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6312 South Fiddler's Green Circle, Suite 200N
To our Stockholders:
The annual meeting of stockholders of Red Robin Gourmet Burgers, Inc. will be held at 8:00 a.m. MDT, on Thursday, May 28, 2015, at our corporate headquarters, located at 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111, for the following purposes:
To elect Robert B. Aiken, Stephen E. Carley, Cambria W. Dunaway, Lloyd L. Hill, Richard J. Howell, Glenn B. Kaufman, Pattye L. Moore, and Stuart I. Oran, as directors of the Company for one-year terms;
To approve, on an advisory basis, the compensation of our named executive officers;
To approve the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan;
To approve an amendment to the Company's Restated Certificate of Incorporation to increase the authorized common stock of the Company from 30,000,000 shares, par value $0.001 per share, to 45,000,000 shares, par value $0.001 per share;
To ratify the appointment of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending December 27, 2015; and
To transact such other business as may properly come before the meeting.
We direct your attention to the proxy statement, which includes information about the matters to be considered at the annual meeting and certain other important information and which we encourage you to carefully review. Our board of directors recommends that you vote FOR the board's nominees for director, FOR approval of our executive compensation, FOR approval of the Cash Incentive Plan, FOR approval of the amendment to increase the authorized shares of common stock of the Company, and FOR ratification of the independent auditor. Your vote is important.
Stockholders of record at the close of business on March 30, 2015 are entitled to notice of, and to vote at, the annual meeting or any postponement or adjournment thereof. This Notice of Annual Meeting of Stockholders and related proxy materials are being distributed or made available to stockholders beginning on or about April [ ], 2015.
This year, we have again elected to provide access to our proxy materials on the Internet under the U.S. Securities and Exchange Commission's "notice and access" rules. Our proxy materials are available at the following website:
http://www.redrobin.com/eproxy
We cordially invite you to attend the annual meeting. Whether or not you plan to attend, it is important that your shares be represented and voted at the meeting. Please refer to your proxy card or Notice Regarding the Availability of Proxy Materials for more information on how to vote your shares at the meeting and return your voting instructions as promptly as possible.
By Order of the Board of Directors,
Pattye L. Moore
Chair of the Board of Directors
April [ ], 2015
PROXY STATEMENT SUMMARY 1
Annual Meeting of Stockholders 1
Proposals and Board Voting Recommendations 1
Director Nominees (Proposal No. 1) 1
Board Nominees 1
Key Corporate Governance Highlights 2
Advisory Vote on Executive Compensation (Proposal No. 2) 2
Executive Compensation Program 2
Pay for Performance 3
2014 Performance Highlights 3
2014 Compensation 4
Cash Incentive Plan (Proposal No. 3) 5
Amendment to Increase Authorized Shares (Proposal No. 4) 5
Independent Auditors (Proposal No. 5) 5
PROXY STATEMENT 6
PROPOSAL 1 ELECTION OF DIRECTORS 6
Selecting Nominees for Director 6
Directors and Nominees 6
Vote Required 11
Board Recommendation 11
CORPORATE GOVERNANCE AND BOARD MATTERS 12
Governance Principles 12
Executive Development and Management Succession 12
Stockholder Engagement 12
Board Leadership Structure 13
Role in Risk Oversight 13
Board Membership and Director Independence 14
Director Attendance 14
Committees of the Board of Directors 14
Stockholder Submission of Director Nominees 16
Communications with our Board of Directors 17
Transactions with Related Persons 17
Review, Approval, or Ratification of Transactions with Related Persons 17
Compensation Committee Interlocks and Insider Participation 17
Director Compensation 18
2014 Director Compensation 19
Director Stock Ownership Guidelines 20
Indemnification of Directors 21
STOCK OWNERSHIP INFORMATION 22
Stock Ownership of Certain Beneficial Owners 22
Stock Ownership of Directors and Management 23
COMPENSATION DISCUSSION AND ANALYSIS 25
Overview 25
2014 Performance 26
Highlights of 2014 Compensation Actions 29
Executive Compensation Decision-making 30
Pay for Performance Alignment 30
Independent Compensation Consultant 32
Risk Mitigation 33
Say on Pay Vote Results 33
Key Components of our Executive Compensation Program 34
Base Salary 34
Incentive-Based Compensation 34
Modest Perquisites 35
Summary of 2014 Compensation Activity 36
2015 Compensation Program 41
Deductibility of Executive Compensation 41
Executive Compensation Policies and Guidelines 42
Executive Employment Agreements 42
Executive Stock Ownership Guidelines 42
Compensation Clawback Policy 43
Pledging and Hedging Transactions in Company Securities 43
Compensation Committee Report 43
2014 Executive Compensation Tables 44
Summary Compensation Table 44
Grants of Plan-Based Awards 46
Outstanding Equity Awards at 2014 Fiscal Year-End 47
Options Exercises and Stock Vested 48
Non-qualified Deferred Compensation 49
Equity Compensation Plan Information 50
Employment Agreements, Separation Related Arrangements, and Change in Control Agreements 51
Change in Control Agreements 54
Incentive Plans 54
Potential Payments upon Termination or Change in Control 56
PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION 58
Advisory Vote 59
PROPOSAL 3 APPROVAL OF THE RED ROBIN GOURMET BURGERS, INC. CASH INCENTIVE PLAN 60
Description of the Proposal 60
Purpose of the Cash Incentive Plan; Section 162(m) 60
Summary of the Cash Incentive Plan 60
Performance Periods; Eligibility and Participation 60
Performance Goals; Bonus Formulas 61
Calculation of Bonuses 62
Maximum Award 62
Payment of Awards 62
Amendment and Termination 62
Tax Withholding 62
New Plan Benefits 62
PROPOSAL 4 APPROVAL OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK 63
Description of the Proposed Amendment 63
Effects of Increasing the Number of Authorized Shares of Common Stock 63
Text of the Amendment 63
Purpose of the Amendment 63
Rights of Additional Authorized Shares 64
Potential Adverse Effects of Amendment 64
Effectiveness of Amendment 64
PROPOSAL 5 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 65
Principal Accountant Fees and Services 65
Audit Fees 66
Audit-Related Fees 66
Tax Fees 66
All Other Fees 66
Audit Committee's Pre-Approval Policies and Procedures 66
AUDIT COMMITTEE REPORT 67
VOTING PROCEDURES 68
ADDITIONAL INFORMATION 71
ANNUAL REPORT ON FORM 10-K 72
APPENDIX A A-1
PROXY STATEMENT SUMMARY
This summary is intended to provide an overview of the items that you will find elsewhere in this proxy statement about our Company and the upcoming 2015 annual meeting of stockholders. As this is only a summary, we encourage you to read the entire proxy statement for more information about these topics before voting.
Annual Meeting of Stockholders
Time and Date: 8:00 a.m. MDT on Thursday, May 28, 2015
Location: Red Robin Gourmet Burgers, Inc. corporate headquarters
Record Date: March 30, 2015
Proposals and Board Voting Recommendations
Board's Voting
Page References
(for more detail)
1 Election of Directors FOR EACH NOMINEE 6
2 Advisory Vote to Approve Executive Compensation FOR 58
3 Approval of the Cash Incentive Plan FOR 60
4 Approval of the Amendment to Increase Authorized Shares FOR 63
5 Ratification of Independent Auditor FOR 65
Stockholders may also vote on such other matters as may properly come before the meeting or any postponement or adjournment thereof. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the board of directors or, if no recommendation is given, in their own discretion.
Director Nominees (Proposal No. 1)
Board Nominees
Director Since
Principal Occupation
Current Committee Assignments
Robert B. Aiken 52 2010 CEO, Feeding America X *NGC, CC
Stephen E. Carley 62 2010 CEO, Red Robin
Cambria W. Dunaway 52 2014 Former U.S. President, Global Chief Marketing Officer, Kidzania X FC, NGC
Lloyd L. Hill 71 2010 Former CEO, Applebee's X *CC, AC
Richard J. Howell 72 2005 Former Partner,
Arthur Andersen X *AC, CC
Glenn B. Kaufman 47 2010 Managing Member,
D Cubed Group
investment firm X *FC, CC
Pattye L. Moore 57 2007 Consultant; former President and Director, Sonic Corp. X (C), AC, NGC
Stuart I. Oran 64 2010 Partner, Liberty Hall Capital Partners private equity firm X AC, FC
Denotes Chair of the Board
Denotes Chair of the Committee
In 2015, all eight of our directors are standing for re-election and the board recommends a vote FOR all director nominees. Directors are elected by a majority of votes cast. See "PROPOSAL 1—ELECTION OF DIRECTORS—Directors and Nominees" on page 6 of this proxy statement for more information about our directors and nominees. In 2014, each director attended at least 75% of the aggregate number of board and applicable committee meetings.
Key Corporate Governance Highlights
The board of directors recognizes the connection between good corporate governance and the creation of sustainable stockholder value and is committed to practices that promote the long-term interests of the Company, accountability of management, and stockholder trust. To this end, we continually evolve our practices to ensure alignment with our stockholders.
Fully declassified board of directors.
Independent chair of the board of directors.
All director nominees are independent other than our CEO.
All committee members are independent.
Frequent engagement by management with institutional investors.
Majority voting standard for uncontested director elections.
Annual review of our succession plan and talent development plan.
Limits on outside board service.
Formal policy prohibiting hedging and pledging of Company securities by executive officers and directors.
Directors regularly engage in in-boardroom and outside director education.
Advisory Vote on Executive Compensation (Proposal No. 2)
We are requesting that stockholders approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. The board recommends a vote FOR Proposal No. 2 because it believes that the Company's executive compensation program is designed to link incentives and rewards for our executives to the achievement of specific, sustainable financial and strategic goals, which are expected to result in increased stockholder value. In 2014, our executive compensation advisory vote proposal was supported by approximately 99.5% of the votes cast. Highlights of our executive compensation program, pay for performance compensation structure, 2014 performance, and 2014 compensation are set forth below. Please see "Compensation Discussion and Analysis" beginning on page 25 for a full discussion of the items below.
Executive Compensation Program
Listed below are highlights of our executive compensation program that reflect our focus on strong corporate governance and prudent compensation decision-making:
Pay for performance focused executive compensation structure, with a significant portion of executive pay "at-risk."
Fully independent compensation committee advised by an independent compensation consultant.
No excise tax gross ups.
Double trigger or attainment of performance targets required for equity vesting upon change in control.
No repricing of underwater options without stockholder approval.
Meaningful stock ownership guidelines for executives and board members.
Clawback policy for the return of certain incentive compensation received by executives.
Few perquisites offered to our executives.
Our compensation program is designed to pay our executives for performance. Our short-term annual cash incentive program uses performance targets based primarily on annual EBITDA (earnings before interest, taxes, depreciation, and amortization) goals. Long-term incentive compensation is based on achievement of financial goals designed to demonstrate sustained improvement over multi-year periods, and time vesting designed to reward executive retention. The cash portion of our long-term incentive awards is measured over a three-year performance period based on both cumulative EBITDA and ROIC (return on invested capital) metrics. Restricted stock units and options each vest ratably in annual increments over four years, with the amount realizable from such awards being dependent, in whole or in part, on increased stock price. Our 2014 performance was driven by strong operating results from the implementation of our aggressive strategic plan, begun in 2011. Our strategic plan is designed to drive performance through top-line growth in sales and increased guest traffic, and lays the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value.
2014 Performance Highlights
Our fiscal 2014 performance continued to be strong. Highlights are set forth below.
Annual revenues were $1.1 billion in 2014, which exceeded $1.0 billion in 2013, an increase of 12.7%. This follows a series of increases in annual revenues over the preceding three fiscal years: annual revenues in fiscal 2013 increased by 4.1% over total revenues for fiscal 2012 (including the 53rd week); increased by 6.8% in 2012 (including the 53rd week) over 2011, and by 5.9% in 2011 over 2010.
Comparable restaurant revenue grew by 3.1% in 2014, after growing by 4.0% in 2013.
We achieved consistent adjusted EBITDA growth over the past four years and achieved net cash provided by operating activities of $123.6 million in 2014, up approximately 75% over 2010.
Diluted earnings per share (EPS) grew to $2.25 in 2014, up 389% over 2010.
Our stock price has more than doubled since 2013, beginning 2013 around $35 per share and beginning 2015 around $80 per share.
We significantly outperformed the casual dining industry in guest traffic for the 2014 full fiscal year by approximately 160 basis points, as reported by Black Box Intelligence, a financial benchmarking report for the restaurant industry.
We added 22 new Red Robin® restaurants and three new Red Robin Burger Works® to our restaurant base and acquired 36 franchised Red Robin® restaurants in fiscal 2014.
We repurchased $26.9 million of our common stock in fiscal 2014 under our stock repurchase program, thereby using excess cash to benefit our stockholders.
For the past four years, our cumulative total shareholder return on our common stock has shown marked improvement.
We continue to make progress strengthening the fundamentals of our business and improving our performance. We have identified and continue to examine opportunities that will:
drive strong financial performance through increasing guest traffic and revenues,
improve operational efficiencies and expense management, and
expand our restaurant base.
2014 Compensation
The table below sets forth the 2014 compensation for our named executive officers:
Stephen E. Carley
Chief Executive Officer 750,000 383,357 794,753 1,319,344 20,219 3,267,673
Stuart B. Brown,
SVP & Chief Financial Officer 357,000 82,069 164,215 398,053 15,407 1,017,066
Denny Marie Post
EVP & Chief Concept Officer 392,700 286,345 172,782 406,189 14,523 1,275,539
Michael L. Kaplan
SVP Legal & Chief Legal Officer 335,000 53,561 107,190 269,471 332,374 1,097,596
Cathy Cooney
SVP & Chief People Officer 305,000 48,737 97,596 245,339 25,635 722,308
Former Executives
Former President & Chief Operating Officer 303,866 144,446 229,090 991,308 1,668,710
Former SVP & Chief
Development Officer 212,419 99,876 185,540 483,449 981,284
See "2014 Executive Compensation Tables" and accompanying footnotes and narratives beginning on page 44 for additional information about the 2014 compensation for each named executive officer.
Cash Incentive Plan (Proposal No. 3)
The board of directors recommends a vote FOR the approval of the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan. The compensation committee and our board unanimously adopted the Cash Incentive Plan in October of 2014, subject to stockholder approval, and directed that we submit the Cash Incentive Plan to a vote of our stockholders at this annual meeting.
The Cash Incentive Plan, if approved by stockholders, would be an important element of our executive compensation program going forward as it would allow us to continue to provide senior management with incentives for the achievement of both near-term and mid-term financial and operational corporate goals and individual objectives in a manner that is intended to be tax-deductible. See "Summary of the Cash Incentive Plan" beginning on page 60 for more information about the purpose and operation of the plan.
Amendment to Increase Authorized Shares (Proposal No. 4)
The board of directors recommends a vote FOR the approval of an amendment to the Company's Restated Certificate of Incorporation to increase the authorized common stock of the Company from 30,000,000 shares, par value $0.001 per share, to 45,000,000 shares, par value $0.001 per share.
The board is recommending an increase in authorized shares primarily to provide the Company the flexibility to issue shares of common stock for future corporate needs, such as future acquisitions, capital-raising or financing transactions, stock splits, stock dividends, and current or future equity compensation plans. See "Effects of Increasing the Number of Authorized Shares of Common Stock" and "Purpose of the Amendment" on page 63 for more information related to the effects of the increase in authorized shares and the purpose.
Independent Auditors (Proposal No. 5)
The board of directors recommends a vote FOR the ratification of the appointment of Deloitte & Touche LLP ("D&T") as the Company's independent auditor for the fiscal year ending December 27, 2015. Set forth below are the fees billed by D&T for fiscal years 2014 and 2013:
2014($)
Audit fees 749,254 749,658
Audit-related fees 125,000 —
Tax fees 139,309 10,774
All other fees 2,200 37,200
Total 1,015,763 797,632
The Board of Directors ("board" or "board of directors") of Red Robin Gourmet Burgers, Inc. ("Red Robin" or the "Company") is providing this proxy statement to stockholders in connection with the solicitation of proxies on its behalf to be voted at our annual meeting of stockholders. The meeting will be held on Thursday, May 28, 2015, beginning at 8:00 a.m. MDT, at our corporate headquarters, located at 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, Colorado 80111. The proxies may be voted at any time and date to which the annual meeting may be properly adjourned or postponed.
As of the date of this proxy statement, our board of directors consists of eight directors, all of whom are independent except our CEO. The board of directors may decide at a later time to add one or more directors who possess skills and experience that may be beneficial to our board and the Company. All of our directors are elected on an annual basis for a one-year term.
The directors elected at this annual meeting will serve in office until our 2016 annual meeting of stockholders or until their successors have been duly elected and qualified, or until the earlier of their respective deaths, resignations, or retirements. Each nominee has consented to serve if elected and we expect that each of them will be able to serve if elected. If any nominee should become unavailable to serve as a director, our board of directors can name a substitute nominee, and the persons named as proxies in the proxy card, or their nominees or substitutes, will vote your shares for such substitute nominee unless an instruction to the contrary is written on your proxy card.
Selecting Nominees for Director
Our board has delegated to the nominating and governance committee the responsibility for reviewing and recommending nominees for director. The board determines which candidates to nominate or appoint, as appropriate, after considering the recommendation of the committee.
In evaluating a director candidate, the nominating and governance committee considers the candidate's independence, character, corporate governance skills and abilities, business experience, industry specific experience, training and education, commitment to performing the duties of a director, and other skills, abilities, or attributes that fill specific needs of the board or its committees. While there is no policy with regard to consideration of diversity in identifying director nominees, the nominating and governance committee considers diversity in business experience, professional expertise, gender, and ethnic background, along with various other factors when evaluating director nominees. The nominating and governance committee will use the same criteria in evaluating candidates suggested by stockholders.
The nominating and governance committee is authorized under its charter to retain, at our expense, outside search firms and any other professional advisors it deems appropriate to assist in identifying or evaluating potential nominees for director. During fiscal year 2014, a third-party director search firm retained by the nominating and governance committee recommended Ms. Dunaway as a candidate for our board.
Directors and Nominees
Below, you can find the principal occupation and other information about each of the director nominees standing for re-election at the annual meeting. Information related to each director nominee's key attributes, experience, and skills, as well as their recent public company board service is included with each director's biographical information.
Robert B. Aiken, 52
Director Since: March 2010
• Nominating and Governance (Chair)
• Compensation
Other Public Company Board Service:
United Stationers Inc. (February 2015-present)
Recent Past Public Company Board Service:
United Stationers Inc. (December 2010-May 2014) Mr. Aiken has been the Chief Executive Officer of Feeding America, a 501(c)3 hunger relief charity organization, since December 2012 and will serve in that role until June 30, 2015. Mr. Aiken was previously the Chief Executive Officer of the food company portfolio at Bolder Capital, a Chicago-based private equity firm from February 2012 to December 2012 and from February 2010 to January 2011. Mr. Aiken was a Managing Director of Capwell Partners, LLC, a Chicago-based private equity firm from January 2011 to February 2012. Prior to entering the private equity business in February 2010, Mr. Aiken served as the President and Chief Executive Officer of U.S. Foodservice (USF). At USF, he served as President and Chief Executive Officer from July 2007 to February 2010, as President and Chief Operating Officer from October 2005 to July 2007, and as Executive Vice President of Sales/Marketing & Supply Chain from February 2004 to October 2005. Prior to joining USF, Mr. Aiken held several positions from 1994 through 2000 at Specialty Foods Corp. of Deerfield, Illinois, including Chief Executive Officer of its Metz Baking Company subsidiary. From 2000 until 2004, Mr. Aiken also served as President and Principal of Milwaukee Sign Co. and early in Mr. Aiken's career, he worked as a business lawyer, first with the firm Sidley & Austin in Chicago and then with Wilson, Sonsini, Goodrich & Rosati in Palo Alto, California.
Mr. Aiken brings to the board of directors, among his other skills and qualifications, experience as a chief executive officer of a corporation with significant operations and a large, labor-intensive workforce. He gained extensive experience in management, operations, and logistics, as well as an understanding of the dining industry through his service at USF. In light of the foregoing, our board of directors has concluded that Mr. Aiken should continue as a member of our board.
Stephen E. Carley, 62
Director Since: September 2010
Harte-Hanks (March 2013-present)
EPL Intermediate, Inc., an affiliate of El Pollo Loco (publicly traded debt) (2004-2010) Mr. Carley joined the Company as Chief Executive Officer and as a director in September 2010. Prior to joining the Company, Mr. Carley served from April 2001 to August 2010 as the Chief Executive Officer of El Pollo Loco, Inc., a privately held restaurant company headquartered in Costa Mesa, California. Prior to his service at El Pollo Loco, Mr. Carley served in various management positions with several companies, including, PhotoPoint Corp., Universal City Hollywood, PepsiCo, Inc., and the Taco Bell Group. Mr. Carley holds a master's degree with a concentration in marketing from Northwestern University and a bachelor's degree in finance from the University of Illinois in Urbana, Illinois.
Mr. Carley brings to the Company and the board of directors, among his other skills and qualifications, extensive restaurant industry experience and valuable executive leadership, which he gained as a chief executive officer of a corporation with significant, large-scale operations. He has extensive knowledge and understanding of the restaurant industry, marketing and brand management in domestic and international markets, as well as significant insight into and experience with franchise operations. In light of the foregoing, our board of directors has concluded that Mr. Carley should continue as a member of our board.
Cambria W. Dunaway, 52
Director Since: June 2014
• Nominating and Governance
Nordstrom FSB (2014-present)
Brunswick Industries (2006-2014) Ms. Dunaway served as the U.S. President and Global Chief Marketing Officer of KidZania, an international location based entertainment concept focused on children's role-playing activities, from October 2010 to December 2014 and currently remains as an advisor to the company. From October 2007 to October 2010, Ms. Dunaway served as Executive Vice President for Nintendo, with oversight of all sales and marketing activities for the company in the United States, Canada, and Latin America. Before joining Nintendo, Ms. Dunaway was Chief Marketing Officer for Yahoo! from June 2003 to November 2007. Prior to joining Yahoo!, Ms. Dunaway was at Frito-Lay for 13 years in various leadership roles in sales and marketing, including serving as the company's Chief Customer Officer and as Vice President of Kids and Teens brands. Ms. Dunaway holds a Bachelor of Science degree in business administration from the University of Richmond and an M.B.A. from Harvard Business School.
Ms. Dunaway brings to the board of directors, among other skills, more than 20 years of experience as a senior marketing and general management executive, launching and growing consumer businesses in entertainment, media, consumer electronics, and package goods. She brings experience in the areas of marketing strategy, communications, data analytics, loyalty, digital transformation, and governance. In light of the foregoing, our board of directors has concluded that Ms. Dunaway should continue as a member of our board.
Lloyd L. Hill, 71
• Compensation (Chair)
• Audit
AMC Entertainment, Inc. and its parent company AMC Entertainment Holdings, Inc. (December 2013-present)
Applebee's International, Inc. (1989-2007) Mr. Hill is the former Chairman and CEO of Applebee's International, Inc. (Applebee's), based in Overland Park, Kansas. Mr. Hill joined Applebee's as Chief Operating Officer in January 1994, and was named President in December 1994. He became Co-Chief Executive Officer in January 1997; Chief Executive Officer in January 1998; and was elected Chairman of the Board in May 2000. Mr. Hill first began serving on Applebee's board as an independent director in 1989 and served until November 2007. Mr. Hill retired as Chief Executive Officer of Applebee's in September 2006. Prior to joining Applebee's, Mr. Hill served as President and Director of Kimberly Quality Care, a market leader in home healthcare and nurse personnel staffing. Mr. Hill received his master's degree in business administration from Rockhurst University in Kansas City, Missouri.
Mr. Hill brings to the board of directors, among his other skills and qualifications, executive leadership and operations skills developed from his years of experience as a chief executive officer of several companies. As Chairman and Chief Executive Officer of Applebee's, Mr. Hill substantially expanded Applebee's business while successfully maintaining relationships with Applebee's stockholders. Under Mr. Hill's leadership, Applebee's grew into the largest casual dining concept in the world, with nearly 1,900 restaurants in 49 states and 17 countries. In 2005, Mr. Hill was named by Institutional Investor magazine as one of America's Best CEOs and as one of the top-performing CEOs within the restaurant industry. Mr. Hill also brings deep knowledge of the casual-dining industry. In light of the foregoing, our board of directors has concluded that Mr. Hill should continue as a member of our board.
Richard J. Howell, 72
• Audit (Chair)
Independent Trustee for the LKCM Funds
(July 2005-present)
Other Board Service:
Board of Directors of NACD North Texas Chapter (2010-present)
None Mr. Howell was an audit partner with Arthur Andersen LLP for over 25 years before retiring in 2002. From January 2004 through May 2009, Mr. Howell served as an adjunct professor of auditing at the Cox School of Business at Southern Methodist University, and he served in a similar capacity from August 2002 to December 2003 at the Neely School of Business at Texas Christian University.
Mr. Howell brings to the board of directors, among his other skills and qualifications, significant experience in accounting and information systems, as well as knowledge of controls and financial reporting requirements of public companies. In addition, during Mr. Howell's career in public accounting he gained significant knowledge of due diligence practices, mergers and acquisitions, and risk management. In his role as the head of the audit division, he gained experience with recruiting, personnel management, budgeting, and client development and management. As a public accountant, Mr. Howell worked with retail and manufacturing companies and developed experience working with supply chain, procurement, manufacturing processes, and inventory management. Mr. Howell's work with audit committees of numerous public reporting companies and his directorship roles have provided him with substantial experience in corporate governance. In light of the foregoing, our board of directors has concluded that Mr. Howell should continue as a member of our board.
Glenn B. Kaufman, 47
Director Since: August 2010
• Finance (Chair)
None Mr. Kaufman has been a Managing Member of the D Cubed Group, a private-market investment firm with a long-term focused value creation model, since January 2011. Prior to forming D Cubed, he consulted to boards and senior executives of operating businesses as well as to private investment firms from January 2009 to December 2010. Previously he spent 11 years at American Securities Capital Partners, where he was a Managing Director. During his tenure at American Securities, Mr. Kaufman spearheaded the firm's investing in the restaurant, food service and franchising, and healthcare sectors. He served as Chairman or a Director of Potbelly Sandwich Works, El Pollo Loco, Press Ganey Associates, Anthony International, and DRL Holdings. He spent four years as an attorney with Cravath, Swaine & Moore and worked previously in the small business consulting group of Price Waterhouse. Mr. Kaufman holds a Bachelor of Science in Economics from the Wharton School of Business of the University of Pennsylvania and a law degree from Harvard University.
Mr. Kaufman brings to the board of directors, among his other skills and qualifications, valuable strategic, finance, budgeting, and executive leadership experience, as well as an extensive understanding of restaurant operations, direct/omni-channel marketing, and franchising. He has approximately 20 years of experience as an active, engaged, private market investor. Mr. Kaufman has extensive restaurant, food service, franchising, healthcare, and retail expertise as a result of his investing and business activities at both the D Cubed Group and American Securities Capital Partners. In addition, Mr. Kaufman also has legal and business consulting expertise. In light of the foregoing, our board of directors has concluded that Mr. Kaufman should continue as a member of our board.
Pattye L. Moore, 57
Director Since: August 2007 (Board Chair since February 2010)
ONEOK (2002-present)
ONEGAS, Inc. (January 2014-present)
Sonic Corp. (2000-2006) Ms. Moore is a business strategy consultant and the author of Confessions from the Corner Office, a book on leadership instincts. Ms. Moore was on the board of directors for Sonic Corp. from 2000 through January 2006 and was the President of Sonic from January 2002 to November 2004. She held numerous senior management positions during her 12 years at Sonic, including Executive Vice President, Senior Vice President—Marketing and Brand Development and Vice President—Marketing. Prior to joining Sonic Corp., she served as a senior executive and account supervisor on the Sonic account at the advertising agency Advertising, Inc.
Ms. Moore brings to the board of directors, among her other skills and qualifications, significant executive leadership, management, marketing, business strategy, brand and concept development, and public relations experience as well as deep knowledge of the restaurant industry. During her tenure at Sonic, the company grew from $900 million in system-wide sales with 1,100 units to over $3 billion in system-wide sales and 3,000 units. Ms. Moore was named one of the top 100 marketers by Advertising Age magazine in 2000 and one of the top 50 women in foodservice by Nation's Restaurant News in 2002. Ms. Moore's directorships at other companies also provide her with extensive corporate governance experience. In light of the foregoing, our board of directors has concluded that Ms. Moore should continue as a member of our board.
Stuart I. Oran, 64
Spirit Airlines (2004-present)
FCB Financial Holdings, Inc. (2010-Present)
OHA Investment Corporation (2014-present)
Deerfield Capital Corp. (2008-2010)
Hughes Telematics (f/k/a Polaris Acquisition Corp.) (2007-2009)
Wendy's International, Inc. (2005-2008) Since 2011, Mr. Oran has been a partner at Liberty Hall Capital Partners, a private equity firm focused on the aerospace and defense sectors. Mr. Oran is also the co-founder of FCB Financial Holdings, Inc., a bank holding company formed to acquire failed banks in FDIC-assisted transactions. Mr. Oran founded Roxbury Capital Group LLC in 2002 and was its managing member until December 2014. From 1994 to 2002, Mr. Oran held a number of senior executive positions at UAL Corporation and its operating subsidiary, United Airlines, Inc., including Executive Vice President—Corporate Affairs (responsible for United's legal, public, governmental and regulatory affairs, and all of United's properties and facilities), Senior Vice President—International (P&L responsibility for United's international division comprised of its operations and employees (approximately 12,000) in 27 countries), and President and Chief Executive Officer of Avolar, United's aviation line of business. During that period, Mr. Oran also served as a director of United Air Lines (the operating subsidiary) and several of its subsidiaries, and on the Management Committee, Risk Management Committee, and Alternative Asset Investment Committee of UAL. Mr. Oran resigned from his positions at UAL Corporation and United Airlines, Inc. in March 2002. Prior to joining UAL and United, Mr. Oran was a corporate partner at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP.
Mr. Oran brings to the board of directors, among his other skills and qualifications, valuable business, leadership, management, and strategic planning experience which he gained during his employment with UAL Corporation and as a board member of Wendy's International, Inc. He also brings significant knowledge of the restaurant industry from his board service at Wendy's. In addition, Mr. Oran has experience serving as a director of a number of other large public companies which provided him with extensive corporate governance experience. In light of the foregoing, our board of directors has concluded that Mr. Oran should continue as a member of our board.
Vote Required
Proposal No. 1 requires the approval of a majority of the votes cast for each director.
Board Recommendation
Our board of directors recommends that you vote FOR the election of each of the nominees for director.
CORPORATE GOVERNANCE AND BOARD MATTERS
The board of directors seeks to ensure that good governance and responsible business practices are part of our culture and values. To ensure that we achieve this goal, the board of directors has previously established corporate governance guidelines that it follows with respect to corporate governance matters, which are available on the investor relations section of our website at www.redrobin.com. The board of directors reviews the governance guidelines annually to ensure that they are timely, effective, and supportive of the board's oversight and other responsibilities.
Executive Development and Management Succession
Executive development and succession is an important responsibility of the board of directors. Under the Company's corporate governance guidelines, the board maintains an ongoing policy and plan for the development and succession of the CEO and other senior officers. The board has delegated some of this responsibility to the nominating and governance committee. As provided in our corporate governance guidelines, the succession policy and plan has a multi-year focus that encompasses, among other things, the following attributes:
criteria that reflect the Company's ongoing business strategies,
identification and development of potential internal candidates,
formal assessment processes to evaluate such potential internal candidates and their development, and
an emergency succession component to address the unforeseen loss of the CEO or other key executives through death, disability, or other similar emergency.
The nominating and governance committee and the board work closely with management to ensure that development and succession are anticipated, planned for, and addressed in a timely manner. Under the guidance of the committee, Mr. Carley and each of the executive officers conduct annual succession planning activities. This process includes annual performance reviews, evaluations, and development plans of the CEO and executive officers, who also conduct evaluations and development of their direct reports.
Mr. Carley regularly meets with the full board on his performance, and his annual performance evaluation is conducted under the oversight of the compensation committee. Mr. Carley conducts annual and interim performance and development evaluations of the other senior executives and reviews these evaluations with the compensation committee or full board.
At least annually, and when otherwise necessary, the nominating and governance committee reviews, makes recommendations for, and reports to the board on programs that have been implemented by management for executive and leadership team development and succession planning.
Stockholder Engagement
The board and management believe that the Company's relationships with our stockholders and other stakeholders are an important part of our corporate governance responsibility, and recognize the value of continuing communications. Among other things, engagement with our stockholders helps us to:
understand and consider the issues that matter most to our stockholders,
learn about expectations for our performance, and
assess stockholder feedback and any emerging issues related to our governance practices, business, operations, or compensation.
This approach has helped us to identify mutual perspectives and goals and to adopt a collaborative approach to these relationships, which has resulted in our receiving essential input from our stockholders. To this end, we regularly engage with our stockholders through attendance at investor conferences, issuance of press releases and other stockholder communications, and individual meetings throughout the year.
We also recognize the connection between good corporate governance and our ability to create and sustain value for our stockholders. In response to evolving governance practices, regulatory changes, and concerns of our stockholders, the Company has made a number of changes to our corporate governance practices over the past few years.
Highlights of our governance program include:
The board recognizes that one of its key responsibilities is to evaluate and determine the optimal leadership structure so as to provide independent oversight of management. Accordingly, at this time, we believe it is appropriate for our board to maintain the separation of the roles of board chair and chief executive officer. Pattye L. Moore currently serves as chair of the board due to, among other things, her prior experience on public company boards of directors, as well as her extensive leadership experience within the restaurant industry.
We believe that having a non-executive, independent board chair is in the best interests of the Company and our stockholders at this time. The separation of the roles of board chair and chief executive officer allows Mr. Carley to focus on managing the Company's business and operations, and allows Ms. Moore to focus on board matters, especially in light of the high level of regulation and scrutiny of public company boards. Further, we believe that the separation of these roles ensures the independence of the board in its oversight role of evaluating and assessing the chief executive officer and management generally.
Role in Risk Oversight
Our executive officers have the primary responsibility for enterprise risk management within our Company. Our board actively oversees the Company's risk management and regularly engages in discussions of the most significant risks that the Company faces and how these risks are being
managed. The board receives regular reports on enterprise risk areas from senior officers of the Company. The board delegates certain risk oversight functions to the audit committee. Under its charter, the audit committee is responsible for oversight of the enterprise risk assessment and management process framework and ensures that the board or a designated committee is monitoring the identification, assessment, and mitigation of significant enterprise risks. The audit committee oversees policies and guidelines that govern the process by which major financial and accounting risk assessment and management may be undertaken by the Company. The audit committee also oversees our corporate compliance programs and the internal audit function. In addition, the other board committees receive reports and evaluate risks related to their areas of focus. The committees regularly report to the full board on the assessment and management of these risks. The board believes that the work undertaken by the audit committee, together with the work of the other committees, the full board, and the senior officers of the Company, enables the board to effectively oversee the Company's risk management.
Board Membership and Director Independence
Our board of directors has determined that each of our directors, except our CEO, Mr. Carley, qualifies as an independent director under the rules promulgated by the U.S. Securities and Exchange Commission ("SEC") and The NASDAQ Stock Market® ("NASDAQ") listing standards. Only independent directors are appointed to the board's audit committee, compensation committee, and nominating and governance committee. All members of each of our board committees are independent in accordance with SEC rules and NASDAQ listing standards. There are no family relationships among any of our executive officers, directors, or nominees for directors.
Director Attendance
The board of directors held nine meetings in 2014, including four in-person meetings. Each of our current directors attended at least 75% of the aggregate total of meetings of the board of directors and committees during their period of service in 2014. The non-management directors of the Company meet at least quarterly throughout the year and as necessary or appropriate in executive sessions at which members of management are not present.
The board of directors strongly encourages each of the directors to attend the annual meeting of stockholders. All of our current directors who were directors at the time attended our 2014 annual meeting.
Our board of directors has four standing committees: an audit committee, a compensation committee, a finance committee, and a nominating and governance committee. Each of our standing committees generally meets at least once each quarter. In addition, other regular and special meetings are scheduled as necessary and appropriate depending on the responsibilities of the particular committee. Each committee regularly meets in executive session without management present.
Each board committee operates pursuant to a written charter. The charter for each committee is available on the corporate governance section of the investor relations tab of our website at www.redrobin.com. The committee charters are reviewed at least annually by the respective committee to revise and update the committee duties and responsibilities as necessary.
Stockholder Submission of Director Nominees
A stockholder may submit the name of a director candidate for consideration by the nominating and governance committee by writing to: Nominating and Governance Committee, Red Robin Gourmet Burgers, Inc., 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111.
The stockholder must submit the following information in support of the candidate: (a) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner, (ii) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of such stockholder's notice by, or on behalf of, such stockholder and such beneficial owner, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Company, the effect or intent of which is to mitigate loss to, manage risk of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of the Company, and (iv) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Company's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company's voting shares to elect such nominee or nominees.
Communications with our Board of Directors
You may communicate with any director, the entire board of directors, the independent directors, or any committee by sending a letter to the director, the board of directors, or the committee addressed to: Board of Directors, 6312 South Fiddler's Green Circle, Suite 200N, Greenwood Village, CO 80111, or by sending an e-mail to: Board@redrobin.com. The Company's chief legal officer will review all communications, categorize them, and forward them to the appropriate board member(s). Messages pertaining to administrative matters, ordinary business matters, personal grievances, and similar issues will be forwarded to the appropriate member of management.
With respect to issues arising under the Company's Code of Ethics, you may also communicate directly with the chair of the audit committee, vice president of internal audit, or the compliance officer in the manner provided in the Company's Problem Resolution and Whistleblower Policy and Reporting Procedures. Both the Code of Ethics and the Problem Resolution and Whistleblower Policy and Reporting Procedures may be found on the corporate governance section of the investor relations tab of our website at: www.redrobin.com.
Transactions with Related Persons
For 2014, we had no material related party transactions which were required to be disclosed in accordance with SEC regulations.
Review, Approval, or Ratification of Transactions with Related Persons
The board of directors recognizes that transactions between the Company and certain related persons present a heightened risk of conflicts of interest. In order to ensure that the Company acts in the best interest of our stockholders, the board has delegated the review and approval of related party transactions to the audit committee. Pursuant to our Code of Ethics and the audit committee charter, any related party transaction required to be disclosed in accordance with applicable SEC regulations must be reviewed and approved by the audit committee. In reviewing a proposed transaction, the audit committee must:
satisfy itself that it has been fully informed as to the related party's relationship and interest, and as to the material facts of the proposed transaction, and
consider all of the relevant facts and circumstances available to the committee.
After its review, the audit committee will only approve or ratify transactions that are fair to the Company and not inconsistent with the best interests of the Company and our stockholders.
During the last completed fiscal year, Robert B. Aiken, Lloyd L. Hill, Richard J. Howell, Glenn B. Kaufman, Pattye L. Moore, and James T. Rothe each served as members of the Company's compensation committee. None of the members of the compensation committee is or has been an officer or employee of the Company. None of our current executive officers serves as a director of another entity that has an executive officer who serves on our Board.
Set forth below are the elements of our director compensation for 2014.
Annual Retainer Each non-employee director of the Company received an annual retainer of $40,000, payable in equal quarterly installments. In addition, the following amounts were paid to the chair of the board and each board committee chair in equal quarterly installments:
Chair of audit committee $15,000
Chair of compensation committee $12,500
Chair of nominating and governance committee $ 7,500
Chair of finance committee $10,000
*The compensation committee increased the board chair retainer from $40,000 to $48,000 in June 2014 based on market data and the recommendation of its compensation consultant.
Meeting Fees Each non-employee director received $2,000 for each in-person board meeting attended and $1,000 for each regularly scheduled telephonic board meeting attended. Each member of the compensation committee, the nominating and governance committee, and the finance committee received $2,000 for each in-person committee meeting attended, and each member of the audit committee received $3,000 for each in-person meeting of the audit committee attended. Each committee member received $1,000 for each regularly scheduled telephonic committee meeting attended. A director receives one-half of the specified meeting fee for any regularly scheduled in-person meeting in which the director instead participates by telephone. The Company also reimburses the directors for costs incurred by them in traveling to and attending board and committee meetings.
Equity Awards Upon initial appointment or election to the board of directors, each non-employee director generally receives a non-qualified stock option grant covering 5,000 shares. Each initial grant of 5,000 stock options vests and becomes exercisable in equal monthly installments over the 24-month period following the date of grant. In addition, at the discretion of the board of directors, each non-employee director is eligible to receive annual grants of stock options, restricted stock, or restricted stock units. In 2014, each non-employee director received an annual grant of restricted stock units with a grant date value of approximately $110,000.
2014 Director Compensation
The following table sets forth a summary of the compensation we paid to our non-employee directors in fiscal 2014:
or Paid
in Cash
Robert B. Aiken 71,500 109,937 — 181,437
Cambria W. Dunaway(3) 26,262 150,241 100,792 — 277,295
Lloyd L. Hill 86,500 109,937 — 196,437
Richard J. Howell 89,000 109,937 — 198,937
Glenn B. Kaufman 77,000 109,937 — 186,937
Pattye L. Moore 119,024 109,937 — 228,961
Stuart I. Oran 66,000 109,937 — 175,937
James T. Rothe 35,810 (4) — 35,810
Each director, other than Ms. Dunaway, was awarded 1,525 restricted stock units in May 2014. The fair value of such restricted stock units was computed in accordance with the authoritative guidance for accounting for stock compensation at $72.09 per share for all directors. All such restricted stock units are subject to vesting in three equal installments on the first, second, and third anniversaries of the date of grant, unless earlier vested per the terms of the award agreement or the Company's Second Amended and Restated 2007 Performance Incentive Plan (the "2007 Plan").
The aggregate amount of all other compensation paid to each director in fiscal year 2014 did not exceed $2,500 per director; in each case constituting meal discounts used by such non-employee director.
Ms. Dunaway received a pro-rated grant of 1,391 restricted stock units when she joined the board in June 2014. The fair value of such restricted stock units was computed in accordance with the authoritative guidance for accounting for stock compensation at $72.65 per share. All such restricted stock units are subject to vesting in three equal installments on the first, second, and third anniversaries of the date of grant, unless earlier vested per the terms of the award agreement or the 2007 Plan. Ms. Dunaway was awarded options to purchase 5,000 shares of common stock upon joining the board. The fair value of such options was computed in accordance with the authoritative guidance for accounting for stock compensation at $30.05 per share covered by the option.
Mr. Rothe retired in May 2014. Amounts reported above reflect fees earned through his retirement date.
As of the end of the fiscal year 2014, the aggregate number of options and restricted stock units outstanding for each non-employee director is set forth below. Options are considered outstanding until exercised and restricted stock units are considered outstanding until vested and paid.
Stock Units
Robert B. Aiken 5,000 5,111
Cambria W. Dunaway 5,000 1,391
Lloyd L. Hill 5,000 5,111
Richard J. Howell 10,000 5,111
Glenn B. Kaufman 0 4,893
Pattye L. Moore 6,500 5,111
Stuart I. Oran 5,000 5,111
In October 2014, the compensation committee voted to change the pay mix for non-employee directors effective in 2015. The committee eliminated director meeting fees, rolling the approximate $30,000 value into the annual retainer, which was increased from $40,000 to $70,000. The change was made to ease administrative burden with respect to the payment of director cash compensation and to better align the Company's practices with those of its peer group. This change was exclusive of chair retainers, which were not changed. In addition, the board voted to reduce the vesting terms for future restricted stock unit grants from three years to one year. This change was made to be consistent with the Company's decision to declassify its board of directors and move from a staggered board with three-year elected terms to a non-staggered board with annual elections for one-year terms in accordance with governance best practices. No changes were made to the vesting terms of existing awards.
Director Stock Ownership Guidelines
The compensation committee has had stock ownership guidelines in place for non-employee directors since March 2009 (see "Executive Stock Ownership Guidelines" on page 42 for discussion of the ownership guidelines for executive officers). The current ownership guidelines require non-employee directors to own Company securities with a cumulative cost basis of at least five times the director's annual retainer. Based on the current annual retainer for non-employee directors, that dollar amount is $350,000. The value of the director's holdings is based on the cumulative cost basis of securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. New non-employee directors have five years from the time the director joins the board to reach the minimum ownership threshold. Non-employee directors may not sell, transfer, or otherwise dispose of common stock that would decrease such director's cumulative cost basis below the ownership guideline amount. All of our directors are currently in compliance or properly on track to be in compliance with the minimum ownership threshold.
The following table sets forth the ownership guidelines and the holdings of the non-employee directors as of March 10, 2015, valued at the acquisition dates pursuant to our director stock ownership guidelines:
Current Dollar
Value of Guideline
Robert B. Aiken 5x Retainer $ 350,000 $ 819,241
Cambria W. Dunaway 5x Retainer $ 350,000 (1) $ 108,441
Lloyd L. Hill 5x Retainer $ 350,000 $ 828,180
Richard J. Howell 5x Retainer $ 350,000 $ 983,023
Glenn B. Kaufman 5x Retainer $ 350,000 $ 710,836
Pattye L. Moore 5x Retainer $ 350,000 $ 672,829
Stuart I. Oran 5x Retainer $ 350,000 $ 567,703
To be achieved by June 2019.
Indemnification of Directors
The Company has entered into agreements to indemnify its directors, executive officers, and certain other key employees. Under these agreements, the Company is obligated to indemnify its directors and officers to the fullest extent permitted under the Delaware General Corporation Law for expenses, including attorneys' fees, judgments, fines, and settlement amounts incurred by them in any action or proceeding arising out of their services as a director or officer. The Company believes that these agreements are necessary in attracting and retaining qualified directors and officers.
STOCK OWNERSHIP INFORMATION
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and except for community property laws where applicable, the persons named in the tables below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership for each table is based on 14,107,108 shares of common stock outstanding as of March 10, 2015.
Stock Ownership of Certain Beneficial Owners
The following table sets forth information regarding beneficial owners of more than 5% of our common stock as of March 10, 2015. All information is taken from or based upon ownership filings made by such persons with the SEC or upon information provided by such persons to the Company.
Shares Beneficially Owned
Amount and Nature of
Percent of
T. Rowe Price Associates, Inc.(1) 1,373,837 9.7 %
BlackRock, Inc.(2) 1,220,453 8.7 %
This disclosure is based on an amendment to Schedule 13G filed with the SEC on February 11, 2015. The reporting person is an investment adviser registered under Section 203 of the Investment Advisors Act of 1940. The Schedule 13G/A discloses that the reporting person has sole voting power over 309,890 shares and sole dispositive power over 1,373,837 shares. T. Rowe Price Associates, Inc. (Price Associates) has indicated that these securities are owned by various individual and institutional investors for which Price Associates serves as an investment advisor with power to direct investments and/or sole power to vote the securities. For the purpose of the reporting requirements of the Exchange Act, Price Associates is deemed to be the beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. The address of the reporting person is 100 East Pratt Street, Baltimore, Maryland 21202.
This disclosure is based on an amendment to Schedule 13G filed with the SEC on January 22, 2015. At the time of filing, the reporting person reported being a holding company that has sole voting power over 1,187,998 shares and sole dispositive power over 1,220,453 shares. The address of this reporting person is 55 East 52nd Street, New York, New York 10022.
Stock Ownership of Directors and Management
The following table contains information about the beneficial ownership (unless otherwise indicated) of our common stock as of March 10, 2015 by:
each of our directors, including the board's nominees for election,
each named executive officer set forth in the Summary Compensation Table, and
all directors and current executive officers as a group.
Shares Beneficially
Owned(1)
Name of Beneficial Owner
Amount and Nature
of Ownership
Stephen E. Carley(2) 151,864 1.07%
Todd A. Brighton(3) 26,254 *
Stuart B. Brown(4) 35,644 *
Eric C. Houseman (5) 22,049 *
Denny Marie Post(6) 21,754 *
Michael L. Kaplan(7) 958 *
Cathy Cooney(8) 2,124 *
Robert B. Aiken(9) 16,030 *
Cambria W. Dunaway(10) 2,083 *
Lloyd L. Hill(11) 17,030 *
Richard J. Howell(12) 22,905 *
Glenn B. Kaufman(13) 17,777 *
Pattye L. Moore(14) 18,685 *
Stuart I. Oran(15) 8,120 *
Directors and Current Executive Officers as a group (13 persons)(16) 330,499 2.31%
Represents beneficial ownership of less than one percent (1.0%) of the outstanding shares of our common stock.
If a stockholder holds options, restricted stock units, or other securities that are currently vested or exercisable or that vest or become exercisable within 60 days of March 10, 2015, we treat the common stock underlying those securities as owned by that stockholder and as outstanding shares when we calculate the stockholder's percentage ownership of our common stock. We do not consider that common stock to be outstanding when we calculate the percentage ownership of any other stockholder.
Consists of 1,000 shares held directly by Mr. Carley, 31,402 shares of common stock held indirectly by the Carley Family Trust, and 119,462 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
As of July 1, 2014, Mr. Brighton's date of departure from the Company, his holdings consisted of 20,588 shares of common stock held directly by Mr. Brighton and 5,666 shares of common stock subject to options that were exercisable within 60 days of July 1, 2014. See "Employment Agreements, Separation Related Arrangements, and Change in Control Agreements" for the treatment of Mr. Brighton's equity following his departure.
Consists of 17,262 shares held directly by Mr. Brown and 18,382 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
As of August 1, 2014, Mr. Houseman's date of departure from the Company, his holdings consisted of 18,920 shares of common stock held directly by Mr. Houseman and 3,129 shares of common stock subject to options that were exercisable within 60 days of August 1, 2014. See "Employment Agreements, Separation Related Arrangements, and Change in Control Agreements" for the treatment of Mr. Houseman's equity following his departure.
Consists of 2,517 shares of common stock held directly by Ms. Post and 19,237 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 174 shares of common stock held directly by Mr. Kaplan and 784 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 256 shares of common stock held directly by Ms. Cooney and 1,868 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 1,063 shares of restricted stock units that are currently vested or will vest within 60 days, 9,967 shares of common stock held indirectly by the Robert B. Aiken Trust, and 5,000 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 2,083 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 1,063 shares of restricted stock units that are currently vested or will vest within 60 days, 8,967 shares of common stock held directly by Mr. Hill, 2,000 shares of common stock held indirectly by the Lloyd Hill Revocable Trust, and 5,000 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 1,063 shares of restricted stock units that are currently vested or will vest within 60 days, 14,342 shares of common stock held directly by Mr. Howell, , and 7,500 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 845 shares of restricted stock units that are currently vested or will vest within 60 days of March 10, 2015, and 16,932 shares of common stock held directly by Mr. Kaufman.
Consists of 1,063 shares of restricted stock units that are currently vested or will vest within 60 days, 16,122 shares of common stock held indirectly by an entity owned and managed by Ms. Moore and her husband, and 1,500 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Consists of 1,063 shares of restricted stock units that are currently vested or will vest within 60 days, 57 shares of common stock held directly by Mr. Oran, 2,000 shares of common stock held indirectly by Mr. Oran in two trusts of which Mr. Oran is co-trustee, and 5,000 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
Includes 6,160 shares of restricted stock units that are currently vested or will vest within 60 days and 194,819 shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 10, 2015.
In this Compensation Discussion and Analysis, we provide an analysis and explanation of our executive compensation program and the compensation derived from this program by our executive officers, including our "named executive officers." For 2014, our named executive officers were:
Stephen E. Carley, Chief Executive Officer
Stuart B. Brown, Senior Vice President and Chief Financial Officer
Denny Marie Post, Executive Vice President and Chief Concept Officer
Michael L. Kaplan, Senior Vice President and Chief Legal Officer
Cathy Cooney, Senior Vice President and Chief People Officer
Eric C. Houseman, Former President and Chief Operating Officer
Todd A. Brighton, Former Senior Vice President and Chief Development Officer
Red Robin Gourmet Burgers, Inc., together with its subsidiaries, is a casual dining restaurant chain focused on serving an imaginative selection of high quality gourmet burgers in a fun environment welcoming to guests of all ages. We are committed to delivering superior experiences for our guests which we believe will lead to operating and financial results better than those of our casual dining peers. Through our engaged and motivated team members, our mission is to deliver a customized experience and create a unique connection with guests of all ages who want to enjoy craveable gourmet burgers in a fun, energetic environment with attentive and friendly service. We have identified and continue to search for opportunities that will drive strong financial performance through increasing guest traffic and revenues, improving operational efficiencies and expense management, enhancing our restaurant environments, and expanding our restaurant base. We have built short-term and long-term strategies and initiatives around these opportunities, and have optimized returns through allocation of our capital. These strategies and initiatives include:
Increasing guest engagement to drive profitable guest traffic and sales in our restaurants through greater frequency of visits and increasing our average guest check;
Improving operational efficiencies and expense management through several initiatives designed to reduce costs and improve efficiencies throughout our organization; and
Expanding our footprint through disciplined deployment of capital to both grow the brand and maximize long-term stockholder returns by optimizing the return on our capital investments, including development of new restaurants and restaurant remodels.
We believe these initiatives also comprise the foundations for scalable and sustainable long-term growth, profitability, and increased stockholder value.
Our executive compensation program supports this focus through several key objectives:
Attracting, retaining, and motivating the best possible executive talent who have the experience and leadership skills capable of driving performance and top-line growth in sales;
Creating value for our stockholders by linking executive compensation to the achievement of measurable corporate objectives and the minimization of unreasonable and excessive risk-taking; and
Paying for superior results through a program that incents and rewards for achievement of both short-term and long-term organizational and functional objectives with a mix of compensation elements that place a significant portion of cash and equity compensation at risk.
Accordingly, our executive compensation is comprised of three primary elements: base salaries, annual cash incentives, and long-term incentives that include both cash awards on three-year performance cycles and equity awards (stock options and restricted stock units). We also provide certain other customary health and welfare benefits and other ancillary compensation to executives, which are in line with those offered to other groups of our employees, and which comprise a modest portion of our named executive officer compensation. See "Summary Compensation Table" on page 44.
Mr. Carley joined the Company in late 2010 as chief executive officer. Under Mr. Carley's direction, we have pursued a course of performance improvement designed to drive top-line growth in sales and lay the foundation for scalable and sustainable long-term growth, profitability, and increased stockholder value. Our compensation objectives are designed to link incentives and rewards with current and long-term sustained achievement of these goals. For the past four years, we have experienced significant improvement in our operating performance. Highlights of our improved performance are set forth below. Note that all of the fiscal years noted were comprised of 52 weeks except for our 2012 fiscal year, which was comprised of 53 weeks due to our fiscal calendar (we experience a 53rd week every 5th or 6th fiscal year).
Annual revenues were $1.1 billion in 2014, which exceeded $1.0 billion in 2013, an increase of 12.7%. This follows a series of increases in annual revenues over the preceding three fiscal years: annual revenues in fiscal 2013 increased by 4.1% over total revenues for fiscal 2012 (including the 53rd week); increased 6.8% in 2012 (including the 53rd week) over 2011, and 5.9% in 2011 over 2010.
Comparable restaurant revenue grew by 3.1% in 2014 and 4.0% in 2013. Comparable restaurants are those Company-owned restaurants that have achieved five full quarters of operations during the period presented, and such restaurants are only included in our comparable metrics if they are comparable for the entirety of both periods presented.
We achieved consistent adjusted EBITDA growth over the past four years. In addition, net cash provided by operating activities was $123.6 million in 2014, an increase of 8.9% over 2013 and an increase of 75% over 2010.
For the 2014 full fiscal year, GAAP earnings per diluted share (EPS) grew to $2.25, an increase of 389% over 2010.
Annual RRGB Diluted GAAP Earnings Per Share
As represented in the bar graph below, our stock price has steadily increased since Mr. Carley joined our Company as chief executive officer in September 2010. Since 2010, our stock price has increased from a high in the mid $20s to around $80 per share.
RRGB Avg. Stock Highs & Lows
For fiscal year 2014, our guest traffic exceeded the casual dining sector by 160 basis points as reported by Black Box Intelligence, which produces a financial benchmarking report for the restaurant industry. We continue to gain market share and, based on Black Box Intelligence reports, we have outperformed the industry in traffic in 9 of the last 11 quarters.
We added 22 new Red Robin® restaurants and 3 new Red Robin Burger Works® to our restaurant base and acquired 36 franchised Red Robin® restaurants in fiscal 2014.
We remodeled 74 Company-owned Red Robin® restaurants to our new brand standards in fiscal 2014.
We used excess cash generated during the last four years to benefit our stockholders in the form of share repurchases. Over the past four years, we have repurchased over $89.2 million or approximately 18.0% of shares outstanding, including $26.9 million repurchased during 2014. In February 2015, our board of directors re-authorized up to $50 million in share repurchases.
As represented in the chart below, for the past four years, our cumulative total shareholder return on our common stock has shown marked improvement and compares favorably with the cumulative total return over the same period for the Russell 3000 Index, the Bloomberg U.S. Full Service Restaurant Index, and a Peer Composite made up of our Current Peer Group restaurants (see "Benchmarking" below beginning on page 31 for a list of our peer restaurants). The comparison assumes $100 was invested on December 31, 2010 in the Company's common stock and in each of the indices (including reinvestment of dividends based on calendar years ending December 31 for purposes of comparability).
Four-Year Indexed Share Price Performance
Calendar Years
Red Robin Gourmet Burgers, Inc. $ 100.00 $ 129.02 $ 164.37 $ 342.52 $ 358.52
Russell 3000 100.00 100.44 116.20 154.30 172.71
Bloomberg Full Service 100.00 101.30 119.20 174.91 200.11
Peer Composite 100.00 114.68 147.75 216.41 281.40
Source: Capital IQ and Bloomberg as of December 31, 2014
Highlights of 2014 Compensation Actions
The table below summarizes key actions taken by our compensation committee in 2014. As described below, the compensation committee did not make significant structural changes to our executive compensation program for 2014.
 Action
Base Salary After assessing our peer compensation levels, the compensation committee chose not to increase the base salary levels of our named executive officers in 2014.
Annual Performance-Based Cash Incentive
The structure of our annual performance-based cash incentive program remained the same in 2014.
Mr. Carley's short-term incentive target was increased from 100% to 120% of salary for 2014 based on updated market information and his performance.
Based on the achievement of pre-set company EBITDA and guest count goals for 2014, our named executive officers received a payout of their annual performance-based cash incentive at approximately 114.9% of target (compared to 130.7% in 2013).
Long-Term Incentives (LTI)
The structure of our long-term incentive program opportunities for executives remained the same in 2014, with 40% of long-term incentives delivered in the form of stock options, 20% delivered in the form of restricted stock units, and 40% delivered in the form of long-term cash incentives.
Based on the achievement of pre-set company EBITDA and return on invested capital goals, the payout of our long-term cash incentives for the 2012-2014 performance period was 79.2% of target (compared to 109.3% for the 2011-2013 performance period).
For 2014, certain of our executive officers' long-term incentive targets as a percent of salary were increased based on updated market information and individual performance. Mr. Carley's target increased from 200% to 240%, Mr. Brown's from 112% to 115%, and Ms. Post's from 80% to 110%.
In order to better incentivize Mr. Carley, the compensation committee made certain modifications to the vesting of his stock option and restricted stock unit awards in the event of his death, disability, or retirement. The changes are designed to maintain incentives for Mr. Carley as he approaches retirement age and provide market competitive protections to him in the event of his death or disability.
Other 2014 Compensation Actions
The Company entered into a severance agreement with Eric Houseman, our former president and chief operating officer, as a result of the elimination of his position and his departure from the Company on August 1, 2014.
The Company entered into a consulting agreement with Todd Brighton, our former senior vice president and chief development officer, as a result of his resignation on July 1, 2014. Mr. Brighton continues to perform real estate development services for the Company pursuant to the terms of his consulting agreement.
The board adopted a formal policy prohibiting hedging and pledging of Company securities by executive officers and directors. All directors and executive officers are in compliance with this policy.
Executive Compensation Decision-making
The compensation committee determines target total direct compensation for named executive officers by establishing base salaries and setting long-term and annual incentive compensation targets. When appropriate, the committee also approves special awards and modest perquisites. When determining target total direct compensation, the committee considers the following:
Company performance and our pay for performance compensation program design.
Benchmarking data for our restaurant peer group at various levels between the 50th and 75th percentile for target total direct compensation (base salaries, short-term incentives, and long-term incentives) for the peer group, based on disclosure in peer proxies and other applicable survey data.
Individual performance and areas of responsibility relative to the market data.
Compensation relative to other executive officers in the Company.
Advice from the committee's independent compensation consultant.
The CEO's recommendations with respect to the compensation of the executives who report directly to him, including the other named executive officers.
Whether our compensation program encourages unnecessary or excessive risk taking.
Results of the Company's say-on-pay votes in prior years.
Pay for Performance Alignment
Our compensation program is designed to pay for performance and link incentives to current and long-term sustained achievement of Company strategic goals. Accordingly, a significant portion of our named executive officers' compensation, excluding base salary, is incentive based, and is comprised of performance-based short-term and long-term awards. Such compensation therefore varies in value and is at-risk of forfeiture or reduced payout if performance goals are not achieved for cash-based incentives, or loss of value if our performance does not drive increases in our stock price. Financial measures such as EBITDA (earnings before interest, taxes, depreciation, and amortization) and ROIC (return on invested capital) used for the annual bonus and cash incentive grants are linked to the Company's strategic business plans that are reviewed and approved by our board of directors. Minimum financial targets must be achieved for any payouts of cash to be made under both the annual bonus and long-term incentive grants. Restricted stock units and stock options vest ratably over four years, the value of which is dependent, in whole or in part, on an increase in the Company's stock price.
The compensation committee believes that the annual incentives (which are generally based on annual Company EBITDA or other financial targets) and the long-term incentives (the cash portions of which are currently based on three-year cumulative EBITDA and ROIC targets) place a large portion of the executive's pay at risk because such pay will fluctuate or vary in value based upon the level of performance achieved by the Company. Because incentive awards are performance-based, they are at risk of forfeiture or reduced payout if performance goals are not achieved. Moreover, long-term equity awards are at risk of forfeiture if the executive does not remain with the Company until the equity vests, and are at risk of reduced realized value based upon Company stock price at the date of exercise.
Risk Profile of 2014 Named Executive Officer Compensation. In 2014, "at-risk" pay (subject to forfeiture or partial or complete loss of value) made up 79% of total compensation for CEO Stephen Carley and 63% of total compensation for the other named executive officers as a group (including our former officers in the named executive officer group) and included short-term and long-term incentives. Short-term incentive pay, aligned with achievement of annual business results based on EBITDA, comprised 26% and 27% of our CEO's and other named executive officers' total compensation
opportunity, respectively. Long-term incentive ("LTI") awards that are designed to maximize retention and to link compensation to the Company's long-term stock price performance comprised 53% and 36% of our CEO's and other named executive officers' total compensation, respectively. LTI awards are based on achievement of longer-term business goals adopted as part of our multi-year strategy.
The charts below reflect the portion of the executives' 2014 compensation that is considered at risk, or subject to forfeiture or partial or complete loss of value.
Other Named Executive Officers
The chart above assumes that at-risk portions of pay at the beginning of 2014 included the 2014 annual cash bonus opportunities (annual short-term bonus incentive) and the three-year long-term incentive grant (40% cash, 40% restricted stock units, and 20% options). The charts above also assumes payout of long-term cash incentives at 100% target levels.
Restaurant Peer Group. Restaurant peer group companies are selected by the compensation committee upon recommendation of its compensation consultant, AON Hewitt, and are based on their similarity to us with respect to several criteria, including revenue, size, and scope. Specifically, peers include U.S. public companies within the restaurant industry that have similar revenue and market value.
The current peer group used for 2014 compensation benchmarking consists of the 15 restaurants identified in the chart below. The Company ranked in the 62nd percentile for its current peer group in sales and 24th percentile in market value based on Aon Hewitt compensation analysis conducted in 2013.
In connection with its review of our executive compensation program in 2014, AON Hewitt recommended changes to the Company's peer group for compensation benchmarking beginning in 2015. Specifically, AON Hewitt recommended an increase in the number of companies in the peer group to include additional companies that meet the comparability criteria and removal of companies
that no longer meet the criteria. Based on that recommendation, the compensation committee added eight new companies and removed two companies. The new peer group for 2015 compensation benchmarking is comprised of the 21 restaurant companies listed below. The Company ranked in the 53rd percentile for this new peer group in sales and 46th percentile in market value based on the AON Hewitt compensation analysis conducted in 2014.
Current Peer Group
(Used for 2014 Compensation Benchmarking)
New Peer Group
(To Be Used for 2015 Compensation Benchmarking)
Biglari Holdings, Inc. Biglari Holdings, Inc.
BJ's Restaurants, Inc. BJ's Restaurants, Inc.
Bob Evans Farms, Inc. Bob Evans Farms, Inc.
Buffalo Wild Wings, Inc. Brinker International, Inc.**
Carrols Restaurant Group, Inc. Buffalo Wild Wings, Inc.
CEC Entertainment, Inc.* Carrols Restaurant Group, Inc.
The Cheesecake Factory, Inc. The Cheesecake Factory, Inc.
Denny's Corporation Cracker Barrel Old Country Store, Inc.**
DineEquity, Inc. Denny's Corporation
Dominos Pizza, Inc. DineEquity, Inc.
Einstein Noah Restaurant Group, Inc. Domino's Pizza, Inc.
Frisch's Restaurants, Inc.* Einstein Noah Restaurant Group Inc.
Papa John's International, Inc. Fiesta Restaurant Group, Inc.**
Sonic Corp. Ignite Restaurant Group, Inc.**
Texas Roadhouse, Inc. Noodles & Company**
Papa John's International, Inc.
Ruby Tuesday, Inc.**
Ruth's Hospitality Group, Inc.**
Sonic Corp.
Texas Roadhouse, Inc.
The Wendy's Company**
Removed for 2015
Added for 2015
2014 Compensation. Annual total direct compensation for 2014, which is comprised of base salaries and annual bonus opportunity, together with long-term incentives, was targeted at approximately the 60th percentile of our peer group (the sum of median total cash and 65th percentile long-term incentives). Although total direct compensation is targeted above the median for our peer group, realization of that level of compensation occurs only upon achievement of both the short and long-term performance results.
Independent Compensation Consultant
The compensation committee has retained AON Hewitt as its independent compensation consultant. Aon Hewitt assists with the compensation committee's annual review of our executive compensation program, cash and equity compensation practices, ongoing development of our executive compensation philosophy, and acts as an advisor to the compensation committee on compensation matters as they arise. AON Hewitt also advises the compensation committee on compensation for the board of directors. The compensation committee evaluated AON Hewitt's independence as its compensation consultant by considering each of the independence factors adopted by NASDAQ and the SEC. Based on such evaluation, the compensation committee believes that no conflict of interest exists that would prevent AON Hewitt from independently representing the compensation committee.
The compensation committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking. The factors considered by the committee include:
the general design philosophy of our compensation policies and practices for employees whose behavior would be most affected by the incentives established by our compensation policies and practices, as such policies and practices relate to or affect risk taking by employees on our behalf, and the manner of their implementation;
our risk assessment and incentive considerations in structuring our compensation policies and practices or in awarding and paying compensation;
how our compensation policies and practices relate to the realization of risks resulting from the actions of employees in both the short term and the long term;
our policies regarding adjustments to our compensation programs and practices to address changes in our risk profile; and
material adjustments that we have made to our compensation policies and practices as a result of changes in our risk profile.
The compensation committee believes that it has mitigated unnecessary risk taking in both the design of the compensation plans and the controls placed upon them because:
payouts under our annual and long-term incentive compensation plans are capped;
the compensation committee has the ability to reduce payouts under our annual incentive compensation plans in its discretion;
executives are subject to robust stock ownership guidelines;
executives are subject to anti-hedging policies with respect to our common stock;
the performance goals under our incentive programs relate directly to the business plan approved by the board of directors; and
there is an appropriate balance between our annual operating achievements and longer-term value creation, with a particular emphasis on longer-term value creation for our executives.
The compensation committee completes this evaluation annually. Accordingly, based upon the foregoing, the Company believes that the risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Say on Pay Vote Results
At our 2014 annual meeting of stockholders, holders of approximately 99.5% of the votes cast on such proposal approved the advisory vote on the 2013 compensation of our named executive officers. The compensation committee did not make significant structural changes to our executive compensation program for 2014. The compensation committee believes the advisory stockholder vote indicates strong support for the Company's executive compensation program. The compensation committee will continue to consider the results of the advisory vote on executive compensation in future executive compensation policies and decisions.
Key Components of our Executive Compensation Program
The compensation committee sets base salaries for our executives to reflect the scope of each executive's responsibilities, experience, and performance. The compensation committee reviews base salaries annually, and adjusts them from time to time to account for relevant factors such as market changes, as documented by the compensation consultant. The compensation committee also considers the CEO's evaluation of each executive's performance and reviews his salary recommendations for our executives.
Incentive-Based Compensation
For our incentive-based compensation, the compensation committee utilizes a mix of performance metrics and time and tenure. Each type of metric serves a different purpose. The short-term (annual bonus) and the cash component of the long-term incentive awards are performance-based and require achievement of certain financial targets, measured over either one or three years. If the financial metrics are not achieved at a minimum threshold level at the end of the performance period, no payment is earned or made. The equity portion of the grants vests ratably over four years. The time-based vesting of the restricted stock units, a comparatively lesser portion of the total long-term incentive awards, is used primarily for retention purposes and to encourage stock ownership by executives, thereby aligning their interests with our stockholders. The stock options vest over time, but require improved stock price performance to realize value.
Annual Performance-Based Incentive (Cash Bonus). Annual performance-based cash bonuses are intended to reward achievement of short-term operating goals and financial performance that are incremental to long-term, sustained creation of stockholder value. Our annual bonuses are established with reference to the annual portion of our multi-year strategic plan and, although measured in one-year increments, are designed to tie each year's results into a long-term target. As the Company's business evolves and develops, the long-term targets may be revised with concurrent impact on each year's annual planning. Generally, the annual performance metrics are financial-based measures that the compensation committee believes are highly correlated to our strategic goals described above. The compensation committee continually evaluates the measures against which we gauge our performance and may incorporate additional or alternative metrics to incentivize executives to achieve appropriate performance targets and respond to industry changes or market forces.
Each of our executives is eligible to receive an annual cash bonus based on achievement of certain performance objectives, predominantly based on annual EBITDA. The EBITDA measure was selected because we believe it best captures our operating results without reflecting the impact of decisions related to our growth, non-operating factors, and other matters. The EBITDA goal is intended to be a "stretch" goal, or challenging target, and is meant to encourage superior performance. The 2007 Plan permits the compensation committee to adjust, in its discretion, EBITDA for non-cash, non-recurring, or unusual items. The compensation committee approves the annual bonus program based on achievement of a predetermined range of minimum threshold, target, and maximum-level EBITDA and approves payout of the bonuses, if any, following review of actual results. Bonuses are based on a percentage of the executive's salary and are set based on market and peer comparisons, and the corresponding dollar payout value varies up or down depending on the actual EBITDA performance level. Bonuses are not payable at all if the minimum threshold of EBITDA is not achieved. The compensation committee sets the EBITDA ranges each year based on performance expectations and other factors. The compensation committee may add or substitute performance measures in future plans. The compensation committee may also use various factors to exercise negative discretion when evaluating performance for purposes of awarding annual incentive compensation. Cash incentive awards are currently paid pursuant to the 2007 Plan. It is anticipated that future cash awards would be paid
pursuant to the proposed Cash Incentive Plan (see Proposal 3—Approval of the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan beginning on page 60).
In addition, the compensation committee may approve special bonuses on an individual or group basis in recognition of extraordinary achievements, or to address other special situations.
Long-Term Performance-Based Incentives. The compensation committee determines the long-term incentive grants for the executive officers, including the named executive officers, pursuant to market data and with respect to comparisons to peer restaurant compensation practices. The compensation committee believes that a mix of performance and time-based cash and equity incentives provides an element of performance risk for executives and encourages equity ownership, thereby aligning the interests of executive officers with our stockholders.
Long-term incentive grants consist of equity awards, typically in the form of restricted stock units and stock options, and a long-term cash incentive component. They are designed to focus management on our strategy of driving consistent, sustainable achievement of long-term goals, both incrementally and over long performance periods. The annual granting of multi-year performance compensation (including three-year performance targets) is designed to ensure that the execution of our strategic plan considers appropriate risks and returns and allows for initiatives that span several fiscal years.
Currently, the long-term incentive awards for executives consist of an equity component comprised of 40% stock options and 20% restricted stock units (both of which vest ratably over four years), and a 40% performance-based cash component. We use stock options to align the interests of our executive officers with stockholders because value is realized only if the stock price appreciates (stock price performance). We use restricted stock units to help retain our executives and further align their interests with our stockholders. The cash component is payable if cumulative EBITDA or ROIC targets are achieved over a three-year performance period. The cumulative EBITDA and ROIC long-term incentive cash metrics are independent of each other. The compensation committee selected a target earnings metric (cumulative EBITDA) and a return metric (ROIC) in the design of the long-term incentive cash design to achieve a balance between profitability and growth, and to effectively reward both. Both the EBITDA goal and the ROIC goal are intended to be "stretch" goals, or challenging targets, and are meant to encourage superior performance. The 2007 Plan permits the compensation committee to adjust, in its discretion, EBITDA or ROIC for non-cash, non-recurring, or unusual items. While there is some overlap with a metric in our annual performance-based cash bonuses and long-term incentive cash awards (EBITDA), the compensation committee believes this is appropriate because the annual performance-based cash bonus is focused on earnings in a particular year, whereas the three-year cumulative EBITDA used in the long-term incentive program is focused on progress over the three-year performance period and can be measured at any point in the performance period. The longer term nature of the long-term incentive cash program links performance to our multi-year strategic plan and growth objectives and encourages management's collaboration on strategic initiatives. Incentive awards of both cash and equity are currently paid pursuant to the 2007 Plan. It is anticipated that future cash awards would be paid pursuant to the proposed Cash Incentive Plan (see Proposal 3—Approval of the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan beginning on page 60).
Modest Perquisites
We offer relatively few perquisites to our executives, but we do provide certain benefits such as car allowances and meal allowances to our named executive officers and certain other employees. In addition, where appropriate, we offer usual and customary relocation expense reimbursements including related tax reimbursements.
Summary of 2014 Compensation Activity
During 2014, the compensation committee did not make any changes to named executive officer salaries. Named executive officer salaries for 2014 are set forth below. The compensation committee considers various factors when setting base salaries including peer compensation practices, Company performance, individual contributions, CEO recommendations for his direct reports, and other relevant matters.
Stephen E. Carley, Chief Executive Officer $ 750,000
Stuart B. Brown, Senior Vice President and Chief Financial Officer $ 357,000
Denny Marie Post, Executive Vice President and Chief Concept Officer $ 392,700
Michael L. Kaplan, Senior Vice President and Chief Legal Officer $ 335,000
Cathy Cooney, Senior Vice President and Chief People Officer $ 305,000
Eric C. Houseman, Former President and Chief Operating Officer $ 420,240
Todd A. Brighton, Former Chief Development Officer $ 340,920
Each of Mr. Carley, Mr. Brown, Ms. Post, and Mr. Kaplan has an employment agreement with the Company, the terms of which are discussed below under "Executive Employment Agreements."
2014 Annual Performance-Based Cash Incentives. For 2014, annual performance-based cash bonuses were contingent upon achievement of an annual Company EBITDA target to focus our efforts on continuing to improve performance and maximizing stockholder returns. In fiscal year 2014, we continued to realize significant movement toward these goals, reporting increased revenues and net income in fiscal 2014 over 2013 and 2012 and sustainable cost reductions. We view these achievements as progress toward establishing best in class operations, profitability, and brand value.
Target bonus opportunities under our annual performance-based cash incentive program are equal to a pre-established percentage of the employee's base salary. Bonuses are determined by comparing the Company's fiscal year EBITDA to a target level of EBITDA for the year established by our compensation committee. For 2014, the EBITDA target was $117.9 million, and preliminary bonus amounts based on achievement of EBITDA targets range from 85% to 115% of the executive's target bonus opportunity. For 2014 we achieved 100.2% of the EBITDA target based on our 2014 EBITDA of approximately $118.1 million, which resulted in a payout of 100.8%. For purposes of calculating our 2014 bonus, EBITDA, as defined in the Company's earnings releases filed with the SEC on Form 8-K, is adjusted for unusual or nonrecurring items including acquisitions, executive transition, changes to the
chief executive officer's retirement provisions, and impairments. Such adjustments were approved by the compensation committee.

EBITDA Target and Preliminary Bonus %
EBITDA Target Achieved Bonus Payout as a
% of Target
Below Minimum <85% 0%
Minimum 85% 30%
Target 100% 100%
 Actual  100.2%  100.8%
Maximum ³115% 170%
The 2014 annual performance-based cash bonus incentive also included a feature, if EBITDA of at least 100% of the target level was achieved, that allows for an increase in the amount up to 120% of the preliminary bonus amount based on achievement of guest traffic outcomes favorable to our casual dining peers as reported by Black Box Intelligence, a financial benchmarking report for the restaurant industry. Due to our achievement of above-target EBITDA performance goals in 2014, and above-target guest traffic increases, eligible employees, including our executive officers, earned a bonus payout of 114.9% of target, as reflected in the tables below.
Guest Count Modifier and Final Bonus as % of Target
Guest Count Increment
over Black Box Guest Count Modifier Payout
Threshold 0.58% 101%
 Actual  1.57%  114%
Maximum ³2.00% 120%
Final Bonus as % of Target Bonus Opportunity
× 114.0%
= 114.9%
(EBITDA %)
(Guest Count Modifier %)
The actual amounts of our 2014 annual performance-based cash incentives paid to our named executive officers in February 2015 for fiscal 2014 performance are as follows.
Performance-Based Bonus Amount
Officer(1)
Annualized
Bonus at
Target (%
of Actual
Salary)
$ Bonus at
Multiplied by
Achieved (%)
Actual Guest
Bonus (% of
S. Carley $ 750,000 120 % $ 900,000 x 100.8 % x 114.0 % = $ 1,034,218 137.9 %
S. Brown $ 357,000 70 % $ 249,900 x 100.8 % x 114.0 % = $ 287,168 80.4 %
D. Post $ 392,700 70 % $ 274,890 x 100.8 % x 114.0 % = $ 315,885 80.4 %
M. Kaplan $ 335,000 70 % $ 234,500 x 100.8 % x 114.0 % = $ 269,471 80.4 %
C. Cooney $ 305,000 70 % $ 213,500 x 100.8 % x 114.0 % = $ 245,339 80.4 %
Former named executive officers were not eligible to receive an annual performance-based cash bonus because they were terminated during the year and instead received a payment in lieu of such bonus. See "Employment Agreements, Separation Related Arrangements, and Change in Control Agreements" for a description of all payments made to former named executive officers.
2014 Long-Term Incentive ("LTI") Program. The 2014 LTI grants made to named and other executive officers followed the same program design implemented in 2011 and used in 2012 and 2013. For our executives, the program consists of an equity component comprised of 40% stock options and 20% restricted stock units (both of which vest ratably over four years), and a 40% long-term cash incentive component measured by company performance over three years. The LTI program grants are made under the 2007 Plan. It is intended that this program will continue annually in overlapping cycles.
2014 Incentive Grants. In February 2014, the Company made the following annual grants to our named executive officers in the form of LTI cash award, options, and restricted stock units under the 2007 Plan. As described above, an executive's total target incentive is comprised of 40% long-term performance-based cash, 40% stock options, and 20% restricted stock units.
Total Long
Non-Qualified
S. Carley 1,800,000 720,069 21,085 5,000
S. Brown 410,550 164,270 4,809 1,140
D. Post 431,970 172,800 5,060 1,200
M. Kaplan 268,000 107,253 3,139 744
C. Cooney 244,000 97,672 2,858 677
Former Named Executive Officer
E. Houseman 336,192 134,556 3,938 933
T. Brighton 340,920 136,398 3,993 947
The estimated fair value of each option granted is calculated using the Black-Scholes multiple option-pricing model. The fair value of the restricted stock units is based on the grant date market value of the common shares.
Long-Term Cash Portion. The long-term cash portion of the performance plan is focused on operational metrics with a three-year performance period. The awards cliff vest at the end of a three-year performance cycle. Performance is measured over the three years based on a range of minimum threshold, target, and maximum level. There are two independent metrics used that provide an appropriate balance between capital efficiency and operational results. The first metric is cumulative
EBITDA, which allows progress toward the EBITDA goal to be measured over three years. The second metric is three-year average ROIC, which recognizes that capital-related returns may take time to manifest. The goals are equally weighted and the payouts may be different depending on the achievement level of each metric.
The same LTI cash award metrics and methodology were implemented for years 2011 through 2014. It is currently intended that each subsequent annual plan will have similar three-year performance periods and vesting.
At the end of 2014, the Company completed a three-year performance cycle for the long-term cash incentive portion of the LTI plan. The performance period covered fiscal 2012 through fiscal 2014. The 2012 LTI cash awards represented 40% of the executive's total 2012 LTI award. Based on achievement of EBITDA and ROIC performance goals, our executive officers earned a LTI cash payout, as reflected in the summary compensation table and the tables below.
For the 2012-2014 LTI cash incentive, our target (100%) level EBITDA objective was approximately $338.7 million. The range of EBITDA objectives to achieve a LTI cash payout based on EBITDA was 90% of target EBITDA for the minimum threshold level, and 120% of target EBITDA for the maximum level (which corresponds to a 50% to 200% target payout range). Our EBITDA achievement for 2012-2014 was $321.8 million, which was 95.0% of the target EBITDA level, and generated a corresponding payout multiple of 75.0%. For purposes of calculating our 2012-2014 LTI cash payout, EBITDA, as set forth in the Company's earnings releases filed with the SEC on Form 8-K, is adjusted for unusual or non-recurring items including acquisitions, executive transition, changes to the chief executive officer's retirement provisions, the 2013 special discretionary bonus, the 2012 variance in the number of operating weeks, and impairments, and is calculated using cumulative EBITDA for the years 2012-2014. Such adjustments were approved by the compensation committee.
EBITDA Target and Preliminary Payout %
EBITDA Target Achieved Payout as a % of Target
 Actual  95%  75%
Our target (100%) level ROIC objective for the 2012-2014 performance period was approximately 10.37%. The range of ROIC objectives to achieve a LTI cash payout based on ROIC was 95.18% of target ROIC for the minimum threshold level, and 104.82% of target ROIC for the maximum level, with a corresponding multiple range that decreased or increased the payout of the executive's target LTI cash incentive. Our ROIC achievement for 2012-2014 was 10.29%, which was 99.2% of the target ROIC level, and generated a corresponding payout multiple of 83.4%. For purposes of calculating our 2012-2014 LTI cash payout, ROIC is calculated by dividing the income from operations plus interest income, each as reported in our annual report on Form 10-K filed with the SEC, and is adjusted for unusual or non-recurring items including acquisitions, executive transition, changes to the chief executive officer's retirement provisions, the 2013 special discretionary bonus, the 2012 variance in the
number of operating weeks, and impairments, for the years 2012-2014 by our average invested capital over the three years. Such adjustments were approved by the compensation committee.
ROIC Target and Preliminary Payout %
ROIC Target Achieved Payout as a % of Target
Below Minimum <95.18% 0%
Minimum 95.18% 20%
 Actual  99.2%  83.4%
Maximum ³104.82% 200%
The actual amounts of our LTI cash incentive paid to our named executive officers in February 2015 for fiscal 2012 through fiscal 2014 performance are as follows. Together, the overall performance of the EBITDA and ROIC metrics averaged a payout percentage of 79.2%.
EBITDA-Based LTI Payout
ROIC-Based LTI Payout
Total LTI
Award at
Portion of
(1/2 of
total) ($)
Payout as a %
of Target
LTI Cash
ROIC Portion
of LTI Award
at Target (1/2
of total) ($)
by Actual
ROIC
Payout as a
ROIC Based
Payout ($)
EBITDA-
Based LTI
Payout +
S.Carley 360,007 180,003 x 75 % = 135,003 180,003 x 83.4 % = 150,123 285,126
S.Brown 140,006 70,003 x 75 % = 52,502 70,003 x 83.4 % = 58,383 110,885
D.Post 114,021 57,010 x 75 % = 42,757 57,010 x 83.4 % = 47,547 90,304
M.Kaplan(2) — — — — — — — —
C.Cooney(2) — — — — — — — —
Former named executive officers were not eligible to receive a LTI cash payout for 2012-2014 because they were terminated during the year. Mr. Brighton instead received a payment in lieu of such LTI cash payout. See "Employment Agreements, Separation Related Arrangements, and Change in Control Agreements" for a description of all payments made to former named executive officers.
Mr. Kaplan and Ms. Cooney joined the company in 2013.
Stock Options. The stock options that were granted in 2014 vest ratably over four years on each anniversary date of the grant, which is designed to align incentives with longer-term achievement of objectives.
Restricted Stock Units. The restricted stock units that were granted in 2014 vest ratably over four years on each anniversary date of the grant.
D. Post Special Equity Award. In addition to the amounts reflected above, the compensation committee awarded a special equity award to Ms. Post in October 2014 based on her expanded role at the Company, including oversight of Canadian and franchise operations, and the recommendation of the committee's compensation consultant. Ms. Post received a restricted stock unit award with a value of $200,000, which is scheduled to vest over four years.
S. Carley Amendments to Restricted Stock Unit and Stock Option Award Agreements. In July of 2014, the compensation committee approved certain amendments to Mr. Carley's existing and future restricted stock unit and stock option award agreements. The amendments provide for the non-forfeitability of such awards upon Mr. Carley's death, disability, or retirement. Following such death, disability, or retirement, stock options would become exercisable in accordance with their existing, normal vesting schedules and would remain outstanding for the duration of their original terms. Affected restricted stock units would similarly be paid out in accordance with their original vesting schedules. Retirement, for purposes of these changes, means Mr. Carley's voluntary resignation when his age and whole years of service with the company equals or exceeds 67, provided that he is at least 58 years of age and has a minimum of 5 full years of service. The changes to Mr. Carley's restricted stock units and stock options are designed to maintain incentives for Mr. Carley as he approaches retirement age and to provide market competitive protections to Mr. Carley in the event of his death or disability. The compensation committee considered carefully these changes after soliciting input from the consultant, and concluded that the existing award structure (which would result in the forfeiture of awards upon retirement) may not provide a meaningful incentive to Mr. Carley as his career with the Company progresses, given that awards issued close in proximity to his expected retirement may be perceived as having little value based on their expected forfeiture. The committee believes that the amended structure, which provides for the non-forfeiture and the extended payout of such awards for several years following retirement, will appropriately incentivize and retain Mr. Carley (as the awards will become non-forfeitable upon his retirement), and will align Mr. Carley's interests with those of our stockholders, both during employment and thereafter, as his ability to garner value from these awards upon retirement will be directly linked not only to the Company's success during his continued tenure as chief executive officer, but also in subsequent years. The committee believes this alignment will encourage Mr. Carley's continued efforts toward the Company's long-term financial and business health, and to pursue appropriate succession planning activities if and when appropriate.
2015 Compensation Program
Our 2015 compensation program has substantially the same key components and elements as our 2014 program.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code limits the deductibility for tax purposes of compensation over $1 million paid by a publicly traded company to certain executive officers, unless such compensation qualifies as "performance-based compensation." The policy of the compensation committee is to establish and maintain a compensation program that maximizes the creation of long-term stockholder value. The compensation committee generally attempts to structure most compensation approaches to preserve deductibility. The compensation committee, however, reserves the right to adopt programs giving consideration to factors other than deductibility where the compensation committee believes stockholder interests are best served by retaining flexibility. In such cases, the compensation committee may consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its compensation objectives.
As discussed above, annual performance-based bonuses are generally paid under the 2007 Plan and thus are intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code. Accordingly, such amounts are intended to be deductible by the Company even if in excess of the $1 million statutory limit. Non-qualified stock options and long-term performance-based cash awards are also granted under the 2007 Plan and are also intended to qualify as "performance-based compensation" under Section 162(m). Such amounts are also intended to be deductible by the Company even if in excess of the $1 million statutory limit. Time-based vesting RSUs
do not satisfy the requirements of Section 162(m). Consequently, a portion of that compensation is expected to not be deductible in fiscal 2014 and in future years based on certain executives' aggregate non-performance-based compensation being in excess of statutory limits. Nonetheless, we believe time-based vesting RSUs are an appropriate component of our executive compensation program for the reasons discussed above in this CD&A.
Executive Compensation Policies and Guidelines
Executive Employment Agreements
Each of Mr. Carley, Mr. Brown, Ms. Post, and Mr. Kaplan has an employment agreement with the Company, described below under "Executive Employment Agreements." The employment agreements have indefinite terms, terminating on discontinuance of employment in accordance with the terms of the agreement. The agreements provide for severance payments upon termination and after a change of control of the Company. The compensation committee believes that the terms of these agreements are in line with market standards and are an important means to allow management to continue to focus on running the business of the Company in the event of a pending or actual change of control event or other event potentially affecting their employment. More detailed information concerning these severance payments appears below under the caption "Potential Payments upon Termination or Change in Control."
Executive Stock Ownership Guidelines
Stock ownership guidelines have been in effect for the Company's executive officers and directors since March 2009. (See "Director Stock Ownership Guidelines" beginning on page 20 for ownership guidelines for directors). The compensation committee believes that executive stock ownership requirements increase alignment of executive interests with those of stockholders with respect to long-term ownership risk. The guidelines require executive officers to hold during the term of the executive's employment a dollar value of Company's securities based on a multiple of base salary. In 2014, the ownership guideline values were increased to five times base salary for our CEO, Mr. Carley, and three times base salary for the other executive officers. Pursuant to the guidelines, the value of the executive's holdings is based on the cumulative cost basis of Company securities held, which is calculated using the price of the Company's common stock at the date of acquisition. All forms of equity owned of record or beneficially, including vested in-the-money options, are credited toward the guidelines. The executive officers have five years to achieve the guidelines from their effective date of employment. An executive officer may receive additional time to achieve his or her minimum requirement if the officer's requirement is increased, calculated based on the additional incremental amount. The compensation committee periodically reviews the guidelines and receives guidance and market data from its advisors.
The following table sets forth the ownership guidelines and the holdings of the named executive officers as of March 10, 2015, valued at the acquisition dates pursuant to our executive stock ownership guidelines(1):
Dollar Value of
S. Carley 5x salary $ 3,750,000 $ 7,124,481
S. Brown 3x salary $ 1,071,000 $ 1,438,067
D. Post 3x salary $ 1,178,100 $ 1,251,962
M. Kaplan 3x salary $ 1,005,000 $ 125,133
C. Cooney 3x salary $ 915,000 $ 234,322
Former executive officers, Messrs. Houseman and Brighton were not included in this table as they were not employed by the Company on March 10, 2015 and are no longer subject to the guidelines.
Compensation Clawback Policy
In March 2012, the Company's board of directors adopted a compensation clawback policy for its executive officers that provides for the recoupment by the Company of certain excess incentive compensation paid to the officers under certain circumstances. In the event of a restatement of the Company's previously issued financial statements as a result of either (i) material non-compliance with financial reporting requirements under the securities law or (ii) intentional misconduct by an executive, the Company may recover, to the extent permitted by law, certain incentive compensation received by the executive that was in excess of what would have been paid in the absence of the incorrect financial statements.
Pledging and Hedging Transactions in Company Securities
In 2014, the board adopted a formal policy prohibiting hedging and pledging of Company securities by executive officers and directors. The policy is set forth in the Company's Insider Trading Policy. All directors and executive officers are currently in compliance with the policy.
Compensation Committee Report
The compensation committee, which is comprised of independent directors, has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the Company's management. Based on this review and discussion, the compensation committee recommended to the Company's board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE
Lloyd L. Hill, Chair
Robert B. Aiken
Richard J. Howell
Glenn B. Kaufman
2014 Executive Compensation Tables
The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to the Company in all capacities by our principal executive officer, principal financial officer, and each of our three other most highly compensated executive officers who were serving as executive officers at the end of fiscal year 2014, as well as two former officers (collectively, the named executive officers), for fiscal years 2012 through 2014:
Stephen E. Carley 2014 750,000 383,357 (7) 794,753 (7) 1,319,344 20,219 3,267,673
Chief Executive Officer 2013 735,578 650,000 299,959 599,998 1,352,231 15,558 3,653,324
2012 740,769 179,995 351,425 794,104 15,765 2,082,058
Stuart B. Brown
Senior Vice President and 2013 350,135 280,000 79,975 159,999 479,603 11,207 1,360,919
Chief Financial Officer 2012 352,692 69,998 136,666 264,660 10,591 834,607
Executive Vice President and 2013 385,147 280,000 62,979 125,999 493,897 186,928 1,534,950
Chief Concept Officer 2012 387,962 56,984 111,281 291,126 137,825 985,178
Michael L. Kaplan(1)
Senior Vice President and 2013 70,865 22,000 19,962 76,614 23,773 213,214
Cathy Cooney(2)
Senior Vice President and 2013 133,731 34,000 48,757 97,579 133,068 97,278 544,413
Eric C. Houseman 2014 303,866 144,446 (7) 229,090 (7) 991,308 1,668,710
President and Chief 2013 412,159 169,000 71,982 144,002 596,773 11,360 1,405,276
Operating Officer 2012 415,170 59,998 117,140 356,050 11,458 959,816
Chief Development Officer 2012 336,806 45,992 89,801 252,739 13,208 738,546
Mr. Kaplan joined the Company in September 2013. The base salary reported for Mr. Kaplan is prorated for the period of time he provided services to us in fiscal 2013. Mr. Kaplan's annual base salary in 2013 was $335,000.
Ms. Cooney joined the Company in July 2013. The base salary reported for Ms. Cooney is prorated for the period of time she provided services to us in fiscal 2013. Ms. Cooney's annual base salary in 2013 was $305,000.
Amounts shown are not reduced to reflect the named executive officers' elections, if any, to defer receipt of salary into the Deferred Compensation Plan. Our 2012 fiscal year contained 53 operating weeks compared to 52 weeks for fiscal 2013.
Bonus amounts reported for 2013 represent a one-time special discretionary bonus in recognition of the Company's extraordinary performance during 2013.
Amounts under Stock Awards represent the aggregate grant date fair value of restricted stock units computed in accordance with the authoritative accounting guidance for accounting for stock compensation for fiscal years 2014, 2013, and 2012. See "Outstanding Equity Awards at 2014 Fiscal Year-End" below for a listing of restricted stock unit awards outstanding for each named executive officer as of December 28, 2014.
Amounts under Option Awards represent the aggregate grant date fair value of such awards computed in accordance with the authoritative accounting guidance for accounting for stock compensation for fiscal years 2014, 2013, and 2012. See Note 16 to our financial statements included in our annual report on Form 10-K for the fiscal years ended December 28, 2014, December 29, 2013, and December 30, 2012, for descriptions of the methodologies and assumptions we used to value option awards.
Includes additional GAAP compensation expense as a result of the amendments made to Mr. Carley's equity award agreements or as a result of post-termination vesting of equity awards of Messrs. Houseman and Brighton.
The amount shown for each named executive officer in the "Non-Equity Incentive Plan Compensation" column for 2012 is attributable to a bonus award under the 2007 Plan earned in fiscal year 2012, but paid in 2013; the amount shown for 2013 is attributable to a bonus award under the 2007 Plan earned in fiscal 2013, but paid in 2014 and the 2011 LTI cash award payout; and the amount shown for 2014 is attributable to (i) a bonus award under the 2007 Plan earned in fiscal 2014, but paid in 2015 and (ii) the 2012 LTI cash award payout. Amounts in the 2014 "Non-Equity Incentive Plan Compensation" column above consist of the following payments to the named executive officers. Amounts shown are not reduced to reflect the named executive officers' elections, if any, to defer receipt of bonus award or LTI cash award payouts into the Deferred Compensation Plan.
Performance-
Based Cash
Incentive Payout
Stephen E. Carley 1,034,218 285,126 1,319,344
Stuart B. Brown 287,168 110,885 398,053
Denny Marie Post 315,885 90,304 406,189
Michael L. Kaplan(1) 269,471 — 269,471
Cathy Cooney(1) 245,339 — 245,339
Amounts in the "All Other Compensation" column consist of the following payments we paid to or on behalf of the named executive officers.
($)(a)
($)(c)
Insurance/
($)(d)
Match under
of Service
Expenses &
Stephen E. Carley 2014 15,000 1,620 — 599 3,000 — 20,219
Stuart B. Brown 2014 10,200 1,620 476 433 3,000 — 15,730
Denny Marie Post 2014 10,200 1,620 718 448 3,000 1,537 (e) 17,523
Michael L. Kaplan 2014 10,052 1,620 1,208 424 3,000 316,070 (e) 332,374
Cathy Cooney 2014 10,200 1,620 199 412 3,000 10,204 (e) 25,635
Eric C. Houseman 2014 6,669 1,059 384 258 982,938 (f) — 991,308
Todd A. Brighton 2014 5,884 935 312 208 476,110 (g) — 483,449
All executives and certain other employees receive monthly car allowances.
All executives and certain other employees receive monthly phone allowances.
Various forms of meal discounts are provided to executives and all other employees. The amounts reported in this column are valued at the incremental cost to our Company and are based on approximately 60% of the cost of the meal, which represents the average cost of goods and labor.
Long-term disability insurance and life insurance are provided to executives and certain other employees and paid by the Company. The value represents the premiums paid by the Company on behalf of the named executive officer.
Represents moving expenses reimbursable by the Company pursuant to the executive's employment agreement or offer letter. The amount includes $58,193 of tax reimbursements related to moving expenses.
Amounts payable to Mr. Houseman under his separation agreement. See "Employment Agreements, Separation Related Arrangements, and Change in Control Agreements—Separation Related Agreements—Eric Houseman Severance Agreement" beginning on page 53.
Amounts payable to Mr. Brighton under his consultant agreement. See "Employment Agreements, Separation Related Arrangements, and Change in Control Agreements—Separation Related Agreements—Todd Brighton Consulting Agreement" beginning on page 53.
The following table provides additional information about equity awards and non-equity incentive plan awards granted to our named executive officers during fiscal 2014:
Estimated Future Payouts
Under Non-Equity Incentive
of Option
Stephen E. Carley 2/19/2014 (1) 270,000 900,000 1,836,000 21,085 (4) 71.99 719,984
2/19/2014 (2) 180,017 720,069 1,368,131 5,000 (5) 359,950
2/19/2014 (2) 41,068 164,270 312,114 1,140 (5) 82,068
10/1/2014 3,675 (6) 199,957
2/19/2014 (2) 26,813 107,253 203,781 744 (5) 53,561
2/19/2014 (2) 24,418 97,672 185,576 677 (5) 48,737
Eric C. Houseman 2/19/2014 (1) 100,858 336,192 685,832 3,938 (4) 71.99 134,475
Amounts under "Estimated Future Payouts Under Non-Equity Incentive Plan Awards" reflect potential bonus payouts granted to the named executive officers under the 2007 Plan that depended on satisfaction of Company EBITDA targets in fiscal 2014. The factors considered by the compensation committee in determining bonus amounts are discussed above in "Compensation Discussion and Analysis—Incentive-Based Compensation—Annual Performance-Based Incentive (Cash Bonus)." We also utilized a minimum threshold target, so that in the event actual EBITDA exceeded the minimum threshold but was less than the target, the amount of bonus to which the executive was entitled would have been adjusted on a pro rata basis between the minimum threshold and the target amount set forth above.
The amounts in this row under "Estimated Future Payouts Under Non-Equity Incentive Plan Awards" reflect potential payouts under a long-term cash performance award granted to the named executive officers under the 2007 Plan. The awards will cliff vest at the end of the three-year performance cycle. Performance will be measured over the three years based on a range of minimum threshold, target, and maximum level. There will be two independent metrics used: (A) the three-year average ROIC and (B) the three-year cumulative EBITDA. The goals are equally weighted and the payouts may be different depending on the achievement level of each metric. For further information on the terms of the long-term cash performance awards, see the discussion under "Compensation Discussion and Analysis—Summary of 2014 Compensation Activity—Incentive-Based Compensation—2014 Long-Term Incentive Program."
See Note 16 to our financial statements included in our annual report on Form 10-K for the fiscal year ended December 28, 2014 for descriptions of the methodologies and assumptions we use to value option awards pursuant to the authoritative guidance for accounting for stock compensation.
Options were granted pursuant to the 2007 Plan. The options are scheduled to vest 25% on each of the first, second, third, and fourth anniversaries of the date of grant subject to continuing employment or service with the Company. Options are exercisable for ten years from the date of issuance, as defined in the 2007 Plan, and certain other conditions.
Comprises time-based restricted stock units granted pursuant to the 2007 Plan. Each restricted stock unit represents the contingent right to receive, upon vesting of the unit, one share of common stock. The units are scheduled to vest 25% on each of the first, second, third, and fourth anniversaries of the date of grant subject to continuing employment or service with the Company.
Ms. Post received a special equity award in October 2014 based on her expanded role at the Company. The award is comprised of time-based restricted stock units granted pursuant to the 2007 Plan. The units are scheduled to vest 25% on each of the first, second, third, and fourth anniversaries of the date of grant subject to continuing employment or service with the Company.
Outstanding Equity Awards at 2014 Fiscal Year-End
Shares That
Have Not
of Shares That
Have Not Vested
($)(18)
Stephen E. Carley 54,787 — 19.64 9/13/17 (1) 1,225 (9) 93,614
19,320 2,760 34.71 6/24/21 (2) 2,538 (10) 193,954
12,032 12,032 35.46 2/21/22 (3) 5,347 (14) 408,618
— 21,085 71.99 2/19/24 (7)
4,678 4,680 35.46 2/21/22 (3) 986 (9) 75,350
2,692 8,079 42.07 2/26/23 (4) 1,425 (14) 108,898
— 4,809 71.99 2/19/24 (7) 1,140 (16) 87,119
3,810 3,810 35.46 2/21/22 (3) 803 (10) 61,365
2,120 6,362 42.07 2/26/23 (4) 1,122 (14) 85,743
3,675 (17) 280,843
744 (16) 56,856
— 2,858 71.99 2/19/24 (7) 677 (16) 51,736
Eric C. Houseman 1,174 718 34.71 6/24/21 (2) 518 (9) 39,586
— 3,938 71.99 219/24 (7) 933 (16) 71,300
These options vest 25% on the first anniversary date of issuance with the balance vesting pro rata on a monthly basis over the following 36-month period and in full on September 13, 2014.
These options vest 25% on the first anniversary date of issuance with the balance vesting pro rata on a monthly basis over the following 36-month period and in full on June 24, 2015.
These options vest 25% on each anniversary date of issuance and in full on February 21, 2016.
These options vest 25% on the first anniversary date of issuance with the balance vesting pro rata on a monthly basis over the following 36-month period and in full on August 2, 2015.
These options vest 25% on the first anniversary date of issuance with the balance vesting pro rata on a monthly basis over the following 36-month period and in full on February 19, 2018.
These options vest 25% on the first anniversary date of issuance with the balance vesting pro rata on a monthly basis over the following 36-month period and in full on July 9, 2017.
Awards of restricted stock units granted on June 24, 2011 that vest 25% on each anniversary date of issuance and in full on June 24, 2015.
Awards of restricted stock units granted on February 21, 2012 that vest 25% on each anniversary date of issuance and in full on February 21, 2016.
Awards of restricted stock units granted on September 12, 2011 that vest 25% on each anniversary date of issuance and in full on September 12, 2015.
Awards of restricted stock units granted on July 9, 2013 that vest 25% on each anniversary date of issuance and in full on July 9, 2017.
Awards of restricted stock units granted on August 2, 2011 that vest 25% on each anniversary date of issuance and in full on August 2, 2015.
Awards of restricted stock units granted on October 1, 2013 that vest 25% on each anniversary date of issuance and in full on October 1, 2017.
Based on the closing price of our common stock on December 26, 2014 of $76.42 per share.
Options Exercises and Stock Vested
The following table contains information with respect to the named executive officers concerning option exercises and vesting of restricted stock units during fiscal year 2014:
on Exercise
Realized on
on Vesting
Stephen E. Carley 5,000 258,175 9,278 592,431
Stuart B. Brown 2,500 104,409 8,695 487,376
Denny Marie Post — — 1,254 89,600
Michael L. Kaplan — — 68 3,700
Cathy Cooney — — 205 14,559
Eric C. Houseman 6,016 281,530 2,694 203,079
Todd A. Brighton — — 1,671 125,924
Based on the amount by which the market price of our common stock on the date of exercise exceeded the exercise price of the option award.
Based on the closing price of our common stock on the date of vesting.
The following table shows information about the amount of contributions, earnings, and balances for each named executive officer under the Company's Deferred Compensation Plan as of December 28, 2014.
in Last
($)(1)(2)
(Loss) in Last
Withdrawals /
Balance at
Last Fiscal
Stephen E. Carley 2,116,728 3,000 0 — 2,119,728
Stuart B. Brown 124,571 3,000 7,589 — 135,160
Denny Marie Post 153,086 3,000 12,476 — 239,954
Michael L. Kaplan 13,400 3,000 756 — 17,156
Cathy Cooney 251,843 3,000 421 — 255,264
Eric C. Houseman 21,968 — 1,795 59,500 23,095
Todd A. Brighton — — — — —
All Executive Contributions in Last Fiscal Year and Registrant Contribution in Last Fiscal Year were reported as compensation to the relevant named executive officers in our Summary Compensation Table. No portion of the Aggregate Earnings (Loss) in Last Fiscal Year was reported as compensation to the relevant named executive officers in our Summary Compensation Table.
The Company provided a 25% match of the participants' contributions up to 4% of their compensation (or, a maximum of 1% of their compensation, the same matching formula used in our 401(k) plan). The company match for named executive officers and other members of the executive team was capped at $3,000 for the 2014 plan year.
All Aggregate Balance at Last Fiscal Year-End amounts reported in this column were reported as compensation to the relevant named executive officers in our Summary Compensation Table for previous years except for any earnings or losses on deferred amounts.
Company employees who are generally considered "highly compensated" pursuant to Internal Revenue Code Section 414(q) are not permitted to participate in the Company's 401(k) program. To permit these employees to save for retirement, the Company has established the Red Robin Gourmet Burgers, Inc. Deferred Compensation Plan. The plan permits executives and other eligible employees to defer portions of their compensation. In 2014 the Company paid all administrative expenses of the plan. Under this plan, eligible employees may elect to defer up to 75% of their base salary and up to 100% of incentive compensation and commissions each plan year. The Company may make matching contributions in an amount determined by the compensation committee. For the 2014 plan year, the compensation committee authorized matching contributions equal to 25% of the first 4% of compensation that is deferred by the participant.
The Company invests the deferred compensation plan assets through a rabbi trust. Assets in the rabbi trust are invested in certain mutual funds that cover an investment spectrum ranging from equities to money market instruments and are available to satisfy the claims of the Company's creditors in the event of bankruptcy or insolvency.
When participants elect to defer amounts into the plan, they also select when the amounts ultimately will be distributed. Participants can elect to have deferrals for a particular year paid in a
future year if the participant is still employed at that time. Such in-service distributions are made in the form of a lump sum or, if the participant's total account balance at the time of the in-service distribution is at least $25,000, the participant can elect to receive payment in up to 5 annual installments. The participant can elect up to 15 annual installments. Otherwise, payment of a participant's account is made the later of (i) in the February following the participant's termination of employment or (ii) six months from participant's termination of employment in the form of a lump sum or in 5, 10, or 15 annual installments if the participant so elected at the time of deferral and if the participant's total account balance is at least $50,000.
A participant can elect to change a prior distribution election to further delay distribution provided that such new election must be provided at least 12 months before the date the previously scheduled distribution would have occurred and provided that the new distribution date is at least 5 years from the originally scheduled distribution date. A participant may obtain a withdrawal prior to the date otherwise scheduled or elected by the participant if the participant incurs an "unforeseeable emergency" (generally including illness, casualty losses, etc.).
With respect to deferrals after 2004, the plan is intended to comply with the requirements of section 409A of the Internal Revenue Code, which was enacted as part of the American Jobs Creation Act of 2004. The plan is considered to be a "non-qualified" plan for federal tax purposes, meaning that the arrangements are deemed to be unfunded and an employee's interest in the plan is no greater than that of an unsecured general creditor of the Company.
We maintain three equity based compensation plans—the 2004 Performance Incentive Plan (the "2004 Plan"), the Second Amended and Restated 2007 Performance Incentive Plan (the "2007 Plan"), and the Employee Stock Purchase Plan (the "ESPP"). Our stockholders have approved each of these plans.
The following table sets forth for our equity compensation plans in the aggregate, the number of shares of our common stock subject to outstanding options and rights under these plans, the weighted average exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 28, 2014:
to be issued
upon exercise of
2004 Plan 12,100
2007 Plan 449,586
Equity compensation plans not approved by security holders N/A N/A
Total 461,686 $ 38.83 786,867 (1)
Of the aggregate number of shares that remained available for future issuance as of December 28, 2014, 59,430 shares were available for issuance under the ESPP and 727,437 shares were available for issuance under the 2007 Plan. Any shares subject to options granted under the 2004 Plan that are not exercised before they expire or are terminated will expire and not be available for additional award grants. No new awards may be granted under the 2004 Plan.
Employment Agreements, Separation Related Arrangements, and Change in Control Agreements
Stephen E. Carley Employment Agreement. Our employment agreement with Mr. Carley, our chief executive officer, dated August 11, 2010, has an indefinite term. The agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Carley's employment upon the occurrence of a change in control event, he will receive, among other things, (a) payment of an amount equal to two times his annual base salary; (b) his pro rata share of the annual bonus, calculated and paid at the end of the plan cycle, that would otherwise have been earned and be payable had he continued to be employed by the Company; (c) payment of an amount equal to two times the highest annual bonus amount earned by Mr. Carley for performance in the last three calendar years prior to the change in control event for which bonuses have been paid or are payable; and (d) coverage under the Company's medical, dental, and prescription insurance plans for the 18-month period following the date of termination.
If Mr. Carley's employment is terminated either by the Company without cause, or by Mr. Carley for good reason, as those terms are defined in the agreement, Mr. Carley will receive, among other things, (a) payment of an amount equal to two times his annual base salary; (b) his pro rata share of the annual bonus, calculated and paid at the end of the plan cycle, that would otherwise have been earned and be payable had he continued to be employed by the Company; and (c) coverage under the Company's medical, dental, and prescription insurance plans for the 18-month period following the date of termination.
Generally, under Mr. Carley's employment agreement and subject to limited exceptions set forth in the agreement, a change in control will be deemed to occur if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Carley is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. Carley for good reason within the two-year period following such change in control event.
Good reason is defined in Mr. Carley's agreement as a material reduction in his annual base salary or target annual bonus opportunity, relocation of the Company's headquarters to a location more than 50 miles from the existing location, a material breach of any provision contained in the employment agreement or any material provision of any equity award agreement, the removal of Mr. Carley from the board of directors, requiring that Mr. Carley report to any other person other than the board, or a material diminution in Mr. Carley's title, duties, or responsibilities; provided that the Company has 30 days to cure any such condition following Mr. Carley's notice thereof.
Stuart B. Brown Employment Agreement. Our employment agreement with Mr. Brown, our chief financial officer, dated August 10, 2011 has an indefinite term. The agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Brown's employment upon the occurrence of a change in control event, Mr. Brown will receive, among other things, (a) continued payment of his annual base salary for a period of twelve months following the effective date of termination; (b) payment of an amount equal to the annual bonus amount earned by Mr. Brown for performance in the last completed fiscal year prior to the change in control event for which bonuses have been paid or are payable; and (c) coverage under the Company's
medical, dental, and prescription insurance plans for the 12-month period following the date of termination.
Upon termination of Mr. Brown's employment either by the Company without cause, or by Mr. Brown for good reason (as each term is defined in the employment agreement), Mr. Brown will receive, among other things, (a) continued payment of his annual base salary for a period of twelve months following the effective date of termination; (b) his pro rata share of the annual bonus that would otherwise have been earned and be payable had he continued to be employed by the Company; and (c) coverage under the Company's medical, dental, and prescription insurance plans for the 12-month period following the date of termination.
The definition of change in control event is substantially the same as that contained in Mr. Carley's employment agreement, and payment of any amount following a change in control event requires that Mr. Brown's employment be terminated by the Company without cause or by Mr. Brown for good reason within the two-year period following such change in control event. Good reason is defined in Mr. Brown's agreement as a reduction in his compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, any willful breach by the Company of a material provision contained in the employment agreement, or a significant reduction in the then-effect responsibilities of the Company's chief financial officer; provided that the Company has 30 days to cure any such condition following receipt of notice from Mr. Brown of such reason.
Denny Marie Post Employment Agreement. Our employment agreement with Ms. Post, our chief concept officer, dated August 1, 2011 has an indefinite term. The agreement provides that she is entitled to receive certain benefits upon termination of her employment. If the Company terminates Ms. Post's employment upon the occurrence of a change in control event, Ms. Post will receive, among other things, continued payment of her annual base salary for a period of twelve months following the effective date of termination.
Upon termination of Ms. Post's employment either by the Company without cause, or by Ms. Post for good reason (as each term is defined in the employment agreement), Ms. Post will receive, among other things, continued payment of her annual base salary for a period of twelve months following the effective date of termination.
The definition of change in control event is substantially the same as that contained in Mr. Carley's employment agreement, and payment of any amount following a change in control event requires that Ms. Post's employment be terminated by the Company without cause or by Ms. Post for good reason within the two-year period following such change in control event. Good reason is defined in her agreement as a reduction in her compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, any willful breach by the Company of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the Company's chief marketing officer; provided that the Company has 30 days to cure any such condition following receipt of notice from Ms. Post of such reason.
Michael L. Kaplan Employment Agreement. Our employment agreement with Mr. Kaplan, our chief legal officer, dated September 30, 2013, has an indefinite term. The employment agreement provides that he is entitled to receive certain benefits upon termination of his employment. If the Company terminates Mr. Kaplan's employment without cause, or Mr. Kaplan terminates his employment for good reason, in both cases either before or following the occurrence of a change in control event, Mr. Kaplan will receive, among other things, (a) payment of an amount equal to one time his annual base salary; and (b) payment of an amount equal to the target amount of Mr. Kaplan's annual bonus for the fiscal year in which the effective date of termination occurs.
Generally, under Mr. Kaplan's employment agreement and subject to limited exceptions set forth in the employment agreement, a change in control will be deemed to occur if any person acquires more
than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company's stockholders approve a complete liquidation or dissolution of the Company. However, upon the occurrence of any such event, Mr. Kaplan is not entitled to any such payment unless his employment with the Company is terminated by the Company without cause or by Mr. Kaplan for good reason within the two-year period following such change in control event.
Good reason is defined in Mr. Kaplan's employment agreement as a reduction in his compensation other than as permitted under the employment agreement, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a willful breach of a material provision contained in the employment agreement, or a significant reduction in the then-effective responsibilities of the chief legal officer; provided that the Company has 30 days to cure any such condition following Mr. Kaplan's notice thereof (which notice is required to be provided within 90 days of the initial existence of the condition).
Separation Related Agreements
Eric Houseman Severance Agreement. Mr. Houseman's position of chief operating officer of the Company was eliminated effective August 1, 2014. In connection with Mr. Houseman's departure, the Company, Red Robin International, Inc., and Mr. Houseman entered into a severance agreement, dated as of July 25, 2014. Pursuant to the terms of the severance agreement, the Company agreed to pay to Mr. Houseman (i) $174,561.23, less applicable taxes, which is an amount equal to the salary the Company would have paid Mr. Houseman if he had remained employed with the Company through December 31, 2014; (ii) a single lump-sum severance payment to Mr. Houseman of $420,240.00, less applicable taxes; and (iii) a lump sum payment in an amount equivalent to the annual bonus that would otherwise have been earned and be payable had he continued to be employed by the Company for the full fiscal year (the bonus targets set forth in the Company's 2014 bonus plan shall govern Mr. Houseman's eligibility for the payment and the amount of the payment, if any is owed). The amounts set forth in (i) and (ii) above are in consideration of Mr. Houseman's obligations under the severance agreement and his provision of transition and other services to the Company through March 1, 2015. In addition, all unvested stock options, restricted stock units, and other equity-based awards held by Mr. Houseman will continue to vest through March 1, 2015. The severance agreement also contains non-solicitation and confidentiality provisions, as well as a general release by Mr. Houseman of claims against the Company, and other customary terms.
Todd Brighton Consulting Agreement. Todd A. Brighton departed from his position as chief development officer of the Company effective as of July 1, 2014. In connection with Mr. Brighton's departure, Red Robin International, Inc., and Mr. Brighton (through his consulting firm) entered into a consulting agreement, dated as of August 8, 2014, under which Mr. Brighton agreed to provide real estate development services to the Company effective as of July 2, 2014 through June 30, 2015. Pursuant to the terms of the consulting agreement, the Company agreed to pay to Mr. Brighton (i) $29,260 per month for the first six-month period of the consulting term; (ii) $14,630 per month during the remaining term of the agreement; (iii) reimbursement for his actual reasonable travel expenses incurred in providing the services under the consulting agreement; and, (iv) an amount equivalent to the annual bonus that would otherwise have been earned and be payable had he continued to be employed by the Company for the full fiscal year (the bonus targets set by the Company's 2014 bonus program shall govern Mr. Brighton's eligibility for the payment and the amount of the payment, if any is owed). In February 2015, Mr. Brighton also received an amount equivalent to
the long term incentive cash that would otherwise have been earned and be payable for the 2012-2014 performance period had he continued to be employed by the Company for the full performance period (the LTI cash targets set by the Company's long term incentive plan shall govern Mr. Brighton's eligibility for the payment and the amount of the payment, if any). In addition, all unvested stock options, restricted stock units, and other equity-based awards held by Mr. Brighton will continue to vest in accordance with existing plan documents during the period that he provides consulting services. The consulting agreement also contains non-competition and non-solicitation provisions, as well as other customary terms, and is subject to delivery of a general release by Mr. Brighton that is not revoked within the periods set forth under applicable law.
Change in Control Agreements
The Company has change in control agreements with each current named executive officer except for Messrs. Carley, Brown, and Kaplan, and Ms. Post, who have change in control provisions in their employment agreements, as discussed above in "Executive Employment Agreements." The change in control agreements provide that if the executive resigns for good reason or is terminated by the Company other than for cause or disability or other than as a result of the executive's death during the 18-month period following a change in control, the executive is entitled to receive the following payments and benefits:
continued payment, for a period consisting of twelve months following the effective date of termination, of his or her base salary as in effect immediately prior to the date of termination;
one times the annual bonus amount earned for his or her performance in the last completed calendar year prior to the change in control; and
payment or reimbursement of the cost of continuing coverage for the executive and his or her spouse under the Company's then existing medical, dental, and prescription insurance plans for the twelve-month period following the effective date of termination or the remainder of the existing employment period.
None of our change in control provisions provide for a gross up payment for Internal Revenue Code Section 280G/4999 purposes. The board has determined not to enter into any agreements with a named executive officer that contain such a gross up provision. The definition of change in control is substantially similar to the definition contained in the 2007 Plan, as discussed below. Good reason is defined as a reduction in the executive's compensation, relocation of the Company's headquarters to a location more than 20 miles from the existing location, a significant reduction in the then-effective responsibilities of the executive without the executive's prior written consent (for this purpose, if the Company ceases to be a publicly traded corporation, the executive will not be deemed to have suffered such a reduction in the nature and scope of his or her responsibilities solely because of the change in the nature and scope thereof resulting from the Company no longer being publicly traded), or failure by the Company to obtain the assumption of the obligations contained in the change in control agreement by any successor to the Company. The agreements also contain standard confidentiality and non-solicitation provisions.
Set forth below is a description of the change in control provisions contained within our Second Amended and Restated 2007 Performance Incentive Plan under which there are unvested awards currently outstanding. All outstanding awards under our 2004 Plan are vested.
Second Amended and Restated 2007 Performance Incentive Plan. Generally, and subject to limited exceptions set forth in the 2007 Plan, if any person acquires more than 50% of the outstanding common stock or combined voting power of the Company, if there are certain changes in a majority of
our board of directors, if stockholders prior to a transaction do not continue to own more than 50% of the voting securities of the Company (or a successor or a parent) following a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of our subsidiaries, a sale or other disposition of all or substantially all of the Company's assets or the acquisition of assets or stock of another entity by us or any of our subsidiaries, or if the Company is dissolved or liquidated, then awards then-outstanding under the 2007 Plan may become fully vested or paid, as applicable, and may terminate or be terminated upon consummation of such a change in control event. However, unless the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control event, no award will vest unless such officer's employment with the Company is terminated by the Company without cause within the two-year period following such change in control event. The administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2007 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a change in control event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.
There are currently no amounts payable to or accrued for payment to any named executive officer under the change in control provisions contained in the plans.
Potential Payments upon Termination or Change in Control
The following table presents the amount of compensation payable to each of our named executive officers as if the triggering termination event had occurred on the last day of our most recently completed fiscal year, December 28, 2014:
Benefit(1)
w/o Cause or
with Good
Reason($)
Cause($)
Death($)
Disability($)
Change in
Control($)(2)
Stephen E. Carley Salary 1,500,000 (3) 1,500,000 (3)
Bonus 1,034,218 (8) 1,034,218 (8) 1,034,218 (8) 3,102,654 (9)
Health Benefits 14,691 (12) 14,691 (12)
Acceleration of LTI Cash Award 640,051 (14) 640,051 (14) 1,320,111 (17)
Acceleration of Restricted Stock Units 1,078,286 (15)
Acceleration of Options 6,498,296 (16)
Bonus 287,168 (8) 287,168 (8) 287,168 (8) 287,168 (8) 613,751 (10)
Health Benefits 8,886 (13) 8,886 (13)
Acceleration of LTI Cash Award 161,442 (14) 161,442 (14) 324,299 (17)
Acceleration of Restricted Stock Units 318,824 (15)
Bonus —
Health Benefits —