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The Role of the Board in Risk Oversight
The Board of Directors is responsible for oversight of the Company’s risk management process. The Board delegates to the Compensation Committee responsibility for oversight of management’s compensation risk assessment. The Board delegates other risk management oversight matters, including cyber security risks, to the Audit Committee. Our Audit Committee periodically discusses and evaluates risk with members of management, our independent auditors and our internal audit group. Both the Compensation Committee and Audit Committee report to the full Board where appropriate.
Risk Assessment – Incentive Compensation Programs
Our Compensation Committee conducted a risk assessment of our compensation programs and practices. This process included a review of our incentive compensation plans. Based on this process, our Compensation Committee concluded that our compensation programs and practices are appropriately structured and do not create risks that are reasonably likely to have a material adverse effect on the Company.
Policy on
Claw BacksClawbacks
The Company has
adopted a
clawback policy,
onestablished in accordance with the
listing requirements of the NASDAQ Stock Market, which provides for the mandatory recovery
or “clawback” of
certain erroneously awarded incentive-based compensation
in the event that the Company is required to prepare an accounting restatement due to material noncompliance with the financial reporting requirements under
certain circumstances, which we refer to as “Claw Backs.” Under this policy a Claw Back review may be initiated as a result of any suspected non-compliance, which includes, but is not limited to: | ● | fraud, money laundering, bribery, corruption or other form of misconduct; |
| ● | any restatement of financial reports as a result of any misconduct; |
| ● | any act causing reputational harm to the Company or its business activities; |
| ● | any other grossly negligent acts or omissions of executives, including a failure to supervise in appropriate circumstances; |
| ● | failure to identify, raise or assess in a timely manner any risks or concerns material to the Company, its business activities or its reputation; and |
| ● | any other violation of the Company’s General Code of Ethics. |
the federal securities laws.
The Board of Directors also unanimously adopted an Anti-Hedging Policy in 2020. Under this policy, Executive Officers and Directors of the Company and its subsidiaries shall not, unless previously approved by the Nominating and Governance Committee of the Board, directly or indirectly:
| ● | Purchase any financial instrument, or enter into any transaction, that is designed to hedge or offset a decrease in the market value of Company stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars or exchange funds); or |
| ● | Hypothecate, or otherwise encumber shares of Company stock as collateral for indebtedness. This prohibition includes, but is not limited to, holding such shares in a margin account. |
Purchase any financial instrument, or enter into any transaction, that is designed to hedge or offset a decrease in the market value of Company stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars or exchange funds); or
Hypothecate, or otherwise encumber shares of Company stock as collateral for indebtedness. This prohibition includes, but is not limited to, holding such shares in a margin account.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of the Board. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Compensation Committee.
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Our Board of Directors has adopted the J & J Snack
GoodsFoods Corp. Non-Employee Director Compensation Plan. Under this Plan, each Non-Employee Director then serving shall receive an annual fee of
$150,000$155,000 payable within ten days of the Company’s annual meeting. In addition, the Chairman of the Audit Committee receives an additional annual fee of $10,000. In the event a Non-Employee Director serves for less than an entire year, the yearly portion of the annual fee payable for such year shall be prorated based on the number of days in the year for which the Director served. Under the Plan, our Non-Employee Directors may elect to receive all or a portion of their annual fee in the form of shares of the Company’s common stock. The number of shares issuable pursuant to an election is equal to the value of the fee forgone divided by the fair market value of the Company’s common stock on the payment date. For
20222023, all of our directors elected to receive their annual fee in the form of a cash
payment.payment, except Mr. Jackson and Ms. Meder.
20222023 Director Compensation Table
The following table shows the director compensation paid for service on the Board during the fiscal year ending on September
24, 2022. Our Chairman,30, 2023. Neither Mr. Fachner nor Mr. Shreiber
does not participateparticipates in the Non-Employee Director Compensation
Plan nor does Mr. Fachner, our President and CEO.Plan. Mr. Fachner’s compensation is described in the
“2022“2023 Summary Compensation Table” below.
| Name | Fees Earned or
Paid in Cash ($) | All Other
Compensation | Total ($) |
| Gerald B. Shreiber | — | | 13,616 | (1) | 13,616 |
| Sidney R. Brown | 150,000 | | — | | 150,000 |
| Roy C. Jackson | 92,307 | (2) | — | | 92,307 |
| Mary Meder | 50,000 | (2) | — | | 50,000 |
| Vincent Melchiorre | 150,000 | | — | | 150,000 |
| Marjorie S. Roshkoff | 112,000 | (2) | 24,167 | (3) | 136,167 |
| Peter G. Stanley | 160,000 | | — | | 160,000 |
Gerald B. Shreiber | | | — | | | $7,057(1) | | | $7,057 |
Sidney R. Brown | | | 155,000 | | | — | | | 155,000 |
Roy C. Jackson | | | 155,000(2) | | | — | | | 155,000 |
Mary M. Meder | | | 155,000(2) | | | — | | | 155,000 |
Vincent A. Melchiorre | | | 155,000 | | | — | | | 155,000 |
Marjorie S. Roshkoff | | | 155,000 | | | 39,021(3) | | | 194,021 |
Peter G. Stanley | | | 165,000 | | | — | | | 165,000 |
(1)
| Includes the value of certain health and welfare benefits provided to the Director. |
(2)
| Represents a pro-rata portion of the annual fee under thePursuant to our Non-Employee Director Compensation Plan, paidMr. Jackson and Ms. Meder elected to Ms. Roshkoff followingreceive a portion of their cash fees in the endform of her employment by the Company as General Counsel and, inshares of our common stock. In the case of Mr. Jackson, and$62,000 was received in the form of 441 shares of common stock (based on a closing price of $140.67). In the case of Ms. Meder, following their election to$155,000 was received in the Board in May 2022 and September 2022, respectively.form of 1,102 shares of common stock (based on a closing price of $140.67). |
(3)
| Includes COBRA premiums payable by the Company on Ms. Roshkoff’s behalf following her separation from the Company as General Counsel. |
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REPORT OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee is to oversee the Company’s accounting and financial reporting process and the audits of the Company’s financial statements.
The Company’s management is responsible for the integrity of the Company’s financial statements, as well as its accounting and financial reporting process and internal controls for compliance with applicable accounting standards, laws and regulations. The Company’s independent registered public accounting firm, Grant Thornton LLP (“Grant Thornton”), is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and expressing an opinion in its report on those financial statements.
The Audit Committee is responsible for monitoring and reviewing these processes, as well as the independence and performance of the Company’s independent registered public accounting firm. The Audit Committee does not conduct auditing or accounting reviews or procedures.
The Audit Committee has relied on management’s representation that the financial statements have been prepared with integrity and in conformity with generally accepted accounting procedures in the U.S. and on the registered public accounting firm representations included in its report on the Company’s financial statements. The Company’s independent registered public accounting firm also audited and discussed with the Audit Committee the Company’s internal control over financial reporting.
The Audit Committee reviewed and discussed with management the Company’s audited financial statements for fiscal year
2022.2023. The Audit Committee discussed with the Company’s registered public accounting firm, Grant Thornton, matters required to be discussed by the applicable standards of the Public Company Accounting Oversight Board.
The Audit Committee has received and reviewed the written disclosures and the letter from Grant Thornton required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accounting firm’s communications with the Audit Committee concerning independence. In addition, the Audit Committee discussed with Grant Thornton its independence from the Company and considered whether the providing of non-audit services to the Company by Grant Thornton is compatible with maintaining Grant Thornton’s independence.
Based on these reviews and discussions and in reliance thereon, the Audit Committee recommended to the Board of Directors that the audited financial statements for the Company be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September
24, 2022.30, 2023.
Audit Committee of the Board of Directors:
Peter G. Stanley, Chairman
Roy C. Jackson
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PROPOSAL 2
APPROVAL OF THEJ & J SNACK FOODS CORP.2022 LONG-TERM INCENTIVE PLANWe are asking for our shareholders to approve the J & J Snack Foods Corp. 2022 Long-Term Incentive Plan (the “2022 Plan”). The Board approved the 2022 Plan on November 9, 2022, subject to approval by our shareholders. The 2022 Plan is set forth in Exhibit A to this proxy statement and is incorporated by reference herein.
Overview of the Plan
The Board recommends that shareholders approve the 2022 Plan in order to attract, retain and compensate our employees, consultants and directors and align the interests of our shareholders with management.
The Company currently maintains the J & J Snack Foods Corp. Amended and Restated Stock Incentive Plan (the “Prior Plan”). As of December 24, 2022, the Prior Plan had approximately 46,363 shares available for issuance. In order to continue to provide a means to offer equity based incentive compensation to the Company’s employees, consultants and directors, the Board and Compensation Committee have determined it is in the best interests of the Company and its shareholders to adopt the 2022 Plan. If the 2022 Plan is approved by our shareholders, the 2022 Plan will replace the Prior Plan and no further grants will be made under the Prior Plan. Any awards previously granted under the Prior Plan will remain subject to the terms of the Prior Plan.
If our shareholders approve this Proposal 2, the 2022 Plan will become effective immediately. If the 2022 Plan is not approved by our shareholders, the Prior Plan will remain in place and we could continue to grant awards under the Prior Plan. However, if the 2022 Plan is not approved by our shareholders, we will not have a sufficient number of shares available for grant to our employees, consultants and directors to continue to provide meaningful equity-based incentive compensation going forward. Accordingly, the Board recommends the approval of the 2022 Plan.
The 2022 Plan Includes Features Designed to Protect Shareholder Interests
The 2022 Plan includes a number of provisions that we believe promote good compensation and governance practices. These provisions include, but are not limited to, the following:
| ● | No Liberal Share Recycling Provisions. Subject to customary exceptions, shares underlying the 2022 Plan will count against the 2022 Plan share reserve unless the award is forfeited, canceled or expires. The following shares may not again be made available for issuance as awards under the Plan: (a) shares covered by an award that are surrendered or withheld in payment of the award’s exercise or purchase price (including pursuant to the “net exercise” of an option), or in satisfaction of tax withholding obligations with respect to an award, and (b) shares of common stock repurchased on the open market with the proceeds of any option exercise price. Additionally, if a stock appreciation right (“SAR”) is exercised and shares are issued, the full number of shares underlying the SAR would count against the share reserve, not just the net number of shares issued upon exercise. |
| ● | No Repricing of Options or SARs. The 2022 Plan does not permit repricing of options or SARs without prior shareholder approval. |
| ● | Clawback Policies. To the extent allowed under applicable law, all awards under the 2022 Plan, and any related payments made thereunder, will generally be subject to the requirements of any applicable clawback, repayment or recapture policy implemented by the Company. |
| ● | No Automatic Grants. The 2022 Plan does not provide for automatic grants to any participant. |
| ● | No Dividend or Dividend Equivalents on Options or SARs. The 2022 Plan prohibits paying dividends or dividend equivalents on options and SARs. Dividends for restricted stock and dividend equivalents for awards other than options, SARs and restricted stock may be provided under the 2022 Plan, but any such dividends or dividend equivalents are subject to forfeiture and will only be paid out to the same extent as the underlying award vests or is otherwise earned. |
| ● | No Tax Gross-Ups. The 2022 Plan does not provide for any tax gross-ups. |
| ● | No “liberal change in control” definition. A change in control transaction must actually be consummated in order for the change in control provisions in the 2022 Plan to be triggered. |
| ● | Option Exercise Price and SAR base price. Options and SARs may not be granted with an exercise price or base price below the fair market value of a share on the grant date. |
Determination of the Number of Shares Reserved for Issuance under the 2022 Plan
The maximum number of shares that may be issued pursuant to all awards (including incentive stock options) is 400,000 shares, less the total number of shares covered by any awards granted under the Prior Plan after December 24, 2022. Additionally, each award granted under the Prior Plan that is outstanding as of the date the 2022 Plan is approved by the Company’s shareholders will be treated as an award for purposes of the 2022 Plan, such that shares covered by such award (or a portion of such award) will be added to the 2022 Plan’s authorized share limit if the award (or a portion of such award) is forfeited, canceled or expires (whether voluntarily or involuntarily) without the issuance of shares.
Shares issued in settlement or assumption of, or in substitution for, outstanding awards in connection with the Company acquiring another entity, an interest in another entity or similar, whether by merger, stock purchase, asset purchase or other form of transaction, will not count against the 2022 Plan share reserve. Additionally, available shares under a shareholder approved plan of an acquired company may be used for issuance of awards under the 2022 Plan without reducing the 2022 Plan share reserve, subject to applicable restrictions under the rules of the stock exchange on which the Company’s shares are listed.
Although our future share usage and needs cannot be predicted with certainty, the Board anticipates that the proposed share reserve will provide us with sufficient shares for our equity compensation program for the next 3 to 4 years. Upon shareholder approval of the 2022 Plan, the dilution attributable to our equity incentive plans and awards would be approximately 5.77%, which is calculated based on 20,406,693 fully diluted shares outstanding as of December 15, 2022, which includes 19,229,330 shares of common stock outstanding, 400,000 shares that would be available for issuance under the 2022 Plan, 46,363 remaining shares available under our existing plans, and 731,000 shares of outstanding restricted stock units and option awards.
As of December 24, 2022, the weighted-average remaining term of our 656,882 outstanding options is 3.1 years and the weighted-average exercise price of the options is $142.02. The closing price of our common stock on December 23, 2022, was $153.40 per share.
Our three-year average historical burn rate has been approximately 0.79%.
The Board believes that the share authorization request under the 2022 Plan is reasonable and customary within our industry.
Summary of Material Terms of the 2022 Plan
The following discussion summarizes the material terms of the 2022 Plan. This discussion does not purport to be complete and is qualified in its entirety by reference to the 2022 Plan, a copy of which is attached hereto as Exhibit A.
Purpose
The purpose of the 2022 Plan is to attract and retain the best available personnel, to provide additional incentives to employees, consultants and directors and to promote the success of the Company.
Administration
Unless otherwise determined by the Board, the 2022 Plan would be administered by our Compensation Committee or any other committee composed of members of the Board that is appointed by the Board or the Compensation Committee in accordance with applicable law (collectively, the “Plan Administrator”), provided that the Compensation Committee may also authorize one or more officers or employees of the Company to administer the Plan with respect to awards granted to employees or consultants who are neither directors nor officers, to the extent permitted by applicable law. Any decision or interpretation made, or action taken by the Plan Administrator in connection with the administration of the 2022 Plan shall be final, conclusive and binding on all participants.
Participants
Any person who is an employee, consultant or director of the Company or any related entity would be eligible to receive an award under the 2022 Plan. For purposes of the 2022 Plan the term “related entity” includes (a) any corporation in which the Company owns, directly or indirectly, at least 50% of the total combined voting power of all classes of stock, or any other entity (including partnerships and joint ventures) in which the Company owns, directly or indirectly, at least 50% of the combined equity thereof, (b) any “parent corporation” of the Company as defined in Section 424(e) of the Internal Revenue Code of 1986, as amended (the “Code”) or (c) any other entity controlling, controlled by or under common control with the Company.
As of December 24, 2022 there were approximately 5,000 employees and eight directors of the Company and our related entities who would potentially be eligible to participate in the 2022 Plan.
Shares Subject to the 2022 Plan
The maximum number of shares that may be issued pursuant to all awards (including incentive stock options) is 400,000 shares, less the total number of shares covered by any awards granted under the Prior Plan after December 24, 2022. Additionally, each award granted under the Prior Plan that is outstanding as of the date the 2022 Plan is approved by the Company’s shareholders will be treated as an award for purposes of the 2022 Plan, such that shares covered by such award (or a portion of such award) will be added to the 2022 Plan’s authorized share limit if the award (or a portion of such award) is forfeited, canceled or expires (whether voluntarily or involuntarily) without the issuance of shares. The shares available for issuance under the 2022 Plan may be shares that are authorized but unissued shares or issued shares that were reacquired by us.
Share Counting
Any unissued shares subject to an award that lapse or are canceled, terminated, expired or forfeited and any unvested shares subject to an award that are forfeited will be available to be granted again under the 2022 Plan. The full number of shares subject to an award will count against the share reserve, even if the exercise price of an option is satisfied through net-settlement or by delivering shares to the Company, and if a SAR is exercised and shares are issued, the full number of shares underlying the SAR would count against the share reserve, not just the net number of shares issued upon exercise. In addition, shares withheld from an award to satisfy withholding tax, shares delivered by a participant to satisfy withholding tax and any shares purchased in the open market with proceeds from the exercise of stock options will not be available for subsequent awards.
Shares issued in settlement or assumption of, or in substitution for, outstanding awards in connection with the Company acquiring another entity, an interest in another entity or similar whether by merger, stock purchase, asset purchase or other form of transaction will not count against the 2022 Plan share reserve. Additionally, available shares under a shareholder approved plan of an acquired company may be used for issuance of awards under the 2022 Plan without reducing the 2022 Plan share reserve, except as required by the rules of any applicable stock exchange.
The share reserve may be subject to proportionate adjustments in connection with (a) any changes in our capitalization (b) certain other non-reciprocal transactions, or (c) any other transaction with respect to the shares, including, but not limited to, a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, liquidation, a “corporate transaction” as defined in Section 424 of the Code or any similar transaction. Generally, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect the number or price of shares subject to an award.
Restricted Stock and Restricted Stock Units
Restricted stock awards are grants of a specified number of shares of common stock that are subject to certain forfeiture conditions and restrictions that limit the participant’s ability to transfer the stock until the specific conditions are met. Restricted stock awards may be subject to any conditions (including continued employment or performance conditions) that the Plan Administrator deems appropriate. Restricted Stock Unit (“RSU”) awards under the 2022 Plan may be settled in either cash or stock, in the Plan Administrator’s discretion. With respect to RSUs, until shares are released to the participant and the participant becomes the holder of record, the participant has none of the rights of a shareholder.
Participants are not entitled to receive dividends with respect to restricted stock awards or dividend equivalents with respect to shares underlying RSUs unless and until the award upon which the dividend or dividend equivalent is based vests.
Option Awards and Stock Appreciation Rights
The Plan Administrator is authorized to grant stock options and SARs under the 2022 Plan. A stock option entitles the participant to purchase shares of stock in the future at a specified price. Options can be granted as incentive stock options or non-qualified stock options, but incentive stock options can only be granted to participants who are employees. A SAR gives the participant the right to share in the appreciation in value of one share of common stock either by receiving shares, cash or a combination thereof.
The per share exercise price of an option and the base amount of a SAR shall be no less than the fair market value on the grant date of such option or SAR. The aggregate fair market value of the stock with respect to incentive stock options that become exercisable for the first time by a participant during any calendar year may not exceed $100,000 or such other amount as may be permitted under the Code.
The Plan Administrator will determine the terms and conditions of the exercise of options and SARs, but no option or SAR can be exercised more than 10 years after the award date (or 5 years for any incentive stock option awarded to a participant who holds more than 10% of the total combined voting power of all classes of stock of the Company). In addition, no dividends or dividend equivalents can be granted to options or SARs.
Performance Awards and Performance Goals
The 2022 Plan allows for vesting, payment, settlement and other entitlements with respect to awards to be subject to items or events that contain vesting or other terms that relate to performance-based conditions. Such performance-based conditions may be based on (by way of example and not as an exhaustive list): cash flow, earnings measures (including earnings per share and earnings before interest, taxes and/or amortization and/or depreciation), stock price, return on equity, total shareholder return, return on capital, return on assets or net assets, revenue (including revenue from direct labor, subcontractors or any other category), income or net income, operating income or net operating income, operating profit or net operating profit, operating margin or profit margin, return on operating revenue, market share, contract win, renewal or extension, days sales outstanding, contract bookings, cost control, cash management, debt reduction, customer satisfaction, delivery schedule, cycle-time improvement, productivity, quality, workforce diversity, comparisons to budget items, implementation or completion of specified projects or processes, employee turnover, forecast accuracy of any performance criteria, staff hiring, and/or completion of mergers or acquisitions.
With respect to performance goals, the Plan Administrator may adjust performance criteria for any unusual or unanticipated occurrences or events, including: asset write-downs, litigation, claims, judgments, settlements, currency fluctuations and other non-cash charges, changes in applicable law, rule or regulation or accounting principles, accruals for reorganization and restructuring programs, costs incurred in the pursuit of acquisition opportunities, strikes, delays or similar disruptions, macroeconomic conditions, terrorism and other international hostilities, significant regional weather events asset write-downs, litigation or claim judgments or settlements, or any other significant unusual or infrequently occurring items or events.
Clawback
Generally, all awards, and any related payments made under the 2022 Plan will be subject to the requirements of any applicable clawback, repayment or recapture policy implemented by the Company, to the extent set forth in such policy and/or in an award agreement or other agreement with the participant.
Amendment and Termination
Our Board would be permitted to amend, suspend or terminate the 2022 Plan at any time. However, no amendment can be made without the approval of our shareholders to the extent such approval is required by applicable law. The Board shall not amend, suspend or terminate the 2022 Plan or any award in a manner that would materially adversely affect the participant’s rights under such award without the participant’s written consent.
No Repricings without Shareholder Approval
Other than in connection with an adjustment made in connection with a corporate transaction or a merger, acquisition or other transaction, the Company will obtain shareholder approval prior to (a) reducing the exercise price of any options or the base amount of SARs, (b) cancelling, surrendering, replacing or otherwise exchanging any outstanding option or SAR where the fair market value of the shares underlying such option or SAR is less than the exercise price of such option or base amount of such SAR for a new option or SAR, another award, cash, shares or other securities or (c) taking any other action that is considered a “repricing” for purposes of the shareholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the shares are listed or quoted.
Change in Control
In the event of a change in control, if the Company is the surviving entity or if the surviving or acquiring corporation assumes outstanding awards or substitutes similar awards (the “Continued, Assumed or Substituted Awards”), such awards shall remain governed by their respective terms; provided, that (a) if, as of the change in control, the awards are subject to vesting conditions relating to items or events other than continuous service (for example performance-based vesting conditions), such vesting conditions shall be deemed to have been satisfied at the “target” performance level (or, if the applicable performance period has been completed as of the date of the change in control, at the performance level achieved based on actual performance) and the Continued, Assumed or Substituted Awards shall remain subject to any vesting conditions based on continuous service, without proration, and (b) if on, or within 18 months following, the date of the change in control, the participant’s continuous service is terminated by the Company or a related entity without cause or by the participant for good reason, the Continued, Assumed or Substituted Awards held by the participant that were not then vested (and, with respect to Options and SARs, exercisable) shall immediately become fully vested and, if applicable, exercisable.
In the event of a change in control, if the Company is not the surviving entity and the surviving entity (or a parent entity thereof) does not assume or substitute awards, the holders of such awards shall be entitled to the benefits provided for Continued, Assumed or Substituted Awards as of the date of the change in control, to the same extent as if the holder’s continuous service had been terminated by the Company without cause as of the date of the change in control. The Committee may provide that each award that is vested (or vests) as of the change in control shall be canceled in exchange for a payment in an amount equal to (a) the fair market value per share subject to the award immediately prior to the change in control over the exercise or base price (if any) per share subject to the award multiplied by (b) the number of shares granted under the award. If the fair market value per share subject to an option or SAR immediately prior to the change in control is less than the exercise or base price per share of such award, such awards shall be cancelled for no consideration.
A change in control means, generally, (a) the acquisition by any person of 50% or more of the voting power of all classes of stock entitled to vote, (b) the current members of our Board, or their approved successors, cease to be a majority of the Board, or (c) a reorganization, merger, consolidation or sale or disposition of all or substantially all of our assets, unless our shareholders hold 50% or more of the voting power of the resulting company, no person owns 50% or more of the voting power of all classes of stock entitled to vote (except to the extent such ownership existed prior to the corporate transaction and at least a majority of the current members of our remain members of the Board following the corporate transaction.
Substitute Awards
The Plan Administrator may issue awards in settlement or assumption of, or in substitution for, outstanding awards in connection with the Company or a related entity acquiring another entity, an interest in another entity or an additional interest in a related entity whether by merger, stock purchase, asset purchase or other form of transaction.
Indemnity
Under the 2022 Plan, members of the Board and any officers or employees to whom authority to act for the Board, the Plan Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by applicable laws on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding (or in connection with any appeal therein) to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the 2022 Plan, or any award, and against all amounts paid in settlement of such a claim (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding. However, this indemnification obligation would not apply to the extent that it is adjudged that a person otherwise entitled to indemnification was liable for gross negligence, bad faith or intentional misconduct.
Adjustments
The 2022 Plan provides that, upon a change in our capitalization, certain other non-reciprocal transactions or any other transaction with respect to the shares, including, but not limited to, a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, liquidation, a “corporate transaction” as defined in Section 424 of the Code or any similar transaction, the Plan Administrator will proportionately adjust the 2022 Plan and the outstanding awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights resulting from such transaction. Actions that the Plan Administrator may take include: (a) adjustment of the number and kind of shares of common stock reserved for issuance under the 2022 Plan, (b) adjustment of the number and kind of shares of common stock or other securities or property subject to outstanding awards granted under the 2022 Plan, (c) adjustment of exercise price, base price or purchase price of an outstanding award and (d) any other adjustments that the Plan Administrator deems equitable.
The Plan Administrator may also amend an award as necessary and subject to applicable laws for the purpose of correcting any errors occurring in connection with the administration or documentation of the award.
Transferability
Incentive stock options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the participant, only by the participant. Awards other than incentive stock options may be transferred by a participant (a) by will or the laws of descent and distribution (b) during the participant’s life time, to the extent and in the manner authorized by the Plan Administrator and subject to applicable laws, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements or (c) as otherwise determined by the Plan Administrator, in accordance with applicable law.
No Right to Company Employment
Nothing in the 2022 Plan or an award agreement confers a right upon a participant with respect to continuous service with the Company or any related entity in any capacity, and nothing in the 2022 Plan or award agreement interferes with the Company’s or any related entity’s right to terminate a participant’s continuous service at any time, with or without cause, and with or without notice.
Other Provisions
A participant may defer receipt or payment of any award granted under this 2022 Plan, in accordance with the terms of any deferred compensation plan or arrangement of the Company.
Compliance with Law
Under the 2022 Plan, the grant, issuance, vesting and settlement of awards thereunder, and our obligation to sell, issue or deliver shares under such awards, would be subject to all applicable federal, state, local and foreign laws, statutes, ordinances, rules and regulations or published administrative guidance or positions, stock exchange rules and regulations and to such approvals by any governmental or regulatory agency as may be required.
Effective Date and Termination of the 2022 Plan
Assuming the 2022 Plan is approved by shareholders on February 14, 2023, it will continue in effect until November 9, 2032, unless sooner terminated pursuant to the 2022 Plan.
Federal Income Tax Treatment
The following tax discussion is a general summary as of the date of this proxy statement of the U.S. federal income tax consequences to us and participants in the 2022 Plan. The discussion is intended solely for general information and does not make specific representations to any participant. The discussion does not address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes, the alternative minimum tax, or the rules related to excess parachute payments under Sections 280G and 4999 of the Code. A participant’s particular situation may be such that some variation of the basic rules is applicable to such participant. In addition, the federal income tax laws and regulations frequently have been revised and may be changed again at any time. Therefore, each participant is urged to consult a tax advisor with respect to any awards and/or shares acquired under the 2022 Plan both with respect to federal income tax consequences as well as any state, local or foreign tax consequences.
Restricted Stock and Restricted Stock Units. Participants of restricted stock awards (other than restricted stock awards with respect to which a Section 83(b) election has been made) or RSUs do not recognize ordinary income at the time of the grant. When the award vests or is paid, participants generally recognize ordinary income in an amount equal to the fair market value of the stock that vests or, in the case of RSUs, the amount of cash and the fair market value of any shares of common stock received at such time. No later than 30 days after a participant is granted a restricted stock award, pursuant to Section 83(b) of the Code, the participant may elect to recognize taxable ordinary income in an amount equal to the fair market value of the shares at the time of receipt less purchase price, if any. Provided that the election is made in a timely manner, when the restrictions on the shares lapse, the participant will not recognize any additional ordinary income. If the participant forfeits the shares to us (e.g., upon the participant’s termination prior to vesting), the participant may not claim a deduction with respect to the ordinary income recognized as a result of the election. Dividends (if any) or dividend equivalents paid with respect to unvested stock-based awards (other than restricted stock awards with respect to which a Section 83(b) election has been made) generally will be taxable as ordinary income to the participant at the time the dividends are received. The Company or a subsidiary is generally entitled to an income tax deduction in the amount of the ordinary income recognized by a participant, subject to possible limitations imposed by Sections 162(m) or 280G of the Code. Any gain that the participant realizes when the participant later sells or disposes of the restricted stock awards or RSUs will be short-term or long-term capital gain, depending on how long the shares were held.
Nonqualified Stock Options. There will be no federal income tax consequences to the participant or to the Company upon the grant of a stock option under the 2022 Plan. When the participant exercises a nonqualified stock option, however, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the common stock received upon exercise over the exercise price, and the Company or a subsidiary will generally be allowed a corresponding deduction, subject to potential deduction limitations under Sections 162(m) and 280G of the Code. Any gain that the participant realizes when the participant later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.
Incentive Stock Options. The participant will not recognize any ordinary income for federal income tax purposes upon receipt or exercise of an incentive stock option, and the Company or a subsidiary will not realize a deduction for federal income tax purposes. However, upon exercise, the difference between the fair market value of a share on the date of exercise and the option exercise price will be a tax preference item that may subject the participant to the alternative minimum tax. If the participant does not dispose of the incentive stock option shares within two years from the date the option was granted or within one year after the shares were transferred to the participant on exercise of the option, then, upon any subsequent disposition, that portion of the gain on the sale of the shares that is equal to the difference between the sales price and the option exercise price will be treated as a long-term capital gain. The Company or a subsidiary will not be entitled to a deduction either at the time the participant exercises the incentive stock option or subsequently sells the incentive stock option shares. However, if the participant sells the incentive stock option shares within two years after the date the incentive stock option is granted or within one year after the date the incentive stock option is exercised, then the sale is considered a disqualifying sale, and the participant would recognize ordinary income in the year of the disposition. The amount of such ordinary income generally is the lesser of (a) the excess of the amount realized on the disposition over the exercise price or (b) the excess of the fair market value of the stock on the exercise date over the
exercise price. The balance of the gain, if any, will be treated as long- or short-term capital gain depending on the length of time the participant held the stock following exercise. The Company or a subsidiary will generally be entitled to a deduction equal to the ordinary income recognized by the participant in the year that the disqualifying sale occurs, subject to potential deduction limitations under Sections 162(m) and 280G of the Code.
Stock Appreciation Rights. A participant receiving a stock appreciation right will not recognize ordinary income, and the Company will not be allowed a tax deduction, at the time the award is granted. When the participant exercises the stock appreciation right, the amount of cash and the fair market value of any shares of common stock received as of the date of such receipt will be ordinary income to the participant and the Company or a subsidiary will generally be allowed a corresponding federal income tax deduction at that time, subject to potential deduction limitations under Sections 162(m) and 280G of the Code.
Cash-Based Awards. Upon receipt of cash in settlement of a cash-based award, a participant will recognize ordinary income equal to the cash received, and the Company or a subsidiary will generally be allowed a corresponding federal income tax deduction at that time, subject to potential deduction limitations under Sections 162(m) and 280G of the Code.
Dividends and Dividend Equivalents. Recipients of stock-based awards that earn dividends or dividend equivalents will recognize taxable ordinary income on any dividend and dividend equivalent payments received with respect to such awards, which income is subject to withholding for U.S. federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the income recognized by a participant, subject to possible limitations imposed by Sections 162(m) or 280G of the Code and so long as the Company withholds the appropriate taxes with respect to such income, if required, and the individual’s total compensation is deemed reasonable in amount.
Company Deduction and Sections 162(m) and 280G of the Code. When a participant recognizes taxable income as described above with respect to each type of award, the Company or a subsidiary for which the participant performs services generally will be entitled to a corresponding deduction for federal income tax purposes, subject to potential deduction limitations under Sections 162(m) and 280G of the Code. With respect to certain of our executive officers, Section 162(m) limits the amount of compensation otherwise deductible by us to $1,000,000 per year for each such individual. Additionally, section 280G of the Code, which can apply to equity awards that vest, accelerate or are otherwise affected by a change in control, may also limit our ability to take a tax deduction with respect to awards granted under the 2022 Plan.
Section 409A Compliance. The Company intends that the 2022 Plan, and awards granted under it, will either be exempt from, or in compliance with, Section 409A of the Code. However, the Company makes no representation that any or all of the payments or benefits provided under the 2022 Plan or an award will be exempt form or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment or benefit. The 2022 Plan states that neither the Company, the related entities nor their respective employees, officers, directors, agents and representatives will have any liability to a participant with respect to any tax or penalty incurred with respect to or as a result of Section 409A of the Code or for damages for failing to comply with Section 409A of the Code. Any payment that falls within the scope of Section 409A of the Code will be paid on the first business day after the requisite six-month period after the participant terminates employment.
New Plan Benefits
The benefits that could be awarded or paid under the 2022 Plan would be determined in the discretion of the Plan Administrator. Because the Plan Administrator has not determined future awards or who might receive them, the benefits that could be awarded or paid under the 2022 Plan are not currently determinable.
Equity Compensation Plan Information
The following table summarizes information regarding outstanding options and shares available for future issuance as of the close of business on December 24, 2022 under the Company’s equity compensation plans. The shares that would be available for issuance under the 2022 Plan are not reflected in the table.
| | | Equity Compensation Plan Information
As of December 24, 2022 |
| Plan Category | | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) | | Weighted-average
exercise price of
outstanding options
(b) | | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in
column (a))
(c) |
| Equity compensation plans approved by security holders: | | | | | | | 136,363 | |
| Stock options | | 656,882 | | | $142.02 | | | — | |
| Restricted stock units | | 74,118 | | | — | | | — | |
| Equity compensation plans not approved by security holders | — | | | — | | | — | |
| Total | | 731,000 | | | | | | 136,363 | (1) |
(1) | Includes 90,000 shares available under the Company’s existing employee stock purchase plan. |
If there is an expiration, termination, or cancellation of any benefit granted under the plans without the issuance of shares, the shares subject to or reserved for that benefit may again be used for new stock options, rights, or awards of any type authorized under the plans.
Vote Required
To be approved, this Proposal 2 must receive the affirmative vote of a majority of the shares of our common stock cast at the annual meeting.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE J & J SNACK FOODS CORP. 2022 LONG-TERM INCENTIVE PLAN.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Grant Thornton LLP, an independent registered public accounting firm,
(“Grant Thornton”) as the independent certified public accountants to audit the accounts of the Company and its subsidiaries for the fiscal year that began on
September 25, 2022.October 1, 2023. Our Board is seeking shareholder ratification of this appointment at the Annual Meeting. Our
Amended and Restated Bylaws do not require that shareholders ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm. However, we are seeking ratification because we believe it is a good corporate governance practice. A representative of Grant Thornton
LLP will be present virtually at the Annual Meeting and will have an opportunity to make a statement if desired. The representative will be available to answer appropriate questions.
Fees of Independent Registered Public Accounting Firm
The following table sets forth aggregate fees billed or expected to be billed for services rendered by Grant Thornton
LLP for fiscal years
20222023 and
2021,2022, inclusive of
out of pocketout-of-pocket expenses.
| Type of Fees | FY 2022
($ in thousands) | FY 2021
($ in thousands) |
| Audit Fees(1) | $1,198 | $1,094 |
| Audit-Related Fees | 448 | 133 |
| Tax Fees | 286 | 378 |
| All Other Fees | — | — |
| Total | $1,932 | $1,605 |
Audit Fees(1) | | | $1,275 | | | $1,198 |
Audit-Related Fees | | | $97 | | | $448 |
Tax Fees | | | $539 | | | $286 |
All Other Fees | | | — | | | — |
Total | | | $1,911 | | | $1,932 |
(1)
| Audit fees include: fees rendered in connection with the annual audit of the Company’s consolidated financial statements; reviews of the Company’s unaudited consolidated interim financial statements; services for consultations and other current matters. |
Audit Committee Policies and Procedures on Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee has adopted policies and procedures requiring that the Company obtain the
Audit Committee’s pre-approval of all audit and permissible non-audit services to be provided by Grant Thornton as the Company’s independent accountants. Pre-approval is generally granted on a fiscal year basis, is detailed as to the particular service or category of services to be provided and is granted after consideration of the estimated fees for each service or category of service. Actual fees and any changes to estimated fees for preapproved services are reported to the Committee on a quarterly basis.
The Audit Committee of the Board of Directors has considered whether the provision of tax services described above is compatible with maintaining the independence of the Company’s independent registered public accounting firm. The Audit Committee has approved Grant Thornton’s performing these services.
Shareholder Approval Required
We are seeking ratification because we believe it is a good corporate governance practice. If shareholders do not ratify the appointment, the Audit Committee will reconsider whether to retain Grant Thornton,
LLP, but in its discretion, may choose to retain Grant Thornton
LLP as the Company’s independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that a change would be in the best interests of the Company and its shareholders.
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Votes may be cast in favor of or against this proposal or a shareholder may abstain from voting. Abstentions will have the effect of a
negative vote.vote “AGAINST” this proposal. As discussed above, the ratification of Grant Thornton
LLP as our independent registered public accounting firm is a “routine” matter, and your broker or nominee will have the discretion to vote your shares on this proposal absent voting instructions from you. Therefore,
we do not expect anythere are no broker non-votes on this proposal.
However, if you do not provide voting instructions and your broker or nominee fails to vote your shares, this will have the effect of a negative vote.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2023.2024.
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ADVISORY VOTE ON APPROVAL OF
Section 14A to the Exchange Act requires that we provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the
SEC’sSecurities and Exchange Commission’s rules.
The vote on this resolution is not intended to address any specific element of compensation; rather, the advisory vote relates to the overall compensation of our named executive officers, as well as the philosophy, policies and practices, all as described in this proxy statement. The vote is advisory, and therefore it is not binding on the
company,Company, the
compensation committeeCompensation Committee or our
boardBoard of
directors. Subject to our evaluation of the voting results for Proposal 5, weDirectors. We have determined that our shareholders should cast an advisory vote on the compensation of our named executive officers on an annual basis. The next advisory vote on the compensation of our named executive officers will be at the
20242025 Annual Meeting of Shareholders.
The affirmative vote of a majority of the shares present
in person or represented
and entitled to voteby proxy at the Annual Meeting is required to approve this Proposal
4.3.
“RESOLVED, that the company’s shareholders approve, on a nonbinding, advisory basis, the compensation of the named executive officers, as disclosed in the
company’sCompany’s Proxy Statement for the
20232024 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
PROPOSAL 5ADVISORY VOTE ON THE FREQUENCYTABLE OF ADVISORY VOTES ON
EXECUTIVE COMPENSATIONCONTENTS
Section 14A of the Exchange Act requires that we provide our shareholders with the opportunity to indicate their preference as to how frequently we should seek an advisory vote on executive compensation as disclosed pursuant to the SEC’s compensation disclosure rules. The preference is to be indicated through a nonbinding advisory vote that takes place at least once every six years. We last conducted a non-binding advisory vote on the frequency of an advisory vote on executive compensation at the 2017 Annual Meeting of Shareholders, and since that time we have conducted an annual advisory vote on named executive officer compensation. By voting on this Proposal 5, shareholders may indicate whether they would prefer that we seek future advisory votes on executive officer compensation once every one, two, or three years.
Our board of directors has determined that an advisory vote on executive compensation that occurs once every year is the most appropriate alternative for the company and, therefore, our board recommends that you vote for a one-year interval for the advisory vote on executive compensation. In determining to recommend that the shareholders select a frequency of once every year, the board has considered that an annual vote provides our shareholders with an opportunity to express their views on the Company’s compensation policies, practices and decisions on a frequent basis and enhance the level of dialogue between the Company and its shareholders overall. The Company recognizes that our shareholders may have different views as to the best approach for the company, and therefore we look forward to hearing from our shareholders as to their preferences on the frequency of an advisory vote on executive compensation.
Shareholders may cast a vote on the preferred voting frequency by selecting the option of one year, two years, or three years (or abstain) when voting. The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the preferred frequency for the advisory vote on executive compensation that has been selected by shareholders. However, because this vote is advisory and not binding on the board of directors or the company in any way, the board may decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option receiving the highest number of votes cast by our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE OPTION OF “ONE YEAR” AS THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED AN ADVISORY VOTE ON EXECUTIVE COMPENSATION AS DISCLOSED PURSUANT TO THE SECURITIES AND EXCHANGE COMMISSION’S COMPENSATION DISCLOSURE RULES.
Set forth below are the names of our executive officers who are not also directors, their ages as of December 15, 2022,2023, their offices within the company, their principal occupations or employment for the past five years and the names of other public companies in which such persons hold directorships.
Robert K. Cranmer | Robert Cranmer | 66 | 67 | | | Senior Vice President, Operations | |
| | | | | | |
Stephen J. Every | 60 | | 61 | | | Chief Operating Officer, The ICEE Company | |
| | | | | | |
Mary Lou Kehoe | 61 | | 62 | | | Vice President, Human Resources | |
| | | | | | |
Lynwood M. Mallard | 54 | | 55 | | | Senior Vice President, Chief Marketing Officer | |
| | | | | | |
Ken A. Plunk | 59 | | 60 | | | Senior Vice President, Chief Financial Officer | |
| | | | | | |
Michael A. Pollner | 49 | | 50 | | | Senior Vice President, General Counsel & Secretary | |
Robert
K. Cranmer
joined the Company in 2013. Since that time, he has served in various operational plant roles prior to becoming Senior Vice President of Operations in 2022.
Stephen
J. Every
was named Chief Operating Officer of The ICEE Company in August 2021. Mr. Every joined The ICEE Company as Director, Special Projects in 2009. In 2012, Mr. Every was promoted to Vice President of Sales with responsibility for the management and development of relationships with many of ICEE’s largest brand and service customers in the USA.
Mary Lou Kehoe
joined the Company in January 2020 as the Director of Human Resources. Ms. Kehoe was promoted to Vice President Human Resources in March 2021 and has responsibility for the Human Resources function across all business lines. Prior to working at J&J & J Snack Foods Corp., Ms. Kehoe served in various Human Resource functions managing the HR Operations side of the business while working at various consumer packaged goods companies, including Campbell Soup, Pinnacle Foods and Conagra Brands.
Lynwood
M. Mallard
joined the Company as Senior Vice President and Chief Marketing Officer in March 2021. Prior to joining J & J, Mr. Mallard worked at the Coca-Cola Company since 1998 where he held various ascending roles in areas of brand marketing, strategy, commercialization, and innovation.
Ken A. Plunk
was appointed Senior Vice President and Chief Financial Officer on September 21, 2020. Prior to joining J & J, Mr. Plunk spent 12 years at Walmart Inc. most recently as Senior Vice President of International Finance. Prior to Walmart, he worked at The Home Depot for four years, holding leadership positions in merchandise finance and internal audit.
Michael A. Pollner
was appointed Senior Vice President and General Counsel in April 2022. Prior to joining J &J, Mr. Pollner spent 16 years at Knoll, Inc., most recently as Senior Vice President, General Counsel, Chief Administrative Officer, General Counsel and Secretary. Prior to Knoll, Inc., Mr. Pollner was a business lawyer with two prominent U.S. based law firms.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of December 15,
20222023 concerning
the beneficial ownership of our Common Stock by (i) each person or group known
to J & Jby us to be the beneficial owner of more than five percent (5%) of
our outstanding Common Stock, (ii) each director of the Company
and director nominee, (iii)
each of the Company’s Named Executive Officers for
the fiscal year
2022,2023, and (iv)
the beneficial ownershipall of
Common Stock by the Company’sour directors and
all Executive Officersexecutive officers as a group. Except as otherwise noted, each beneficial owner of the Common Stock listed below has sole investment and voting power. Percentage of ownership is based on
19,229,33019,366,375 shares of common stock outstanding as of December 15,
2022.| | | Common Stock Beneficially Owned | |
| Name of Beneficial Owner | | Number | | Percent(1) | |
| Shareholders owning approximately 5% or more: | | | | | | | |
| 2021 Irrevocable Trust for Gerald B. Shreiber(2) | | | 3,498,511 | | | 18.2 | |
| BlackRock, Inc.(3) | | | 2,285,347 | | | 11.9 | |
| The Vanguard Group(4) | | | 1,499,504 | | | 7.8 | |
| Allspring Global Investment Holdings, LLC(5) | | | 1,349,955 | | | 7.0 | |
| Macquarie Group Limited(6) | | | 1,029,680 | | | 5.4 | |
| Directors and Executive Officers: | | | | | | | |
| Dan Fachner(7) | | | 28,987 | | | * | |
| Ken Plunk(8) | | | 1,846 | | | * | |
| Robert Cranmer(9) | | | 2,148 | | | * | |
| Stephen J. Every(10) | | | 5,102 | | | * | |
| Lynwood Mallard(11) | | | 312 | | | * | |
| Gerald B. Shreiber(12) | | | 3,947,438 | | | 20.5 | |
| Sidney R. Brown(13) | | | 17,284 | | | * | |
| Roy C. Jackson | | | — | | | * | |
| Mary Meder | | | — | | | * | |
| Vincent Melchiorre | | | 3,000 | | | * | |
| Marjorie S. Roshkoff (14) | | | 3,807,564 | | | 19.8 | |
| Peter G. Stanley | | | 10,000 | | | * | |
| All directors and executive officers as a group (14 persons)(15) | | | 4,325,696 | | | 22.5 | |
Shareholders owning approximately 5% or more: | | | | | | |
2021 Irrevocable Trust for Gerald B. Shreiber(2) | | | 3,498,511 | | | 18.1 |
BlackRock, Inc.(3) | | | 2,364,130 | | | 12.2 |
The Vanguard Group(4) | | | 1,562,967 | | | 8.1 |
Allspring Global Investment Holdings, LLC(5) | | | 1,329,781 | | | 6.9 |
Macquarie Group Limited(6) | | | 1,273,361 | | | 6.6 |
Directors and Executive Officers: | | | | | | |
Daniel J. Fachner(7) | | | 28,987 | | | * |
Ken A. Plunk(8) | | | 1,846 | | | * |
Robert K. Cranmer(9) | | | 2,148 | | | * |
Stephen J. Every(10) | | | 5,102 | | | * |
Lynwood M. Mallard(11) | | | 312 | | | * |
Gerald B. Shreiber(12) | | | 3,928,167 | | | 20.2 |
Sidney R. Brown(13) | | | 17,284 | | | * |
Roy C. Jackson | | | 411 | | | * |
Mary M. Meder | | | 1,102 | | | * |
Vincent A. Melchiorre | | | 3,000 | | | * |
Marjorie S. Roshkoff(14) | | | 3,806,314 | | | 19.7 |
Peter G. Stanley | | | 10,000 | | | * |
All directors and executive officers as a group (14 persons)(15) | | | 4,307,007 | | | 22.2 |
*
| Represents beneficial ownership of less than one percent (1%) of our outstanding common shares |
(1)
| The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the Securities and Exchange Commission and, accordingly, include securities owned by or for the spouse, children or certain other relatives of such person as well as other securities as to which the person has or shares voting or investment power or has the right to acquire within 60 days after December 15, 2022.2023. The same shares may be beneficially owned by more than one person. |
(2)
| Marjorie S. Roshkoff possesses the voting and dispositive power with respect to the securities beneficially owned by the 2021 Irrevocable Trust for Gerald B. Shreiber based upon a Schedule 13D filed with the SEC on September 3, 2021. The address for the Trust is 6000 Central Highway, Pennsauken, New Jersey 08109. |
(3)
| BlackRock, Inc. filed a Schedule 13G/A with the SEC on January 27, 2022,26, 2023, indicating that as of December 31, 2021,2022, (a) it had sole voting power over 2,263,7012,343,214 of these shares, and (b) it had sole dispositive power over all of these shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. |
(4)
| The Vanguard Group filed a Schedule 13G/A with the SEC on February 10, 2022,9, 2023, indicating that as of December 31, 2021,30, 2022, (a) it had shared voting power over 28,12026,183 of these shares, (b) it had shared dispositive power over 41,71841,366 of these shares, and (c) it had sole dispositive power over 1,457,7861,521,601 of these shares. The address of The Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355. |
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(5) | Allspring Global Investments Holdings, LLC, Allspring Global Investments, LLC and Allspring Funds Management, LLC filed a Schedule 13G13G/A with the SEC on January 19, 2022,13, 2023, indicating that as of December 31, 2021,2022, (a) Allspring Global Investment Holdings, LLC had sole voting power over 1,269,2881,252,290 of these shares and sole dispositive power over all of these shares, (b) Allspring Global Investments, LLC had sole voting power over 205,851240,634 of these shares and beneficial ownership of, and sole dispositive power over, 1,346,5131,327,588 of these shares and (c) Allspring Funds Management, LLC had sole voting power over 1,063,4371,011,656 of these shares, sole dispositive power over 3,4422,193 of these shares and beneficial ownership of 1,066,8791,013,849 of these shares. The address of Allspring Global Investments Holdings, LLC, Allspring Global Investments, LLC and Allspring Funds Management, LLC is 525 Market Street, 10th Floor, San Francisco, CA 94105. |
(6)
| Macquarie Group Limited, Macquarie Management Holdings Inc., and Macquarie Investment Management Business Trust and Macquarie Investment Management Global Limited filed a Schedule 13G/A with the SEC on February 14, 2022,2023, indicating that as of December 31, 2021:30, 2022: (a) Macquarie Group Limited had beneficial ownership of all of these shares;shares, and (b) Macquarie Management Holdings Inc. and Macquarie Investment Business Trust had sole voting power and sole dispositive power of 1,023,446over 1,263,465 of these shares and beneficial ownership of 1,023,556 of these shares; and (c) Macquarie Investment Management Group Limited had sole voting and dispositive power and beneficial ownership of 124all of these shares. The address of Macquarie Group Limited and Macquarie Investment Management Global Limited is 50 Martin Place Sydney, New South Wales, Australia. The address of Macquarie Management Holdings Inc. and Macquarie Investment Management Business Trust is 2005 Market Street, Philadelphia, PA 19103. |
(7)
| Includes options to purchase 8,000 shares of common stock and 600 shares of common stock held in a Donor Advised Fund. Excludes 22,91128,556 restricted stock units and options to purchase 12,000 shares of common stock held by Mr. Fachner which will not vest within 60 days of December 15, 2022.2023. |
(8)
| Excludes 6,1097,614 restricted stock units and 527 restricted shares held by Mr. Plunk subject to forfeiture which will not vest within 60 days of December 15, 2022.2023. |
(9)
| Includes options to purchase 5002,000 shares of common stock. Excludes 2,2922,856 restricted stock units and options to purchase 1,500 shares of common stock held by Mr. Cranmer which will not vest within 60 days of December 15, 2022.2023. |
(10)
| Includes options to purchase 1,500 shares of common stock. Excludes 2,2922,856 restricted stock units and options to purchase 2,000 shares of common stock held by Mr. Every which will not vest within 60 days of December 15, 2022.2023. |
(11)
| Excludes 2,2922,856 restricted stock units held by Mr. Mallard which will not vest within 60 days of December 15, 2022.2023.
|
(12)
| Includes 3,498,511 shares held in the 2021 Irrevocable Trust for Gerald B. Shreiber, 259,755 shares held in the GerryGerald B. Shreiber Foundation of which Mr. Shreiber is a Trustee and options to purchase 140,000120,000 shares of common stock. Excludes options to purchase 20,000 shares of common stock held by Mr. Shreiber which will not vest within 60 days of December 15, 2022.2023. |
(13)
| Includes 14,469 shares held in the Sidney and Sandy Brown Foundation of which Mr. Brown is a Trustee. |
(14)
| Includes 3,498,511 shares held in the 2021 Irrevocable Trust for Gerald B. Shreiber, for which Ms. Roshkoff is Trustee, and options to purchase 1,321 shares of common stock. Also includes 217,642 shares held in an Intentionally Defective Grantor Trust for Ms. Roshkoff and her siblings, for which Ms. Roshkoff serves as the Trustee. Also includes 18,756 shares held for the benefit of Ms. Roshkoff’s children in trust or custodian accounts, each of which Ms. Roshkoff serves as the Trustee or Custodian. |
(15)
| Excludes 40,8003,500 shares of common stock issuable to all directors and executive officers as a group upon the exercise of options 854 shares of restricted stock and 37,54647,816 restricted stock units held by all directors and executive officers as a group, all of which will not vest within 60 days after December 15, 2022. |
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Compensation Discussion Andand Analysis (“CD&A”) J & J Snack Foods Corp. manufactures and sells snack foods and frozen beverages which it markets nationally to the food service and retail supermarket industries. Our compensation programs are designed to support our business goals and promote both short-term and long-term growth. This section of the proxy statement explains how our compensation programs are designed and operate in practice with respect to our Named Executive Officers (each an “NEO” and, collectively,
our “NEOs”). For fiscal year
2022,2023, our
Named Executive OfficersNEOs are
DanDaniel J. Fachner, our
Chairman, President and Chief Executive Officer, Ken
A. Plunk, our Chief Financial Officer, Stephen
J. Every, Chief Operating Officer - The ICEE Company, Lynwood
M. Mallard, our Chief Marketing Officer, and Bob
K. Cranmer, SVP – Operations. The “Executive Compensation” section presents compensation earned by the Named Executive Officers and references in this CD&A to our “executive officers” or “officers” refer to the
Named Executive OfficersNEOs unless the context indicates otherwise.
Overview- How Did We Perform?
The past fiscal year
We performed well in 2023, delivering record sales of $1.56 billion and record adjusted EBITDA of $181.6 million2. In 2023, we met our goal to achieve gross margins of at least 30%, delivering a yearly gross margin of 30.1%, with gross margins of 32.8% in the fourth quarter of 2023. This was, filled with many milestones for J &J. The Company grew top-line salesin part, the result of improved operating performance and efficient management of distribution expenses. This performance enabled us to an all-time record, completed the acquisition of Dippin’ Dots, L.L.C., launched the Hola! Brand of Churros products and successfully implemented an enterprise resource planning system conversion in a significant part of our business. The Company also returnedreturn over $48$53.0 million of cash to itsour shareholders in the form of dividends. However, as with most companies, inflationdividends in fiscal year 2023. The Compensation Committee recognized that this performance was delivered in a consistent headwind throughoutyear where significant inflationary pressures carried over from 2022 for a significant part of fiscal year 2023.
In addition to achievement of the financial measures mentioned above, we completed the opening of six new production lines in 2023, significantly increasing our production capacity. We also successfully opened the first of our new regional distribution centers in Terrell, Texas in July 2023. The second regional distribution center opened in Woolwich, New Jersey in October 2023, and dramatically impacted the Company’s ultimate earnings performance. third one is expected to open in Arizona in February 2024.
Based on the Company’s
partial achievementfinancial performance in 2023, delivering $181.6 million in adjusted EBITDA, relative to a target of
key goals for 2022,$195.0 million, and taking into account the economic environment during the year and all the non-financial achievements the Company accomplished in 2023, the Compensation Committee approved
20222023 short-term incentive payments that
were seventyranged between one hundred twenty-five percent
(70%(125%) of target and one hundred thirty-nine percent (139%) of target.
How did we respond to our
20222023 Advisory Vote on Executive Compensation?
Approximately 98%97% of our shareholders voted in favor of our advisory say on pay proposal at our 20222023 Annual Meeting. Our Compensation Committee has reviewed the results of this vote and, based in part on the substantial support we received, we did not make significant changes to our compensation programs for the 20222023 fiscal year. We remain willing to discuss any compensation concerns with our shareholders if and when they arise.
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Executive Compensation Objectives and Philosophy
Our executive compensation programs reflect our results-oriented corporate culture that rewards achievement of aggressive goals. Our compensation programs for executive officers are designed to attract, retain, motivate and reward talented executives who will advance our strategic, operational and financial objectives and thereby enhance shareholder value.
Our executive compensation program incorporates the following best practices:
ü | | | We provide a significant portion of our named executive officers’ total compensation in the form of awards tied to our long-term strategy and our performance. |
ü | | | We balance both Company performance and retention in our compensation awards. |
ü | | | We have ongoing consideration and oversight by an independent Compensation Committee with respect to any potential risks associated with our incentive compensation programs. |
ü | | | We maintain a Clawback Policy for Section 16 Officers which permits the company to recover excess incentive compensation in the event of a restatement. |
ü | | | We prohibit our Executive Officers from engaging in hedging transactions in our stock. |
Determining Compensation – Role of Compensation Committee and Management
The Compensation Committee’s process for determining compensation levels for executive officers differs depending upon the compensation element and the position of the individual being considered. For each executive officer, other than the Chief Executive Officer, the Compensation Committee annually reviews each element of compensation described below in consultation with the Chief Executive Officer. With respect to the Chief Executive Officer, the Compensation Committee assesses the annual Company and individual performance. A number of factors are considered in determining individual compensation level, including performance of the individual and the business unit or function under his or her leadership, the Company’s performance, and economic and business conditions affecting J & J at the time of the review. Management and external sources provide relevant information and analyses as the Compensation Committee deems appropriate. While substantially guided by the applicable performance metrics of our programs, the Compensation Committee retains authority to exercise its judgment when approving individual awards and payouts.
Elements of Executive Compensation Program
Our executive compensation programs are comprised of: (i) base salary; (ii) annual non-equity incentive bonuses, which are discretionary, but based primarily on the achievement of company objectives and performance; and (iii) long-term incentive compensation in the form of periodic equity awards. Consistent with our overall compensation philosophy, a substantial component of overall compensation for each Executive Officer is performance-based.
The following sets forth the primary objectives addressed by each component of our executive compensation programs:
Base Salary | | | Provides NEOs with a competitive level of fixed compensation. Reflects individual performance and scope of responsibilities, as well as the competitive market for executive talenttalent. | | | Competitive salaries help us attract and retain talented executives.NEOs. |
Annual Non-Equity Incentive Bonus | | | Rewards executives for achieving annual company and individual goalsgoals. | Focused | | Ensures that NEOs are focused on meeting key short-term business objectives and performance metricsmetrics. |
Long-Term Equity Incentive Awards | | | Provides equity awards for NEOs to focus on long-term shareholder value creationcreation. | | | Award value is based on long-term growth in performance criteria correlated with an increase in market valuation.
Assists in retention of key executives and focus on long-term strategic objectives. |
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Base Salary:
The Compensation Committee reviews base salary levels for executive officersNEOs on an annual basis and any changes are typically effective on January 1st of the next calendar year. We attempt to set base salary at levels that are competitive in the industry and in relation to the particular job function of the executive officer.NEO. Base salaries are intended to provide a base level of compensation for services rendered during the year and isare intended to reward the executive officerNEO for the day-to-day complexities of his/his or her job. Effective as of the end of the 20222023 Fiscal Year (September 30, 2023), the base salaries for our Executive OfficersNEOs are as follows:| Name | | Salary |
| Dan Fachner | | $ | 900,000 |
| Ken Plunk | | $ | 500,000 |
| Robert Cranmer | | $ | 285,000 |
| Stephen J. Every | | $ | 320,000 |
| Lynwood Mallard | | $ | 285,000 |
Daniel J. Fachner | | | $950,000 |
Ken A. Plunk | | | $522,500 |
Robert K. Cranmer | | | $320,000 |
Stephen J. Every | | | $334,400 |
Lynwood M. Mallard | | | $320,000 |
Annual Non-Equity Incentive Bonus:
Annual non-equity incentive bonuses are based primarily on adjusted earnings before interest, depreciation and taxes (EBITDA) but also may include supplemental goals considered by the Compensation Committee in its discretion. Our Compensation Committee may also consider the operating performance of individual business segments, subsidiaries or business functions. There is generally no quantitative formula in calculating incentive payments. Instead, the Compensation Committee considers a variety of factors, including: (i) the company’sCompany’s overall performance for the year, (ii) the individual executive’sNEO’s performance; (iii) the business environment existing during the year and (iv) any extraordinary obstacles or accomplishments that may have arisen during the course of the year. Target payouts on our annual non-equity incentive bonuses generally range from 40%-100% of base salary.The Compensation Committee ultimately determines the amount of each
executive officer’sNEO’s actual non-equity incentive payment based principally on our achievement of the Company’s goals. However, the Compensation Committee also has significant flexibility to increase or decrease the amounts paid irrespective of Company performance relative to its targets.
Long-Term Equity Incentive Awards:
Long-term equity incentive grants are provided at levels intended to align the interests of our executive officersNEOs with those of our shareholders and to reward executive officersNEOs for performance resulting in positive increases in our stock price. Beginning with fiscal year 2022, our long-term incentive grants are generally structured as a combination of time-vested restricted stock units and performance-based restricted stock units. Our time-vested restricted stock units vest over a three-year service period in annual one-third installments. Our performance-based restricted stock units vest on the basis of our performance relative to a two-year performance condition, followed by an additional one-year service-based vesting requirement. Performance-based stock units may be earned between 50% of target level for threshold performance and up to 200% of the target level for outstanding performance. By utilizing equity grants that incorporate both types of vesting criteria, we believe our long-term equity incentive awards serve a retention, motivation and reward function over a longer performance horizon than our annual incentive payments.We do not apply a rigid formula in determining the specific equity award levels for our
Executive Officers.NEOs. Instead, the Compensation Committee exercises its discretion and professional judgment as to what is appropriate for each individual NEO based on their role and experience.
Retirement and Other Company Benefits
Our
Executive OfficersNEOs participate in the full range of Company benefit and retirement plans provided to all salaried employees. These include health and welfare benefits, our 401(K) plan and our Employee Stock Purchase Plan.
J & J provides a limited number of perquisites to its
Named Executive Officers.NEOs. The most significant of these perquisites to the
Named Executive OfficersNEOs is the use of Company-owned automobiles. Mr. Fachner also receives an allowance to defray the cost of his Country Club membership.
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Clawback Policy
The Compensation Committee has adopted a mandatory clawback policy for current and former executive officers aligned with the rules of the SEC and the NASDAQ Stock Market (the “Clawback Policy”). Under the Clawback Policy, in the event of an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, the Company will recover erroneously awarded incentive compensation received by current and former executive officers during the three completed fiscal years immediately preceding the restatement date, unless one of the exceptions specified in the Clawback Policy is applicable to the particular circumstances.
2023 Compensation - Analysis
As described above, J & J
partially achieved its objectives for 2022. We successfully converteddelivered record sales and profitability performance in 2023. While the adjusted EBITDA results were a
new enterprise resource planning system, closed our strategic acquisition of Dippin’ Dots and launched our new Hola! Brand of Churros products. In terms of our financial performance, J & J delivered strong top line sales growth exceeding pre-COVID levels. However,less than the Company’s
earnings performance was challenged by inflationary increasesplan for the year, the Compensation Committee recognized all of the other accomplishments in
operating expenses.Basedthe year, many of which will have a significant impact on the Company’s partial achievement of objectives for 2022, and in recognition of significant performance in future years, especially the contextdesign and execution of an unprecedented inflationary environment, our Compensation Committeesix new production lines and significant product innovation, and approved 20222023 non-equity incentive payments to our Executive OfficersNEOs that were generally seventy percent ofabove the target amount, except for our Chief Operating Officer of The ICEE Company whose incentive compensation is governed by a different plan specific to that business unit.
amounts.
Mr. Fachner was paid base salary at a rate of $900,000$950,000 per annum for FY 2022. Due2023. On February 14, 2023, the Company entered into an Employment Agreement with Mr. Fachner (the “Fachner Agreement”), pursuant to which, among other things, Mr. Fachner will (i) receive a base salary of at least $950,000, (ii) receive an annual bonus with an annual target no less than Mr. Fachner’s base salary, (iii) receive an annual equity incentive award of not less than $1,500,000, and (iv) receive paid time off and other benefits on the same basis generally made available to other, similarly situated executives. The Fachner Agreement is for an initial term of four years (the “Term”) but may be extended upon mutual agreement of Mr. Fachner and the Company. If Mr. Fachner remains employed by the Company for the entire Term and the Company obtains a target EBITDA of $600 million in the aggregate over the course of fiscal years 2023 through 2026, Mr. Fachner will earn an additional bonus of $5,000,000. In the event the Fachner Agreement is terminated prior to the expiration of the Term or is not renewed, Mr. Fachner will be eligible to receive one of three severance packages, depending upon the timing and reason for his termination or the non-renewal.
Based on our partial achievement of objectivesperformance for 2022,2023, both quantitative and qualitative as discussed above, Mr. Fachner received a 20222023 non-equity incentive payment of $630,000,$1,324,945, approximately seventyone hundred thirty-nine percent (70%(139%) of the target amount. The Compensation Committee was particularly focused on rewarding Mr. Fachner for his strong leadership of the Company, driving the right strategic initiatives in furtherance of the Company’s long-term success.
On November
10, 2021,16, 2022, Mr. Fachner was granted
4,8394,949 time-vesting restricted stock units and
4,8389,898 performance-vesting restricted stock units. The time-vesting restricted stock units vest in equal one-third annual installments over a three-year service period. The performance-vesting restricted stock units vest at the target level based on our achievement of
$361.5$396.57 million in cumulative
adjusted EBITDA over a two-year performance period, provided Mr. Fachner remains employed for an additional year thereafter. Our
compensation committeeCompensation Committee believes that the combination of these grants will have a retentive influence over Mr. Fachner and, at the same time, incentivize him to achieve our goals.
Mr. Plunk was paid base salary at a rate of $500,000 per annum for FY 2022. Due tothe first few months of fiscal year 2023, and $522,500 per annum for the remainder of the fiscal year beginning in January 2023. Based on our partial achievement of objectivesperformance for 2022,2023, both quantitative and qualitative as discussed above, Mr. Plunk received a 20222023 non-equity incentive payment of $262,500,$491,850, approximately seventyone hundred twenty-five percent (70%(125%) of the target amount.
On November 10, 2021,16, 2022, Mr. Plunk was granted 1,2901,320 time-vesting restricted stock units and 1,2902,639 performance-vesting restricted stock units. The time-vesting restricted stock units vest in equal one-third annual installments over a three-year service period. The performance-vesting restricted stock units vest at the target level based on our achievement of $361.5$396.57 million in cumulative adjusted EBITDA over a two-year performance period, provided Mr. Plunk remains employed for an additional year thereafter. Our compensation committee believes that the combination of these grants will have a retentive influence over Mr. Plunk and, at the same time, incentivize him to achieve our goals.
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Senior Vice President-Operations
Mr. Cranmer was paid base salary at a rate of $285,000 per annum for FY 2022. Due tothe first few months of fiscal year 2023, and $320,000 per annum for the remainder of the fiscal year beginning in January 2023. Based on our partial achievement of objectivesperformance for 2022,2023, both quantitative and qualitative as discussed above, Mr. Cranmer received a 20222023 non-equity incentive payment of $79,800,$165,510, approximately seventyone hundred twenty-nine percent (70%(129%) of the target amount.
On November
10, 2021,16, 2022, Mr. Cranmer was granted
484495 time-vesting restricted stock units and
484990 performance-vesting restricted stock units. The time-vesting restricted stock units vest in equal one-third annual installments over a three-year service period. The performance-vesting restricted stock units vest at the target level based on our achievement of
$361.5$396.57 million in cumulative
adjusted EBITDA over a two-year performance period, provided Mr. Cranmer remains employed for an additional year thereafter. Our
compensation committeeCompensation Committee believes that the combination of these grants will have a retentive influence over Mr. Cranmer and, at the same time, incentivize him to achieve our goals.
Chief Operating Officer – ICEE Company
Mr. Every was paid base salary at a rate of $320,000 per annum for FY 2022. As Chief Operating Officerthe first few months of ICEE Company,fiscal year 2023, and $334,400 per annum for the remainder of the fiscal year beginning in January 2023. Based on our performance for 2023, both quantitative and qualitative as discussed above, Mr. Every received a quarterly2023 non-equity incentive payment based on the financial results of that business unit. Such payments totaled $128,000 in the aggregate for 2022,$171,270, approximately one hundred twenty-eight percent (100%(128%) of the target amount.
On November
10, 2021,16, 2022, Mr. Every was granted
484495 time-vesting restricted stock units and
484990 performance-vesting restricted stock units. The time-vesting restricted stock units vest in equal one-third annual installments over a three-year service period. The performance-vesting restricted stock units vest at the target level based on our achievement of
$361.5$396.57 million in cumulative
adjusted EBITDA over a two-year performance period, provided Mr. Every remains employed for an additional year thereafter. Our
compensation committeeCompensation Committee believes that the combination of these grants will have a retentive influence over Mr. Every and, at the same time, incentivize him to achieve our goals.
Senior Vice President and Chief Marketing Officer
Mr. Mallard was paid base salary at a rate of $285,000 per annum for FY 2022. Due tothe first few months of fiscal year 2023, and $320,000 per annum for the remainder of the fiscal year beginning in January 2023. Based on our partial achievement of objectivesperformance for 2022,2023, both quantitative and qualitative as discussed above, Mr. Mallard received a 20222023 non-equity incentive payment of $79,800,$165,510, approximately seventyone hundred twenty-nine percent (70%(129%) of the target amount.
On November
10, 2021,16, 2022, Mr. Mallard was granted
484495 time-vesting restricted stock units and
484990 performance-vesting restricted stock units. The time vesting restricted stock units vest in equal one-third annual installments over a three-year service period. The performance-vesting restricted stock units vest at the target level based on our achievement of
$361.5$396.57 million in cumulative
adjusted EBITDA over a two-year performance period, provided Mr. Mallard remains employed for an additional year thereafter. Our
compensation committeeCompensation Committee believes that the combination of these grants will have a retentive influence over Mr. Mallard and, at the same time, incentivize him to achieve our goals.
November
20222023 Equity Grant
After the conclusion of the 20222023 fiscal year, we granted an aggregate of 7,7546,980 time-vesting units and 15,5076,976 performance-vesting units on November 16, 202217, 2023 to our named executive officers in the following amounts: Mr. Fachner (4,949(4,454 time-vesting units and 9,8984,454 performance-vesting units), Mr. Plunk (1,320(1,188 time-vesting units and 2,6391,187 performance-vesting units), Mr. Cranmer (495(446 time-vesting units and 990445 performance-vesting units), Mr. Every (495(446 time-vesting units and 990445 performance-vesting units) and Mr. Mallard (495(446 time-vesting units and 990445 performance-vesting units). The time-vesting units vest in equal one third annual installments on the anniversary of the grant date over a three-year service period. The performance-vesting units vest upon our achievement of a cumulative two-year adjusted EBITDA target, provided that the executive officer remains employed for an additional year thereafter. As explained above, our Compensation Committee determined the specific level of each of these awards by applying its discretion as to what is appropriate in light of all of the circumstances, including our strategic objectives and the responsibilities of our executive officers and their outstanding equity awards.
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee of the Board of Directors:
Sidney R. Brown, Chairman
Peter G. Stanley
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SUMMARY COMPENSATION TABLE
The following table summarizes compensation paid or earned for the three
previous fiscal years
ended September 24, 2022 for the Company’s
Named Executive Officers.Name and Principal
Position | | Year | | Salary
($) | | Stock
Awards
($)(1) | | Option
Awards
($)(1) | | Non-Equity
Incentive Plan
Compensation
($)(2) | | All Other
Compensation
($)(3) | | Total
($) |
| Dan Fachner, | | 2022 | | 896,154 | | 1,500,032 | | — | | 630,000 | | 21,972 | | 3,048,158 |
| President and Chief | | 2021 | | 575,692 | | — | | — | | 900,000 | | 17,526 | | 1,493,218 |
| Executive Officer | | 2020 | | 408,308 | | — | | 171,840 | | 643,119 | | 16,517 | | 1,239,784 |
| Ken Plunk, | | 2022 | | 493,942 | | 399,926 | | — | | 262,500 | | 2,925 | | 1,159,293 |
| Chief Financial Officer | | 2021 | | 455,000 | | 207,749 | | — | | 375,000 | | 2,412 | | 1,040,161 |
| | | 2020 | | 8,750 | | — | | — | | — | | — | | 8,750 |
Robert Cranmer, Senior
Vice President-Operations | | 2022 | | 271,154 | | 150,050 | | — | | 79,800 | | 10,047 | | 511,051 |
| Stephen J. Every, | | 2022 | | 320,000 | | 150,050 | | — | | 128,000 | | 9,790 | | 609,840 |
| Chief Operating Officer- | | 2021 | | 245,785 | | | | — | | 42,000 | | 10,183 | | 297,968 |
| ICEE Company | | | | | | | | | | | | | | |
| Lynwood Mallard, | | 2022 | | 274,231 | | 150,050 | | — | | 79,800 | | 2,451 | | 506,531 |
Senior Vice President and
Chief Marketing Officer | | 2021 | | 139,423 | | | | — | | 58,000 | | 663 | | 198,086 |
Daniel J. Fachner,
President and Chief
Executive Officer | | | 2023 | | | 936,538 | | | 2,250,063 | | | | | | 1,324,945 | | | 57,813 | | | 4,569,359 |
| | 2022 | | | 896,154 | | | 1,500,032 | | | — | | | 630,000 | | | 21,972 | | | 3,048,158 |
| | 2021 | | | 575,692 | | | — | | | — | | | 900,000 | | | 17,526 | | | 1,493,218 |
Ken A. Plunk,
Chief Financial Officer | | | 2023 | | | 526,058 | | | 599,986 | | | | | | 491,850 | | | 17,773 | | | 1,635,667 |
| | 2022 | | | 493,942 | | | 399,926 | | | — | | | 262,500 | | | 2,925 | | | 1,159,293 |
| | 2021 | | | 455,000 | | | 207,749 | | | — | | | 375,000 | | | 2,412 | | | 1,040,161 |
Robert K. Cranmer Senior
Vice President-Operations | | | 2023 | | | 316,058 | | | 225,052 | | | | | | 165,510 | | | 28,253 | | | 734,873 |
| | 2022 | | | 271,154 | | | 150,050 | | | — | | | 79,800 | | | 10,047 | | | 511,051 |
Stephen J. Every,
Chief Operating Officer-
ICEE Company | | | 2023 | | | 330,523 | | | 225,052 | | | | | | 171,270 | | | 25,669 | | | 752,514 |
| | 2022 | | | 320,000 | | | 150,050 | | | — | | | 128,000 | | | 9,790 | | | 607,840 |
| | 2021 | | | 245,785 | | | | | | — | | | 42,000 | | | 10,183 | | | 297,968 |
Lynwood M. Mallard,
Senior Vice President and
Chief Marketing Officer | | | 2023 | | | 316,058 | | | 225,052 | | | | | | 165,510 | | | 27,221 | | | 733,841 |
| | 2022 | | | 274,231 | | | 150,050 | | | — | | | 79,800 | | | 2,451 | | | 506,531 |
| | 2021 | | | 139,423 | | | | | | — | | | 58,000 | | | 663 | | | 198,086 |
(1)
| Amounts shown in this column do not reflect the compensation actually received by the named executive officer.NEO. Instead, the amounts shown in this column represent the aggregate grant date fair value determined for financial accounting purposes. The aggregate grant date fair values of these awards were determined in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 718. The awards for which amounts are shown in this table are the option and equity awards granted to the named executive officersNEOs in November 2022, November 2021, October 2020 and MayOctober 2020, as further described in the Outstanding Equity Awards at Fiscal-Year End table below. The assumptions used in determining the grant date fair values of these awards are set forth in Notes A and K to our consolidated financial statements, which are included in our annual report on Form 10-K for the year ended September 24, 2022,30, 2023, filed with the SEC on November 22, 2022.28, 2023. |
(2)
| For 2023, represents amounts earned under a non-equity incentive award granted to the named executive officer in November 2022 for services rendered in fiscal 2023. See “Compensation Discussion and Analysis” on page 27 for more details on this compensation. For 2022, represents amounts earned under a non-equity incentive award granted to the named executive officer in November 2021 for services rendered in fiscal 2022. See “Compensation Discussion and Analysis” on page 37For 2021, represents amounts earned under a non-equity incentive award granted to the named executive officer in November 2020 for more details on this compensation.services rendered in fiscal 2021. |
(3)
| Includes useautomobile lease payments ($32,742 in the case of Company automobiles,Mr. Fachner), company paid fuel cards, and 401(k) match, group term life insurance andcompany match. For Mr. Fachner, also includes membership fees at a local country club for Mr. Fachner. |
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GRANTS OF PLAN-BASED AWARDS
The following table shows all plan-based awards granted to the
named executive officersNEOs during fiscal year
2022:| Name | Grant
Date | | Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan
Awards
Target ($) | | | Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards
Target (#) | | | Maximum | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options (#) | | Exercise
or Base
Price of
Option
Awards ($/Sh) | | Grant Date
Fair Value
of Stock
and Option
Awards(1) |
| Dan Fachner | 11/10/2021 | | 900,000 | | | — | | | | | | — | | | — | | — | | — |
| | 11/10/2021 | | — | | | 4,838 | (2) | | 9,676 | (2) | | — | | | — | | — | | 749,938 |
| | 11/10/2021 | | — | | | — | | | — | | | 4,839 | (3) | | — | | — | | 750,094 |
| Ken Plunk | 11/10/2021 | | 375,000 | | | — | | | | | | — | | | — | | — | | — |
| | 11/10/2021 | | — | | | 1,290 | (2) | | 2,580 | (2) | | — | | | — | | — | | 199,963 |
| | 11/10/2021 | | — | | | — | | | — | | | 1,290 | (3) | | — | | — | | 199,963 |
| Robert Cranmer | 11/10/2021 | | 114,000 | (2) | | — | | | | | | — | | | — | | — | | — |
| | 11/10/2021 | | — | | | 484 | (2) | | 968 | (2) | | — | | | — | | — | | 75,025 |
| | 11/10/2021 | | — | | | — | | | — | | | 484 | (3) | | — | | — | | 75,025 |
| Stephen J. Every | 11/10/2021 | | 128,000 | (2) | | — | | | | | | | | | — | | — | | — |
| | 11/10/2021 | | — | | | 484 | (2) | | 968 | (2) | | | | | — | | — | | 75,025 |
| | 11/10/2021 | | — | | | — | | | | | | 484 | (3) | | — | | — | | 75,025 |
| Lynwood Mallard | 11/10/2021 | | 114,000 | (2) | | — | | | | | | | | | — | | — | | — |
| | 11/10/2021 | | — | | | 484 | (2) | | 968 | (2) | | | | | — | | — | | 75,025 |
| | 11/10/2021 | | — | | | — | | | — | | | 484 | (3) | | — | | — | | 75,025 |
Dan Fachner | | | 11/16/2022 | | | 950,000 | | | — | | | | | | — | | | — | | | — | | | — |
| | 11/16/2022 | | | — | | | 9,898(2) | | | 19,796(2) | | | — | | | — | | | — | | | 1,500,042 |
| | 11/16/2022 | | | — | | | — | | | — | | | 4,949(3) | | | — | | | — | | | 750,021 |
Ken Plunk | | | 11/16/2022 | | | 391,875 | | | — | | | | | | — | | | — | | | — | | | — |
| | 11/16/2022 | | | — | | | 2,639(2) | | | 5,278(2) | | | — | | | — | | | — | | | 399,940 |
| | 11/16/2022 | | | — | | | — | | | — | | | 1,320(3) | | | — | | | — | | | 200,046 |
Robert Cranmer | | | 11/16/2022 | | | 128,000(2) | | | — | | | | | | — | | | — | | | — | | | — |
| | 11/16/2022 | | | — | | | 990(2) | | | 1,980(2) | | | — | | | — | | | — | | | 150,035 |
| | 11/16/2022 | | | — | | | — | | | — | | | 495(3) | | | — | | | — | | | 75,017 |
Stephen J. Every | | | 11/16/2022 | | | 133,760(2) | | | — | | | | | | | | | — | | | — | | | — |
| | 11/16/2022 | | | — | | | 990(2) | | | 1,980(2) | | | | | | — | | | — | | | 150,035 |
| | 11/16/2022 | | | — | | | — | | | | | | 495(3) | | | — | | | — | | | 75,017 |
Lynwood Mallard | | | 11/16/2022 | | | 128,000(2) | | | — | | | | | | | | | — | | | — | | | — |
| | 11/16/2022 | | | — | | | 990(2) | | | 1,980(2) | | | | | | — | | | — | | | 150,035 |
| | 11/16/2022 | | | — | | | — | | | — | | | 495(3) | | | — | | | — | | | 75,017 |
(1)
| The aggregate grant date fair values of these awards were determined in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 718. The awards for which amounts are shown in this table are the equity awards granted to the named executive officersNEOs in November 2021,2022, as further described in the Outstanding Equity Awards at Fiscal-Year End table below. The assumptions used in determining the grant date fair values of these awards are set forth in Notes A and K to our consolidated financial statements, which are included in our annual report on Form 10-K for the year ended September 24, 2022,30, 2023, filed with the SEC on November 22, 2022.28, 2023. |
(2)
| The awards indicated represent performance-based restricted stock units granted to the named executive officerNEO on November 10, 2021.16, 2022. The restricted stock units vest based on our cumulative adjusted EBITDA performance over a two-year period, provided the named executive officer remains employed for an additional year thereafter. Fifty percent (50%) of the target units vest if we achieve $336.2$337.09 million in cumulative adjusted EBITDA over two years, one hundred percent (100%) of the target units vest if we achieve $361.5$396.57 million in cumulative adjusted EBITDA over two years, and two hundred percent (200%) of the target units vest if we achieve $397.7$436.23 million in cumulative adjusted EBITDA over two years. |
(3)
| The awards indicated represent time-vesting restricted stock units granted to the named executive officerNEO on November 10, 2021.16, 2022. These restricted stock units vest in equal one-third annual installments over a three-year service period. |
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding equity awards held by our
named executive officersNEOs as of September
24, 2022.| | | | Option Awards | | Stock Awards |
| Name | | Grant Date | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
UnExercisable | | | Option
Exercise
Price | | Option
Expiration
Date | | Number of
Shares or
Units of Stock
That Have Not
Vested (#) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)(1) | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (#) | | | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)(1) |
| Dan Fachner | | 3/13/2018 | | 8,000 | | | | | 141.01 | | 3/12/2023 | | | | | | | | | | |
| | | 5/14/2019 | | 8,000 | | | | | 163.29 | | 5/13/2024 | | | | | | | | | | |
| | | 5/20/2020 | | | | 12,000 | (2) | | 125.83 | | 5/20/2025 | | | | | | | | | | |
| | | 11/10/2021 | | | | | | | | | | | 4,839 | (3) | | 661,007 | | | | | |
| | | 11/10/2021 | | | | | | | | | | | | | | | | 4,838 | (4) | | 660,871 |
| Ken Plunk | | 10/20/2020 | | | | | | | | | | | 1,053 | (5) | | 143,840 | | | | | |
| | | 11/10/2021 | | | | | | | | | | | 1,290 | (3) | | 176,214 | | | | | |
| | | 11/10/2021 | | | | | | | | | | | | | | | | 1,290 | (4) | | 176,214 |
| Robert Cranmer | | 5/14/2019 | | 500 | | | | | 163.29 | | 5/13/2024 | | | | | | | | | | |
| | | 5/20/2020 | | | | 1,500 | (2) | | 125.83 | | 5/19/2025 | | | | | | | | | | |
| | | 11/10/2021 | | | | | | | | | | | | | | | | | | | |
| | | 11/10/2021 | | | | | | | | | | | 484 | (3) | | 66,114 | | | | | |
| | | | | | | | | | | | | | | | | | | | 484 | (4) | | 66,114 |
| Stephen J. Every | | 5/14/2019 | | 1,500 | | | | | 163.29 | | 5/13/2024 | | | | | | | | | | |
| | | 5/20/2020 | | | | 2,000 | (2) | | 125.83 | | 5/19/2025 | | | | | | | | | | |
| | | 11/10/2021 | | | | | | | | | | | | | | | | | | | |
| | | 11/10/2021 | | | | | | | | | | | 484 | (3) | | 66,114 | | | | | |
| | | | | | | | | | | | | | | | | | | | 484 | (4) | | 66,114 |
| Lynwood Mallard | | 11/10/2021 | | | | | | | | | | | 484 | (3) | | 66,114 | | | | | |
| | | 11/10/2021 | | | | | | | | | | | | | | | | 484 | (4) | | 66,114 |
Dan Fachner | | | 5/14/2019 | | | 8,000 | | | | | | 163.29 | | | 5/13/2024 | | | | | | | | | | | | |
| | 5/21/2020 | | | 12,000(2) | | | | | | 125.83 | | | 5/20/2025 | | | | | | | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | 3,226(3) | | | 527,935 | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | | | | | | | 4,838(4) | | | 791,739 |
| | 11/16/2022 | | | | | | | | | | | | | | | 4,949(3) | | | 809,904 | | | | | | |
| | 11/16/2022 | | | | | | | | | | | | | | | | | | | | | 9,898(6) | | | 1,619,808 |
Ken Plunk | | | 10/20/2020 | | | | | | | | | | | | | | | 526(5) | | | 86,080 | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | 860(3) | | | 140,739 | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | | | | | | | 1,290(4) | | | 211,109 |
| | 11/16/2022 | | | | | | | | | | | | | | | 1,320(3) | | | 216,018 | | | | | | |
| | 11/16/2022 | | | | | | | | | | | | | | | | | | | | | 2,639(6) | | | 431,872 |
Robert Cranmer | | | 5/14/2019 | | | 500 | | | | | | 163.29 | | | 5/13/2024 | | | | | | | | | | | | |
| | 5/20/2020 | | | 1,500(2) | | | | | | 125.83 | | | 5/19/2025 | | | | | | | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | 323(3) | | | 52,859 | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | | | | | | | 484(4) | | | 79,207 |
| | 11/16/2022 | | | | | | | | | | | | | | | 495(3) | | | 81,007 | | | | | | |
| | 11/16/2022 | | | | | | | | | | | | | | | | | | | | | 990(6) | | | 162,014 |
Stephen J. Every | | | 11/10/2021 | | | | | | | | | | | | | | | 323(3) | | | 52,859 | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | | | | | | | 484(4) | | | 79,207 |
| | 11/16/2022 | | | | | | | | | | | | | | | 495(3) | | | 81,007 | | | | | | |
| | 11/16/2022 | | | | | | | | | | | | | | | | | | | | | 990(6) | | | 162,014 |
Lynwood M. Mallard | | | 11/10/2021 | | | | | | | | | | | | | | | 323(3) | | | 52,859 | | | | | | |
| | 11/10/2021 | | | | | | | | | | | | | | | | | | | | | 484(4) | | | 79,207 |
| | 11/16/2022 | | | | | | | | | | | | | | | 495(3) | | | 81,007 | | | | | | |
| | 11/16/2022 | | | | | | | | | | | | | | | | | | | | | 990(6) | | | 162,014 |
(1)
| Calculated based upon the closing price of our common stock on September 23, 2022,29, 2023, the last trading day of the fiscal year, which was $136.60$163.65 per share. |
(2)
| These stock options were granted in May 2020 and cliff vest on the third anniversary of the date of grant. |
(3)
| The awards indicated represent restricted stock units granted to the named executive officer on the date indicated. These restricted stock units vest in equal one-third annual installments over a three-year service period. |
(4)
| The awards indicated represent the target amount of performance-based restricted stock units granted to the named executive officer on November 10, 2021. The restricted stock units vest based on our cumulative EBITDA performance over a two-year period, provided the named executive officer remains employed for an additional year thereafter. Fifty percent (50%) of the target units vest if we achieve $336.2 million in cumulative EBITDA over two years, one hundred percent (100%) of the target units vest if we achieve $361.5 million in cumulative EBITDA over two years, and two hundred percent (200%) of the target units vest if we achieve $397.7 million in cumulative EBITDA over two years. |
(5)
| In October 2020, Mr. Plunk received 1,579 shares issued pursuant to an Inducement Restricted Stock Award Agreement with such shares vesting over three (3) years in equal annual installments. |
(6)
| 44 | The awards indicated represent performance-based restricted stock units granted to the NEO on November 16, 2022. The restricted stock units vest based on our cumulative adjusted EBITDA performance over a two-year period, provided the named executive officer remains employed for an additional year thereafter. Fifty percent (50%) of the target units vest if we achieve $337.09 million in cumulative adjusted EBITDA over two years, one hundred percent (100%) of the target units vest if we achieve $396.57 million in cumulative adjusted EBITDA over two years, and two hundred percent (200%) of the target units vest if we achieve $436.23 million in cumulative adjusted EBITDA over two years. |
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Option Exercises and Stock Vested
| | | Options Awards | | Stock Awards |
| Name | | Number of
Shares
Acquired on
Exercise (#) | | Value Realized
on Exercise ($)(1) | | Number of
Shares
Acquired on
Vesting (#) | | Value Realized
on Vesting ($)(1) |
| Dan Fachner | | 8,000 | | 1,240,000 | | — | | |
| Ken Plunk | | — | | — | | 526 | | 77,480 |
| Robert Cranmer | | 500 | | 77,425 | | — | | |
| Stephen J. Every | | 2,227 | | 348,952 | | — | | |
| Lynwood Mallard | | — | | — | | — | | — |
Daniel J. Fachner | | | | | | | | | 1,613 | | | 229,853 |
Ken A. Plunk | | | — | | | — | | | 957 | | | 132,936 |
Robert K. Cranmer | | | | | | | | | 161 | | | 22,943 |
Stephen J. Every | | | 3,500 | | | 469,595 | | | 161 | | | 22,943 |
Lynwood M. Mallard | | | — | | | — | | | 161 | | | 22,943 |
(1)
| Calculated using the closing price on the applicable vesting date or exercise date. |
POTENTIAL PAYMENT UPON TERMINATION OR CHANGE IN CONTROL
Dan Fachner, our Chairman, President and Chief Executive Officer, has entered into an employment agreement with the Company which provides for potential post-employment benefits in certain circumstances upon a termination or a change in control (the “Agreement”). The amount of such post-employment benefits depends upon the circumstances and timing of Mr. Fachner’s termination and is conditioned upon Mr. Fachner’s execution of a general release agreement.
In the event that Mr. Fachner is terminated by the Company without Cause, by Mr. Fachner for Good Reason, or due to a Change in Control during the Term of the Agreement, Mr. Fachner shall receive the following benefits:
base salary through the date of termination, compensation for accrued but unused paid time off; reimbursement of unreimbursed business expenses, and all compensation otherwise due under the terms of the Company’s benefit plans (collectively “Accrued Obligations”);
salary continuation equal to the greater of (i) base salary in effect at the time of termination for the remainder of the Term of the Agreement and (ii) three (3) times base salary in effect at time of termination;
lump sum bonus payment equal to three (3) times the greater of (i) his most recent annual bonus and (ii) the annual bonus received immediately prior to his most recent annual bonus;
payment of COBRA premiums until Mr. Fachner voluntarily elects not to receive COBRA benefit coverage or the date he becomes ineligible for COBRA continuation coverage benefits (“COBRA Benefits”); and
vesting of unvested, outstanding equity incentive awards in accordance with their original vesting schedule (“Equity Benefit”).
The benefits outlined above are referred to in the Agreement as “Severance Package III.”
In the event of a termination due to Death or Disability (as such terms are defined in the Agreement), Mr. Fachner will receive the benefits referenced above, except that Mr. Fachner will receive salary continuation benefits for two years and a reduced lump sum bonus equal to two (2) times the greater of (i) his most recent annual bonus and (ii) his annual bonus immediately received prior to his most recent Annual Bonus. These benefits are referred to in the Agreement as “Severance Package II.”
In the event Mr. Fachner is terminated by the Company due to non-renewal of the Agreement by the Company or by Mr. Fachner without Good Reason or for Retirement after completion of at least two years of the Term, Mr. Fachner shall receive the same benefits outlined in Severance Package III, except that he will receive one (1) one year of salary continuation at his base salary in effect at the time of termination; and (2) a lump sum bonus payment equal to the greater of his most recent annual bonus and the annual bonus received immediately prior to his most recent Annual Bonus. These benefits are referred to in the Agreement as “Severance Package I.”
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If Mr. Fachner is terminated by the Company for Cause, for non-renewal of the Agreement either by Mr. Fachner or upon mutual agreement of the parties, due to his termination without Good Reason or Retirement prior to completion of at least two (2) years of the Term, Mr. Fachner shall only be entitled to receive the Accrued Obligations.
The table below summarizes the potential post-employment benefits for Mr. Fachner pursuant to the Agreement under the situations identified in the table. The amounts shown in the table are approximate and reflect certain assumptions that the Company has made in accordance with the SEC’s rules. These assumptions include that the applicable event occurred on September 30, 2023, and that the value of a share of the Company’s common stock on that day was $163.65 (the closing price per share of the Company’s common stock on September 29, 2023). For the Equity Benefit column below, the amount is a lump sum amount based on full vesting at the time of separation; however, the equity would vest over time in accordance with the terms of the underlying agreements and, with respect to the performance-based awards, only if performance is achieved.
Termination by the Company without Cause, by Mr. Fachner for Good Reason or due to a Change in Control during the Term of the Agreement | | | $3,169,635 | | | $2,700,000 | | | $3,485,096 |
Termination due to Death or Disability | | | $1,900,000 | | | $1,800,000 | | | $3,485,096 |
Termination by the Company due to non-renewal of the Agreement by the Company or by Mr. Fachner without Good Reason or for Retirement after completion of at least two years of the Term | | | $950,000 | | | $900,000 | | | $3,485,096 |
Termination by the Company for Cause, for non-renewal of the Agreement either by Mr. Fachner or upon mutual agreement of the parties, due to his termination without Good Reason or Retirement prior to completion of at least two (2) years of the Term | | | — | | | — | | | — |
In addition to the above amounts, Mr. Fachner would be entitled to have his COBRA payments reimbursed by the Company and the Company would pay him for all Accrued Obligations as of the time of the termination/separation.
The Company does not have any agreements to provide payment oroffer similar post-employment benefits to any Named Executive Officerits NEOs other than Mr. Fachner. However, our long-term incentive awards address the vesting of outstanding unvested equity awards in the event of the termination of an NEO under specified circumstances, including a change in control.
Our 2021 Performance Share and Service Share Unit Agreements allow for pro rata vesting of unvested units in the event of the executive’s death or disability during the performance or vesting period, respectively. In all other instances of termination, the unvested units are forfeited.
Our 2022 Performance Share and Service Share Unit Agreements address potential vesting of outstanding equity upon termination or change-in-control.a Change in Control (as defined in the Award). Specifically, all unvested equity awards are forfeited if the executive’s employment is terminated by the Company for Cause of if the executive resigns prior to the vesting date. In the event of a termination of executive’s employment due to death or disability, or by the Company for reasons other than for Cause (as defined in the Award) prior to the applicable vesting date, any outstanding, unvested equity shall vest on a pro rata basis upon termination.
In the event of a termination (other than for Cause) in connection with a Change in Control (as defined in the award agreements), the outstanding award shall become fully vested.
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The table below summarizes the value of outstanding equity awards under the situations identified in the table. The amounts shown in the table are approximate and reflect certain assumptions that the Company has made in accordance with the SEC’s rules. These assumptions include that the applicable event occurred on September 30, 2023, and that the value of a share of the Company’s common stock on that day was $163.65 (the closing price per share of the Company’s common stock on September 29, 2023).
Ken Plunk | | | $327,464 | | | — | | | — | | | $167,087 | | | $647,890 |
Robert Cranmer | | | $145,812 | | | — | | | — | | | $70,533 | | | $243,020 |
Stephen Every | | | $145,812 | | | — | | | — | | | $70,533 | | | $243,020 |
Lynwood Mallard | | | $145,812 | | | — | | | — | | | $70,533 | | | $243,020 |
Under rules adopted pursuant to the Dodd-Frank Act of 2010, the Company is required to calculate and disclose the total compensation paid to its median paid employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to the Company’s Chief Executive Officer.
We identified the median employee using our employee population on September 30, 2023 and total year-to-date cash compensation for all employees, excluding the Company’s Chief Executive Officer.
Median annual total compensation of all employees (excluding Mr. Fachner) | | | $40,089 |
| | | |
Annual total compensation of Mr. Fachner, CEO | | | $4,569,359 |
| | | |
Ratio of Mr. Fachner’s annual total compensation to the median of all employees | | | 114:1 |
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PAY VERSUS PERFORMANCE
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning how the Company aligns executive compensation with the Company’s performance, refer to “Compensation Discussion and Analysis.”
2023 | | | 4,569,359 | | | — | | | 5,061,370 | | | — | | | 964,224 | | | 1,024,944 | | | 132.13 | | | 114.15 | | | 78,906 | | | 181,555 |
2022 | | | 3,048,158 | | | — | | | 1,999,614 | | | — | | | 696,179 | | | 560,871 | | | 102.64 | | | 111.70 | | | 47,235 | | | 124,068 |
2021 | | | 1,493,218 | | | 561,299 | | | 1,908,781 | | | 955,872 | | | 393,859 | | | 480,685 | | | 118.98 | | | 104.52 | | | 55,607 | | | 127,952 |
(1)
| The dollar amounts reported in column (b1) are the amounts of total compensation reported for Mr. Fachner (our Chief Executive Officer) for each corresponding year in the “Total” column of the Summary Compensation Table. Mr. Fachner began serving as Chief Executive Officer in May 2021, subsequent to Mr. Shreiber’s service as Chief Executive Officer which ended in May 2021. |
(2)
| The dollar amounts reported in column (b2) are the amounts of total compensation reported for Mr. Shreiber (our Chief Executive Officer in fiscal year 2021) for fiscal year 2021 in the “Total” column of the Summary Compensation Table for fiscal year 2021. |
(3)
| The dollar amounts reported in column (c1) represent the amount of “compensation actually paid” to Mr. Fachner, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Fachner during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Fachner’s total compensation for each year to determine the compensation actually paid: |
2023 | | | $4,569,359 | | | $2,250,063 | | | $492,011 | | | $5,061,370 |
2022 | | | $3,048,158 | | | $1,500,032 | | | $(1,048,544) | | | $1,999,614 |
2021 | | | $1,493,218 | | | — | | | $415,563 | | | $1,908,781 |
(a)
| The equity award adjustments include the addition (or subtraction, as applicable) of the amounts specified in the following table, in accordance with Item 402(v) of Regulation S-K. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows: |
2023 | | | $(2,250,063) | | | $2,429,712 | | | $87,263 | | | $177,672 | | | — | | | $47,427 | | | $492,011 |
2022 | | | $(1,500,032) | | | $661,007(1) | | | $(120,401) | | | $(101,695) | | | — | | | $12,577 | | | $(1,048,544) |
2021 | | | — | | | — | | | $248,077 | | | $167,486 | | | — | | | — | | | $415,563 |
(1)
| The year end fair value of equity awards in fiscal year 2022 does not include the value of the performance-vesting restricted stock units granted during the fiscal year. The performance condition related to these awards was determined to not likely be met as of the end of the fiscal year in which the awards were granted. |
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(4)
| The dollar amounts reported in column (c2) represent the amount of “compensation actually paid” to Mr. Shreiber, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Shreiber during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Shreiber’s total compensation to determine the compensation actually paid: |
2021 | | | $561,299 | | | $560,600 | | | $394,573 | | | $955,872 |
(a)
| The equity award adjustments include the addition (or subtraction, as applicable) of the amounts specified in the following table, in accordance with Item 402(v) of Regulation S-K. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows: |
2021 | | | $(560,600) | | | $475,061 | | | $480,112 | | | — | | | — | | | — | | | $394,573 |
(5)
| The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s NEOs as a group (excluding Mr. Fachner and Mr. Shreiber) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Fachner and Mr. Shreiber) included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023 and 2022, Ken Plunk, Stephen Every, Lynwood Mallard, and Bob Cranmer and (ii) for 2021, Ken Plunk, Robert Pape, Stephen Every, Lynwood Mallard, Robert Radano and Dennis Moore. |
(6)
| The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group (excluding Mr. Fachner and Mr. Shreiber), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Fachner and Mr. Shreiber) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the NEOs as a group (excluding Mr. Fachner and Mr. Shreiber) for each year to determine the compensation actually paid, using the same methodology described above in Note 3: |
2023 | | | $964,224 | | | $318,786 | | | $60,720 | | | $1,024,944 |
2022 | | | $696,179 | | | $212,519 | | | $(135,308) | | | $560,871 |
2021 | | | $393,859 | | | $34,625 | | | $86,826 | | | $480,685 |
(a)
| The amounts deducted or added in calculating the total average equity award adjustments in accordance with Item 402(v) of Regulation S-K are as follows: |
2023 | | | $(318,786) | | | $344,238 | | | $15,926 | | | $12,250 | | | — | | | $7,092 | | | $60,720 |
2022 | | | $(212,519) | | | $93,639(1) | | | $(13,268) | | | $(5,626) | | | — | | | $2,466 | | | $(135,308) |
2021 | | | $(34,625) | | | $40,436 | | | $48,407 | | | $31,972 | | | — | | | $636 | | | $86,826 |
(1)
| The year end fair value of equity awards in fiscal year 2022 does not include the value of the performance-vesting restricted stock units granted during the fiscal year. The performance condition related to these awards was determined to not likely be met as of the end of the fiscal year in which they were granted. |
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(7)
| Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. |
(8)
| Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: S&P 500 Packaged Foods & Meats Index. |
(9)
| The dollar amounts reported represent the amount of net earnings (in thousands) reflected in the Company’s audited financial statements for the applicable year. |
(10)
| The dollar amounts reported reflect Adjusted EBITDA (in thousands), which is a performance measure used when determining annual non-equity incentive bonuses and a portion of our long-term equity grants. Adjusted EBITDA consists of net earnings adjusted to exclude: income taxes (benefit); investment income; interest expense; depreciation and amortization; share-based compensation expense; COVID-19 related expenses (recoveries); net (gain) loss on sale or disposal of assets; impairment charges, restructuring costs, merger and acquisition costs, acquisition related inventory adjustments, strategic business transformation costs, and integration costs. |
Financial Performance Measures
The financial measures that the Company uses for both our long-term and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows:
Adjusted EBITDA
Net Sales
Analysis of the Information Presented in the Pay versus Performance Table
In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table.
TABLE OF CONTENTS
Compensation Actually Paid and Cumulative TSR
As demonstrated by the following graph, the amount of compensation actually paid to Mr. Fachner and Mr. Shreiber, and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Fachner and Mr. Shreiber) is aligned with the Company’s cumulative TSR over the three years presented in the table. The alignment of compensation actually paid with the Company’s cumulative TSR over the period presented is because a significant portion of the compensation actually paid to Mr. Fachner, Mr. Shreiber, and to the other NEOs, is comprised of equity awards. The Company’s cumulative TSR over the three-year period presented in the table was 32%, while the cumulative TSR of the peer group presented for this purpose, the S&P 500 Packaged Foods & Meats Index, was 14% over the three years presented in the table. The Company’s cumulative TSR outperformed the S&P 500 Packaged Foods & Meats Index during the three years presented in the table, representing the Company’s superior financial performance as compared to the companies comprising the S&P 500 Packaged Foods & Meats Index.
TABLE OF CONTENTS
Compensation Actually Paid and Net Earnings
As demonstrated by the following graph, the amount of compensation actually paid to Mr. Fachner and Mr. Shreiber, and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Fachner and Mr. Shreiber) is generally aligned with the Company’s net earnings over the three years presented in the table. While the Company does not use net earnings as a performance measure in the overall executive compensation program, the measure of net earnings is correlated with the measure Adjusted EBITDA, which the company does use for when setting goals in the Company’s incentive plans.
Compensation Actually Paid and Adjusted EBITDA
As demonstrated by the following graph, the amount of compensation actually paid to Mr. Fachner and Mr. Shreiber and the average amount of compensation actually paid to the Company’s NEOs as a group (excluding Mr. Fachner and Mr. Shreiber) is generally aligned with the Company’s Adjusted EBITDA over the three years presented in the table. The Company has determined that Adjusted EBITDA is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the company’s NEOs, for the most recently completed fiscal year, to Company performance. The Company utilizes Adjusted EBITDA when determining annual non-equity incentive bonuses and the Company’s long term equity awards.
TABLE OF CONTENTS
TRANSACTIONS WITH RELATED PERSONS
The Compensation Committee is required to approve the compensation payable to officers and directors and to family members of officers and directors. The Company’s Code of Business Conduct and Ethics applies to all officers, directors and employees of the Company. This code requires that if any director or executive officer or their family members seek to provide goods or services to the Company or has or will have any transaction
with the Company that is expected to exceed $120,000
in value, they must notify the Company’s Chief Financial Officer, who
reviewswill review the proposed transaction and
notifiesnotify the Nominating and Corporate Governance Committee
forso that it may review and
take action as it sees fit.
The
Chartercharter of the Nominating and Corporate Governance Committee provides that the
Nominating and Corporate Governance Committee shall review the material terms of the transaction, including the approximate dollar amount, and the material facts and the related persons direct or indirect interest in, or relationship to, the transaction. In determining whether to approve or ratify a transaction, the
Nominating and Corporate Governance Committee is directed to consider, among other factors it may deem appropriate, whether the transaction was or will be on terms no less favorable that those generally available to an unaffiliated third party under the same or similar circumstances. No director may participate in the discussion or approval of a transaction in which he or she, or a member of his or her immediate family, has a direct or indirect interest.
The
Nominating and Corporate Governance Committee’s Charter provides that it is deemed to have approved any transaction, even if exceeding $120,000, in which a related person’s only interest is as a holder of the Company’s stock, and all holders received or will receive proportional benefits (such as the payment of regular quarterly dividends).
The directors and executive officers annually complete a proxy questionnaire in which they are asked to describe any transactions they or their immediate family have with the company in an amount that exceeds $120,000.
CERTAIN TRANSACTIONS
Robyn Shreiber, daughter of Gerald B. Shreiber, is Vice President, Food Service at the Company. During fiscal
2022year 2023 she received
$372,346$326,191 in total compensation. Frank Shreiber, brother of Gerald B. Shreiber, is Director of Procurement. During fiscal
2022,year 2023, he received
$160,021$183,838 in total compensation. Ms. Roshkoff’s husband, Ken Roshkoff, is the owner of a global marketing research company, AMC Global. In fiscal year
20222023 AMC Global provided attitudinal and research services to the Company in the amount of
$261,000.$124,625. Ken Roshkoff also received $50,000 in Board advisory consulting fees in fiscal
2022.year 2023. Aaron Winkelman, son-in- law of Dan Fachner, is Senior Vice President-Sales for The ICEE
CompanyCompany. During fiscal year
2022,2023, he received total compensation of
$213,747.$306,060. Jordan Vega, son-in-law of Dan Fachner, is Director, Safety for The ICEE Company and in fiscal year 2023 he received $124,364 in total compensation. Tyler Every, son of Steve Every, is Director of Business Development for The ICEE Company. During fiscal year
2022,2023, he received total compensation of
$179,335.CEO PAY RATIO
Under rules adopted pursuant to the Dodd-Frank Act of 2010, the Company is required to calculate and disclose the total compensation paid to its median paid employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to the Company’s Chief Executive Officer.
We identified the median employee using our employee population on September 24, 2022 and total year-to-date cash compensation for all employees, excluding the Company’s Chief Executive Officer.
| Median annual total compensation of all employees (excluding Mr. Fachner) | | $ | 42,067 | |
| | | | | |
| Annual total compensation of Mr. Fachner, CEO | | $ | 3,048,158 | |
| | | | | |
| Ratio of Mr. Fachner’s annual total compensation to the median of all employees | | | 72:1 | |
$261,738.
The Company is not presently aware of any matters (other than procedural matters) which will be brought before the Annual Meeting which are not reflected in the attached Notice of the Annual Meeting. However, if a matter comes up for a vote at the Annual Meeting that is not described in this proxy statement or listed on the proxy card, the persons named in the enclosed proxy card will vote your shares, under your proxy, in accordance with their best judgment.
| | | By Order of the Board of Directors, |
| | | |
|  |
| | |
| | Michael A. Pollner, Senior Vice President,
General Counsel and Secretary |
EXHIBIT A
J & J Snack Foods Corp. 2022 Long-Term Incentive Plan
1. Purposes of the Plan. The purposes of the Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company.
2. Definitions. The following definitions shall apply as used herein and in the individual Award Agreements, except as defined otherwise in an individual Award Agreement. If a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.
(a) “Applicable Laws” means the requirements applicable to the Plan and Awards under (i) any U.S. or non-U.S. federal, state or local law, statute, ordinance, rule, regulation or published administrative guidance or position, (ii) the rules of any stock exchange or national market system and (iii) generally accepted accounting principles or international financial reporting standards.
(b) “Award” means an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or Other Award.
(c) “Award Agreement” means the written agreement or other instrument evidencing the grant of an Award, including any amendments thereto.
(d) “Beneficial Ownership” has the meaning defined in Rule 13d-3 under the Exchange Act.
(e) “Board” means the Board of Directors of the Company.
(f) “Cause” means, with respect to the termination by the Company or a Related Entity of a Grantee’s Continuous Service, that such termination is for “Cause” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or, in the absence of such then-effective written agreement and definition, the Grantee’s:
(i) failure to perform duties (other than as a result of death or Disability) as are reasonably requested by the Company, provided such requested duties are not inconsistent with the duties of the Grantee’s job position, after written notice and a 10-day opportunity to cure (if curable);
(ii) willful misconduct, gross negligence or reckless disregard of the Grantee’s duties or of the interest or property of the Company or any Related Entity;
(iii) intentional disclosure to an unauthorized person of confidential information or trade secrets;
(iv) act of fraud against, misappropriation from, or dishonesty to either the Company or a Related Entity or any other party or engaging in conduct that has, or could reasonably be expected to have, an adverse impact on the reputation or business of the Company or any Related Entity, or that results in his improper gain or personal enrichment to the detriment of the Company or any Related Entity; or
(v) commission of a felony or a lesser crime involving dishonesty, fraud, theft, wrongful taking of property, embezzlement, bribery, forgery, extortion; or other crime involving moral turpitude.
(g) “Change in Control” means the occurrence of any of the following events:
(i) the acquisition by any Person of Beneficial Ownership of securities possessing more than 50% of the total combined voting power of the Company’s then outstanding securities; provided, however, that for purposes of this Subsection (i), the following acquisitions shall not constitute a Change in Control: (1) any acquisition by the Company; (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (3) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of Subsection (ii) below;
(ii)�� consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (each, a “Corporate Transaction”), in each case, unless, following such
Corporate Transaction, (A) all or substantially all of the individuals and entities that had Beneficial Ownership of the Company’s outstanding securities immediately prior to such Corporate Transaction have Beneficial Ownership, directly or indirectly, of more than 50% of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Company’s then outstanding equity securities and the combined voting power of the then outstanding voting securities, (B) no Person (excluding any employee benefit plan or related trust of the Company, a Related Entity or a corporation or other entity resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 50% or more of, respectively, the then outstanding shares of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership of the Company existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation (or other governing board of a non-corporate entity) resulting from such Corporate Transaction were members of the Incumbent Board (as defined in Subsection (iii)) at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction; or
(iii) individuals who, as of the date the Plan was adopted, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director after the date the Plan was adopted whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least 2/3 of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
With respect to Awards that are “deferred compensation” under Section 409A of the Code, to the extent necessary to avoid incurring adverse tax consequences under Section 409A of the Code with respect to such Awards, each of the foregoing events shall only be deemed to be a Change in Control for purposes of the Plan to the extent such event qualifies as a “change in control event” for purposes of Section 409A of the Code.;
(h) “Code” means the Internal Revenue Code of 1986.
(i) “Committee” means the Compensation Committee of the Board or any other committee composed of members of the Board that is appointed by the Board or the Compensation Committee of the Board to administer the Plan and constituted in accordance with Applicable Laws. Once appointed, the Committee shall continue to serve in its designated capacity until otherwise directed by the Board or the Committee.
(j) “Company” means J & J Snack Foods Corp., or any successor entity that adopts the Plan in connection with a Corporate Transaction.
(k) “Consultant” means any natural person and other permitted recipients under the Applicable Laws (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.
(l) “Continuous Service” means that the provision of services to the Company and any Related Entities in any capacity as an Employee, Director or Consultant is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company or any Related Entity in any capacity as an Employee, Director or Consultant or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity as an Employee, Director or Consultant (in each case, except as otherwise provided in the Award Agreement). Notwithstanding the foregoing, except as otherwise determined by the Committee, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award. An approved leave of absence shall include sick leave, military leave or any other authorized personal leave. For purposes of an Incentive Stock Option, if such leave exceeds three months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then employment will be deemed terminated on the first day immediately following such three-month period and the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the date that is three months and one day following such deemed termination of employment.
(m) “Director” means a member of the Board or the board of directors or board of managers of any Related Entity.
(n) “Disability” means such term (or word of like import) as defined under the long-term disability policy of the Company or the Related Entity to which a Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides services does not have a long-term disability policy in place, “Disability” means that the Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than 90 consecutive days. A Grantee will not be considered to have incurred a Disability unless the Grantee furnishes proof of such impairment sufficient to satisfy the Committee in its discretion.
(o) “Dividend Equivalent Right” means a right granted under the Plan entitling the Grantee to compensation measured by dividends paid to stockholders with respect to Shares.
(p) “Employee” means any employee of the Company or any Related Entity.
(q) “Exchange Act” means the Securities Exchange Act of 1934.
(r) “Fair Market Value” means, as of any date, the value of a Share determined as follows:
(i) if the Shares are listed on one or more established stock exchanges or national market systems, the closing sales price for a Share (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Shares are listed (as determined by the Committee) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported);
(ii) if the Shares are regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, the closing sales price for a Share as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for a Share on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported); or
(iii) in the absence of an established market for the Shares of the type described in (i) and (ii) above, the Fair Market Value shall be determined by the Committee in good faith and in a manner consistent with Applicable Laws.
(s) “Good Reason” means, with respect to the termination by a Grantee of the Grantee’s Continuous Service, that such termination is for “Good Reason” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or a Related Entity, or in the absence of such then-effective written agreement and definition, means the occurrence of any of the following events or conditions unless consented to by the Grantee: (i) a change in the Grantee’s authority, responsibilities or duties that represents a material and substantial diminution in the Grantee’s authority, responsibilities or duties; (ii) a material reduction in the Grantee’s base salary, provided, however, that an across-the-board reduction in the salary level of substantially all other individuals in positions similar to the Grantee’s by approximately the same percentage amount shall not constitute such a salary reduction; or (iii) a change of more than 50 miles to the Grantee’s primary place of employment that represents a material increase in the Grantee’s commuting distance. Any such event or condition shall not constitute Good Reason unless (A) the Grantee provides the Company with written notice thereof no later than 90 days following the initial occurrence of such event or condition, (B) the Company fails to remedy such event or condition within 30 days after receipt of such notice and (C) the Grantee actually terminates his or her Continuous Service within 30 days after the expiration of such remedial period.
(t) “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan (and any permitted transferee of an Award or Shares).
(u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(v) “Non-Qualified Stock Option” means an Option that is not intended to, or that does not, qualify as an incentive stock option within the meaning of Section 422 of the Code.
(w) “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act.
(x) “Option” means an option to purchase Shares granted under the Plan.
(y) “Other Award” means an entitlement to Shares or cash (other than an Option, SAR, Restricted Stock or Restricted Stock Unit) granted under the Plan that may or may not be subject to restrictions upon issuance, as established by the Committee.
(z) “Parent” means a “parent corporation,” whether now or hereafter existing, of the Company, as defined in Section 424(e) of the Code.
(aa) “Person” means any natural person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act).
(bb) “Plan” means this J & J Snack Foods Corp. 2022 Long-Term Incentive Plan, as may be amended, modified or restated from time to time.
(cc) “Prior Plan” means the J & J Snack Foods Corp. Amended and Restated Long-Term Incentive Plan.
(dd) “Post-Termination Exercise Period” means, with respect to an Option or SAR, the period commencing on the Termination Date and ending on the date specified in the Award Agreement during which the vested portion of the Option or SAR may be exercised.
(ee) “Related Entity” means any (i) Parent or Subsidiary or (ii) other entity controlling, controlled by or under common control with the Company.
(ff) “Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to specified restrictions on transfer, forfeiture provisions and other specified terms and conditions.
(gg) “Restricted Stock Unit” means a right granted under the Plan entitling the Grantee to receive the value of one Share in cash, Shares or a combination thereof.
(hh) “SAR” means a stock appreciation right granted under the Plan entitling the Grantee to Shares or cash or a combination thereof, as measured by appreciation in the value of a Share.
(ii) “Section 409A” means Section 409A of the Code.
(jj) “Securities Act” means the Securities Act of 1933.
(kk) “Share” means a share of the common stock of the Company.
(ll) “Subsidiary” means any corporation in which the Company owns, directly or indirectly, at least 50% of the total combined voting power of all classes of stock, or any other entity (including partnerships and joint ventures) in which the Company owns, directly or indirectly, at least 50% of the combined equity thereof; provided, however, that for purposes of determining whether any individual may be a Grantee for purposes of any grant of an Incentive Stock Option, “Subsidiary” shall have the meaning ascribed to such term in Section 424(f) of the Code.
(mm) “Termination Date” means the date of termination of a Grantee’s Continuous Service, subject to Section 7(c)(ii).
3. Stock Subject to the Plan.
(a) Subject to Sections 3(b) and 10, the maximum number of Shares that may be issued pursuant to all Awards (including Incentive Stock Options) is 400,000 Shares, less the total number of Shares covered by any awards granted under the Prior Plan after December 24, 2022. The Shares to be issued pursuant to the Awards may be authorized, but unissued, or reacquired Shares.
(b) Any Shares covered by an Award (or portion of an Award) that (i) is forfeited, is canceled or expires (whether voluntarily or involuntarily) without the issuance of Shares or (ii) is granted in settlement or assumption of, or in substitution for, an outstanding award pursuant to Section 6(d), shall be deemed not to have been issued for purposes of determining the maximum number of Shares that may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, such Shares shall become available for future issuance under the Plan. The following Shares may not again be made available for issuance as Awards under the Plan: (i) Shares covered by an Award that are surrendered or withheld in payment of the Award’s exercise or purchase price (including pursuant to the “net exercise” of an Option pursuant to Section 7(b)(vi)), or in satisfaction of tax withholding obligations with respect to an Award, and (ii) shares of Common Stock repurchased on the open market with the proceeds of any Option exercise price. If a SAR payable in Shares is exercised, such exercise shall reduce the maximum aggregate number of Shares which may be issued under the Plan by the gross number of Shares subject the SAR (or, if less than the entire SAR is exercised, by the gross number of Shares subject to the portion of the SAR that is exercised). Additionally, each award granted under the Prior Plan that is outstanding as of the date the Plan is approved by the Company’s stockholders will be treated as an “Award” for purposes of this Section 3, such that Shares covered by such award (or portion of such award) will be added to the Plan’s authorized Share limit if the award (or a portion of such award) is forfeited, is canceled or expires (whether voluntarily or involuntarily) without the issuance of Shares.
4. Administration of the Plan.
(a) Plan Administration. Unless determined otherwise by the Board, the Plan shall be administered by the Committee; provided, that with respect to Awards granted to Employees or Consultants who are neither Directors nor Officers, to the extent permitted by Applicable Law, the Board or the Committee may also authorize one or more Officers or Employees to administer the Plan and to grant such Awards, subject to such limitations and conditions as the Board or Committee deems appropriate, and to the extent such administrative authority has been so delegated, references in the Plan and Award Agreements to the “Committee” shall be deemed to be references to the Officers or Employees to whom such authority has been delegated.
(b) Powers of the Committee. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Committee hereunder), and except as otherwise provided by the Board, the Committee shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom Awards may be granted;
(ii) to determine whether, when and to what extent Awards are granted;
(iii) to determine the number of Shares or the amount of cash or other consideration to be covered by each Award;
(iv) to approve forms of Award Agreements;
(v) to determine the terms and conditions of any Award, including the vesting schedule, forfeiture provisions, payment contingencies, purchase price and any performance goals, and whether to waive or accelerate any such terms and conditions;
(vi) to grant Awards to Employees, Directors and Consultants residing outside the U.S. or to otherwise adopt or administer such procedures or sub-plans on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to further the purposes of the Plan or comply with Applicable Laws;
(vii) to amend the terms of any outstanding Award, subject to Section 13(c);
(viii) to determine whether, to what extent and under what circumstances cash, Shares, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the Grantee or of the Committee;
(ix) to establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees;
(x) to construe and interpret the terms of the Plan and Awards, including any Award Agreement;
(xi) to approve corrections in the documentation or administration of any Award; and
(xii) to take such other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate.
The express grant in the Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. Any decision or interpretation made, or action taken, by the Committee in connection with the administration of the Plan shall be final, conclusive and binding on all Grantees.
(c) Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees, members of the Board and any Officers or Employees to whom authority to act for the Board, the Committee or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by Applicable Laws on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such individual is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such individual shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.
5. Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or Subsidiary. Notwithstanding the foregoing, any Option or SAR intended to qualify as an exempt “stock right” under Section 409A may only be granted with respect to “service recipient stock” (as defined in Section 409A).
6. Terms and Conditions of Awards.
(a) Types of Awards. The Committee may award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR or a similar right with a fixed or variable price related to the Fair Market Value of the Shares. Such awards may include Options, SARs, Restricted Stock, Restricted Stock Units, Other Awards or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two or more of them in any combination. Vesting, payment, settlement and other entitlements with respect to an Award may be conditioned upon such items or events as the Committee may determine, including the passage of time, Continuous Service, the occurrence of one or more events or the satisfaction of one or more performance goals selected by the Committee, either individually, alternatively or in any combination, applied to the Company as a whole or to a business unit, group, division and/or Subsidiary, and measured over an annual or other period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group or index, in each case as specified by the Committee. Such performance goals may include (by way of example and not as an exhaustive list): cash flow, earnings measures (including earnings per share and earnings before interest, taxes and/or amortization and/or depreciation), stock price, return on equity, total stockholder return, return on capital, return on assets or net assets, revenue (including revenue from direct labor, subcontractors or any other category), income or net income, operating income or net operating income, operating profit or net operating profit, operating margin or profit margin, return on operating revenue, market share, contract win, renewal or extension, days sales outstanding, contract bookings, cost control, cash management, debt reduction, customer satisfaction, delivery schedule, cycle-time improvement, productivity, quality, workforce diversity, comparisons to budget items, implementation or completion of specified projects or processes, employee turnover, forecast accuracy of any performance criteria, staff hiring, and/or completion of mergers or acquisitions. Performance Goals need not be measured in accordance with generally accepted accounting principles and may include such adjustments as may be determined by the Committee. Additionally, the Committee may adjust Performance Goals or evaluation of performance with respect to Performance Goals to take into account unusual or unanticipated occurrences or events, including asset write-downs, litigation, claims, judgments, settlements, currency fluctuations and other non-cash charges, changes in applicable law, rule or regulation or accounting principles, accruals for reorganization and
restructuring programs, costs incurred in the pursuit of acquisition opportunities, strikes, delays or similar disruptions, macroeconomic conditions, terrorism and other international hostilities, significant regional weather events asset write-downs, litigation or claim judgments or settlements, or any other significant unusual or infrequently occurring items or events.
(b) Dividends and Dividend Equivalent Rights. Dividends may be granted in connection with Restricted Stock, and Dividend Equivalent Rights may be granted in connection with Awards other than Options, SARs and Restricted Stock; provided, that dividends and Dividend Equivalents will only be paid with respect to Restricted Stock and Awards other than Options and SARs if and to the extent the Award (or portion of the Award to which the Dividend or Dividend Equivalent relates) vests.
(c) Designation of Options. Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. Any Option designated as an Incentive Stock Option shall comply with the requirements of Section 422 of the Code, including the requirement that Incentive Stock Options may only be granted to individuals who are employed by the Company. Notwithstanding any designation as an Incentive Stock Option, to the extent the aggregate Fair Market Value of Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Grantee during any calendar year (under this Plan or any other stock plan maintained by the Company or any of its affiliates) exceeds $100,000, such excess Options shall be treated as Non-Qualified Stock Options. If the Code is amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
(d) Acquisitions and Other Transactions. The Committee may issue Awards in settlement or assumption of, or in substitution for, outstanding awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction. Any Shares issuable pursuant to such Awards shall not reduce the Share limit set forth in Section 3(a). Additionally, available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect such acquisition) may be used for Awards under the Plan and shall not reduce the Share limit set forth in Section 3(a), except as required by the rules of any applicable stock exchange.
(e) Term of Award. The term of each Award, if any, shall be the term stated in the Award Agreement; provided, however, that the term of an Award shall be no more than 10 years from the grant date. In the case of an Incentive Stock Option granted to a Grantee who, on the grant date, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary, the term of the Incentive Stock Option shall be no more than five years from the grant date. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.
(f) Transferability of Awards. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Awards other than Incentive Stock Options shall be transferable (i) by will or by the laws of descent and distribution, (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Committee, but only to the extent such transfers are made in accordance with Applicable Laws to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee and (iii) as otherwise expressly permitted by the Committee and in accordance with Applicable Laws.
(g) Grant Date of Awards. The grant date of an Award shall, for all purposes, be the date on which the Committee makes the determination to grant such Award, or such later date as determined by the Committee.
7. Exercise Price, Base Amount or Purchase Price, Consideration and Taxes.
(a) Exercise Price, Base Amount or Purchase Price. The exercise price, base amount or purchase price, if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, on the grant date, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall not be less than 110% of the Fair Market Value on the grant date; or
(B) granted to any Employee other than an Employee described in the preceding clause (A), the per Share exercise price shall not be less than 100% of the Fair Market Value on the grant date.
(ii) The per Share exercise price of an Option and the base amount of a SAR shall be such price as determined by the Committee in accordance with Applicable Laws; provided, that, other than an Option or SAR issued pursuant to Section 6(d) or adjusted pursuant to Section 10, the per Share exercise price of an Option and the base amount of a SAR shall not be less than the Fair Market Value on the grant date.
(b) Consideration. In addition to any other types of consideration the Committee may determine, the Committee is authorized to accept as consideration for Shares issued under the Plan, and subject to Applicable Laws, the following:
(i) cash;
(ii) check;
(iii) wire transfer;
(iv) surrender of Shares, or delivery of a properly executed form of attestation of ownership of Shares as the Committee may require, that have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise or purchase price of the Award;
(v) with respect to Options, payment through a broker-assisted cashless exercise program;
(vi) with respect to Options, payment through a “net exercise” procedure established by the Company such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (A) the number of Shares as to which the Option is being exercised, multiplied by (B) a fraction, the numerator of which is the Fair Market Value on the exercise date less the exercise price per Share, and the denominator of which is such Fair Market Value (with the number of net Shares to be received rounded down to the nearest whole number of Shares); or
(vii) any combination of the foregoing methods of payment.
The Committee may grant Awards that do not permit all of the foregoing forms of consideration to be used in payment for the Shares or that otherwise restrict one or more forms of consideration.
(c) Taxes.
(i) A Grantee shall, no later than the date as of which taxes are required by Applicable Laws to be withheld with respect to an Award, pay to the Company or a Related Entity, or make arrangements satisfactory to the Committee regarding payment of, such withholding taxes. The obligations of the Company under the Plan shall be conditional on the making of such payment or arrangements, and the Company shall, to the extent permitted by Applicable Laws, have the right to deduct any such taxes from any payment of any kind otherwise due to the Grantee. The Committee may require or may permit a Grantee to elect that the withholding requirement be satisfied in whole or in part, by having the Company withhold or by tendering to the Company, Shares having a Fair Market Value equal to the minimum statutory withholding with respect to an Award or such other rate that will not cause adverse accounting consequences for the Company and is permitted under Applicable Laws. The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by Applicable Laws, to satisfy its withholding obligation with respect to an Award.
(ii) The Plan and Awards (and payments and benefits thereunder) are intended to be exempt from, or to comply with, Section 409A, and, accordingly, to the maximum extent permitted, the Plan, Award Agreements and other agreements or arrangements relating to Awards shall be interpreted accordingly. Notwithstanding anything to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A, (A) a Grantee shall not be considered to have terminated Continuous Service and no payment or benefit shall be due to the Grantee under the Plan or an Award until the Grantee would be considered to have incurred a “separation from service” from the Company and the Related Entities within the meaning of Section 409A and (B) if the Grantee is a “specified employee” (as defined in Section 409A), amounts that would otherwise be payable and benefits that would otherwise be provided under the Plan or an Award during the six-month period immediately following the Grantee’s separation from service shall instead be paid or provided on the first business day after the date that is six months following the Grantee’s separation from service (or death, if earlier). Each amount to be paid or benefit to be provided under the Plan or an Award shall be construed as a separate identified payment for purposes of Section 409A. The Company makes no representation that any or all of the payments or benefits provided under the Plan or an Award will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment or benefit. The Grantee shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A, and the Company, the Related Entities and their respective employees, officers, directors, agents and representatives (including legal counsel) will not have any liability to any Grantee with respect to any taxes, penalties, interest or other costs or expenses the Grantee or any related party may incur with respect to or as a result of Section 409A or for damages for failing to comply with Section 409A.
8. Exercise of Options and SARs.
(a) Procedure for Exercise.
(i) An Option or SAR shall be exercisable at such times and under such conditions as determined by the Committee under the terms of the Plan and specified in the Award Agreement.
(ii) An Option or SAR shall be deemed exercised when written notice of such exercise has been given to the Company (or a broker pursuant to Section 7(b)(v)) in accordance with the terms of the Award by the Grantee and, if applicable, full payment for the Shares with respect to which the Option or SAR is exercised has been made (together with applicable tax withholding).
(b) Exercise Following Termination of Continuous Service. If a Grantee’s Continuous Service terminates, all or any portion of the Grantee’s Options or SARs that were vested at the Termination Date (including any portion thereof that vested as a result of such termination) may be exercised during the applicable Post-Termination Exercise Period. Except as otherwise determined by the Committee or as set forth in the Grantee’s Award Agreement, if the Grantee’s Options or SARs are unvested on the Termination Date (and do not vest as a result of such termination), or if the vested portion of the Grantee’s Options or SARs is not exercised within the applicable Post-Termination Exercise Period, the Options and SARs shall terminate.
(i) Termination for Cause. Except as otherwise determined by the Committee or set forth in the Grantee’s Award Agreement, upon the termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise an Option or SAR (whether vested or unvested) shall terminate concurrently with the termination of the Grantee’s Continuous Service.
(ii) Change in Status. If a Grantee’s status changes from Employee to Consultant or non-Employee Director, the Employee’s Incentive Stock Option shall automatically become a Non-Qualified Stock Option on the day that is three months and one day following such change of status.
(iii) Termination Due to Disability. If a Grantee’s Continuous Service terminates as a result of Disability, if such Disability is not a “permanent and total disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option, such Incentive Stock Option shall automatically become a Non-Qualified Stock Option on the day that is three months and one day following such termination.
(c) Extension If Exercise Prevented by Applicable Laws. Notwithstanding the foregoing, if the exercise of an Option or SAR during the applicable Post-Termination Exercise Period is prevented by the provisions of Section 9, the Option or SAR shall remain exercisable until the 30th day (or such later date as determined by the Committee) after the date the Grantee is notified by the Company that the Option or SAR is exercisable, but in no event later than the expiration date of the term of such Option or SAR specified in the Award Agreement and only in a manner and to the extent permitted under Section 409A.
9. Conditions upon Issuance of Shares. If the Committee determines that the delivery of Shares with respect to an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares with respect to an Award shall be suspended until the Committee determines that such delivery is lawful. An Incentive Stock Option may not be exercised until the Plan has been approved by the stockholders of the Company. The Company shall have no obligation to effect any registration or qualification of the Shares under Applicable Laws. A Grantee’s right to exercise an Award may be suspended for a limited period of time if the Committee determines that such suspension is administratively necessary or desirable. In no event shall the Company issue fractional Shares.
10. Adjustments upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, Applicable Laws and Section 11, (a) the number and kind of Shares or other securities or property covered by each outstanding Award, (b) the number and kind of Shares that have been authorized for issuance under the Plan, (c) the exercise price, base amount or purchase price of each outstanding Award and (d) any other terms that the Committee determines require adjustment, shall be proportionately adjusted for: (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares; (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; or (iii) any other transaction with respect to the Shares, including any distribution of cash, securities or other property to stockholders (other than a normal cash dividend), a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete), a “corporate transaction” as defined in Section 424 of the Code or any similar transaction; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Any such adjustments to outstanding Awards shall be effected in a manner that is intended to preclude the enlargement or diminution of rights and benefits under such Awards. Except as the Committee determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.
11. Change in Control. Subject to Section 10 and except as otherwise provided in an Award Agreement, employment or similar agreement or in the definitive Change in Control transaction agreement, in the event of a Change in Control, the Awards shall be treated as follows:
(a) Awards Continued or Assumed or Substituted by Surviving Entity.
(i) If the Company is the surviving entity (in which case the Awards will continue) or if the Company is not the surviving entity, but the surviving entity (or a parent entity thereof) assumes an Award or substitutes for an Award another award relating to the stock of such surviving entity (or parent thereof), such awards (the “Continued, Assumed or Substituted Awards”) shall remain governed by their respective terms; provided, that (A) if, as of the Change in Control, the Awards are subject to vesting conditions relating to items or events other than Continuous Service (e.g., performance-based vesting conditions), such vesting conditions shall be deemed to have been satisfied at the “target” (or term of similar import) performance level (or, if the applicable performance period has been completed as of the date of the Change in Control, at the performance level achieved based on actual performance) and the Continued, Assumed or Substituted Awards shall remain subject to any vesting conditions based on Continuous Service, without proration, and (B) if on, or within 18 months following, the date of the Change in Control, the Grantee’s Continuous Service is terminated by the Company or a Related Entity without Cause or by the Grantee for Good Reason, the Continued, Assumed or Substituted Awards held by the Grantee that were not then vested (and, with respect to Options and SARs, exercisable) shall immediately become fully vested and, if applicable, exercisable.
(ii) If the Company is not the surviving entity and the surviving entity (or a parent entity thereof) does not assume or substitute Awards, the holders of such Awards shall be entitled to the benefits set forth in Section 11(a)(i) as of the date of the Change in Control, to the same extent as if the holder’s Continuous Service had been terminated by the Company without Cause as of the date of the Change in Control; provided, that, to the extent any Award constitutes deferred compensation for purposes of Section 409A, if the settlement or other payment event resulting from the vesting of such Award pursuant to this Section 11(a)(ii) would not be permitted by Section 409A, such Award shall vest pursuant to this Section 11(a)(ii), but the settlement or other payment event with respect to such Award shall not be accelerated and shall instead occur when it would have occurred had the Award been Continued, Assumed or Substituted pursuant to Section 11(a)(i) (or on such earlier date as is permitted under Section 409A). The Committee may provide that each Award that is vested (or vests) as of the Change in Control shall be canceled in exchange for a payment in an amount equal to (A) the Fair Market Value per Share subject to the Award immediately prior to the Change in Control over the exercise or base price (if any) per Share subject to the Award multiplied by (B) the number of Shares granted under the Award. For avoidance of doubt, if the Fair Market Value per Share subject to an Option or SAR immediately prior to the Change in Control is less than the exercise or base price per Share of such Award, such Awards shall be cancelled for no consideration.
(b) For the purposes of this Section 11, an Award shall be considered assumed or substituted for if immediately following the Change in Control the award is of substantially equal value, with the determination of such substantial equality of value being made by the Committee before the Change in Control.
12. Effective Date and Term of Plan. The Plan shall become effective on February 14, 2023, the date it was first approved by the stockholders of the Company. The Plan shall continue in effect for a term of 10 years from the earlier of its adoption by the Board or its approval by the stockholders of the Company, unless sooner terminated pursuant to Section 13(a).
13. Amendment, Suspension or Termination of the Plan or Awards; No Repricings.
(a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws.
(b) No Award may be granted during any suspension of the Plan or after termination of the Plan.
(c) No amendment, suspension or termination of the Plan or any Award shall materially adversely affect the Grantee’s rights under an Award without the Grantee’s written consent; provided, however, that an amendment or modification that (i) may cause an Incentive Stock Option to become a Non-Qualified Stock Option or (ii) the Committee considers, in its sole discretion, necessary or advisable to comply with, take into account or otherwise respond to Applicable Laws, shall not be treated as materially adversely affecting the Grantee’s right under an outstanding Award.
(d) Notwithstanding anything in the Plan to the contrary, except as otherwise provided in Section 10, the following actions shall not be taken without the requisite prior affirmative approval of the Company’s stockholders: (i) reduce the exercise price or base amount, as applicable, of any Options or SARs, (ii) cancel, surrender, replace or otherwise exchange any outstanding Option or SAR where the Fair Market Value of the Shares underlying such Option or SAR is less than its exercise price or base amount, as applicable, of such Option or SAR for a new Option or SAR, another Award, cash, Shares or other securities or (iii) take any other action that is considered a “repricing” for purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Shares are listed or quoted.
14. Clawback, Repayment or Recapture Policy. Notwithstanding anything to the contrary, to the extent allowed under Applicable Laws, unless otherwise determined by the Committee, all Awards, and any related payments made under the Plan, shall be subject to the requirements of any applicable clawback, repayment or recapture policy implemented by the Company, to the extent set forth in such policy and/or in an Award Agreement or other agreement with the Grantee.
15. Limitation of Liability. The Company is under no duty to ensure that Shares may legally be delivered under the Plan, and shall have no liability in the event such delivery of Shares may not be made.
16. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with the Grantee’s right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice.
17. No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a compensation or benefit plan, program or arrangement of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of such plans, programs or arrangements. The Plan is not a “pension plan” or “welfare plan” under the Employee Retirement Income Security Act of 1974.
18. Unfunded Obligation. A Grantee shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan or an Award shall be unfunded and unsecured obligations for all purposes, including Title I of the Employee Retirement Income Security Act of 1974. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, to create any trusts, or to establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, that the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Committee, the Company or any Related Entity and a Grantee, or otherwise create any
vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. A Grantee shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.
19. Construction. The following rules of construction shall apply to the Plan and Award Agreements. Captions and titles are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan or Award Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the word “or” is not intended to be exclusive, unless the context clearly requires otherwise. The words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. The words “writing” and “written” and comparable words refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. Any reference to any federal, state or other statute or law shall be deemed also to refer to such statute or law as amended, and to all rules and regulations promulgated thereunder. References to “stockholders” shall be deemed to refer to “shareholders” to the extent required by Applicable Laws. References to the Company or any Related Entity shall include such entity’s successors.
20. Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable.
21. Governing Law. Except as otherwise provided in an Award Agreement, the Plan, the Award Agreements and any other agreements or arrangements relating to Awards shall be interpreted and construed in accordance with the laws of New Jersey, without regard to the conflicts of laws rules of such state, to the extent not preempted by federal law. If any provision of the Plan, the Award Agreements or any other agreements or arrangements relating to Awards is determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by Applicable Laws and the other provisions shall nevertheless remain effective and shall remain enforceable.
