the Company has 30 days to cure any such condition following Ms. Schweinfurth's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Cause generally has the same definition in Ms. Schweinfurth's employment agreement as in Mr. Murphy's employment agreement, except the cure period is 10 days instead of 30 days.
Jonathan A. Muhtar Employment Agreement. Our amended and restated employment agreement with Mr. Muhtar, our Chief Concept Officer, dated August 20, 2018, has an indefinite term and provides him with an annual base salary of $425,000, a target bonus of 70% of his base salary (but which would not be less than $262,500 for fiscal year 2015 and which is currently 75% of his base salary) and, a target long-term incentive award of 140% of his base salary for fiscal year 2016. Mr. Muhtar received a one-time cash sign-on bonus of $200,000 and a sign-on equity grant of RSUs with a grant date value of $250,000 and stock options with a grant date value of $250,000, in each case, that vest in equal installments on the first three anniversaries of the grant date. Mr. Muhtar's employment agreement also provides for a monthly car allowance of $850 and provided that he was entitled to reimbursement of relocation expenses incurred in connection with his relocation to Denver, Colorado, including a tax gross up on such reimbursements, of $170,000. Mr. Muhtar was required to repay the cash sign-on bonus, the grant date value of his sign-on equity grants, the guaranteed annual bonus for 2015, and the payments if he terminated his employment without good reason or we terminated him for cause prior to the first anniversary of his start date.
The employment agreement provides that he is entitled to receive certain benefits upon the occurrencetermination of his employment not related to a change in control, subjectcontrol. If the Company terminates Mr. Muhtar's employment without cause, or Mr. Muhtar terminates his employment for good reason, Mr. Muhtar will receive, among other things, payment of an amount equal to one times his annual base salary.
Good reason is defined in Mr. Muhtar's employment agreement as a reduction in his compensation other than as permitted under the limitationsemployment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in his then-effective responsibilities; provided that the Company has 30 days to cure any such condition following Mr. Muhtar's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Cause generally has the same definition in Mr. Muhtar's employment agreement as in Ms. Schweinfurth's employment agreement.
Michael L. Kaplan Employment Agreement. Our amended and conditions described below, sherestated employment agreement with Mr. Kaplan, our Chief Legal Officer, dated August 20, 2018, has an indefinite term and provides him with an annual base salary of $335,000 (which is currently $400,000), a target bonus of 70% of his base salary and, for 2014 a target long-term incentive award of 80% of his base salary. In addition, Mr. Kaplan received a sign on equity award in the amount of $20,000 that vest in equal installments on the first, second, third, and fourth anniversaries of the grant date. Mr. Kaplan's employment agreement also provides for a monthly car allowance of $833.33, and provided he was entitled to reimbursement of relocation expenses incurred in connection with his relocation to Denver, Colorado, including a tax gross up on such reimbursements, up to $400,000 in the aggregate.
The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment not related to a change in control. If the Company terminates
Mr. Kaplan's employment without cause, or Mr. Kaplan terminates his employment for good reason, Mr. Kaplan will receive, among other things, (a) payment of an amount equal to two times herone time his annual base salary; (b) her pro rata share of the annual bonus, calculated and paid at the end of the plan cycle, that would otherwise have been earned and been payable had she continued to be employed by the Company; (c) payment of an amount equal to two times the highest annual bonus amount earned by Ms. Post for performance in the last three fiscal years prior to the change in control date for which bonuses have been paid or are payable; (d)(b) payment of an amount equal to the difference betweentarget amount of Mr. Kaplan's annual incentive for the exercise pricefiscal year in which the effective date of each outstanding option grantedtermination occurs.
Good reason is defined in Mr. Kaplan's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief legal officer; provided that the Company has 30 days to cure any such condition following Mr. Kaplan's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Cause generally has the same definition in Mr. Kaplan's employment agreement as in Mr. Murphy's employment agreement, except that the cure period only applies to clause (a).
Each of the above agreements also contains standard confidentiality, non-competition, and non-solicitation provisions.
Denny Marie Post Retirement Agreement. On April 3, 2019, Ms. Post notified the board of her retirement as President and the fair market value of the common sharesChief Executive Officer of the Company atand her resignation from the timeboard, in each case effective as of termination; and (e) paymentApril 3, 2019. Ms. Post served as President of an amount equal to the product of (i) the portion of premiums of Ms. Post's group health insurance that the Company paid immediately priorfrom February 2016 until her departure and as Chief Executive Officer of the Company from August 2016 until her departure. Our employment agreement with Ms. Post, dated August 20, 2018, as reaffirmed by her retirement agreement with the Company, provided certain benefits to her, date of termination and (ii) eighteen.
If Ms. Post's employment is terminated either by the Company without cause, or by Ms. Post for good reason, as those terms are defined in the agreement, Ms. Post will receive,including, among other things, (a) continued payment of her annual base salary for a period of two years following the effective date of termination;retirement; (b) herpayment of a pro rata share of theher annual bonus calculatedfor 2019 based on actual performance; and paid at(c) upon her timely election under COBRA, a cash payment equal to eighteen months of her health insurance premiums, including coverage for her dependents.
Pattye L. Moore Separation Arrangement. Ms. Moore retired from her position as Interim Chief Executive Officer effective October 3, 2019 and from her position on the endboard of directors of the plan cycle, that would otherwise have been earnedCompany effective as of December 31, 2019. In connection with Ms. Moore's resignation, Ms. Moore and be payable had she continuedthe Company entered into a transition services agreement, dated December 30, 2019, under which Ms. Moore agreed to provide advisory services to the Company effective as of December 31, 2019 through the date of the Company's 2020 annual meeting of the stockholders. Pursuant to the terms of the transition services arrangement, Ms. Moore is deemed to be employedan independent contractor of the Company and is not entitled to any right, privileges, or benefits that employees of the Company are entitled to, but will continue to vest in her equity awards through the date of the Company's 2020 annual meeting of the stockholders. The transition services agreement also contains a general release by Ms. Moore of claims against the Company, and other customary terms.
Guy J. Constant Employment Agreement. Effective as of January 7, 2020, Mr. Constant's employment with the Company was terminated without cause. Mr. Constant served as Executive Vice President and Chief Operating Officer of the Company from January 2019 until his departure and prior to that served as Executive Vice President and Chief Financial Officer since December 2016. Our employment agreement with Mr. Constant, dated December 13, 2016 and amended effective August 20, 2018, provided certain severance benefits to him, including, among other things, payment of an amount equal to one times his annual base salary.
The Company's employment agreements with its executive officers provide that such executive officers shall participate in the Company's Executive Change in Control Severance Plan, effective August 14, 2018 (the "Change in Control Plan"). Following a review of the Company's change in control benefits, which were set forth in individual agreements, the compensation committee found the benefits were below market and had inconsistent terms among various executives. The committee transitioned to the Change in Control Plan to adjust and adopt provisions consistent with the market and to provide consistent benefits across the executive team while enabling the Company to maintain the ability to differentiate benefits by title, lessen administrative burdens, ease the ability to modify benefits, and simplify negotiations in the future. The Change in Control Plan provides that if the executive's employment with the Company is terminated (a) by the Company;Company without cause or (b) by the executive for good reason during the 24-month period following a change in control, the executive is entitled to receive, among other things, the following payments and (c) benefits:
Tabletwenty-four (24) months (in the case of Contentsthe chief executive officer, president or any executive vice president of the Company) or twelve (12) months (in the case of any senior vice president of the Company), as applicable; and
Generally, under Ms. Post's employment agreementthe Change in Control Plan and subject to limited exceptions set forth in the agreement,Change in Control Plan, a change in control will be deemed to occur if any person acquires more than 50%30% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Ms. Post is not entitled to any such payment unless her employment with the Company is terminated by the Company without cause or by Ms. Post for good reason within the two-year period following such change in control.
Good reason is defined in Ms. Post's agreement as a reduction in herthe executive's compensation, other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief executive officer; provided that the Company has 30 days to cure any such condition following Ms. Post's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Guy J. Constant Employment Agreement. Our employment agreement with Mr. Constant, our chief financial officer, dated December 13, 2016, and amended effective July 25, 2017, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Constant's employment upon the occurrence of a change in control, subject to the limitations and conditions described below, he will receive, among other things, (a) payment of an amount equal to one time his annual base salary; (b) payment of the higher of Mr. Constant's target or actual annual bonus amount earned by Mr. Constant for performance during the fiscal year in which the change in control occurs; (c) payment of an amount equal to the difference between the exercise price of each outstanding option granted to Mr. Constant and the fair market value of the common shares of the Company at the time of termination; and (d) payment of an amount equal to the product of (i) the portion of premiums of Mr. Constant's group health insurance that the Company paid immediately prior to his date of termination and (ii) twelve.
If the Company terminates Mr. Constant's employment without cause, or Mr. Constant terminates his employment for good reason, Mr. Constant will receive, among other things, payment of an amount equal to one time his annual base salary.
Generally, under Mr. Constant's employment agreement and subject to limited exceptions set forth in the agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Constant is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. Constant for good reason within the two-year period following such change in control.
Good reason is defined in Mr. Constant's employment agreement as a material reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief financial officer; provided thatexecutive without the executive's prior written consent, or failure by the Company has 30 days to cure any such condition following Mr. Constant's notice thereof (which notice is required to be provided within 90 daysobtain the assumption of the initial existence of the condition).
In connection with entering his employment agreement, Mr. Constant received a sign-on equity award consisting of (i) a stock option for 20,695 shares (representing an aggregate grant date fair value of $400,000) and (ii) 3,666 restricted stock units ("RSUs") with a grant date fair value of $200,000. He also received a performance stock unit of 7,332 shares (at target).
Jonathan A. Muhtar Employment Agreement. Our employment agreement with Mr. Muhtar, our chief concept officer, dated November 26, 2015, and amended effective July 25, 2017, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Muhtar's employment upon the occurrence of a changeobligations contained in control, subject to the limitations and conditions described below, he will receive, among other things, (a) payment of an amount equal to one time his annual base salary; (b) payment of the higher of Mr. Muhtar's target or actual annual bonus amount earned by Mr. Muhtar for performance during the fiscal year in which the change in control occurs; (c) payment of an amount equalagreement by any successor to the difference between the exercise price of each outstanding option granted to Mr. Muhtar and the fair market value of the common shares of the Company at the time of termination; and (d) payment of an amount equal to the product of (i) the portion of premiums of Mr. Muhtar's group health insurance that the Company paid immediately prior to his date of termination and (ii) twelve.Company.
If the Company terminates Mr. Muhtar's employment without cause, or Mr. Muhtar terminates his employment for good reason, Mr. Muhtar will receive, among other things, payment of an amount equal to one time his annual base salary.
Generally, under Mr. Muhtar's employment agreement and subject to limited exceptions set forth in the employment agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Muhtar is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. Muhtar for good reason within the two-year period following such change in control.
Good reason is defined in Mr. Muhtar's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in his then-effective responsibilities; provided that the Company has 30 days to cure any such condition following Mr. Muhtar's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Carin L. Stutz Employment Agreement. Our employment agreement with Ms. Stutz, our chief operating officer, dated April 27, 2016, has an indefinite term. The employment agreement provides that she is entitled to receive certain benefits upon termination of her employment. If the Company terminates Ms. Stutz's employment upon the occurrence of a change in control, subject to the limitations and conditions described below, she will receive, among other things, (a) payment of an amount equal to one time her annual base salary; (b) payment of the higher of Ms. Stutz's target or actual annual bonus amount earned by Ms. Stutz for performance during the fiscal year in which the change in control occurs; (c) payment of an amount equal to the difference between the exercise price of each outstanding option granted to Ms. Stutz and the fair market value of the common shares of the Company at the time of termination; and (d) payment of an amount equal to the product of (i) the portion of premiums of Ms. Stutz's group health insurance that the Company paid immediately prior to her date of termination and (ii) twelve.
If the Company terminates Ms. Stutz's employment without cause, or Ms. Stutz terminates her employment for good reason, Ms. Stutz will receive, among other things, payment of an amount equal to one time her annual base salary.
Generally, under Ms. Stutz's employment agreement and subject to limited exceptions set forth in the agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Ms. Stutz is not entitled to any such payment unless her employment with the Company is terminated by the Company without cause or by Ms. Stutz for good reason within the two-year period following such change in control.
Good reason is defined in Ms. Stutz's employment agreement as a reduction in her compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief operating officer; provided that the Company has 30 days to cure any such condition following Ms. Stutz's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Michael L. Kaplan Employment Agreement. Our employment agreement with Mr. Kaplan, our chief legal officer, dated September 30, 2013, and amended effective July 25, 2017, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Kaplan's employment upon the occurrence of a change in control, subject to the limitations and conditions described below, he will receive, among other things, (a) payment of an amount equal to one time his annual base salary; (b) payment of the higher of Mr. Kaplan's target or actual annual bonus amount earned by Mr. Kaplan for performance during the fiscal year in which the change in control occurs; (c) payment of an amount equal to the difference between the exercise price of each outstanding option granted to Mr. Kaplan and the fair market value of the common shares of the Company at the time of termination; and (d) payment of an amount equal to the product of (i) the portion of premiums of Mr. Kaplan's group health insurance that the Company paid immediately prior to his date of termination and (ii) twelve.
If the Company terminates Mr. Kaplan's employment without cause, or Mr. Kaplan terminates his employment for good reason, Mr. Kaplan will receive, among other things, (a) payment of an amount equal to one time his annual base salary; and (b) payment of an amount equal to the target amount of Mr. Kaplan's annual bonus for the fiscal year in which the effective date of termination occurs.
Generally, under Mr. Kaplan's employment agreement and subject to limited exceptions set forth in the employment agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Kaplan is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. Kaplan for good reason within the two-year period following such change in control.
Good reason is defined in Mr. Kaplan's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief legal officer; provided that the Company has 30 days to cure any such condition following Mr. Kaplan's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
The Company has change in control agreements with certain of its current executive officers other than those who have separate employment agreements. The Company's change in control agreements provide that if the executive resigns for good reason or is terminated by the Company other than for cause or disability or other than as a result of the executive's death during the 24-month period following a change in control, the executive is entitled to receive the following payments and benefits:
None of our change in control provisions provide for an excise tax gross up payment for Internal Revenue Code Section 280G/4999 purposes. The board has determined not to enter into any agreements with a named executive officer that contain such an excise tax gross up provision. The definition of change in control is substantially similar to the definition contained in the employment agreements with our named executive officers, as discussed above. Good reason is defined as a reduction in the executive's compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a significant reduction in the then-effective responsibilities of the executive without the executive's prior written consent (for this purpose, if the Company ceases to be a publicly traded corporation, the executive will not be deemed to have suffered such a reduction in the nature and scope of his or her responsibilities solely because of the change in the nature and scope thereof resulting from the Company no longer being publicly traded), or failure by the Company to obtain the assumption of the obligations contained in the change in control agreement by any successor to the Company. The agreements also contain standard confidentiality and non-solicitation provisions.
Set forth below is a description of the change in control provisions contained within our 2017 Plan and our Second Amended and Restated 2007 Performance Incentive Plan (under which there are unvested awards currently outstanding), and our Cash Incentive Plan.. All outstanding awards under our 2004 Plan are vested.
2017 Plan.Plan, as Amended. Generally, and subject to limited exceptions set forth in the 2017 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstandingthen outstanding under the 2017 Plan may become fully vested or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event.event; provided, that, pursuant to the amendment to the 2017 Plan approved in the Company's April 10, 2019 proxy statement, all awards, including awards of stock options and stock appreciation rights (but excluding performance-based awards) issued to individuals other than non-employee directors of the board shall be subject to a minimum vesting period of at least one year from the date of the award, and that all awards, including awards of stock options and stock appreciation rights, if any, to non-employee directors of the board shall be subject to a minimum vesting period ending no earlier than the sooner of the next annual stockholders meeting and one year from the date of the award. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the two-year period following such change in control event. The compensation committee also has the discretion to establish other change in control provisions with respect to awards granted under the 2017 Plan. For example, subject to certain limitations, the compensation committee could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event. The compensation committee has established awards of PSUs and cash performance awards
under the 2017 Plan that provide for acceleration of vesting of such awards in the event of death, disability, or retirement of the participant or a change in control event of the Company.
Second Amended and Restated 2007 Performance Incentive Plan. Generally, and subject to limited exceptions set forth in the 2007 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2007 Plan may become fully vested
or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the two-year period following such change in control event. The administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2007 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Cash Incentive Plan. Through fiscal year Beginning in May 2017, the Company awarded bonuses under the Cash Incentive Plan. At the beginning of each performance period under the Cash Incentive Plan, the compensation committee established when bonus awards for such performance period were to be paid. Under that plan, the compensation committee had the ability to provide for the effect of any participant's death, disability, termination without cause, or a change in control event of the Company on the payment of awards for the performance period. The definition of a change in control event under the Cash Incentive Plan is substantially the same as that contained in the 2007 Plan and the 2017 Plan. The compensation committee also had the discretion to establish other change in control provisions with respect to awards granted under the Cash Incentive Plan. Beginning in fiscal year 2018, the Company intends to makehas made all awards, including annual bonus award,incentive awards, under the 2017 Plan.
There are currently no amounts payable to or accrued for payment to any named executive officer under the change in control provisions contained in the plans.
Potential Payments upon Termination or Change in Control
The following table presents the amount of compensation payable to each of our named executive officers as if the triggering termination event had occurred on the last day of our most recently completed fiscal year, December 31, 2017:29, 2019:
Name | Benefit(1) | Termination w/o Cause or Resignation with Good Reason($) | Termination with Cause or Resignation w/o Good Reason($) | Death($) | Disability($) | Change in Control($)(2) | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Denny Marie Post | Salary | 1,500,000(3) | 1,500,000(4) | |||||||||
Bonus | 653,777(9) | 653,777(9) | 653,777(9) | 653,777(9) | 1,961,331(10) | |||||||
Health Benefits | 10,678(11) | 10,678(11) | ||||||||||
Acceleration of LTI Cash Award | 183,306(14) | 183,306(14) | 274,945(17) | |||||||||
Acceleration of Restricted Stock Units | 729,985(15) | |||||||||||
Acceleration of Options | 1,033,375(16) | |||||||||||
Acceleration of Performance Stock Units | 152,506(18) | 152,506(18) | 992,471(19) | |||||||||
Guy J. Constant | Salary | 500,000(5) | 500,000(5) | |||||||||
Bonus | 254,247(9) | 254,247(9) | 254,247(9) | 254,247(9) | 604,247(17) | |||||||
Health Benefits | 7,073(12) | |||||||||||
Acceleration of LTI Cash Award | ||||||||||||
Acceleration of Restricted Stock Units | 206,762(15) | |||||||||||
Acceleration of Options | 38,286(16) | |||||||||||
Acceleration of Performance Stock Units | 50,027(18) | 50,027(18) | 325,710(19) | |||||||||
Carin Stutz | Salary | 475,000(6) | 475,000(6) | |||||||||
Bonus | 258,787(9) | 258,787(9) | 258,787(9) | 258,787(9) | 615,037(13) | |||||||
Health Benefits | 4,951(12) | |||||||||||
Acceleration of LTI Cash Award | 80,000(14) | 80,000(14) | 240,024(17) | |||||||||
Acceleration of Restricted Stock Units | 227,348(15) | |||||||||||
Acceleration of Options | 134,758(16) | |||||||||||
Jonathan A. Muhtar | Salary | 385,000(7) | 385,000(7) | |||||||||
Bonus | 195,770(9) | 195,770(9) | 195,770(9) | 195,770(9) | 465,270(13) | |||||||
Health Benefits | 7,073(12) | |||||||||||
Acceleration of LTI Cash Award | 210,026(14) | 210,026(14) | 420,046(17) | |||||||||
Acceleration of Restricted Stock Units | 352,331(15) | |||||||||||
Acceleration of Options | 402,226(16) |
Name | Benefit(1) | Termination w/o Cause or Resignation with Good Reason($) | Termination with Cause or Resignation w/o Good Reason($) | Death($) | Disability($) | Change in Control($)(2) | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Paul J.B. Murphy III | Salary | 1,800,000(3) | - | - | - | - | ||||||
Salary + Annual Incentive | - | - | - | - | 1,800,000(4) | |||||||
Annual Incentive | -(5) | -(5) | -(5) | -(5) | -(5) | |||||||
Health Benefits | 8,996(6) | - | - | - | 11,994(7) | |||||||
Acceleration of Restricted Stock Units | 1,643,969(8) | - | - | - | 1,643,969(9) | |||||||
Acceleration of Options | - | - | - | - | - | |||||||
Acceleration of Performance Stock Units | - | - | - | - | - | |||||||
Lynn S. Schweinfurth | Salary | 450,000(10) | - | - | - | - | ||||||
Salary + Annual Incentive | - | - | - | - | 1,530,000(4) | |||||||
Annual Incentive | 211,000(14) | 211,000(14) | 211,000(14) | 211,000(14) | 313,274(11) | |||||||
Health Benefits | - | - | - | - | 6,981(7) | |||||||
Acceleration of Restricted Stock Units | - | - | - | - | 573,745(9) | |||||||
Acceleration of Options | - | - | - | - | - | |||||||
Acceleration of Performance Stock Units | - | - | 17,129(12) | 17,129(12) | 271,699(13) |
Name | Benefit(1) | Termination w/o Cause or Resignation with Good Reason($) | Termination with Cause or Resignation w/o Good Reason($) | Death($) | Disability($) | Change in Control($)(2) | Benefit(1) | Termination w/o Cause or Resignation with Good Reason($) | Termination with Cause or Resignation w/o Good Reason($) | Death($) | Disability($) | Change in Control($)(2) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jonathan A. Muhtar | Salary | 425,000(15) | - | - | - | - | ||||||||||||||||||
Salary + Annual Incentive | - | - | - | - | 1,487,500(4) | |||||||||||||||||||
Annual Incentive | 105,315(14) | 105,315(14) | 105,315(14) | 105,315(14) | 317,877(11) | |||||||||||||||||||
Health Benefits | - | - | - | - | 17,624(7) | |||||||||||||||||||
Acceleration of Restricted Stock Units | - | - | - | - | 299,781(9) | |||||||||||||||||||
Acceleration of Options | - | - | - | - | -(16) | |||||||||||||||||||
Acceleration of Performance Stock Units | - | - | 41,642(12) | 41,642(12) | 362,337(13) | |||||||||||||||||||
Michael L. Kaplan | Salary | 355,000(8) | 355,000(8) | Salary | 400,000(17) | - | - | - | - | |||||||||||||||
Bonus | 429,015(20) | 180,515(9) | 180,515(9) | 180,515(9) | 429,015(13) | Salary + Annual Incentive | - | - | - | 680,000(18) | ||||||||||||||
Health Benefits | 7,073(12) | Annual Incentive | 280,000(19) | 90,021(14) | 90,021(14) | 90,021(14) | 279,333(11) | |||||||||||||||||
Acceleration of LTI Cash Award | 121,850(14) | 121,850(14) | 244,885(17) | Health Benefits | - | - | - | - | 6,563(7) | |||||||||||||||
Acceleration of Restricted Stock Units | 143,425(15) | Acceleration of Restricted Stock Units | - | - | - | - | 167,159(9) | |||||||||||||||||
Acceleration of Options | 69,739(16) | Acceleration of Options | - | - | - | - | -(16) | |||||||||||||||||
Acceleration of Performance Stock Units | - | - | 22,962(12) | 22,962(12) | 199,988(13) | |||||||||||||||||||
Dean Cookson | Salary | - | - | - | - | |||||||||||||||||||
Salary + Annual Incentive | - | - | - | - | 544,000(18) | |||||||||||||||||||
Annual Incentive | - | - | - | - | 203,441(11) | |||||||||||||||||||
Health Benefits | - | - | - | - | 8,812(7) | |||||||||||||||||||
Acceleration of Restricted Stock Units | - | - | - | - | 371,491(9) | |||||||||||||||||||
Acceleration of Options | - | - | - | - | -(16) | |||||||||||||||||||
Acceleration of Performance Stock Units | - | - | 16,632(12) | 16,632(12) | 144,910(13) | |||||||||||||||||||
- | - | - | - | - | ||||||||||||||||||||
Former Executive | - | - | - | - | - | |||||||||||||||||||
Guy J. Constant | Salary | 515,000(20) | - | - | - | - | ||||||||||||||||||
Salary + Annual Incentive | - | - | - | - | 1,802,500(4) | |||||||||||||||||||
Annual Incentive | 127,617(14) | 127,617(14) | 127,617(14) | 127,617(14) | 385,192(11) | |||||||||||||||||||
Health Benefits | - | - | - | - | 13,126(7) | |||||||||||||||||||
Acceleration of Restricted Stock Units | - | - | - | - | 941,171(9) | |||||||||||||||||||
Acceleration of Options | - | - | - | - | -(16) | |||||||||||||||||||
Acceleration of Performance Stock Units | - | - | 129,954(12) | 129,954(12) | 517,425(13) |
executive officers would have received benefits and payments under these plans in addition to the amounts described in the table above.
is equal to two times her highest bonus amount earned in the last three completed fiscal years payable in a lump sum at the regularly scheduled payment dateeighteen months following the effective date of termination.
have been achieved. Accordingly, the values included in the table above are based on the number of shares that would have vested under the PSU on December 31, 2017 (the29, 2019 (each of which is the last day of a tranche under the PSU awards), multiplied by the closing sales price of the Company's common stock on Nasdaq as of December 29, 2017,27, 2019, the last business day immediately preceding such date ($56.40)31.03).
As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are providing information about the ratio of the annual total compensation of our Chief Executive Officer Mr. Murphy, who served in such capacity effective October 3, 2019 through the duration of fiscal year 2019, to the annual total compensation of our median employee. We believe our pay ratio,
which is based on our payroll and employment records using the methodology described below, is a reasonable estimate calculated in a manner consistent with the SEC pay ratio rules.
Approximately 92% of our employee population consists of hourly restaurant Team Members. Red Robin hourly restaurant roles can be full-time or part-time. Flexible and part-time employment opportunities can be attractive for Team Members seeking to balance other commitments, have a social connection, or earn supplemental income. However, part-time employment has the effect of reducing the annual total compensation for our median employee.
To determine the median employee, we used total cash compensation paid in 2018 as reported to the Internal Revenue Service on Form W-2 of our employee population (including full-time, part-time, temporary, and seasonal employees), excluding our former Chief Executive Officer, on December 30, 2018. In reliance on the de minimis exemption under the pay ratio rules, we excluded 1,286 Team Members in Canada, representing less than 5% of our total employee population of approximately 25,841 individuals as of December 30, 2018. No cost of living adjustments were made to determine the median employee. We did, however, annualize the compensation used for full-time and part-time employees who were not employed by Red Robin for all of 2018 by taking an employee's compensation for the number of active weeks for which they were employed and annualizing such amount for the full year. We believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do not widely distribute equity awards to employees. Less than 1.0% of our total employee population of 25,841 individuals as of December 30, 2018 received equity awards in 2018. The employee who was selected in 2018 was promoted from a Restaurant Team Member to a Restaurant Manager position during 2019. Therefore, the next closest employee to the median employee selected in 2018 was selected as the representative median employee for 2019. Our median employee was identified as a restaurant Team Member who was paid on an hourly basis and who worked an average of 16.17 hours per week (or 841 hours per year) in 2019. After identifying the median employee, we calculated that employee's 2019 annual total compensation using the same methodology (and including all the same compensation elements) that we used for our named executive officers in the 2019 Summary Compensation Table set forth above in this proxy statement.
To determine our CEO total compensation, we adjusted Mr. Murphy's actual 2019 salary since his hire date of $180,000 to his annual salary amount of $900,000. Using this methodology, our median employee's annual total compensation for 2019 was $22,157. The annual 2019 total compensation of our CEO after annualizing the salary and other applicable perquisite compensation items generally delivered to senior executives including car and phone allowance, company paid life insurance, and Company match on 401(k) contributions is $2,803,349. As a result, we estimate that for fiscal year 2019, the ratio of our CEO annual total compensation to that of our median employee was approximately 127:1.
Because the rules governing pay ratio disclosure allow for companies to use different methodologies, apply various exclusions, and otherwise make reasonable assumptions and estimates that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio. As a result, our pay ratio should not be used as a basis for comparison between us and other companies. We have provided this pay ratio information for compliance purposes, and neither the compensation committee nor Company management has used the pay ratio measure to influence decisions in determining compensation for our executives or other employees.
PROPOSAL 22:
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Pursuant to Section 14A of the Exchange Act, theThe Company is again asking our stockholders to cast anseeks a non-binding advisory vote from its stockholders to approve the executive compensation of our named executive officers as disclosed in this proxy statement. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation programs. As an advisory vote, the outcome of the vote on this proposal is not binding upon us. Our compensation committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by our stockholders and will consider the outcome of this vote when making future compensation decisions for our named executive officers. In 2017,2019, our advisory vote proposal was supported by approximately 98.5%90.7% of the votes cast. The board has adopted a policy of providing for annual say-on-pay advisory votes.
As described in detail under the heading "Compensation Discussion and Analysis," our executive compensation objectives have been designed to link incentives and rewards for our executives to the achievement of specific and sustainable financial and strategic goals which are expected to result in increased stockholder value. We believe that our executive compensation program satisfies these goals and is aligned with the long-term interests of our stockholders. Highlights of our current compensation program include the following.
Please read the "Compensation Discussion and Analysis" section contained in this proxy statement, including the tables and narrative disclosures contained therein for additional details about our executive compensation programs.
We request stockholder approval of the 20172019 compensation of our named executive officers as disclosed in this proxy statement. This vote is not intended to address any specific element of compensation, but rather the overall compensation of our named executive officers and the compensation philosophy, policies, and practices described in this proxy statement. Accordingly, we ask that you voteFOR the following resolution to approve, on an advisory basis, the compensation of our named executive officers:
"RESOLVED, that the stockholders of Red Robin Gourmet Burgers, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company's proxy statement for the 20182020 annual meeting of stockholders pursuant to the compensation disclosure rules of the U. S.U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20172019 Summary Compensation Table, and the other related tables and disclosure within this proxy statement."
Please read the "Compensation Discussion and Analysis" section contained in this proxy statement, including the tables and narrative disclosures contained therein for additional details about our executive compensation programs.
Proposal No. 2 requires the approval of a majority of the votes cast on the proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.
Board RecommendationBOARD RECOMMENDATION
Our board of directors unanimously recommends a vote OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR this proposal. THIS PROPOSAL.
PROPOSAL 3:
APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
Our Employee Stock Purchase Plan (the "ESPP") was adopted by our board of directors and approved by our stockholders in 2002. Since its original adoption in 2002, our board of directors has effected three subsequent amendments, in August 2009 and in December 2009, and an amendment and restatement in February 2017. Under the ESPP, eligible employees have the opportunity to acquire shares of our common stock at a discount.
A total of 386,710 shares of our common stock were authorized for issuance under the ESPP. As of March 30, 2020, 346,213 shares of our common stock were issued under the ESPP, and 40,497 shares of our common stock were available for issuance under the ESPP. On February 25, 2020, the board approved a proposal to further amend and restate the ESPP to increase the number of shares of common stock authorized for issuance under the ESPP by an additional 150,000 shares. We are seeking stockholder approval of the amendment to the ESPP.
Set forth below is a summary of the principal terms of the ESPP as proposed to be amended, and all references in this section are to the ESPP as proposed to be amended. The summary of the provisions below is qualified in its entirety by the full text of the ESPP. A copy of the ESPP as amended and restated by the proposed amendment is attached to this proxy statement as Appendix A.
SUMMARY DESCRIPTION OF THE ESPP
Purpose. The purpose of the ESPP is to assist eligible employees in acquiring a stock ownership interest in the Company, at a favorable price and upon favorable terms, pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code (the "Code"). The ESPP is also intended to encourage eligible employees to remain in the employ of the Company or a subsidiary and to provide them with an additional incentive to advance the best interests of the Company.
Administration. The compensation committee shall supervise and administer the ESPP and shall have full power and discretion to adopt, amend, and rescind any rules deemed desirable and appropriate for the administration of the ESPP, and to make all other determinations necessary or advisable for the administration of the ESPP.
Eligibility. Any person who is employed by the Company or a participating subsidiary as of the first day of any offering period (the "Grant Date") shall be eligible to participate in the ESPP during the offering period in which such Grant Date occurs; provided, however, that any person who has been employed by the Company or a subsidiary for less than one year or whose customary employment is for twenty hours or less per week shall not be eligible to participate in the ESPP.
Maximum Purchase. The maximum number of shares that any one participant may acquire upon exercise of his or her option with respect to any one offering period is 750; provided, however, that the compensation committee may establish a different individual limit in offering documents, in which case the 750 share limit shall be superseded by the individual limit set forth in such offering documents.
Offering Periods. The ESPP is implemented by consecutive six-month offering periods; provided, however, that the compensation committee may declare, as it deems appropriate and in advance of the
applicable offering period, a shorter or longer offering period. Unless otherwise specified by the compensation committee in advance of the offering period, an offering period that commences on or about July 1 will end the following December 31, and an offering period that commences on or about January 1 will end the following June 30.
Method of Payment of Contributions. At the time an eligible employee files a subscription agreement with the Company to participate in the ESPP, he or she elects to have payroll deductions made on each payday during the offering period in an amount not exceeding 15% of the compensation such participant receives on each payday during the offering period. The Company shall maintain on its books, or cause to be maintained by a recordkeeper, an account in the name of each eligible employee who has elected to participate in the ESPP. A participant may not make any additional payments to his or her account. A participant may terminate his or her contributions during an offering period by filing with the Company a written withdrawal form; provided, however, that for such withdrawal to be effective, the Company must receive the participant's withdrawal form prior to the last day of that offering period (the "Exercise Date").
Grant of Option. On each Grant Date, each eligible employee who is a participant during that offering period shall be granted an option to purchase a number of shares of our common stock. The option shall be exercised on the Exercise Date. The number of shares subject to the option shall be determined by dividing the participant's account balance as of the applicable Exercise Date by the option price, subject to the maximum number of shares provided under the heading "Maximum Purchase" above.
The compensation committee shall determine the option price per share at which shares of our common stock are sold in an offering period under the ESPP; provided that such option price may not be less than the lesser of (a) 85% of the fair market value of a share of our common stock on the applicable Grant Date; and (b) 85% of the fair market value of a share of our common stock on the applicable Exercise Date. Fair market value shall mean, as of any date and unless the compensation committee determines otherwise, the closing sales price of our common stock as quoted on any established stock exchange or national market system on the date of determination (or the closing bid, if no sales were reported) as reported in a source the compensation committee deems reliable.
A person who is otherwise eligible to participate in the ESPP shall not be granted any option or other right to acquire our common stock under the ESPP to the extent (a) it would cause the person to own stock possessing 5% or more of the total combined voting power or value of all classes of our common stock or that of any subsidiary; or (b) such option would cause the individual to have rights to acquire stock under the ESPP (and any of our other existing compensation plans or compensation plans of our subsidiaries) that accrue at a rate that exceeds $25,000 of the fair market value of our common stock or that of a subsidiary for each calendar year in which such right is outstanding at any time.
Exercise of Option. Unless a participant terminates his or her participation in the ESPP by filing a withdrawal form, as discussed above, his or her option to acquire our common stock shall be exercised automatically on the Exercise Date for that offering period, without any further action on the participant's part, and the maximum number of whole shares of our common stock subject to such option shall be acquired at the option price with the balance of such participant's account. Fractional shares of our common stock may not be acquired. If an amount which exceeds the individual limit established pursuant to Section 4(b) of the ESPP or one of the limitations set forth in Section 8(c) of the ESPP remains in a participant's account after the exercise of his or her option on the Exercise Date, such amount shall be refunded to the participant as soon as administratively practicable after such date.
Transferability. Rights granted under the ESPP are not transferable by a participant other than by will, by the laws of descent and distribution or pursuant to the ESPP's beneficiary designation provisions.
Adjustments of and Changes in our Common Stock. Should any change be made to our common stock by reason of any reclassification, recapitalization, stock split, or reverse stock split; any merger, combination, consolidation, or other reorganization; any split-up, spin-off, or similar extraordinary dividend; any exchange of our common stock or other securities, any similar, unusual or extraordinary corporate transaction in respect to our common stock; or any sale of substantially all of the assets of the Company as an entirety; the compensation committee may make appropriate adjustments to the option price and number of shares of our common stock issuable under the ESPP.
Possible Early Termination of ESPP and Options. Upon a dissolution of the Company, or any other event described in "Adjustments of and Changes in our Common Stock" above, in respect of which the Company is not the surviving corporation, the ESPP and, if prior to the last day of an offering period, any outstanding option granted with respect to that offering period shall terminate, subject to any provision that has been expressly made by our board of directors for the survival, substitution, assumption, exchange, or other settlement of the ESPP and options. In the event a participant's option is terminated without a provision having been made by our board of directors for a substitution, exchange, or other settlement of the option, such participant's account shall be paid to him or her in cash without interest.
Term of Plan; Amendment or Termination. The ESPP became effective as of July 12, 2017 (the "Effective Date"). No new offering periods shall commence on or after the day after the tenth anniversary of the Effective Date and the ESPP shall terminate as of the later of (a) the tenth anniversary of the Effective Date; and (b) the Exercise Date of the last offering period commenced on or prior to the day before the tenth anniversary of the Effective Date, unless sooner terminated pursuant to Section 4, Section 18, or Section 19 of the ESPP.
Our board of directors may, at any time, terminate or, from time to time, amend, modify, or suspend the ESPP, in whole or in part, without notice. Stockholder approval for any amendment or modification shall not be required, except to the extent required by applicable law or required under Section 423 of the Code in order to preserve the intended tax consequences of the ESPP, or otherwise deemed necessary or advisable by our board of directors.
Tax Withholding. The Company may deduct from a participant's account balance as of an Exercise Date, and before the exercise of the participant's option takes effect, the amount of any taxes which the Company reasonably determines we may be required to withhold with respect to such exercise. In such event, the maximum number of whole shares of our common stock subject to such option shall be acquired at the option price with the balance of the participant's account.
U.S. Federal Income Tax Consequences
The U.S. federal income tax consequences of the ESPP under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the ESPP. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under the ESPP. Furthermore, any tax advice contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Rights to acquire shares of our common stock granted under the ESPP are intended to qualify for favorable federal income tax treatment associated with rights granted under an "employee stock purchase plan" that qualifies under the provisions of Section 423(b) of the Code. Under such an arrangement, no taxable income will be recognized by an employee, and no deductions will be allowable to the Company, upon either the grant or the exercise of purchase rights. However, an employee may become liable for tax upon dispositions of shares acquired under the ESPP, and the tax consequences will depend on how long an employee has held the shares prior to disposition.
Under these provisions, no income will be taxable to a participant until the shares acquired under the ESPP are sold or otherwise disposed of by the participant. If shares acquired under the ESPP are disposed of within two years from the date of grant or within one year from the date of purchase (a transaction referred to as a "disqualifying disposition"), the participant will recognize ordinary income in the year of such disposition equal to the excess of the fair market value of the stock on the date of purchase over the option exercise price, and the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to such amount, subject to the satisfaction of any tax-reporting obligations. The employee will also recognize a capital gain to the extent that the amount realized upon the sale of the shares exceeds the sum of the aggregate price paid for those shares and the ordinary income recognized in connection with the disposition. A capital gain or loss will be long-term if the participant holds the shares for more than two years from date of grant and one year after the date the participant purchases the shares.
If stock acquired under the ESPP is sold (or otherwise disposed of) more than two years after the date of grant and more than one year after the date of purchase, then the lesser of (i) the excess of the sale price of the stock at the time of disposition over the option price and (ii) the excess of the fair market value of the shares on the first day of the offering period over the option price (determined as if the first day of the offering period were the Exercise Date) will be treated as ordinary income. If the sale price is less than the option price, no ordinary income will be reported. In all other cases, no deduction is allowed.
To the extent required by applicable federal, state, or local law, a participant must make arrangements satisfactory to the Company for the payment of any withholding or similar tax obligations that arise in connection with the ESPP.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE ESPP. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE. IN ADDITION, THIS DISCUSSION DOES NOT APPLY TO EVERY SPECIFIC TRANSACTION THAT MAY OCCUR IN CONNECTION WITH THE ESPP. THEREFORE, IT IS IMPORTANT THAT ANY PARTICIPANT CONSULT WITH HIS OR HER OWN TAX ADVISOR BEFORE TAKING OR NOT TAKING ANY ACTION WITH RESPECT TO THE ESPP.
The benefits to be received by our employees as a result of the amendment and operation of the ESPP are not determinable, since the amounts of future purchases by employees are based on elective contributions.
Aggregate Past Purchases Under the Employee Stock Purchase Plan
As of March 30, 2020, 346,213 shares of the Company's common stock had been purchased under the ESPP. The following number of shares had been purchased under the ESPP as of that date by the persons and groups identified below:
| Aggregate Number of Shares Purchased Under the ESPP in the 12-Month Period Ended March 30, 2020 | Aggregate Number of Shares Purchased Under the ESPP in All Completed Offering Periods | |||||
---|---|---|---|---|---|---|---|
Named Executive Officers | |||||||
Paul J.B. Murphy III | - | - | |||||
Lynn S. Schweinfurth | - | - | |||||
Jonathan A. Muhtar | - | - | |||||
Michael L. Kaplan | - | - | |||||
Dean Cookson | - | - | |||||
Former Executives | |||||||
Denny Marie Post | 482 | ||||||
Pattye L. Moore | - | - | |||||
Guy J. Constant | - | - | |||||
Total of all Current Executive Officers as a Group (5 persons) | 486 | 2,195 | |||||
Total of all Current Non-Employee Directors as a Group (10 persons)(1) | - | - | |||||
Each other person who has received 5% or more of the options, warrants or rights under the ESPP | - | - | |||||
All employees, including all current officers who are not executive officers or directors as a group | 25,389 | 343,536 | |||||
| | | | | | | |
Total | 25,875 | 346,213 | |||||
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Proposal No. 3 requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTEFOR APPROVAL OF THE AMENDMENT TO OUR AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 4:
APPROVAL OF THE AMENDMENT TO THE 2017 PERFORMANCE INCENTIVE PLAN
Our board of directors recommends and proposes an amendment (the "Amendment to the 2017 Plan") to our 2017 Performance Incentive Plan (as previously amended, the "current 2017 Plan"). The current 2017 Plan was originally approved by our board in 2017, and amended in 2019, both of which were approved by our stockholders.
If approved by the Company's stockholders, the Amendment to the 2017 Plan would increase the balance of the number of shares of our common stock available for issuance under the 2017 Plan by 275,000 shares. The total number of shares authorized under the Amendment to the 2017 Plan would increase from 1,290,182 shares under the current 2017 Plan to 1,565,182 shares under the 2017 Plan as amended (which we refer to in this Proposal as the "2017 Plan"). However, the maximum number of shares of common stock that may be delivered pursuant to new awards granted to eligible persons under the Amendment to the 2017 Plan will equal the sum of: (i) 275,000 shares; (ii) the remaining number of shares of common stock available for additional award grant purposes under the current 2017 Plan as of the date of stockholder approval of the Amendment to the 2017 Plan (which was 769,155 shares as of March 30, 2020); and (iii) the number of shares of common stock subject to outstanding awards that may become available because they are not deemed issued under Section 2.2 of the 2017 Plan, such as for example shares that are forfeited or canceled (but not including shares not delivered due to net settlement of options or that are withheld to pay taxes). Our compensation committee approved the Amendment to the 2017 Plan on April 3, 2020, subject to stockholder approval at the 2020 annual meeting. If the Amendment to the 2017 Plan is approved by our stockholders, it will become effective on the day of the 2020 annual meeting. Outstanding awards under the terms of the current 2017 Plan will continue in effect in accordance with their terms.
Although we increased the number of shares for issuance under the current 2017 Plan in 2019, the negative impact on the Company's stock price due to the effect of COVID-19 on the market results in an unanticipated need to utilize a significantly increased amount of shares for our equity incentive awards to our employees, officers and directors, such that there would not be sufficient shares under the current 2017 Plan to make all of the originally contemplated annual equity grants in 2020. As a result of this unexpected accelerated depletion of the remaining shares under the current 2017 Plan, the board of directors unanimously recommends that the Company's stockholders to approve the Amendment to the 2017 Plan to ensure that the Company continues to have sufficient shares available for future grants.
We believe that an increase in the number of shares available for future grants is necessary as part of our ongoing commitment to align the interests of our employees (including executive officers) with those of our stockholders. We believe that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company. As previously disclosed, our compensation committee had begun a shift in the structure of our long-term incentive component for all of our named and other executive officers to include more equity and less cash. Without the Amendment, we could be required to use additional cash incentives instead of equity based awards.
Further, the Company's ability to grant an appropriate number of equity based awards continues to be crucial in allowing the Company to effectively compete for key employee talent. It is in the long-term interest of the Company and its stockholders to strengthen the ability to attract, motivate
and retain employees, officers, and directors, and to provide additional incentive for those persons through stock ownership and other incentives to improve operations, increase profits, and strengthen the mutuality of interest between those persons and the Company's stockholders.
As of March 30, 2020, of the 1,290,182 shares authorized under the current 2017 Plan, there were approximately 769,155 shares remaining available for issuance. Without adequate share availability under the Amendment to the 2017 Plan, the board will need to consider alternative compensation arrangements in order to ensure that the Company remains competitive and is able to continue to recruit and retain quality talent.
Summary of the Amendment to the 2017 Plan
The Amendment to the 2017 Plan would increase the total aggregate number of shares authorized by 275,000 shares of common stock, from 1,290,182 shares to 1,565,182.
As of March 30, 2020, we had 769,155 shares available for issuance under the current 2017 Plan, which would increase to 1,044,155 shares available for issuance as of such date with the approval of the Amendment to the 2017 Plan, plus the number of shares of Common Stock subject to outstanding awards that may become available because they are not deemed delivered. The current 2017 Plan permits the re-use of shares that are cancelled, terminated, forfeited, otherwise failed to vest ("Forfeited Shares"). The exact number of shares remaining under the current 2017 Plan will vary because additional awards may be made to newly-hired or promoted employees prior to the annual meeting on May 21, 2020. If the Amendment to the 2017 Plan is approved, the aggregate number of shares underlying outstanding awards under the current 2017 Plan, and our other equity plans (the "Existing Plans"), plus the number of shares available for issuance in connection with the grant of awards under the Amendment to the 2017 Plan, would increase to approximately 13.1% of the number of shares of Company common stock outstanding on a fully diluted basis (including all common stock outstanding at March 30, 2020 plus all shares reserved for outstanding or future awards under the Existing Plans and the Amendment to the Plan).
Summary Description of the 2017 Plan (as proposed to be amended).
A copy of the full text of the 2017 Plan (the current 2017 Plan as amended by the Amendment to the 2017 Plan) is attached to this proxy statement as Appendix B. A summary of the 2017 Plan (as proposed to be amended by the Amendment to the 2017 Plan) is set forth below. Other than set forth in the summary below, there have been no other material changes to the current 2017 Plan.
Purpose. The purpose of the 2017 Plan is to promote the success of the Company and to increase stockholder value by (a) incentivizing the officers, employees, directors, consultants, and other service providers of the Company and our affiliates to foster and build upon the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain officers, employees, directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of stock, or to receive compensation which is based upon appreciation in the value of stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.
Administration. Our compensation committee will administer the 2017 Plan. The compensation committee has full authority in its discretion to determine the officers, employees, directors, consultants, and other service providers of the Company or our affiliates to whom awards will be granted and the terms and provisions of awards, subject to the provisions of the 2017 Plan. Subject to the provisions in the 2017 Plan, the compensation committee has full and conclusive authority to:
(a) interpret the 2017 Plan; (b) prescribe, amend, and rescind rules and regulations relating to the 2017 Plan; (c) determine the terms and provisions of the respective award agreements; and (d) make all other determinations necessary or advisable for the proper administration of the 2017 Plan.
Our board of directors may by resolution authorize one or more officers of the Company and/or the chair of the compensation committee to designate individuals to receive awards under the 2017 Plan, and to determine the type of awards and the terms and conditions and number of shares of common stock or the amount of cash subject to such awards; provided however, that any such delegation will be subject to such parameters and restrictions consistent with the 2017 Plan.
No Repricing. In no case (except due to an adjustment to reflect a stock split, or similar event, or any repricing that may be approved by our stockholders) will any adjustment be made to a stock option or stock appreciation right award under the 2017 Plan (by cancellation, surrender, or exchange) that would constitute a repricing of the per share exercise or base price of the award.
Eligibility and Limits. Persons eligible to receive awards under the 2017 Plan, subject to limited exceptions set forth in the 2017 Plan, include officers, employees, directors, consultants, and other service providers of the Company or any affiliate of the Company. Currently, approximately 550 officers and employees of the Company and our affiliates (including all of our named executive officers), and each of our non-employee directors are considered eligible under the 2017 Plan.
The maximum number of shares of our common stock that would be authorized for awards under the Amendment to the 2017 Plan, if approved, is approximately 1,565,182. This number includes, as of March 30, 2020, 521,027 grants previously issued and outstanding, 769,155 shares available for awards under the current 2017 Plan (including Forfeited Shares), and 275,000 newly authorized shares.
The following other limits are also contained in the 2017 Plan:
Types of Awards. The 2017 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in our common stock or unit of our common stock, as well as cash performance awards pursuant to Section 3.5 of the 2017 Plan.
A stock option is the right to purchase shares of our common stock at a future date at a specified price per share (the "Exercise Price"). The per share Exercise Price of an option generally may not be less than the fair market value of a share of our common stock on the date of grant. The maximum term of an option is ten years from the date of the grant. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under "Federal Income Tax Consequences of Awards under the 2017 Plan" below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2017 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.
A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of a specified or determinable number of shares of our common stock at the time of payment or exercise over a specified or determinable price, which may not be less than the fair market value of such shares of stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant.
With respect to any stock option or stock appreciation right issued to a Participant other than a non-employee member of the board of directors, the minimum service period required for such award (or portion thereof) to vest is one year following the date of grant of such award.
The other types of awards that may be granted under the 2017 Plan include, without limitation, grants of our common stock, grants of rights to receive our common stock in the future, dividend equivalent rights, and cash performance awards granted consistent with "Performance-Based Awards" as described below.
Performance-Based Awards. The compensation committee historically granted awards intended to be performance-based awards within the meaning of Section 162(m) of the U.S. Internal Revenue Code ("Performance-Based Awards"), prior to its repeal in 2017. Performance-Based Awards are in addition to any of the other types of awards that may be granted under the 2017 Plan (including options and stock appreciation rights which may also qualify as performance-based awards for Section 162(m) purposes). Performance-Based Awards may be in the form of restricted stock, performance stock, stock units, other rights, or cash performance awards.
The vesting or payment of Performance-Based Awards (other than options or stock appreciation rights) will depend on the absolute or relative performance of the Company on a consolidated, business unit, division, or affiliate (or business unit or division of an affiliate) basis. The compensation committee will establish the criterion or criteria and target(s) on which performance will be measured. The compensation committee must establish criteria and targets in advance of applicable deadlines under the U.S. Internal Revenue Code and while the attainment of the performance targets remains substantially uncertain. The criteria that the compensation committee may use for this purpose include one or more of the following: earnings per share; book value per share; operating cash flow; free cash flow; cash flow from return on investments; cash available; net income (before or after taxes); revenue or revenue growth; total stockholder return; return on invested capital; return on stockholder equity; return on assets; return on common book equity; return on gross investment; market share; economic value added; operating margin; profit margin; stock price; enterprise value; operating income; EBIT or EBITDA; expenses or operating expenses; productivity of employees as measured by revenues, costs, or earnings per employee; working capital; improvements in capital structure; guest retention, traffic and/or satisfaction; employee retention and/or engagement; completion of operating milestones; cost reduction goals; Company, franchise, or system same restaurant sales; Company, franchise, or system restaurant growth in number of new restaurants; average restaurant volume growth; or any combination of the foregoing. The performance measurement period with respect to an award will be
established by the compensation committee at the time the award is granted. The compensation committee may appropriately adjust any evaluation of performance under a performance goal to remove the effect of any one or more of the following: equity compensation expense under accounting standard ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the award under Section 162(m), if applicable.
With respect to any full-value award, the vesting of which is based solely on service with the Company (and not upon, either all or in part, the attainment of any performance measures), with the exception of such awards to non-employee directors, the minimum period of service required for such award to vest is three years following the date of grant of such award, provided that such award may vest ratably in no less than equal annual increments over such period. With respect to any full-value award that is a Performance-Based Award and issued to an individual under the 2017 Plan other than a non-employee director, the applicable performance measurement period may not be less than one year. With respect to any award issued to a non-employee director, the minimum period of service required for such award to vest (or the minimum performance period for any such award) shall be the period beginning on the date of grant and ending on the sooner of (i) the date of the next annual stockholders meeting and (ii) the one-year anniversary of the grant date of such award. Except as described in the immediately preceding sentence with respect to awards issued to non-employee directors, no installment or portion of any award subject to a minimum vesting period described under the 2017 Plan may vest earlier than one-year after the date of grant of such award. The compensation committee may not waive the applicable vesting requirements for an award except in the case of death, disability, or change in control. The term "full-value awards" includes awards of restricted stock, restricted stock units, performance shares, and Other Stock-Based Awards (as defined in the 2017 Plan) granted under the 2017 Plan, but does not include awards pursuant to which the participant's ultimate remuneration is limited solely to the post-grant appreciation in the value of the shares of the Company's common stock subject to the award (such as options or stock appreciation rights having a per share exercise of base price, as applicable, at least equal to the fair market value of a share of the Company's common stock at the time of grant of such award).
Performance-Based Awards may be paid in stock or cash (in either case, subject to the limits described under the heading "Eligibility and Limits" above). Before any Performance-Based Award (other than an option or stock appreciation right) is paid, the compensation committee must certify in writing that the performance target or targets have been satisfied. The compensation committee has discretion to determine the performance target or targets and any other restrictions or other limitations of Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.
Acceleration of Awards;Early Termination of Awards. Generally, and subject to limited exceptions set forth in the 2017 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2017 Plan may become fully vested
or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the two-year period following such change in control event. The compensation committee also has the discretion to establish other change in control provisions with respect to awards granted under the 2017 Plan. For example, subject to certain limitations, the compensation committee could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
Restrictions on Transfer. Subject to certain exceptions contained in Section 4.2 of the 2017 Plan or the applicable award agreement, awards under the 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution, or pursuant to domestic relations orders, and are generally exercisable, during the recipient's lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient's beneficiary or representative. The compensation committee has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws.
Adjustments. As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, consolidations, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends.
No Limit on Other Authority. Except as expressly provided with respect to the termination of the authority to grant new awards under the 2007 Plan, the 2017 Plan does not limit the authority of the board of directors or the compensation committee to grant awards or authorize any other compensation, with or without reference to our common stock, under any other plan or authority.
Termination and Amendment of the 2017 Plan. The board of directors may amend or terminate the 2017 Plan at any time without stockholder approval; provided, however, that the board of directors shall obtain stockholder approval for any amendment to the 2017 Plan that, except as provided under Section 5.1 of the 2017 Plan, increases the number of shares of stock available under the 2017 Plan, materially expands the classes of individuals eligible to receive awards, materially expands the type of awards available for issuance under the 2017 Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the award agreement explicitly provides otherwise, no such termination or amendment may materially and adversely affect the rights of the recipient under such award without the consent of the holder of an award.
Federal Income Tax Consequences of Awards under the 2017 Plan
The U.S. federal income tax consequences of the 2017 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or international tax consequences. Individual circumstances may vary and participants should rely on the advice of their tax counsel regarding federal income tax treatment under the 2017 Plan. Furthermore, any tax advice contained in this discussion is not intended to be used, and may not be used, to avoid penalties imposed under the U.S. Internal Revenue Code.
Stock Options and Stock Appreciation Rights. With respect to nonqualified stock options, the Company is generally entitled to deduct, and the participant will recognize, taxable ordinary income in an amount equal to the excess of the fair market value of the shares at the time of exercise over the option exercise price. Stock appreciation rights are taxed and deductible in substantially the same manner as nonqualified stock options.
With respect to incentive stock options, a participant who exercises an incentive stock option will not be taxed at the time of exercise. Instead, the participant will be taxed at the time the participant sells common stock purchased pursuant to the incentive stock option on the difference between the price the participant paid for the stock pursuant to the incentive stock option and the amount for which the participant sells that stock. If the participant does not sell the stock prior to two years after the date the option was granted to the participant and one year after the date the stock is transferred to the participant, then the participant will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and the aggregate exercise price and the Company will not get a corresponding tax deduction. If the participant sells the stock at a gain prior to the expiration of such one and two year periods, the amount by which (A) the lesser of (i) the fair market value of the stock on the date of exercise and (ii) the amount for which the stock is sold exceeds (B) the amount the recipient paid for the stock will be taxed as ordinary income and the Company will be entitled to a corresponding tax deduction in the same amount (if the amount for which the stock is sold exceeds the fair market value on the date of exercise, such excess amount is taxed as capital gain). If the participant sells the stock for less than the amount paid for the stock prior to the expiration of the one and two year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive option may subject a recipient to, or increase a recipient's liability for, the alternative minimum tax.
Stock Awards. A participant will not be taxed upon the grant of a stock award if such award is not transferable by the recipient and is subject to a "substantial risk of forfeiture," as defined in the U.S. Internal Revenue Code. However, when the shares of common stock that are subject to the stock award are transferable by the participant or are no longer subject to a substantial risk of forfeiture, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the stock subject to the stock award minus any amount paid for such stock, and the Company will at such time be entitled to a corresponding deduction. However, if a participant so elects at the time the participant receives a stock award, the participant may include the fair market value (at the time of receipt) of the stock subject to the stock award, less any amount paid for such stock, in the participant's income at that time and the Company also will be entitled to a corresponding deduction at that time.
Other Awards. A participant will not recognize income upon the grant of a dividend equivalent right, restricted stock unit or cash performance award. Generally, at the time a payment receives payment under any dividend equivalent right, restricted stock unit, or cash performance award, the participant will recognize compensation taxable as ordinary income in an amount equal to the cash or the fair market value of common stock received, and the Company will then be entitled to a corresponding deduction.
General. Unless specified otherwise in an individual agreement between a participant and the Company, to the extent that acceleration of an award made under the 2017 Plan in connection with a "change in control" (as this term is used under the U.S. Internal Revenue Code) would result in compensation being paid that is not fully deductible by the Company or one of its subsidiaries because of Section 280G of the U.S. Internal Revenue Code, such award will not accelerate to the extent or in a manner that would result in any compensation being paid that is not fully deductible.
The compensation committee has historically generally intended to structure our executive compensation in a manner designed to qualify for deductibility under Section 162(m) of the Internal Revenue Code, provided additional requirements are satisfied. The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
The 2017 Plan is not qualified under Section 401(a) of the U.S. Internal Revenue Code.
New Plan Benefits under the 2017 Plan
Because future awards under the 2017 Plan will be granted at the discretion of the compensation committee, the type, number, recipients, and other terms of such awards cannot be determined at this time. Information regarding our recent practices with respect to annual and long-term incentive awards and stock-based compensation under existing plans is presented in the "Summary Compensation Table" and "Outstanding Equity Awards at 2019 Fiscal Year-End" table contained elsewhere in this proxy statement, and in our financial statements for the fiscal year ended December 29, 2019, in the Annual Report on Form 10-K which accompanies this proxy statement.
In accordance with SEC rules, the table below indicates the aggregate number of stock options granted under the 2017 Plan since its adoption in 2017 to each named executive officer, all current executive officers as a group, all current directors (other than executive officers) as a group, and all current employees (other than executive officers) as a group.
Stock Options Granted | ||||
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Named Executive Officers | ||||
Paul J.B. Murphy III | 119,472 | |||
Lynn S. Schweinfurth | 24,332 | |||
Jonathan A. Muhtar | 35,856 | |||
Michael L. Kaplan | 23,131 | |||
Dean Cookson | 13,542 | |||
Former Executives | ||||
Denny Marie Post | 39,617 | |||
Pattye L. Moore | - | |||
Guy J. Constant | 14,510 | |||
Total of all Current Executive Officers as a Group (5 persons) | 212,133 | |||
Total of all Current Non-Employee Directors as a Group (10 persons) | - | |||
Each other person who has received 5% or more of the options, warrants or rights under the 2017 plan | - | |||
All employees, including all current officers who are not executive officers or directors as a group | 156,514 | |||
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Total | 368,647 | |||
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Proposal No. 4 requires the approval of a majority of the votes cast on the proposal. Abstentions and broker non-votes will have no effect on the outcome of the vote.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE AMENDMENT OF THE 2017 PLAN.
PROPOSAL 5:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm retained to perform the audit of our financial statements and our internal control over financial reporting. The audit committee selected KPMG LLP ("KPMG") as our independent auditor for the fiscal year ending December 30, 2018. KPMG also served as our independent auditor for the 2017 fiscal year ended December 31, 2017, the 2016 fiscal year ended December 25, 2016 and the 2015 fiscal year ended December 27, 2015.2020. In 2017,2019, stockholders approved the ratification of KPMG by approximately 99.98%99.6% of votes cast. The audit committee believes the continued retention of KPMG is in the best interests of the Company and our stockholders. Representatives from KPMG are expected to be present at the annual meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to any questions that might arise.
Evaluation of AuditorEVALUATION OF AUDITOR
In approving the selection of KPMG as the Company's independent auditor for the fiscal year ending December 30, 2018,27, 2020, the audit committee considered, among other factors:
Based on this evaluation, our board is requesting that our stockholders ratify KPMG's appointment for the 20182020 fiscal year. We are not required to seek ratification from stockholders of our selection of independent auditor but are doing so as a matter of good governance. If the selection is not ratified, the audit committee will consider whether it is appropriate to select another independent auditor. Even if the selection is ratified, the audit committee in its discretion may select a different independent auditor at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table summarizes the aggregate fees billed or expected to be billed by KPMG for the fiscal years ended December 29, 2019 and December 30, 2018:
| 2019 | 2018 | |||||
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Audit fees | $ | 835,990 | $ | 828,891 | |||
Audit-related fees | - | - | |||||
Tax fees | - | 13,134 | |||||
All other fees | - | - | |||||
| | | | | | | |
Total | $ | 835,990 | $ | 842,025 |
Principal Accountant Fees and Services
The following table summarizes the aggregate fees billed or to be billed by KPMG for the fiscal years ended December 31, 2017 and December 25, 2016:
| 2017($) | 2016($) | ||
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Audit fees | 755,616 | 824,379 | ||
Audit-related fees | - | - | ||
Tax fees | 30,000 | - | ||
All other fees | - | - | ||
| | | | |
Total | 785,616 | 824,379 |
Fees for audit services in 20172019 and 20162018 consisted of the audit of our annual financial statements and reports on internal controls required by the Sarbanes-Oxley Act of 2002, reviews of our quarterly financial statements, and fees related to a review of our Franchise Disclosure Document.Document, and a subscription for the KPMG Accounting Research Online tool.
There were no audit-related fees billed by KPMG in 20162019 or 2017.2018.
There were no tax fees billed by KPMG in 2016.2019. The tax fees billed by KPMG in 20172018 related to tax compliance services with respect to tax accounting methods used in tax filings.
There were no all other fees billed by KPMG in 20162019 or 2017.2018.
Audit Committee's Pre-Approval Policies and Procedures
The audit committee pre-approves all audit and non-audit services to be performed by its independent auditor and has established policies and procedures to ensure that the Company is in full compliance with the requirements for pre-approval set forth in the Sarbanes-Oxley Act of 2002 and the SEC rules regarding auditor independence. The policies and procedures are detailed as to the particular service and do not delegate the audit committee's responsibility to management.
In accordance with these policies and procedures, management submits for approval audit and non-audit services that management may wish to have the independent auditor perform during the fiscal year, accompanied by an estimated range of fees for each service to be performed. The audit committee pre-approves or rejects the service and an accompanying range of fees for each service desired to be performed. Management is required to seek additional audit committee pre-approval when management becomes aware that any pre-approved service will result in actual fees greater than the fees initially approved. During the course of the year, the chair of the audit committee has the authority to pre-approve requests for services. At each subsequent audit committee meeting, the chair of the audit committee reports any interim pre-approvals since the last meeting.
All of the fees set forth in the Principal Accountant Fees and Services table above for fiscal year 20172019 were pre-approved by the audit committee.
Proposal No. 35 requires the approval of a majority of the votes cast on the proposal. Abstentions will have no effect on the outcome of the vote.
Board RecommendationBOARD RECOMMENDATION
Our board of directors recommends that you vote OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTEFOR ratification of the appointment of RATIFICATION OF THE APPOINTMENT OF KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 30, 2018.AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 27, 2020.
The audit committee is responsible for overseeing and evaluating the Company's financial reporting process on behalf of the board of directors. Management has the primary responsibility for the Company's financial reporting process, accounting principles, and internal controls as well as preparation of the Company's financial statements in accordance with generally accepted accounting principles in the United States (GAAP). KPMG, our independent auditor for 2019, 2018, 2017, 2016, and 2015, is responsible for expressing opinions on the conformity of the Company's audited financial statements with generally accepted accounting principlesGAAP and on the Company's internal control over financial reporting.
The audit committee has reviewed and discussed with management and KPMG the audited financial statements for the year ended December 31, 2017,29, 2019, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, the clarity of the disclosures in the financial statements, and KPMG's evaluation of the Company's internal control over financial reporting.
The audit committee has reviewed and discussed with KPMG the matters required to be discussed pursuant to Public Company Accounting Oversight Board (PCAOB) standards. The audit committee has received from KPMG the written disclosures and the letter required by applicable PCAOB requirements regarding the independent accountant's communications with the audit committee concerning independence. The audit committee has also discussed such independence with KPMG.
Based upon the review and discussions described above, the audit committee recommended to the board of directors that the Company's audited financial statements be included in its annual report on Form 10-k10-K for the year ended December 31, 2017,29, 2019, and the board of directors accepted the audit committee's recommendations.
THE AUDIT COMMITTEERichard J. Howell, Chair
Steven K. Lumpkin, ChairPattye L. MooreThomas G. Conforti
Stuart I. Oran
It is very important that your shares be represented and voted at the annual meeting. Whether or not you plan to attend the 2020 annual meeting of stockholders, please takevote as soon as possible. We urge you to read the time toProxy Statement and vote your shares as soon as possible. Specific voting instructions are set forth in the Proxy Statement and on both the Important Notice Regarding the Availability of Proxy Materials and proxy card. We urge you to vote as soon as possible even if you plan to attend the 2020 annual meeting of the stockholders, so that if you are unable to attend the annual meeting, your shares can be voted. Voting now will not limit your right to change your vote or to attend the 2020 annual meeting. If you should be present at the annual meeting and desire to vote in person, you may revoke any previously submitted proxy. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you received from the holder of record in order to vote your shares.
If you are a beneficial owner of shares, to the extent that your bank, broker, or other holder of record has provided you with proxy materials and you do not instruct your bank, broker, or other holder of record how you want to vote, your shares may not be voted by a record holder on Proposal Nos. 1-4. Accordingly, we urge you to give instructions to your bank, broker, or other holder of record as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters.
The individuals named as proxies on the proxy card to vote your shares also have the discretionary authority to vote your shares, to the extent permitted by Rule 14(a)-4(c) under the Securities Exchange Act of 1934, as amended, on any matter that is properly brought before the annual meeting. As of the date of the Notice of Annual Meeting of Stockholders, we knew of no other matters to be presented at the annual meeting.
The SEC's "notice and access" rule allows companies to deliver a notice regarding internet availability of proxy materials ("notice regarding internet availability") to stockholders in lieu of a paper copy of the proxy statement and related materials and the Company's annual report on Form 10-K (collectively, the "proxy materials"). We use the notice and access process for all of our beneficial holders. The notice regarding internet availability provides instructions as to how these holders can access the proxy materials online, contains a listing of matters to be considered at the meeting, and sets forth instructions as to how shares can be voted. Shares must be voted either by telephone, online, or by completing and returning a proxy card.Shares cannot be voted by marking, writing on, and/or returning the notice regarding internet availability. Any notices regarding internet availability that are returned will not be counted as votes. Instructions for requesting a paper copy of the proxy materials are set forth on the notice regarding internet availability.
Important Notice Regarding Availability of Proxy Materials
Our proxy materials are available at http://www.redrobin.com/eproxy.
"Householding" of Proxy Materials
As permitted by applicable law, we may deliver only one copy of certain of our documents, including the notice regarding internet availability, proxy statement, annual report, and information statement to stockholders residing at the same address, unless such stockholders have notified us of their desire to receive multiple copies thereof. This process, which is commonly referred to as "householding," is intended to provide extra convenience for stockholders and cost savings for the Company.
If you wish to opt-out of householding and continue to receive multiple copies of the proxy materials at the same address, you may do so at any time prior to thirty days before the mailing of the notice regarding internet availability or the proxy materials themselves, which are typically mailed in April of each year, by notifying us in writing at: Red Robin Gourmet Burgers, Inc., Attn: Shareholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111, or by contacting us at (303) 846-6000. You also may request additional copies of the proxy materials by notifying us in writing at the same address or contacting us at (303) 846-6000, and we will undertake to deliver such additional copies promptly. If you share an address with another stockholder and currently are receiving multiple copies of the proxy materials, you may request householding by notifying us at the above referenced address or telephone number.
Voting rights. As of April 2, 2018,March 30, 2020, the record date for the meeting, we had 12,971,47912,882,682 shares of common stock outstanding. Each share of our common stock outstanding on the record date is entitled to one vote on all items being voted on at the meeting. You can vote all of the shares that you owned on the record date. These shares may include: (1) shares held directly in your name as the stockholder
of record, and (2) shares held for you as the beneficial owner through a stockbroker, bank, or other nominee.
Voting instructions. We encourage all stockholders to submit votes in advance of the meeting. Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted in advance of the meeting.
If you receive more than one set of proxy materials, it means that you hold shares registered in more than one name or account. You should sign and return each proxy and follow the instructions on each notice regarding internet availability that you receive to ensure that all your shares are voted.
Voting in-person. Shares held in your name as the stockholder of record may be voted in person at the annual meeting. Shares held beneficially in street name may be voted in person only if you obtain and submit a legal proxy from the broker, bank, or other holder of record that holds your shares giving you the right to vote the shares.
Counting of votes. Votes will be counted by our transfer agent, American Stock Transfer & Trust Company, LLC, which we have retained to act as the inspector of election for the annual meeting.
Additional meeting matters. We do not expect any matters to be presented for a vote at the meeting other than the matters described in this proxy statement. If you grant a proxy, either of the officers named as proxy holder, Denny Marie PostLynn S. Schweinfurth or Guy J. Constant,Michael L. Kaplan, or their nominee(s) or substitute(s), will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the meeting. If a nominee is not available as a candidate for director, the person named as the proxy holder will vote your proxy for another candidate nominated by our board of directors.
VOTES REQUIRED FOR EACH PROPOSAL
The following five proposals will be presented at the annual meeting for your vote.
Dissenters' rights. Our board of directors recommends a voteFOR No action is proposed herein for whichall the laws of the state of Delaware or our bylaws provide a right of our stockholders to dissentdirector nominees in Proposal 1, and obtain appraisal of or payment for such stockholders' common stock.FOR Proposals 2, 3, 4, and 5.
Proposal | | Votes Required for Each Proposal | Board's Voting Recommendation | Page Reference (for more detail) | ||||
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1 | Election of Directors | Affirmative vote of a majority of the votes cast | FOR All nominees | 7 | ||||
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Even after you have submitted your proxy, you may change your vote or revoke your proxy at any time before the votes are cast at the meeting by: (1) delivering a written notice of your revocation to our corporate secretary at our principal executive office, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111; or (2) executing and delivering a later dated proxy. In addition, the powers of the proxy holders will be suspended if you attend the meeting in person and so request, although attendance at the meeting will not by itself revoke a previously granted proxy.
All stockholders as of the record date, or their duly appointed proxies, may attend the meeting.
If you are not a stockholder of record but hold shares through a bank, broker, or bank,other holder of record, you should provide proof of beneficial ownership on the record date, such as your most recent account statement as of April 2, 2018, a copy of the voting instruction card provided by your broker, bank, or other holder of record,March 30, 2020 or other similar evidence of ownership. If you do not have valid, current, government-issued photo identification, such as a driver's license, or proof of your stock ownership, you will not be admitted to the meeting. Please arrive early enough to allow yourself adequate time to clear security. Registration and seating will begin at 7:30 a.m. We do not permitMDT.
No cameras, laptops, recording devices, orequipment, other similar electronic devices, signs, placards, briefcases, backpacks, large bags, or packages will be permitted in the annual meeting. The Company reserves the right to deny admittance to any stockholder who attempts to bring any such item into the annual meeting. Small purses are permissible, but they and any bags or packages permitted in the meeting room will be subject to inspection. All security procedures and instructions require strict adherence. By attending the annual meeting, stockholders agree to abide by the agenda and procedures for the annual meeting, copies of which will be distributed to attendees at the meeting.
We intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19) pandemic and we are sensitive to the public health and travel concerns our stockholders may have and protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as soon as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our annual meeting website at http://www.redrobin.com/eproxy for updated information. If you are planning to attend our annual meeting, please check the website one week prior to the annual meeting date. As always, we encourage you to vote your shares prior to the annual meeting.
DETERMINATION OF QUORUM VOTE REQUIRED, ABSTENTIONS, AND BROKER NON-VOTES
Quorum
The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our common stock outstanding as of the record date will constitute a quorum. There must be a quorum for any action to be taken at the meeting (other than an adjournment or postponement of the meeting). If you submit a properly executed proxy card, even if you abstain from voting, then your shares will be counted for purposes of determining the presence of a quorum. Broker non-votes will be counted for purposes of determining the presence of a quorum at the meeting.
Vote Required
ForProposal 1 (director election), in an uncontested election (such as the election to be held at this annual meeting), each director will be elected by the affirmative vote of the majority of the votes cast. A majority of votes cast means that the number of shares castFOR a director's election exceeds the number of shares castAGAINST that director. If a nominee does not receive a majority of the votes cast for such nominee, then the resulting vacancy will be filled only by a majority vote of the directors then in office, and the director(s) so chosen shall serve for a term expiring at the next annual meeting of stockholders or until such director's successor shall have been duly elected and qualified. Abstentions and broker non-votes are not considered votes cast and therefore will have no effect on the outcome of the vote.
Proposal 2 (say-on-pay) represents an advisory vote and the results will not be binding on the board or the Company. The affirmative vote of a majority of the votes cast for this proposal will constitute the stockholders' non-binding approval with respect to our executive compensation programs. Our board will review the voting results and take them into consideration when making future decisions regarding executive compensation. Abstentions and broker non-votes will have no effect on the outcome of the vote.
ForProposal 3 (ratification of auditors), the affirmative vote of a majority of the votes cast on this proposal will be required to approve such proposal. Abstentions will have no effect on the outcome of the vote.
Broker Non-Votes
Brokers, banks, or other holders of record are no longer permitted to vote on most proxy proposals without specific client instructions. In these cases, the broker can register your shares as being present at the annual meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules. If you are a beneficial owner whose shares are held of record by a broker, bank, or other holder of record, you must instruct the broker, bank, or other holder of record how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
At this annual meeting, your broker, bank, or other holder of record does not have discretionary voting authority to vote on any of the proposals other than Proposal 3 (ratification of auditors) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters.
ADDITIONAL INFORMATION REVOCABILITY OF PROXIES
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) Even after you have submitted your proxy, you may change your vote or revoke your proxy at any time before the votes are cast at the meeting by: (1) delivering a written notice of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities,your revocation to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors, and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and representations that no other reports were required, during fiscal year 2017, all of our officers, directors, and greater than ten percent beneficial owners timely complied with all Section 16(a) filing requirements.
Proposals for Inclusion in 2019 Proxy Statement. For your proposal or director nomination to be considered for inclusion in our proxy statement for next year's meeting, your written proposal must be received by our corporate secretary at our principal executive office, no6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111; (2) executing and delivering a later than December 11, 2018.dated proxy; or (3) voting in person at the annual meeting. In addition, the powers of the proxy holders will be suspended if you attend the meeting in person and so request, although attendance at the meeting will not by itself revoke a previously granted proxy.
If we changeyour shares are held in "street name" (i.e., held of record by a bank, broker, or other holder of record) and you wish to revoke a proxy, you should contact your bank, broker, or other holder of record and follow its procedures for changing your voting instructions. You also may vote in person at the date of next year's meeting by more than 30 days from the date of this year's meeting, then the deadline is a reasonable time before we begin to print and mail our proxy materials. You should also be aware that your proposal must comply with SEC regulations regarding inclusion of stockholder proposals in Company-sponsored proxy materials and our bylaws.
Proposals to be Addressed at 2019 Annual Meeting (but not included in proxy statement). In order for you to properly bring a proposal (including director nominations) before next year's annual meeting our corporate secretary must receiveif you obtain and submit a written noticelegal proxy from your bank, broker, or other holder of record.
Only the proposal no later than February 25, 2019 and no earlier than January 25, 2019, and it must contain the additional information required by our bylaws. All proposals received after February 25, 2019latest validly executed proxy that you submit will be considered untimely. You may obtain a complete copy of our bylaws by submitting a written request to our corporate secretary at our principal executive office. If we change the date of next year's meeting by more than 30 days from the date contemplated at this year's meeting, in order for the proposal to be timely, we must receivecount.
Table of Contents PROXY SOLICITATION COSTS
your written proposal at least 90 days before the date of next year's meeting or no more than 10 days following the day on which the meeting date is publicly announced.
Proxy Solicitation Costs. The accompanying proxy is being solicited on behalf of the board of directors of our Company. The expense of preparing, printing, and mailing the notice regarding internet availability or proxy card and the material used in the solicitation thereof will be borne by the Company. In addition to the use of the mails, proxies may be solicited by telephone, other electronic means, or in person, by our directors, officers, and employees at no additional compensation. Arrangements may also be made with brokerage houses and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and we may reimburse them for reasonable out-of-pocket expenses incurred by them in connection therewith. In addition, Georgeson LLCInnisfree M&A Incorporated has been retained to assist in the solicitation of proxies for the 20182020 annual meeting of stockholders for a fee of approximately $6,500$25,000 plus associated costs and expenses.
ANNUAL REPORT ON FORM 10-K DELIVERY OF PROXY MATERIALS
We filed withThis proxy statement and the SEC anaccompanying proxy card were first mailed to our stockholders on or about April 10, 2020.
Important Notice Regarding Availability of Proxy Materials
Our proxy materials are available at http://www.redrobin.com/eproxy.
"HOUSEHOLDING" OF PROXY MATERIALS
As permitted by applicable law, we may deliver only one copy of certain of our documents, including the proxy statement, annual report, on Form 10-K on February 27, 2018and information statement to stockholders residing at the same address, unless such stockholders have notified us of their desire to receive multiple copies thereof. This process, which is commonly referred to as "householding," is intended to provide extra convenience for stockholders and cost savings for the fiscal year ended December 31, 2017. A copyCompany.
If you wish to opt-out of householding and continue to receive multiple copies of the annual report on Form 10-K has been made available concurrently with this proxy statement to all of our stockholders entitled to notice of and to votematerials at the annual meeting. In addition,same address, you may obtain a copydo so at any time prior to thirty days before the mailing of the annual report on Form 10-K, without charge,proxy materials, which are typically mailed in April of each year, by notifying us in writing toat: Red Robin Gourmet Burgers, Inc., Attn: ShareholderStockholder Services, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111.80111, or by contacting us at (303) 846-6000. You also may request additional copies of the proxy materials by notifying us in writing at the same address or contacting us at (303) 846-6000, and we will undertake to deliver such additional copies promptly. If you share an address with another stockholder and currently are receiving multiple copies of the proxy materials, you may request householding by notifying us at the above referenced address or telephone number.
The board knows of no other matters to be presented for stockholder action at the meeting. If other matters are properly brought before the meeting, the persons named as proxies in the accompanying proxy card intend to vote the shares represented by them in accordance with their best judgment.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and except for community property laws where applicable, the persons named in the tables below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership for each table is based on 12,882,682 shares of common stock outstanding as of March 30, 2020.
Stock Ownership of Certain Beneficial Owners
The following table sets forth information regarding beneficial owners of more than 5% of our common stock as of March 30, 2020 (unless otherwise indicated). All information is taken from or
based upon ownership filings made by such persons with the SEC or upon information provided by such persons to the Company.
| Shares Beneficially Owned | ||||||
---|---|---|---|---|---|---|---|
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||||
T. Rowe Price Associates, Inc.(1) | 2,361,057 | 18.33 | % | ||||
BlackRock, Inc.(2) | 2,058,635 | 15.98 | % | ||||
Vintage Capital Management, LLC(3) | 1,500,000 | 11.64 | % | ||||
Dimensional Fund Advisors LP(4) | 1,062,413 | 8.25 | % | ||||
The Vanguard Group(5) | 861,878 | 6.69 | % | ||||
American Century Investment Management, Inc.(6) | 806,784 | 6.26 | % |
Stock Ownership of Directors and Management
The following table contains information about the beneficial ownership (unless otherwise indicated) of our common stock as of March 30, 2020 by:
| Shares Beneficially Owned(1) | ||||
---|---|---|---|---|---|
Name of Beneficial Owner | Amount and Nature of Ownership | Percent of Class | |||
Paul J.B. Murphy(2) | 10,000 | * | |||
Lynn S. Schweinfurth(3) | 12,888 | * | |||
Jonathan A. Muhtar(4) | 45,327 | * | |||
Michael L. Kaplan(5) | 23,781 | * | |||
Dean Cookson(6) | 4,812 | * | |||
Denny Marie Post(7) | 14,710 | * | |||
Pattye L. Moore(8) | 31,320 | * | |||
Guy J. Constant(9) | 33,930 | * | |||
Anthony S. Ackil | - | * | |||
Thomas G. Conforti(10) | 10,288 | * | |||
Cambria W. Dunaway(11) | 17,299 | * | |||
G.J. Hart(12) | 7,811 | * | |||
Kalen F. Holmes(13) | 14,074 | * | |||
Glenn B. Kaufman(14) | 32,733 | * | |||
Steven K. Lumpkin(15) | 24,074 | * | |||
Stuart I. Oran(16) | 13,416 | * | |||
David A. Pace(17) | 10,988 | * | |||
Allison Page | - | * | |||
Directors and executive officers as a group (19 persons)(18) | 288,674 | 2.22% |
stockholder and as outstanding shares when we calculate the stockholder's percentage ownership of our common stock, and we do not consider that common stock to be outstanding when we calculate the percentage ownership of any other stockholder.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors, and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and representations that no other reports were required, during fiscal year 2019, all of our officers, directors, and greater than ten percent beneficial owners timely complied with all Section 16(a) filing requirements except for one filing by our former director, Ms. Moore. Ms. Moore's filing for her off cycle director award grant following her service as interim CEO was inadvertently filed late.
EQUITY COMPENSATION PLAN INFORMATION
We maintain three equity-based compensation plans—the Second Amended and Restated 2007 Performance Incentive Plan (the "2007 Plan"), the 2017 Performance Incentive Plan (the "2017 Plan"), and the Amended and Restated Employee Stock Purchase Plan (the "ESPP"). Our stockholders have approved each of these plans.
The following table sets forth our equity compensation plans in the aggregate, the number of shares of our common stock subject to outstanding options and rights under these plans, the weighted average exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 29, 2019:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | ||||||||||
2007 Plan | 242,579 | $ | 57.94 | - | ||||||
2017 Plan(1) | 60,850 | $ | 60.40 | 1,051,084 | ||||||
ESPP | N/A | N/A | 52,451 | |||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||
| | | | | | | | | | |
Total | 303,429 | $ | 58.33 | 1,103,535 | ||||||
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PROPOSALS FOR INCLUSION IN 2021 PROXY STATEMENT
For your proposal or director nomination to be considered for inclusion in our proxy statement for next year's meeting, your written proposal must be received by our corporate secretary at our principal executive office no later than December 11, 2020. If we change the date of next year's meeting by more than 30 days from the date of this year's meeting, then the deadline is a reasonable time before we begin to print and mail our proxy materials. You should also be aware that your proposal must comply with SEC regulations regarding inclusion of stockholder proposals in Company-sponsored proxy materials and the Bylaws.
PROPOSALS TO BE ADDRESSED AT 2021 ANNUAL MEETING (BUT NOT INCLUDED IN PROXY STATEMENT)
In order for you to properly bring a proposal (including director nominations) before next year's annual meeting, our corporate secretary must receive a written notice of the proposal no later than February 24, 2021 and no earlier than January 25, 2021, and it must contain the additional information required by the Bylaws. All proposals received after February 24, 2021 will be considered untimely. You may obtain a complete copy of the Bylaws by submitting a written request to our corporate secretary at our principal executive office. If we change the date of next year's meeting by more than 30 days from the date contemplated at this year's meeting, in order for the proposal to be timely, we must receive your written proposal at least 90 days before the date of next year's meeting or no more than 10 days following the day on which the meeting date is publicly announced.
By Order of the Board of Directors, | ||
Michael L. Kaplan Secretary | ||
Greenwood Village, Colorado April |
RED ROBIN GOURMET BURGERS, INC.
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Red Robin Gourmet Burgers, Inc. Amended and Restated Employee Stock Purchase Plan (the "Plan").
1. PURPOSE
The purpose of this Plan is to assist Eligible Employees in acquiring a stock ownership interest in the Corporation, at a favorable price and upon favorable terms, pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code. This Plan is also intended to encourage Eligible Employees to remain in the employ of the Corporation (or a Subsidiary which may be designated by the Committee as "Participating Subsidiary") and to provide them with an additional incentive to advance the best interests of the Corporation.
2. DEFINITIONS
Capitalized terms used herein which are not otherwise defined shall have the following meanings.
"Account" means the bookkeeping account maintained by the Corporation, or by a recordkeeper on behalf of the Corporation, for a Participant pursuant to Section 7(a).
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commission" means the United States Securities and Exchange Commission.
"Committee" means the committee appointed by the Board to administer this Plan pursuant to Section 12.
"Common Stock" means the Common Stock, par value $0.001 per share, of the Corporation, and such other securities or property as may become the subject of Options pursuant to an adjustment made under Section 17.
"Company" means, collectively, the Corporation, its Parent and its Subsidiaries (if any).
"Compensation" means an Eligible Employee's regular gross pay for a 40-hour week. Compensation includes any amounts contributed as salary reduction contributions to a plan qualifying under Section 401(k), 125 or 129 of the Code. Any other form of remuneration is excluded from Compensation, including (but not limited to) the following: overtime payments, commissions, prizes, awards, relocation or housing allowances, stock option exercises, stock appreciation rights, restricted stock exercises, performance awards, auto allowances, tuition reimbursement and other forms of imputed income, bonuses, incentive compensation, special payments, fees and allowances. Notwithstanding the foregoing, Compensation shall not include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Company.
"Contributions" means all bookkeeping amounts credited to the Account of a Participant pursuant to Section 7(a).
"Corporation" means Red Robin Gourmet Burgers, Inc., a Delaware corporation, and its successors.
"Effective Date" meansJuly 12, 2017.
"Eligible Employee" means any employee of the Corporation or of any Subsidiary which has been designated in writing by the Committee as a "Participating Subsidiary" (including any Subsidiaries which have become such after the date that this Plan is approved by the stockholders of the Corporation). Notwithstanding the foregoing, "Eligible Employee" shall not include any employee:
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
"Exercise Date" means, with respect to an Offering Period, the last day of that Offering Period.
"Fair Market Value" means, as of any date and unless the Committee determines otherwise, the value of Common Stock determined as follows:
"Grant Date" means the first day of each Offering Period, as determined by the Committee and announced to potential Eligible Employees.
"Offering Period" means the six-consecutive month period commencing on each Grant Date; provided, however, that the Committee may declare, as it deems appropriate and in advance of the applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period; provided further that the Grant Date for an Offering Period may not occur on or before the Exercise Date for the immediately preceding Offering Period.
"Option" means the stock option to acquire Shares granted to a Participant pursuant to Section 8.
"Option Price" means the per share exercise price of an Option as determined in accordance with Section 8(b).
"Parent" means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation in which each corporation (other than the Corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
"Participant" means an Eligible Employee who has elected to participate in this Plan and who has filed a valid and effective Subscription Agreement to make Contributions pursuant to Section 6.
"Plan" means this Red Robin Gourmet Burgers, Inc. Amended and Restated Employee Stock Purchase Plan, as amended from time to time.
"Rule 16b-3" means Rule 16b-3 as promulgated by the Commission under Section 16 of the Exchange Act, as amended from time to time.
"Share" means a share of Common Stock.
"Subscription Agreement" means the written agreement filed by an Eligible Employee with the Corporation pursuant to Section 6 to participate in this Plan.
"Subsidiary" means any corporation (other than the Corporation) in an unbroken chain of corporations (beginning with the Corporation) in which each corporation (other than the last corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
3. ELIGIBILITY
Any person employed as an Eligible Employee as of a Grant Date shall be eligible to participate in this Plan during the Offering Period in which such Grant Date occurs, subject to the Eligible Employee satisfying the requirements of Section 6.
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
In the event that all of the Shares made available under this Plan are subscribed prior to the expiration of this Plan, this Plan shall terminate at the end of that Offering Period and the Shares available shall be allocated for purchase by Participants in that Offering Period on a pro-rata basis determined with respect to Participants' Account balances.
5. OFFERING PERIODS
During the term of this Plan, the Corporation will offer Options to purchase Shares in each Offering Period to all Participants in that Offering Period. Unless otherwise specified by the Committee in advance of the Offering Period, an Offering Period that commences on or about July 1 will end the following December 31 and an Offering Period that commences on or about January 1 will end the following June 30. Each Option shall become effective on the Grant Date. The term of each Option shall be the duration of the related Offering Period and shall end on the Exercise Date. The first Offering Period shall commence as of a date determined by the Board or Committee, but no earlier than the Effective Date. Offering Periods shall continue until this Plan is terminated in accordance with Section 18 or 19, or, if earlier, until no Shares remain available for Options pursuant to Section 4.
6. PARTICIPATION
7. METHOD OF PAYMENT OF CONTRIBUTIONS
used to pay the Option Price of Shares acquired, or by any other amounts distributed pursuant to the terms hereof.
8. GRANT OF OPTION
lesser of: (i) 85% of the Fair Market Value of a Share on the applicable Grant Date; and (ii) 85% of the Fair Market Value of a Share on the applicable Exercise Date.
For purposes of the foregoing, a right to purchase stock accrues when it first become exercisable during the calendar year. In determining whether the stock ownership of an Eligible Employee equals or exceeds the 5% limit set forth above, the rules of Section 424(d) of the Code (relating to attribution of stock ownership) shall apply, and stock which the Eligible Employee may purchase under outstanding options shall be treated as stock owned by the Eligible Employee.
9. EXERCISE OF OPTION
Unless a Participant's Plan participation is terminated as provided in Section 11, his or her Option for the purchase of Shares shall be exercised automatically on the Exercise Date for that Offering Period, without any further action on the Participant's part, and the maximum number of whole Shares subject to such Option (subject to the Individual Limit set forth in Section 4(b) and the limitations contained in Section 8(c)) shall be purchased at the Option Price with the balance of such Participant's Account.
If any amount which is not sufficient to purchase a whole Share remains in a Participant's Account after the exercise of his or her Option on the Exercise Date: (i) such amount shall be credited to such Participant's Account for the next Offering Period, if he or she is then a Participant; or (ii) if such Participant is not a Participant in the next Offering Period, or if the Committee so elects, such amount shall be refunded to such Participant as soon as administratively practicable after such date. If the Share limit of Section 4(a) is reached, any amount that remains in a Participant's Account after the exercise of his or her Option on the Exercise Date to purchase the number of Shares that he or she is allocated shall be refunded to the Participant as soon as administratively practicable after such date.
If an amount which exceeds the Individual Limit established pursuant to Section 4(b) or one of the limitations set forth in Section 8(c) remains in a Participant's Account after the exercise of his or her Option on the Exercise Date, such amount shall be refunded to the Participant as soon as administratively practicable after such date.
10. DELIVERY
As soon as administratively practicable after the Exercise Date, the Corporation shall deliver to each Participant a certificate representing the Shares purchased upon exercise of his or her Option. The Corporation may make available an alternative arrangement for delivery of Shares to a recordkeeping service. The Committee (or its delegate), in its discretion, may either require or permit Participants to elect that such certificates representing the Shares purchased or to be purchased under the Plan be delivered to such recordkeeping service. In the event the Corporation is required to obtain from any commission or agency authority to issue any such certificate, the Corporation will seek to obtain such authority. If the Corporation is unable to obtain from any such commission or agency authority which counsel for the Corporation deems necessary for the lawful issuance of any such certificate, or if for any other reason the Corporation cannot issue or deliver Shares and satisfy Section 21, the Corporation shall be relieved from liability to any Participant except that the Corporation shall return to each Participant the amount of the balance credited to his or her Account.
11. TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS
If a Participant (i) ceases to be an Eligible Employee during an Offering Period but remains an employee of the Company through the Exercise Date, or (ii) during an Offering Period commences a sick leave, military leave, or other leave of absence approved by the Company, and the leave meets the requirements of Treasury Regulation Section 1.421-1(h)(2) and the Participant is an employee of the Company or on such leave as of the applicable Exercise Date, such Participant's Contributions shall cease (subject to Section 7(d)), and the Contributions previously credited to the Participant's Account for that Offering Period shall be used to exercise the Participant's Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely election to terminate Contributions in accordance with Section 7(c), in which case such Participant's Account shall be paid to him or her in cash in accordance with the foregoing paragraph).
12. ADMINISTRATION
13. DESIGNATION OF BENEFICIARY
14. TRANSFERABILITY
Neither Contributions credited to a Participant's Account nor any Option or rights with respect to the exercise of any Option or right to receive Shares under this Plan may be anticipated, alienated, encumbered, assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 13) by the Participant. Any such attempt at anticipation, alienation, encumbrance, assignment, transfer, pledge or other disposition shall be without effect and all amounts shall be paid and all Shares shall be delivered in accordance with the provisions of this Plan. Amounts payable or Shares deliverable pursuant to this Plan shall be paid or delivered only to the Participant or, in the event of the Participant's death, to the Participant's beneficiary pursuant to Section 13.
15. USE OF FUNDS; INTEREST
All Contributions received or held by the Corporation under this Plan will be included in the general assets of the Corporation and may be used for any corporate purpose. Notwithstanding anything else contained herein to the contrary, no interest will be paid to any Participant or credited to his or her Account under this Plan (in respect of Account balances, refunds of Account balances, or otherwise).
16. REPORTS
Statements shall be provided to Participants as soon as administratively practicable following each Exercise Date. Each Participant's statement shall set forth, as of such Exercise Date, that Participant's Account balance immediately prior to the exercise of his or her Option, the Option Price, the number of whole Shares purchased and his or her remaining Account balance, if any.
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK
Upon or in contemplation of any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), or reverse stock split, any merger, combination, consolidation, or other reorganization, any split-up, spin-off, or similar extraordinary dividend distribution in respect of the Common Stock (whether in the form of securities or property), any exchange of Common Stock or other securities of the Corporation, any similar, unusual or extraordinary corporate transaction in respect of the Common Stock, or any sale of substantially all the assets of the Corporation as an entirety occurs; the Committee shall, in such manner, to such extent (if any), and at such time as it deems appropriate and equitable in the circumstances:
outstanding Options, (iii) the Option Price of any or all outstanding Options, or (iv) the securities, cash or other property deliverable upon exercise of any outstanding Options; or
The Committee may adopt such valuation methodologies for outstanding Options as it deems reasonable in the event of a cash or property settlement and, without limitation on other methodologies, may base such settlement solely upon the excess (if any) of the amount payable upon or in respect of such event over the exercise or strike price of the Option.
In any of such events, the Committee may take such action sufficiently prior to such event to the extent that the Committee deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is or will be available to stockholders generally.
18. POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS
Upon a dissolution of the Corporation, or any other event described in Section 17 that the Corporation does not survive, the Plan and, if prior to the last day of an Offering Period, any outstanding Option granted with respect to that Offering Period shall terminate, subject to any provision that has been expressly made by the Board for the survival, substitution, assumption, exchange or other settlement of the Plan and Options. In the event a Participant's Option is terminated pursuant to this Section 18 without a provision having been made by the Board for a substitution, exchange or other settlement of the Option, such Participant's Account shall be paid to him or her in cash without interest.
19. TERM OF PLAN; AMENDMENT OR TERMINATION
Committee shall have the right to designate from time to time the Subsidiaries whose employees may be eligible to participate in this Plan and such designation shall not constitute an amendment to this Plan requiring stockholder approval.
20. NOTICES
All notices or other communications by a Participant to the Corporation contemplated by this Plan shall be deemed to have been duly given when received in the form and manner specified by the Committee (or its delegate) at the location, or by the person, designated by the Committee (or its delegate) for that purpose.
21. CONDITIONS UPON ISSUANCE OF SHARES
This Plan, the granting of Options under this Plan and the offer, issuance and delivery of Shares are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation and as a condition precedent to the exercise of his or her Option, provide such assurances and representations to the Corporation as the Committee may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
22. PLAN CONSTRUCTION
23. EMPLOYEES' RIGHTS
24. MISCELLANEOUS
25. EFFECTIVE DATE
Notwithstanding anything else contained herein to the contrary, the effectiveness of this Plan is subject to the approval of this Plan by the stockholders of the Corporation within twelve months after the Effective Date. Notwithstanding anything else contained herein to the contrary, no Shares shall be issued or delivered under this Plan until such stockholder approval is obtained and, if such stockholder approval is not obtained within such twelve month period of time, all Contributions credited to a Participant's Account hereunder shall be refunded to such Participant (without interest) as soon as practicable after the end of such twelve month period.
26. TAX WITHHOLDING
Notwithstanding anything else contained in this Plan herein to the contrary, the Company may deduct from a Participant's Account balance as of an Exercise Date, before the exercise of the Participant's Option is given effect on such date, the amount of any taxes which the Company reasonably determines it may be required to withhold with respect to such exercise. In such event, the maximum number of whole Shares subject to such Option (subject to the other limits set forth in this Plan) shall be purchased at the Option Price with the balance of the Participant's Account (after reduction for the tax withholding amount).
Should the Company for any reason be unable, or elect not to, satisfy its tax withholding obligations in the manner described in the preceding paragraph with respect to a Participant's exercise of an Option, or should the Company reasonably determine that it has a tax withholding obligation with respect to a disposition of Shares acquired pursuant to the exercise of an Option prior to satisfaction of the holding period requirements of Section 423 of the Code, the Company shall have the right at its option to (i) require the Participant to pay or provide for payment of the amount of any taxes which the Company reasonably determines that it is required to withhold with respect to such event or (ii) deduct from any amount otherwise payable to or for the account of the Participant the amount of any taxes which the Company reasonably determines that it is required to withhold with respect to such event.
27. NOTICE OF SALE
Any person who has acquired Shares under this Plan shall give prompt written notice to the Corporation of any sale or other transfer of the Shares if such sale or transfer occurs (i) within the two-year period after the Grant Date of the Offering Period with respect to which such Shares were acquired, or (ii) within the twelve month period after the Exercise Date of the Offering Period with respect to which such Shares were acquired.
RED ROBIN GOURMET BURGERS, INC.
2017 PERFORMANCE INCENTIVE PLAN
(as proposed to be amended)
1.1 Definitions. Whenever used in the Plan, the masculine pronoun will be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized words and phrases are used in the Plan with the meaning thereafter ascribed:
successor, or (IV) any acquisition by any entity pursuant to a transaction that complies withSections (3)(A),(B) and(C) below;
Notwithstanding the foregoing, with respect to any Award that is subject to Code Section 409A, "Change in Control" will mean a "change in control event" under Code Section 409A to the extent Change in Control is either a payment or settlement event under such Award or such definition is otherwise required for the Award to satisfy the requirements of Code Section 409A; provided, however, that the Committee may provide a different definition that complies with Code Section 409A in an applicable Award Agreement.
Notwithstanding the foregoing, for purposes of Paragraph (1) or (2) above, the Committee may use the closing price as of the indicated date, the average price or value as of the indicated date or for a period certain ending on the indicated date, the price determined at the time the transaction is processed, the tender offer price for shares of Stock, or any other method which the Committee determines is reasonably indicative of the fair market value of the Stock; provided, however, that for purposes of granting Nonqualified Stock Options or Stock Appreciation Rights, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 409A, and for purposes of granting Incentive Stock Options, Fair Market Value of Stock shall be determined in accordance with the requirements of Code Section 422.
either individually, alternatively or in combination, and measured either monthly, quarterly, annually, or over another specified period or cumulatively or averaged over a period of months, quarters, years, or other specified period, on an absolute basis or relative to a pre-established target, to one or more previous periods' results or to a designated comparison group, in each case as specified by the Committee in the Award:
Any of the foregoing may be determined on a per share basis (basic or diluted) as appropriate. The Committee may appropriately adjust any evaluation of performance under a Performance Goal to remove the effect of any one or more of the following: equity compensation expense under ASC 718; accelerated amortization of acquired technology and intangibles; asset write-downs; litigation or claim judgments or settlements; changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; discontinued operations; restaurant closure costs; executive transition costs; acquisition and dispositions; a material change in planned capital expenditures; and any items that are unusual in nature, non-recurring or infrequent in occurrence, except where such action would result in the loss of the otherwise available exemption of the Award under Code Section 162(m), if applicable.
(whether as an employee or as an independent contractor) permanently decreases (excluding a decrease as a result of military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment with the Service Recipient under an applicable statute or by contract) to no more than twenty percent (20%) of the average level of bona fide services performed for the Service Recipient (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of service if the Participant has been providing services to the Service Recipient for less than 36 months) that, in either case, constitutes a "separation from service" within the meaning of Code Section 409A and the regulations thereunder;
SECTION 2. THE PERFORMANCE INCENTIVE PLAN
2.1 Purpose of the Plan. The purpose of this Plan is to promote the success of the Company and to increase stockholder value by (a) incentivizing the officers, employees, directors, consultants, and other service providers of the Company and its Affiliates to foster and build upon the continued
success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encouraging stock ownership by certain officers, employees, directors, consultants, and other service providers by providing them with a means to acquire a proprietary interest in the Company, acquire shares of Stock, or to receive compensation which is based upon appreciation in the value of Stock; and (c) providing a means of obtaining, rewarding and retaining officers, employees, directors, consultants, and other service providers.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance with Section 5.2, the sum of (i) 925,0001,200,000 shares of Stock plus (ii) the number of shares of Stock available for grant under the Red Robin Gourmet Burgers, Inc. Second Amended and Restated 2007 Performance Incentive Plan (the "Maximum Plan Shares") are hereby reserved exclusively for issuance upon exercise, settlement, or payment pursuant to Awards, all or any of which may be pursuant to any one or more Award(s), including, without limitation, Incentive Stock Options. Shares of Stock will not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwise unsettled portion of any Award that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full will again be available for purposes of the Plan. The following shares, however, may not again be made available for grant in respect of Awards under this Plan: (i) shares not issued or delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right; (ii) shares delivered to or withheld by the Company to pay the Option or Grant Price of or the withholding taxes with respect to an Award, and (iii) shares repurchased on the open market with the proceeds from the payment of the Option Price of an Option. Shares of Stock available for Awards under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
2.3 Administration of the Plan.
2.4 Eligibility and Limits.
the Option or Stock Appreciation Right that is deemed to be cancelled and the Option or Stock Appreciation Right that is deemed to be granted will both be counted against the maximum number of shares for which Options or Stock Appreciation Rights may be granted to an employee as described in thisSection 2.4.
3.1 Terms and Conditions of All Awards.
3.2 Terms and Conditions of Options. Each Option granted under the Plan must be evidenced by an Award Agreement. At the time an Option is granted, the Committee will determine whether the Option is an Incentive Stock Option described in Code Section 422 or a Nonqualified Stock Option, and the Option must be clearly identified as to its status as an Incentive Stock Option or a Nonqualified Stock Option. Incentive Stock Options may only be granted to employees of the Company or any Subsidiary or Parent. At the time any Incentive Stock Option granted under the Plan is exercised, the Company will be entitled to legend the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as representing shares purchased upon the exercise of an Incentive Stock Option. An Incentive Stock Option may only be granted within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company's stockholders. Neither an Option nor the shares of Stock underlying an Option may be eligible for dividends or dividend equivalents.
(a) Option Price. Subject to adjustment in accordance withSection 5.1 and the other provisions of thisSection 3.2, the Exercise Price of any Options will be as set forth in the applicable Award Agreement, but in no event may it be less than Fair Market Value on the date the Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price may not be less than one hundred and ten percent (110%) of Fair Market Value on the date the Option is granted.
(b) Option Term. No Incentive Stock Option may be exercised after the expiration of ten (10) years from the date the Option is granted. Further, any Incentive Stock Option granted to an Over 10% Owner may not be exercised after the expiration of five (5) years from the date the Option is granted. The term of any Nonqualified Stock Option will be as specified in the applicable Award Agreement but may not exceed ten (10) years from the date the Option is granted; provided, however, that if the term specified in an Award Agreement for a Nonqualified Stock Option would otherwise expire during a period when trading in Stock is prohibited by law or by the Company's insider trading policy, then the term of the Nonqualified Stock Option will be deemed to expire on the thirtieth (30th) day after expiration of the applicable prohibition, notwithstanding any contrary term in the Award Agreement.
(c) Payment. Payment for all shares of Stock purchased pursuant to exercise of an Option may be made in any form or manner authorized by the Committee in the Award Agreement or by amendment thereto, including, but not limited to, and in each case subject to such procedures or restrictions as the Committee may impose:
In the event that the Committee allows a Participant to exercise an Award by delivering shares of Stock owned by such Participant, and unless otherwise expressly provided by the Committee, any shares delivered which were initially acquired by the Participant from the Company (upon exercise of an Option or otherwise) must have been owned by the Participant for at least six months as of the date of delivery. Shares of Stock used to satisfy the Exercise Price will be valued at their Fair Market Value on the date of exercise. The Company is not obligated to deliver any shares of Stock acquired pursuant to the exercise of an Option unless and until it receives full payment of the Exercise Price therefor and any related withholding obligations underSection 6.1 and any other conditions to exercise or purchase, as established from time to time by the Committee, have been satisfied. Unless otherwise expressly provided in the applicable Award Agreement, the Committee may at any time eliminate or limit a Participant's ability to pay the Exercise Price by any method other than cash payment to the Company. The holder of an Option, as such, has none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted under the Plan is exercisable by such person or persons, at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the Award Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may modify the terms of an Option to the extent not prohibited by the terms of the Plan, including, without limitation, accelerating the time or times at which such Option may be exercised in whole or in part, and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provision of the Award Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an Incentive Stock Option, in the event of the Termination of Employment of a Participant, the Option or portion thereof held by the Participant which is unexercised will expire, terminate, and become unexercisable no later than of the date that is three months after the date of Termination of Employment; provided, however, that in the case of a holder whose Termination of Employment is due to death or Disability, one year will be substituted for such three month period; provided, further that such time limits may be extended by the Committee under the terms of the grant, in which case, the Incentive Stock Option will be a Nonqualified Stock Option if it is exercised after the time limits otherwise applicable to Incentive Stock Options. For purposes of this Subsection (e), the Termination of Employment of a Participant will not be deemed to have occurred if the Participant is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options. Notwithstanding anything to the contrary in thisSection 3.2, any Option issued in substitution for an option previously issued by another entity, which substitution occurs in connection with a transaction to which Code Section 424(a) or 409A is applicable, may provide for an Exercise Price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms and conditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option being replaced thereby.
(g) No Reload Grants. Options may not be granted under the Plan in consideration for, and may not be conditioned upon the delivery of, shares of Stock to the Company in payment of the Exercise Price and/or tax withholding obligation under any other Option held by a Participant.
(h) No Repricing. Except as provided inSection��5.1, without the approval of the Company's stockholders the exercise price of an Option may not be reduced after the grant of the Option and an Option may not be cancelled or surrendered in consideration of, or in exchange for, (i) the grant of a new Option having an Exercise Price below that of the Option that was surrendered, (ii) Stock, (iii) cash, or (iv) any other Award.
3.3 Terms and Conditions of Stock Appreciation Rights. Each Stock Appreciation Right granted under the Plan must be evidenced by an Award Agreement. A Stock Appreciation Right entitles the Participant to receive the excess of (1) the Fair Market Value of a specified or determinable number of shares of Stock at the time of payment or exercise over (2) a specified or determinable price, which may not be less than the Fair Market Value of such shares of Stock on the date of grant. A Stock Appreciation Right granted in connection with an Option may only be exercised to the extent that the related Option has not been exercised, paid or otherwise settled. Neither a Stock Appreciation Right nor the shares of Stock underlying a Stock Appreciation Right are eligible for dividends or dividend equivalents.
(a) Settlement. Upon settlement of a Stock Appreciation Right, the Company shall pay the appreciation to the Participant in, at the discretion of the Committee, cash or shares of Stock (valued at the aggregate Fair Market Value on the date of payment or exercise) as provided in the Award Agreement or, in the absence of such provision, as the Committee determines.
(b) Term. The term of any Stock Appreciation Right will be as specified in the applicable Award Agreement, but may not exceed ten (10) years after the date the Stock Appreciation Right is granted; provided, however, that if the term specified in an Award Agreement for a Stock Appreciation Right would otherwise expire during a period when trading in Stock is prohibited by law or the Company's insider trading policy, then the term of the Stock Appreciation Right will be deemed to expire on the thirtieth (30th) day after expiration of the applicable prohibition, notwithstanding any contrary term in the Award Agreement.
(c) Conditions to Exercise. Each Stock Appreciation Right granted under the Plan is exercisable or payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the Award Agreement; provided, however, that subsequent to the grant of a Stock Appreciation Right, the Committee may, at any time before complete termination of such Stock Appreciation Right, accelerate the time or times at which such Stock Appreciation Right may be exercised or paid in whole or in part.
(d) No Repricing. Except as provided inSection 5.1, without the approval of the Company's stockholders, the price of a Stock Appreciation Right may not be reduced after the grant of the Stock Appreciation Right, and a Stock Appreciation Right may not be cancelled or surrendered in consideration of, or in exchange for, (i) the grant of a new Stock Appreciation Right having a price below that of the Stock Appreciation Right that was surrendered, (ii) Stock, (iii) cash, or (iv) any other Award.
3.4 Terms and Conditions of Other Stock-Based Awards. An Other Stock-Based Award shall entitle the Participant to receive one or more of (i) a specified or determinable number of shares of Stock, (ii) the value of a specified or determinable number of shares of Stock, (iii) a percentage or multiple of the value of a specified number of shares of Stock or (iv) dividend equivalents on a specified, or a determinable number, or a percentage or multiple of a specified number, of shares of Stock. At the time of the grant, the Committee shall determine the specified number of shares of Stock or the percentage or multiple of the specified number of shares of Stock, as applicable; and the
Performance Goals or other performance criteria, if any, applicable to the Other Stock-Based Award. The Committee may provide for an alternate percentage or multiple under certain specified conditions.
(a) Payment. Payment in respect of Other Stock-Based Awards may be made by the Company in cash or shares of Stock as provided in the applicable Award Agreement or, in the absence of such provision, as the Committee determines.
(b) Conditions to Payment or Lapse of Restrictions. Each Other Stock-Based Award granted under the Plan will be payable, and restrictions on such Other Stock-Based Award will lapse, at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified in the applicable Award Agreement; provided, however, that subsequent to the grant of an Other Stock-Based Award, the Committee, at any time before complete termination of such Other Stock-Based Award, may accelerate the time or times at which such Other Stock-Based Award may be paid or such restrictions will lapse, in whole or in part. Dividends (and dividend equivalents granted with respect to shares of Stock subject to an Other Stock-Based Award), will accrue and not be paid until, and will be paid only to the extent, the Award vests and, with respect to Other Stock-Based Awards that are subject to Performance Goals or other performance criteria, is earned.
3.5 Terms and Conditions of Cash Performance Awards. A Cash Performance Award will entitle the Participant to receive, at a specified future date, payment of an amount equal to all or a portion of either (i) the value of a specified or determinable number of units (stated in terms of a designated or determinable dollar amount per unit), or (ii) a percentage or multiple of a specified cash amount. At the time of the grant, the Committee shall determine the base value of each unit; the number of units subject to a Cash Performance Award, the specified amount and the percentage or multiple of the specified amount, as applicable; and the Performance Goals or other performance criteria, if any, applicable to the determination of the ultimate payment value of the Cash Performance Award. The Committee may provide for an alternate base value for each unit or an alternate percentage or multiple under certain specified conditions.
(a) Payment. Payment in respect of Cash Performance Awards will be made by the Company in cash.
(b) Conditions to Payment. Each Cash Performance Award granted under the Plan will be payable at such time or times, or upon the occurrence of such event or events, and in such amounts, as specified by the Committee.
3.6 Treatment of Awards on Termination of Service. Except as otherwise provided by PlanSection 3.2(e), any Award under this Plan to a Participant who has experienced a Termination of Employment, Separation from Service, or termination of some other service relationship with the Company and its Affiliates may be cancelled, accelerated, paid or continued, as provided in the applicable Award Agreement, or, as the Committee may otherwise determine to the extent not prohibited by the Plan. The portion of any Award exercisable in the event of continuation or the amount of any payment due under a continued Award may be adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Employment, Separation from Service or termination of some other service relationship or such other factors as the Committee determines are relevant to its decision to continue the Award.
SECTION 4. RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan will be issued in the Participant's name, but, if the applicable Award Agreement so provides, the shares
of Stock will be held by a custodian designated by the Committee (the "Custodian"). Each applicable Award Agreement providing for transfer of shares of Stock to the Custodian may require a Participant to complete an irrevocable stock power appointing the Custodian or the Custodian's designee as the attorney-in-fact for the Participant for the term specified in the applicable Award Agreement, with full power and authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if the Participant forfeits the shares under the terms of the applicable Award Agreement. During the period that the Custodian holds the shares subject to this Section, the Participant is entitled to all rights, except as provided in the applicable Award Agreement, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian must, as provided in the applicable Award Agreement, be paid directly to the Participant or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Award Agreement and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant or to the Company, as applicable.
4.2 Restrictions on Transfer. Except as expressly set forth in thisSection 4.2 or the applicable Award Agreement, all Awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. Any such disposition of an Award of or of the shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Award Agreement will be void. The Company will not recognize, or have the duty to recognize, any disposition not made in accordance with the Plan and the applicable Award Agreement, and any shares so transferred will continue to be bound by the Plan and the applicable Award Agreement. Notwithstanding the general prohibition set forth above, the Committee may permit Awards to be transferred to other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Committee establishes in writing (provided that any transfers of Incentive Stock Options may only be made to the extent permitted under the federal tax laws governing Incentive Stock Options). Any permitted transfer will be subject to compliance with applicable federal and state securities laws.
Further, the transfer restrictions of thisSection 4.2 will not apply to:
SECTION 5. ADJUSTMENTS; ACCELERATION
5.1 Adjustments.
upon the exercise, settlement, vesting, grant or payment, as applicable, of each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award (if any); the Exercise Price of each outstanding Option, the threshold price of each outstanding Stock Appreciation Right, the specified number of shares of Stock to which each outstanding Option, Stock Appreciation Right, and Other Stock-Based Award pertains, the total number of shares of Stock that may be subject to Awards granted by one or more officers of the Company and/or the Chairperson of the Compensation Committee of the Board of Directors, and the maximum number of shares as to which Options, Stock Appreciation Rights, and other Awards may be granted during any calendar year or other period, will be proportionately adjusted for any nonreciprocal transaction between the Company and the holders of capital stock of the Company that causes the per share value of the shares of Stock underlying an Award to change (e.g., a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend) (each, an "Equity Restructuring").
5.2 Automatic Acceleration of Awards. Except as otherwise provided inSection 5.3, upon a dissolution of the Company (or other event described inSection 5.1 that the Company does not survive
(or does not survive as a public company in respect of its Stock)), each then-outstanding Option and Stock Appreciation Right will become fully vested, each Other Stock-Based Award then outstanding will fully vest free of restrictions, and each other Award, including, without limitation, each Cash Performance Award, granted under this Plan that is then outstanding will become payable to the holder of such Award; provided that such acceleration provision will not apply, unless otherwise expressly provided by the Committee, with respect to any Award to the extent that the Board of Directors or the Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Award, or the Award would otherwise continue in accordance with its terms, in the circumstances.
5.3 Possible Acceleration of Awards. Upon the occurrence of a Change in Control, each outstanding Option and Stock Appreciation Right will become fully vested, each Other Stock-Based Award then outstanding will fully vest free of restrictions, and each other Award, including, without limitation, each Cash Performance Award, granted under this Plan that is then outstanding will vest and become payable to the holder of such Award. However, with respect to a Participant who is designated on the payroll records of the Company as a Tier 1 or Tier 2 executive or above (or comparable designation) or executive officer on the date of the Change in Control, no Award will vest solely on account of such Change in Control unless such Participant's employment with the Company (and its Subsidiaries) is terminated without "cause" (as defined in such Participant's Individual Agreement or the applicable Award Agreement) within the two-year period immediately following the consummation of such Change in Control.
5.4 Early Termination of Awards. Any Award that has been accelerated as required or contemplated bySection 5.2 orSection 5.3 (or would have been so accelerated but forSection 5.5,Section 5.6, orSection 5.7) will terminate upon the related event referred to inSection 5.2 orSection 5.3, as applicable, subject to any provision that has been expressly made by the Committee, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other continuation or settlement of such Award; provided that, in the case of Options and Stock Appreciation Rights that will not survive, be substituted for, assumed, exchanged, or otherwise continued or settled in the transaction, the holder of such Award will be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding Options and Stock Appreciation Rights in accordance with their terms before the termination of such Awards (except that in no case will more than ten (10) days' notice of accelerated vesting and the impending termination be required and any acceleration may be made contingent upon the actual occurrence of the event).
5.5 Other Acceleration Rules. Any acceleration of Awards pursuant to thisSECTION 5. must comply with all applicable legal requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Committee to occur a limited period of time (not greater than thirty (30) days) before the event. Without limiting the generality of the foregoing, the Committee may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an Award if an event giving rise to acceleration does not occur. Notwithstanding any other provision of the Plan to the contrary, the Committee may override the provisions ofSection 5.2,Section 5.3,Section 5.4 and/orSection 5.6 by express provision in an Award Agreement (provided that that the Committee may not, under the authority provided in thisSection 5.5, provide for the acceleration of vesting of an Award in the absence of a Change in Control or an event described inSection 5.1). In addition, the Committee may accord any Participant the right to refuse any acceleration, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve. The portion of any Incentive Stock Option accelerated pursuant toSection 5.3 or any other action permitted hereunder shall remain exercisable as an Incentive Stock Option only to the extent the applicable $100,000 limitation on Incentive Stock Options
is not exceeded. To the extent exceeded, the accelerated portion of the Option will be treated as a Nonqualified Stock Option.
5.6 Possible Rescission of Acceleration. If the vesting of an Award has been accelerated expressly in anticipation of an event or upon stockholder approval of an event and the Committee later determines that the event will not occur, the Committee shall rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested Awards.
5.7 Golden Parachute Limitation. Notwithstanding anything else contained in thisSECTION 5. to the contrary, in no event may an Award be accelerated under this Plan to an extent or in a manner that would result in any compensation being paid that is not fully deductible by the Company or one of its Subsidiaries for federal income tax purposes because of Code Section 280G, nor may any payment made under the Plan be accelerated to the extent any portion of such accelerated payment would result in the payment of compensation that is not deductible by the Company or one of its Subsidiaries because of Code Section 280G. If a Participant would be entitled to benefits or payments under the Plan that, together with payments under any other plan or program, would constitute "parachute payments" as defined in Code Section 280G, then any such parachute payments will be reduced or modified on a pro rata basis so that the Company and its Subsidiaries are not denied federal income tax deductions for such payments because of Code Section 280G. Notwithstanding the foregoing, if a Participant is a party to an Individual Agreement with the Company or one of its Subsidiaries, or is a participant in a severance program sponsored by the Company or one of its Subsidiaries, that contains express provisions regarding Code Section 280G and/or Code Section 4999 (or any similar successor provision), the Code Section 280G and/or Code Section 4999 provisions of such Individual Agreement will control as to any Awards held by that Participant.
6.1 Withholding. The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan or upon the vesting of any Award, the Company may require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local tax withholding requirements prior to the issuance or transfer of any such shares or the vesting of such Award. A Participant may satisfy the withholding obligation in cash, cash equivalents, or if and to the extent the applicable Award Agreement or Committee procedure so provides, a Participant may elect to have the number of shares of Stock he or she is to receive reduced by, or tender back to the Company, the number of whole shares of Stock that, when multiplied by the Fair Market Value of the shares of Stock, is sufficient to satisfy federal, state and local, if any, withholding obligation arising from exercise or payment of an Award. The Company may, with the Committee's approval, accept one or more promissory notes from a Participant in connection with taxes required to be withheld upon the vesting or payment of any Award under the Plan; provided that any such note will be subject to terms and conditions established by the Committee and applicable legal requirements.
6.2 Awards to Non-U.S. Employees. The Committee has the power and authority to determine which Affiliates will be covered by this Plan and which employees outside the United States of America will be eligible to participate in the Plan. The Committee may adopt, amend or rescind rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures, and practices. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures, and sub-plans with provisions that limit or modify rights on death, disability or retirement, or on Separation from Service or Termination of Employment; available methods of exercise or settlement of an Award; payment of income, social insurance contributions and payroll taxes; the withholding procedures and handling of
any stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.
6.3 Compliance with Code.
(a) Code Section 422. All Incentive Stock Options to be granted under the Plan are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted under the Plan must be construed in such a manner as to effectuate that intent.
(b) Code Section 409A. Except to the extent provided otherwise by the Committee, Awards under the Plan are intended to satisfy the requirements of Code Section 409A (and the Treasury Department guidance and regulations issued thereunder) so as to avoid the imposition of any additional taxes or penalties under Code Section 409A. If the Committee determines that an Award, Award Agreement, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to any additional taxes or other penalties under Code Section 409A, then unless the Committee provides otherwise, such Award, Award Agreement, payment, distribution, deferral election, transaction or other action or arrangement will not be given effect to the extent it causes such result and the related provisions of the Plan and/or Award Agreement will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Code Section 409A to the extent determined appropriate by the Committee, in each case without the consent of or notice to the Participant. Notwithstanding anything in the Plan, an Award Agreement, or any other agreement (written or oral) to the contrary, if a Participant is a "specified employee" (within the meaning of Code Section 409A) on the date of his or her Separation from Service, any payments made with respect to such Separation from Service under any Award will be delayed to the extent necessary to comply with Code Section 409A(a)(2)(B)(i), and such payments or benefits will be paid or distributed to the Participant during the five-day period commencing on the earlier of: (i) the expiration of the six-month period measured from the date of the Participant's Separation from Service, and (ii) the date of the Participant's death. Upon the expiration of the applicable six-month period under Code Section 409A(a)(2)(B)(i), all payments so deferred will be paid to the Participant (or the Participant's estate, in the event of the Participant's death) in a lump sum payment. Any remaining payments and benefits due under an Award will be paid as otherwise provided in an Award.
6.4 Right to Terminate Employment or Service. Nothing contained in this Plan or any Award Agreement confers upon any Participant any right to continue in the employment or other service of the Company or any of its Subsidiaries, constitutes a contract or agreement of employment or other service, or affects in any way an employee's status as an employee at will, nor may the Plan or any Award Agreement be construed so as to interfere in any way with the right of the Company and its Subsidiaries to change a person's compensation or other benefits, or to terminate his or her employment or other service, with or without cause; provided that nothing in thisSection 6.4 is intended to adversely affect any express independent right of such person under any Individual Agreement.
6.5 Non-Alienation of Benefits. Other than as provided in the Plan, no benefit under the Plan may be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so is void. No such benefit may, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant.
6.6 Restrictions on Delivery and Sale of Shares; Legends. Each Award is subject to the condition that if at any time the Committee, in its discretion, determines that the listing, registration or qualification of the shares covered by such Award upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Award or the purchase or delivery of shares thereunder, the delivery of any or all shares pursuant to such Award may be withheld unless and until such listing, registration or qualification shall have been effected. If a registration statement is not in effect under the Securities Act or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Awards then outstanding, the Committee may require, as a condition of exercise of any Option or as a condition to any other delivery of Stock pursuant to an Award, that the Participant or other recipient of an Award represent, in writing, that the shares received pursuant to the Award are being acquired for investment and not with a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company has received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act and any applicable state securities laws. The Company may include on certificates representing shares delivered pursuant to an Award such legends referring to the foregoing representations or restrictions or any other applicable restrictions on resale as the Company, in its discretion, deems appropriate.
6.7 Listing and Legal Compliance. The Committee may suspend the exercise or payment of any Award if it determines that securities exchange listing or registration or qualification under any securities laws or compliance with any other law is required in connection therewith and has not been completed on terms acceptable to the Committee.
6.8 Termination and Amendment of the Plan. The Board of Directors at any time may amend or terminate the Plan without stockholder approval; provided, however, that the Board of Directors shall obtain stockholder approval for any amendment to the Plan that, except as provided underSection 5.1 of the Plan, increases the number of shares of Stock available under the Plan, materially expands the classes of individuals eligible to receive Awards, materially expands the type of Awards available for issuance under the Plan, or would otherwise require stockholder approval under the rules of the applicable exchange. Unless the Award Agreement explicitly provides otherwise, no such termination or amendment may materially and adversely affect the rights of the Participant under such Award without the consent of the holder of an Award.
6.9 Stockholder Approval. The Company shall submit the Plan to the stockholders of the Company for their approval within twelve (12) months before or after the adoption of the Plan by the Board of Directors. If such approval is not obtained, any Award granted under the Plan will be void.
6.10 Choice of Law. The laws of the State of Delaware will govern the Plan, to the extent not preempted by federal law, without reference to the principles of conflict of laws
6.11 Effective Date of Plan; Term of Plan. The Plan will become effective as of the date the Plan is approved by the stockholders (the "Effective Date") pursuant toSection 6.9, regardless of the date the Plan is signed. No Award may be granted more than ten (10) years after the date the Plan was approved by the Company's stockholders.
ANNUAL MEETING OF STOCKHOLDERS OF RED ROBIN GOURMET BURGERS, INC. May 30, 201821, 2020 NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS: The Notice of Meeting, Proxy Statement, F orm of Proxy Card, and 20172019 Annual Report on Form 10-K are available at http://www.redrobin.com/eproxy Please sign, date, and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2, 3, 4, and 3.5. PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE 1. The election of eight (8)ten (10) directors for one-year terms: FOR AGAINST ABSTAIN (a) Anthony S. Ackil (b) Thomas G. Conforti (c) Cambria W. Dunaway (b)(d) G.J. Hart (e) Kalen F. Holmes (c)(f) Glenn B. Kaufman (d) Aylwin B. Lewis (e)(g) Steven K. Lumpkin (f) Pattye L. Moore (g) Stuart I. Oran (h) Denny Marie PostPaul J.B. Murphy III (i) David A. Pace (j) Allison Page 2. Approval, on an advisory basis, of the Company’s executive compensation. 3. Approval of the Amendment to the Amended and Restated Employee Stock Purchase Plan. 4. Approval of the Amendment to the 2017 Performance Incentive Plan. 5. Ratification of the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending December 30, 2018. 4.2 7, 2020. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee, or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, BUT NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” PROPOSALS 1, 2, 3, 4, AND 3.5. SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCOR-DANCE WITH THE STOCKHOLDER’S SPECIFICATIONS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS TO THE UNDERSIGNED. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RED ROBIN GOURMET BURGERS, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING. The undersigned hereby acknowledges receipt of the notice of annual meeting of stockholders, proxy statement, and 20172019 annual report on Form 10-K. X
RED ROBIN GOURMET BURGERS, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Denny Marie PostLynn S. Schweinfurth and Guy J. Constant,Michael L. Kaplan, and each of them, as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all the shares of Common Stock of Red Robin Gourmet Burgers, Inc. held of record by the undersigned on April 2, 2018March 30, 2020 at the Annual Meeting of Stockholders to be held at our corporate headquarters,Red Robin’s Yummm U, located at 6312 South Fiddler ’s Green Circle, Suite 200N, Greenwood Village,10000 East Geddes Avenue, Unit 500, Englewood, Colorado 8011180112 at 8:00 a.m. MDT on May 30, 2018,21, 2020, or any adjournment or postponement thereof. This proxy authorizes each of the persons named above to vote at hisher or herhis discretion on any other matter that may properly come before the meeting or any postponement or adjournment thereof. If this card is properly executed and returned, but contains no specific voting instructions, these shares will be voted in accordance with the recommendation of the Board of Directors. (Continued and to be signed on the reverse side)