Meeting, we must be so receivedreceive such notice no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made.
To be in proper form, a stockholder’s notice must set forth:
| (i) | as to each person whom the stockholder proposes to nominate for election as a director at such meeting, |
the name, age, business address and residence of the person;
the principal occupation or employment of the person;
the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the person; and
any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act; and
| (ii) | as to the stockholder giving the notice, |
the name and record address of such stockholder;
the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by such stockholder;
a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder;
a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in the notice; and
any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act.
Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director, if elected.
The mailing envelope should contain a clear notation indicating that the enclosed letter is a “Stockholder Nomination for Director.” In accordance with our bylaws, stockholder nominations which do not comply with the submission deadline are not required to be recognized by the presiding officer at the annual meeting. Timely nominations will be brought before the meeting but will not be part of the slate nominated by our Board of Directors and will not be included in our proxy materials.
Compensation Committee Interlocks and Insider Participation
During fiscal 2017, Mr. Selati (as Chairman), Ms. Cooper, Mr. Hudson and Ms. Baglivo served on our Compensation Committee. No member of our Compensation Committee had a relationship with us that requires disclosure under Item 404 ofRegulation S-K.
During fiscal 2017, none of our executive officers served as a member of the Board of Directors or Compensation Committee, or other Committee serving an equivalent function, of any entity that has one or more executive officers who served as members of our Board of Directors or our Compensation Committee. None of the members of our Compensation Committee is an officer or employee of the Company, nor have they ever been an officer or employee of the Company.
Director Compensation
Summary ofNon-Employee Director Annual Compensation
Under ourNon-Employee Director Compensation Program, each of ournon-employee directors receives, as applicable:
An annual fee of $55,000 for service on our Board and an annual fee of $15,000 for service as our Board’s lead outside director;
An annual fee of $7,500 for service on the Audit Committee and an annual fee of $15,000 for service as the Chairman of the Audit Committee;
An annual fee of $3,500 for service on our Governance Committee and an annual fee of $7,500 for service as the Chairman of our Governance Committee;
An annual fee of $4,500 for service on our Compensation Committee and an annual fee of $10,000 for service as the Chairman of our Compensation Committee; and
An annual restricted stock grant equal to that number of shares with a value on the date of grant of 1.75 times the annual base cash retainer for service on our Board, with such grants vesting annually in equal installments over a three-year period, subject to the recipient’s continued service as a director.
Directors who are also employees receive no compensation for serving as directors.Non-employee directors are not eligible to participate in the deferred compensation plan. Information regarding Mr. O’Donnell’s compensation is described below under “Executive Compensation.”
Non-Employee Director Compensation for Fiscal Year 2017
The following table summarizes the compensation paid to thenon-employee directors of the Company in 2017:
| | | | | | | | | | | | | | | | |
Name | | Fees Earned
or Paid in
Cash | | | Stock Awards(1) | | | All Other
Compensation(2) | | | Total | |
Giannella Alvarez | | $ | 62,500 | | | $ | 96,244 | | | $ | 2,866 | | | $ | 161,610 | |
Mary Baglivo | | $ | 31,500 | | | $ | 96,246 | | | $ | 808 | | | $ | 128,554 | |
Carla R. Cooper | | $ | 63,000 | | | $ | 96,244 | | | $ | 3,828 | | | $ | 163,072 | |
Bannus B. Hudson | | $ | 70,500 | | | $ | 96,244 | | | $ | 3,828 | | | $ | 170,572 | |
Robert S. Merritt | | $ | 77,500 | | | $ | 96,244 | | | $ | 3,828 | | | $ | 177,572 | |
Robin P. Selati | | $ | 91,750 | | | $ | 96,244 | | | $ | 3,828 | | | $ | 191,822 | |
Alan Vituli (3) | | $ | 33,000 | | | $ | 0 | | | $ | 991 | | | $ | 33,991 | |
(1) | The amounts in this column include the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, except that in accordance with SEC rules, the amounts do not reflect an estimate for forfeitures related to service-based vesting conditions. |
(2) | All other compensation includes dividends earned on unvested shares of restricted stock. |
(3) | Mr. Vituli retired from the board of directors following the Annual Meeting in 2017. |
Additional Information With Respect to Director Equity Awards
The following table summarizes the outstanding equity awards held by our directors other than Michael P. O’Donnell as of the end of fiscal 2017:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards(1) | |
Name | | Number of Securities
Underlying
Unexercised Options
Exercisable (#) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#) | | | Option
Exercise
Price ($) | | | Option
Expiration
Date | | | Number of
Shares of
Stock that
have not
Vested (#) | | | Market Value
of Shares of
Stock that
have not
Vested ($) | |
Giannella Alvarez | | | — | | | | — | | | | — | | | | — | | | | 8,788 | | | $ | 190,260 | |
Mary Baglivo | | | — | | | | — | | | | — | | | | — | | | | 4,487 | | | $ | 97,144 | |
Carla R. Cooper | | | — | | | | — | | | | — | | | | — | | | | 10,507 | | | $ | 227,477 | |
Bannus B. Hudson | | | — | | | | — | | | | — | | | | — | | | | 10,507 | | | $ | 227,477 | |
Robert S. Merritt | | | — | | | | — | | | | — | | | | — | | | | 10,507 | | | $ | 227,477 | |
Robin P. Selati | | | — | | | | — | | | | — | | | | — | | | | 10,507 | | | $ | 227,477 | |
(1) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price of the last business day in the fiscal year ending on December 31, 2017 of $21.65. These shares of restricted stock vest annually in equal installments over a three-year period beginning on the date of grant. |
Non-Employee Director Reimbursement Practice
We reimburse all directors for reasonableout-of-pocket expenses that they incur in connection with their service as directors.
Stock Ownership Guidelines forNon-Employee Directors; Anti-Hedging Policy
In July 2012, based on the recommendation of our Compensation Committee’s independent compensation consultant, Willis Towers Watson, our Compensation Committee approved stock ownership guidelines for ournon-employee directors, based on the belief that stock ownership guidelines further align the interests of ournon-employee directors with those of our stockholders. Pursuant to ournon-employee director stock ownership guidelines, eachnon-employee director is generally expected to accumulate and hold shares of our common stock equal in value to two times his or her base annual retainer for service on our Board. For purposes of ournon-employee director stock ownership guidelines, a director’s “annual retainer” excludes any retainer for serving as a member or as a chair of any Board committees and any meeting fees. Shares subject to stock options and unvested or unearned performance shares will not count toward the minimum ownership requirement. Restricted stock and restricted stock units (whether or not vested) will count toward the minimum ownership requirement.Non-employee directors have three years to achieve their targeted level. Allnon-employee directors satisfied our stock ownership guidelines as of the end of fiscal 2017.
Pursuant to our insider trading policy, our directors may not engage in any hedging or monetization transactions involving our securities.
EXECUTIVE OFFICERS
Certain information regarding our executive officers is provided below:
| | | | |
Name
| | Age | | Position
|
Michael P. O’Donnell
| | 62 | | Chairman of the Board and Chief Executive Officer |
Arne G. Haak
| | 50 | | Executive Vice President and Chief Financial Officer |
Cheryl J. Henry
| | 44 | | President and Chief Operating Officer of Ruth’s Hospitality Group, Inc. |
Susan L. Mirdamadi
| | 55 | | Senior Vice President and Chief Services Officer |
Kevin W. Toomy
| | 64 | | Former President and Chief Operating Officer of Ruth’s Chris Steak House |
For information with respect to Michael P. O’Donnell, please see the information about the members of our Board of Directors on the preceding pages.
Mr. Haakhas served as Executive Vice President and Chief Financial Officer since August 2011. From 1999 through 2011, Mr. Haak held a number of leadership positions with AirTran Airways (“AirTran”) (NYSE: AAI), which is now a wholly owned subsidiary of Southwest Airlines Co. (NYSE: LUV). From 2008 to 2011, Mr. Haak served as AirTran’s Senior Vice President of Finance and Chief Financial Officer. From 2005 to 2008, Mr. Haak served as AirTran’s Vice President of Finance and Treasurer. Mr. Haak has also held various positions with U.S. Airways, Inc. (NYSE: LCC) in pricing and revenue management.
Ms. Henry has served as President and Chief Operating Officer, Ruth’s Hospitality Group, Inc. since July 2016. Prior to that, Ms. Henry was Senior Vice President and Chief Branding Officer from August 2011 to July 2016. From June 2007 to August 2011, she served in various roles with the Company, including as Chief Business Development Officer. Prior to joining the Company, she was the Chief of Staff for the Mayor of Orlando. Ms. Henry has served on the Board of Trustees of the Culinary Institute of America since December 2017 and on the Board of Governors of the Center for Creative Leadership since June 2017.
Ms. Mirdamadi has served as our Senior Vice President, Chief Services Officer since June 2017. She joined Ruth’s Hospitality Group in June 2012 as Chief Information Officer. Prior to that she held various Operations and IT leadership positions at Denny’s Corporation (NASDAQ: DENN) from 2000 until 2012, including Vice President, Operations Services and Chief Information Officer.
Mr. Toomy served as President and Chief Operating Officer of Ruth’s Chris Steak House from March 2010 until September 2017 and remains employed with the Company in anon-executive officer capacity. Mr. Toomy served as the Company’s Senior Vice President and Chief Operating Officer of Ruth’s Chris Steak House from October 2008 until March 2010 and Vice President of Special Projects from September 2008 to October 2008. Before that, from August 2007 to September 2008, he served as an independent restaurant consultant. From October 2002 to August 2007, he served as Owner and President of Goldcoast Seafood Grill in South Florida. He started his career serving as a General Manager for Steak & Ale Corporation, and shortly thereafter, joined two former Steak & Ale executives to grow the now nationwide Houston’s restaurant brand. Mr. Toomy has also been a joint venture partner for the Roy’s and Outback Steakhouse brands.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis is designed to provide stockholders with an understanding of our compensation philosophy and objectives as well as the analysis that we performed in setting executive compensation. This discussion addresses the compensation program in place for fiscal year 2017 for our named executive officers, including our Chief Executive Officer, Chief Financial Officer and our other three named executive officers. For 2017, our named executive officers were:
Michael P. O’Donnell, our Chief Executive Officer;
Arne G. Haak, our Executive Vice President and Chief Financial Officer;
Cheryl J. Henry, our President & Chief Operating Officer of Ruth’s Hospitality Group, Inc.;
Susan L. Mirdamadi, our Senior Vice President and Chief Services Officer; and
Kevin W. Toomy, our Former President & Chief Operating Officer of Ruth’s Chris Steak House.
Executive Summary
Ruth’s Business and Strategy.
Ruth’s develops and operates fine dining restaurants under the trade name Ruth’s Chris Steak House. As of December 31, 2017, there were 155 Ruth’s Chris Steak House restaurants, making it one of the largest upscale steakhouse companies in the world. The Ruth’s Chris brand reflects its53-year commitment to the core values instilled by its founder, Ruth Fertel, of caring for guests by delivering the highest quality food, beverages and genuine hospitality in a warm and inviting atmosphere.
The restaurant industry in which the Company competes is a mature segment, and the Company has a long operating history in upscale fine dining. The restaurant business is highly cyclical and results can be affected by consumer spending, commodity prices and real estate costs. The Company’s approach is to maintain a strategy focused on multi-year, long-term results.
The Company’s strategy is to deliver a total return to stockholders by maintaining a healthy core business, growing with a disciplined investment approach and returning excess capital to stockholders. The Company strives to maintain a healthy core business by growing sales through traffic, managing operating margins and leveraging infrastructure. The Company is committed to disciplined growth in markets with attractive sales attributes and solid financial returns. The Company believes that its franchisee program is a point of competitive differentiation and looks to grow its franchisee-owned restaurant locations as well. The Company also will consider acquiring franchisee-owned restaurants at terms that it believes are beneficial to both the Company and the franchisee. The Company returns excess capital to stockholders through share repurchases and dividends.
2017 Performance Highlights.
Our fiscal year end 2017 financial results reflect market conditions as well as factors specific to Ruth’s. There were many positive aspects to our performance that demonstrate the strength and consistency of our business, even though we did not achieve all of our objectives in 2017. Our results were affected by a significant increase in the cost of beef, deal-related expenses associated with the acquisition of our Hawaiian franchise restaurants, the impairment of assets at one restaurant location and a reduction in the value of the Company’s deferred tax assets. Despite these headwinds, we still achieved positive sales and revenue growth during a year when many other restaurant companies experienced declining sales.
Total revenues up 7.5% to $414.8 million, compared to $385.9 million in 2016.
Comparable restaurant sales growth of 1%, marking our eighth consecutive year of comparable restaurant sales growth.
Total operating income down 1.9% to $46.7 million, compared to $47.6 million in 2016, reflecting a $27.3 million increase in restaurant sales, which was offset by increased food and beverage costs, increased restaurant operating expenses, marketing and advertising, general and administrative costs, depreciation and amortization expenses,pre-opening costs, and a loss on impairment of one restaurant location.
Net income down 1.3% to $30.1 million, compared to $30.5 million in 2016.
GAAP diluted earnings per share up 2.1% to $0.97, compared to $0.95 in 2016.
Annual dividend up 28.6% to $0.36 per share, compared to $0.28 per share for 2016.
Opened four new restaurants in 2017 and secured two new restaurant openings for 2018.
Completed the acquisition of six restaurants in Hawaii from longtime franchise partner, Desert Island Restaurants.
Completed six restaurant remodels in 2017 designed to enhance the guest experience and expand our operating capabilities.
Returned capital to stockholders through share repurchases of $23.9 million and dividends of $11.4 million.
Key Executive Compensation Practices.
Key executive compensation practices are summarized below. We believe these practices promote alignment with the interests of our stockholders, and are consistent with market best practices.
What We Do
| | | | | | |
 | | Beginning in 2012, grant annual restricted stock award based on equal parts performance (considering prior year actual performance) and retention/tenure. | | | | Review and consider stockholder feedback in structuring executive compensation. |
| | | |
| | Retain an independent compensation consultant to advise the Compensation Committee. | | | | Prudently exercise discretion to be responsive to the cyclical nature of our business and advance our goal of creating value for our stockholders. |
| | | |
| | Apply multi-year vesting requirements to all equity awards to facilitate retention and ensure performance alignment, generally these are2-6 years post-grant. | | | | Generally set our total compensation target opportunities at the median level for our market. |
| | | |
| | Prohibit hedging. | | | | Maintain stock ownership guidelines of 2x salary for all NEOs, other than CEO, whose requirement is 3x salary. Ensure guidelines are achieved. |
What We Don’t Do
| | | | | | |
 | | No automatic, annual increase in executive salaries. | | | | No option repricing without stockholders approval. |
| | | |
| | No exchange of underwater options for cash. | | | | Nogross-ups. |
Snapshot of Compensation Elements.
The overall philosophy of our compensation programs is to create value for our stockholders by using all elements of executive compensation to reinforce a results-oriented management culture focusing on our level of earnings and performance as compared to our annual operating plan and industry competitors, the achievement of longer-term strategic goals and objectives and specific individual performance. Accordingly, our executive compensation program has been designed to achieve the following objectives:
focus executive officers on both annual and long-term business results with the goal of enhancing stockholder value;
align the interests of our executives and stockholders; and
provide executive compensation packages that attract, retain and motivate individuals of the highest qualifications, experience and ability.
The components of our 2017 compensation program included:
| | | | | | |
Short-Term Compensation
| | Long-Term
Compensation
| | Total Indirect Compensation
|
Base Salary | | Performance-Based Cash Bonuses | | Long-Term Incentive Awards | | Other Compensation and Benefits |
| | | |
Fixed cash component | | Cash bonus based on personal and company performance (subject to meeting minimum adjusted EBITDA level)
Metrics: personal goals and adjusted EBITDA
| | Annual restricted stock awards and long-term retention based restricted stock awards
Metrics: tenure/retention requirements, adjusted EBITDA and adjusted EPS
| | Modest perquisites and employee benefits generally available to all team members including automobile allowances, medical benefit plans, life and accidental death and dismemberment insurance, long-term disability plans, 401(k) matching,non-qualified deferred compensation plan (employee contributions only), and additional benefits payable upon a change in control |
Total direct compensation (cash compensation and equity compensation) mix for fiscal year 2017 was allocated as follows for our CEO and our other named executive officers:
Incentive Compensation Metrics.
To align compensation with our business strategy of creating value for our stockholders, we historically have used adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization, adjusted for store closures, a rent dispute and the impact of unbudgetedmid-year executive compensation changes) and adjusted EPS (earnings per diluted share, excluding the impact of store closures, a rent dispute,non-recurring tax items and the impact of unbudgetedmid-year executive compensation changes) as the metrics for our long-term incentive awards and adjusted EBITDA for our performance-based annual cash bonuses. We believe that adjusted EBITDA tends to provide a true measure of profitability by aligning incentives with stockholder value and that adjusted EPS tends to represent sustained value for stockholders. Some of the key drivers that affect adjusted EBITDA and adjusted EPS are as follows:
| | |
Adjusted EBITDA
| | Adjusted EPS
|
• Revenues
• Restaurant Sales
• Franchise Income
• Other
• Operating costs and expenses
| | • Revenues
• Restaurant Sales
• Franchise Income
• Other
• Operating costs and expenses
• Interest, tax, depreciation and amortization expense
|
Provided that the minimum adjusted EBITDA and adjusted EPS levels are achieved, then we also evaluate individual contributions and accomplishments for determining incentive compensation. This may include (depending on the executive) same store sales, entrée count, traffic, development of additional operating units, addition of operating weeks, increase in check average, completion of acquisitions or transactions, settlement of litigation, risk management, brand protection initiatives and management of third-party vendor costs.
Compensation Objectives and Program Structure
The Compensation Committee of the Board of Directors oversees and directs our executive compensation philosophy, policies, plans and programs. Our Compensation Committee is responsible for determining the compensation elements and amounts paid to named executive officers.
Generally, the types of compensation and benefits provided to our named executive officers are similar to those provided to executive officers of other national restaurant companies. The overall philosophy is to create value for our stockholders by using all elements of executive compensation to reinforce a results-oriented management culture focusing on our level of earnings and performance as compared to our annual operating plan and industry competitors, the achievement of longer-term strategic goals and objectives and specific individual performance. Accordingly, our executive compensation program has been designed to achieve the following objectives:
reinforce a results-oriented management culture with total executive compensation that varies according to performance;
focus executive officers on both annual and long-term business results with the goal of enhancing stockholder value;
align the interests of our executives and stockholders; and
provide executive compensation packages that attract, retain and motivate individuals of the highest qualifications, experience and ability.
Our Compensation Committee sets the pay range and specific components of the total compensation package for each of our named executive officers. In establishing the compensation for the named executive officers, the Compensation Committee consults with their independent compensation consultant and also considers the recommendation of the Chief Executive Officer, with the exception of his own compensation, which is determined solely by the Compensation Committee with advice from its independent consultant. Any salary increase or other adjustment is approved by our Compensation Committee.
Our Compensation Committee considers Company performance, both operational and financial, to determine compensation. In connection with its compensation review, our Compensation Committee has historically engaged Willis Towers Watson to review and evaluate our compensation objectives and program structure relative to the marketplace. In fiscal 2015, the company engaged Willis Towers Watson to update the compensation review that had last been performed in 2012. For purposes of this review, Willis Towers Watson relied on both its own and other compensation databases, as well as its experience with restaurant sector and general industry companies with annual revenues similar to that of the Company, and research from the proxy statements of companies considered peers of the Company. Willis Towers Watson also developed marketplace base salary, target annual incentive opportunity, target total annual compensation, actual total annual compensation, long-term incentive award level, target total direct compensation, and actual total direct compensation rates at the 25th, 50th, and 75th percentiles, which were used as a reference to assist the Committee in designing and maintaining the Company’s compensation programs. Willis Towers Watson reviewed all methods of compensation and compared the Company’s levels and method of compensation to a Company-approved peer group.
In March 2018, the Compensation Committee engaged Willis Towers Watson to update the Company’s peer group given changes to the organization and the fact that certain of the historical peer companies were (or will be) no longer publicly traded. The Compensation Committee considers the peer group data when benchmarking executive compensation but also takes into consideration that the Company is an industry leader in fine dining. Although the Company’s revenues and market capitalization are in line with many peers, our margins, return on invested capital and sales growth differentiate us from most of our peers. The Compensation Committee exercises its independent judgement to account for differences between the Company and the peer group in terms of ownership structure, dining industry segment, size and complexity of operations, sourcing pool for executive talent and other differentiators.
The changes to the peer group for 2018 included removing seven organizations: Bravo Brio Restaurant Group, Inc., Buffalo Wild Wings, Inc., Cosi, Inc., Dunkin’ Brands Group, Inc., Famous Dave’s of America, Inc., Kona Grill, Inc. and Ruby Tuesday, Inc. In their place, and reflecting the marketplace for talent, the Compensation Committee added six organizations: Bloomin’ Brands, Inc., Bojangles’, Inc., Cracker Barrel Old Country Store, Inc., El Pollo Loco Holdings, Inc., Shake Shack Inc., and Zoe’s Kitchen, Inc. The updated peer group now includes:
| | | | |
• BJ’s Restaurants, Inc.
| | • Cracker Barrel Old Country Store, Inc.
| | • Fiesta Restaurant Group, Inc.
|
| | |
• Bloomin’ Brands, Inc.
| | • Dave & Buster’s Entertainment, Inc.
| | • Red Robin Gourmet Burgers Inc.
|
| | |
• Bojangles’, Inc.
| | • Del Frisco’s Restaurant Group, Inc.
| | • Shake Shack Inc.
|
| | | | |
• Brinker International, Inc.
| | • Denny’s Corporation
| | • Sonic Corp.
|
| | |
• Cheesecake Factory Incorporated
| | • El Pollo Loco Holdings, Inc.
| | • Texas Roadhouse Inc.
|
| | | | • Zoe’s Kitchen, Inc.
|
Willis Towers Watson continues to serve as an independent compensation consultant to our Compensation Committee. Our Compensation Committee has assessed the independence of Willis Towers Watson and has concluded that no conflict of interest has existed during Willis Towers Watson’s engagement that would prevent Willis Towers Watson from serving as an independent compensation consultant to our Compensation Committee. Our Compensation Committee considers the following factors in determining that its compensation consultant is independent: SEC rules regarding compensation consultant independence, including the amount of fees paid by us as a percentage of the consulting firm’s total revenue, conflict of interest policies of the consulting firm and business or personal relationships between the consulting firm and the members of our Compensation Committee or our executive officers.
Our Board of Directors and our Compensation Committee value the opinions of our stockholders and are committed to ongoing engagement with our stockholders on executive compensation practices. At the 2017 annual meeting, our stockholders approved the Company’s holding an advisory vote on executive compensation every year. At the 2017 annual meetings of stockholders, approximately 94% of the votes cast on the stockholder advisory vote on executive compensation were voted in favor of our executive compensation. Our Compensation Committee has considered strong stockholder support among the factors evaluated in approving compensation decisions with respect to 2017 and in maintaining the core structure of our executive compensation program. Proposal No. 2 of this proxy statement asks our stockholders to approve, on an advisory basis, the compensation of our named executive officers.
2017 Compensation Considerations
In approving compensation decisions with respect to 2017, our Compensation Committee considered a variety of factors, including the Company’s operational and financial performance. In this regard, highlights from fiscal 2017 include:
our total operating income decreased by 1.9% to $46.7 million, compared to $47.6 million in 2016;
our net income decreased by 1.3% to $30.1 million, compared to $30.5 million in 2016;
our GAAP diluted earnings per share increased 2.1% to $0.97, compared to $0.95 in 2016;
our annual dividend increased 28.6% to $0.36 per share, compared to $0.28 per share for 2016;
four new Company-owned Ruth’s Chris Steak House restaurants and two new franchisee-owned restaurants opened during 2017; and
we returned $35.3 million of capital to stockholders through share repurchases of $23.9 million and dividends of $11.4 million.
In addition, our stockholders returns have substantially outperformed the S&P 500, the S&P Small Cap 600 Index and the Dow Jones U.S. Restaurants & Bars Index over the lastone-, three-, and five-year periods, as shown in the performance graph on page 20 of the Company’s Annual Report on Form10-K, filed on March 16, 2018.
Elements of Compensation
Consistent with our compensation objectives described above, our executive compensation program is generally designed to be similar to the programs that are offered at nationwide restaurant companies comparable to us. We attempt to set our target total compensation opportunities generally consistent with the median level because of the desire to attract and retaintop-level executives in the market in which we operate and compete for talent and because we believe that compensation should only exceed the market median when performance exceeds our targets. We believe that this benchmarking process is an important part of our Compensation Committee’s decision-making process; however, we do deviate from pure benchmarking information, where appropriate on an individual basis, where appropriate.
The total compensation program for the named executive officers includes base salary, performance-based cash incentive compensation under our bonus plan, long-term equity incentive compensation benefits and modest perquisites. It is our Compensation Committee’s practice to target each of these elements to deliver compensation to each executive and all executives as a group within themid-level range (or median) of compensation for persons having similar responsibilities at other comparable nationwide restaurant companies.
Our Compensation Committee is focused on providing a total compensation package that is performance-based, and utilizes short and long-term incentives. We allocate a substantial portion of the total annual compensation paid to the named executive officers to variable compensation, including bonus opportunities and equity incentive awards. We believe that equity incentive awards are an important part of the compensation package because they incent the management team to think of the business from a long-term perspective similar to that of an owner.
A significant portion of the compensation paid to executive officers is designed to reward them based on our financial performance compared to financial objectives, the growth of the Company, and increased stockholder value, as reflected in increases in the Company’s share price. Our Annual Bonus Plan is designed to reward executive officers with cash awards for the achievement of annual objectives tied to the financial performance of the Company and their individual performance. In fiscal 2017, our performance goals for the Bonus Plan were based on adjusted EBITDA targets and performance versus the prior year’s adjusted EBITDA; however, we may consider using other performance goals in the future. Our 2017 targets were higher than 2016 actual results and 2016 targets. Our performance-based long-term incentive awards of restricted stock for prior year performance were based on adjusted EBITDA and adjusted EPS. We believe that adjusted EBITDA tends to provide a true measure of profitability by aligning incentives with stockholder value. We believe that adjusted EPS tends to represent sustained value for stockholders. The equity component of executive officers’ compensation, in the form of restricted stock, is designed to reward stock price improvement over the grant-date stock price, which aligns their interests with our stockholders and reinforces our results-oriented management culture for both annual and long-term business results.
The corporate and individual targets under the Bonus Plan are intended to be challenging, yet achievable for our executive officers. The targets are meant to require substantial efforts by executive officers and their teams toward achieving our strategic goals, but at the same time they are intended to be within reach if such significant efforts are made. For example, reaching target adjusted EBITDA performance only results in a payout of 75% of the target award opportunity. Actual performance must exceed target adjusted EBITDA performance measures for our executive officers to receive 100% of the target award opportunity.
Consistent with the executive compensation principles described above, Mr. O’Donnell’s salary and short- and long-term incentive compensation for fiscal 2017 was as follows:
Base salary of $675,000, which represented no increase since 2015;
2017 Target bonus opportunity under the Bonus Plan remained at 100% of base salary; actual 2017 award under the Bonus Plan was $433,621 (approximately 64.2% of target award); and
2017 annual long-term incentives were granted in restricted stock awards and long-term retention based restricted stock awards with a grant date fair value of $1,535,119.
Mr. O’Donnell’s 2017 total direct compensation mix is similar to that for our other named executive officers.
Base Salary
Base salary is established based on the experience, skills, knowledge and responsibilities required of the executive officers in their roles. When establishing the base salaries of the executive officers, a number of factors are considered, including the individual’s duties and responsibilities, the individual’s experience, the ability to replace the individual, the base salary at the individual’s prior employment, market data on similar positions with competitive companies and information derived from our directors’ experience at other companies. We seek to provide base salaries that are competitive with the marketplace and allow us to attract and retain executive talent.
The Compensation Committee completed a review of the base salaries of the executive officers with its independent compensation consultant, Willis Towers Watson during fiscal 2015. As a result of this review, the base salaries of the executive officers were increased. This was the first increase in the base salaries of the named executive officers since 2012 other than for promotions. The Compensation Committee did not increase base salaries for the named executive officers in 2017, other than Ms. Mirdamadi who received an increase from $265,000 to $300,000 in connection with her promotion to Senior Vice President and Chief Services Officer.
Bonuses
Our performance-based cash incentive awards focus on closely aligning rewards with results. The philosophy of our performance-based annual cash incentive awards is simple: a basic reward for reaching minimum expectations and an upside for reaching the Company’s goals.
Under the Bonus Plan, Mr. O’Donnell, Mr. Haak, Ms. Henry, Ms. Mirdamadi, and Mr. Toomy were eligible to receive cash bonuses based on personal and Company performance over the course of the 2017 fiscal year. The purpose of the Bonus Plan is to encourage a consistent high standard of excellence for all team members in the home office, including the named executive officers. Bonus awards under the Bonus Plan are determined by our Compensation Committee, subject to approval by our Board, and are based on (i) the financial performance of the Company during the applicable fiscal period as measured against the prior year’s adjusted EBITDA and our Board’s previously approved plan with targeted EBITDA adjusted for changes in accounting policies,non-recurring extraordinary transactions, ormid-year changes in executive compensation and (ii) individual performance.
Individual performance is measured against goals developed prior to the period in question. The goals typically address whether the individual complied with budget objectives and managed to achieve department-specific objectives oriented toward facilitating the Company’s achieving its adjusted EBITDA goal. These goals differ by person and include, among others, same store sales, entrée count, development of additional operating or franchise units, addition of operating weeks, increase in check average, completion of transactions, settlement of litigation, risk management, brand protection initiatives and management of third-party vendor costs.
Our goals for the Bonus Plan are based on adjusted EBITDA as it tends to provide a true measure of profitability by aligning incentives with stockholder value. Bonuses are only payable under the Bonus Plan if adjusted EBITDA during the applicable fiscal period exceeds the prior year’s adjusted EBITDA. If the adjusted EBITDA target is achieved, 75% of target bonus potential is awarded. Once the adjusted EBITDA target is achieved, 50% of the adjusted EBITDA increase over the target is added to the bonus pool until the maximum funding of the bonus pool is achieved (resulting in the payment of 200% of target bonus potential). Practically speaking, our adjusted EBITDA performance must exceed target amounts by some measure before our executive officers will receive 100% of the target Bonus Plan amount. If the adjusted EBITDA target is not achieved, but adjusted EBITDA exceeds adjusted EBITDA for the prior year, as in 2017, a percentage of the bonus potential is awarded equal to 75% times the amount adjusted EBITDA exceeds adjusted EBITDA for the prior year, divided by the difference between the adjusted EBITDA target for the current year and adjusted EBITDA for the prior year. Where adjusted EBITDA equals or exceeds the adjusted EBITDA target, the aggregate Bonus Plan pool can be illustrated as follows:
75% x (Base Salary x Target Base Salary %) + 50% * (Adjusted EBITDA – Target Adjusted EBITDA)
The percentage of base salary for each cash bonus is established based on the individual’s level of responsibility. During 2017, the target and maximum cash bonuses were as follows:
| | | | | | | | |
Name | | Target Base Salary % | | | Maximum Base Salary % | |
Michael P. O’Donnell | | | 100 | % | | | 200 | % |
Arne G. Haak | | | 75 | % | | | 150 | % |
Cheryl J. Henry | | | 80 | % | | | 160 | % |
Susan L. Mirdamadi | | | 60 | % | | | 120 | % |
Kevin W. Toomy | | | 100 | % | | | 200 | % |
These percentages are used to calculate the annual bonus amounts and are prorated at a percentage based on the number of weeks worked by the individual in the fiscal year. The actual cash bonuses payable to our executive officers may be less than the calculated cash bonus, depending on the operational performance, the individual’s performance and certain other factors that may be considered by our Board and our Compensation Committee. There are no minimum cash bonuses established by the Bonus Plan. As a result of Ms. Mirdamadi’s promotion, the percentage used to calculate the annual bonus amounts for Ms. Mirdamadi was increased to 60% from 50% in order to remain competitive with the market for her new role.
For fiscal 2017, actual adjusted EBITDA was approximately $66,431,000, which exceeded the prior year’s actual adjusted EBITDA of $61,658,000 but fell short of the 2017 adjusted EBITDA target (which would have resulted in a 75% payout) of $67,231,000. In order to achieve 100% payout, it would have been necessary to achieve adjusted EBITDA of $68,914,000. In order to achieve the maximum payout under the Bonus Plan formula described above, it would have been necessary to achieve adjusted EBITDA of $75,644,000. For a further illustration of how adjusted EBITDA relates to target EBITDA, see the second table under “Long-Term Incentive Awards” below. Cash bonuses were paid under the Bonus Plan for fiscal 2017 in the following amounts, which equal approximately 64.2% of each officer’s respective target bonus amount. No adjustments were made for individual performance, although individual performance was considered.
| | | | | | | | |
Name | | Cash Bonus Amount | | | % of Base Salary | |
Michael P. O’Donnell | | $ | 433,621 | | | | 64 | % |
Arne G. Haak | | $ | 180,675 | | | | 48 | % |
Cheryl J. Henry | | $ | 210,708 | | | | 51 | % |
Susan L. Mirdamadi | | $ | 115,632 | | | | 39 | % |
Kevin W. Toomy | | $ | 215,204 | | | | 64 | % |
Long-Term Incentive Awards
The Company’s equity programs are designed to encourage creation of long-term value for our stockholders, employee retention and stock ownership. The programs currently consist primarily of annual restricted stock awards and long-term retention based restricted stock awards. Our equity incentive programs are intended to promote a long-term focus on results and to align employee and stockholder interests.
Based on the recommendation of our Compensation Committee’s independent compensation consultant, Willis Towers Watson, we adopted an equity award grant policy for certain executive officers and key employees in July 2012 that provides that each of the Company’s executive officers and key employees may receive an annual award under the Amended and Restated 2005 Long-Term Equity Incentive Plan. The annual award generally consists of restricted stock with a value equal to a multiple of base salary that is consistent with the median long-term incentive plan practices of peer companies. Half of the restricted stock award is based on tenure, and half of the restricted stock award is based on prior year performance, and may have a value that is less than or greater than the targeted multiple of base salary, depending on our performance in the prior year. The Compensation Committee evaluates our prior year performance, and makes the annual awards of restricted stock, in March following the fiscal year to which the performance relates. The tenure-based restricted stock will vest in equal annual installments over the three years following the grant date, subject to continued service as an employee and certain other conditions. The restricted stock for prior year performance will vest on the second anniversary of the grant date, subject to continued service as an employee and certain other conditions.
For awards granted in March 2017 and awards granted in March 2018, the target values of the restricted stock awards were based on the below multiples of the named executive officers’ respective salaries. The actual amount received is equal to the below multiples times a multiple for tenure and a performance multiple for adjusted EBITDA and adjusted EPS. If the Company does not achieve adjusted EBITDA or adjusted EPS at or above the level of the prior fiscal year, then only the tenure grant is awarded but no restricted stock is earned for the performance component, which results in total compensation below the median level. If performance exceeds the prior year but does not reach the target level, then the number of shares awarded in respect of performance will be reduced and total compensation will also fall below the applicable market median.
| | | | | | | | | | | | | | |
| | | | | | | | | Multiple of Base Salary |
Name | | FY16
Salary | | | FY17
Salary | | | Tenure-Based
Award | | Target Award Based on
Adjusted EBITDA | | Target Award Based
on Adjusted EPS |
Michael P. O’Donnell | | $ | 675,000 | | | $ | 675,000 | | | 1.000x | | 0.500x | | 0.500x |
Arne G. Haak | | $ | 375,000 | | | $ | 375,000 | | | 0.500x | | 0.250x | | 0.250x |
Cheryl J. Henry | | $ | 410,000 | | | $ | 410,000 | | | 0.750x | | 0.375x | | 0.375x |
Susan L. Mirdamadi(1) | | $ | 265,000 | | | $ | 300,000 | | | 0.500x | | 0.250x | | 0.250x |
Kevin W. Toomy | | $ | 335,000 | | | $ | 335,000 | | | 0.375x | | 0.188x | | 0.188x |
(1) | Ms. Mirdamadi’s salary was increased to $300,000 effective July 2017 in connection with her promotion to Senior Vice President and Chief Services Officer. In addition, the multipliers for her Tenure-Based Award, and for the Target Awards based on adjusted EBITDA and adjusted EPS were increased to the levels shown in the table above. |
Consistent with the above, our Board grants annual restricted stock awards to the named executive officers in March of each year, taking into account the Compensation Committee’s policy and, with respect to the restricted stock for prior year performance, adjusted EBITDA and adjusted EPS for the prior fiscal year. When performance exceeds performance in the prior year, the performance multiple is equal to 100% times a percentage equal to the actual amount of growth over the prior year divided by the target growth amount. When the target is exceeded, the performance multiple is equal to 125% times a percentage equal to actual performance divided by target performance. To illustrate, if the Company’s actual adjusted EBITDA is 110% of the target amount, then a performance multiple equal to 137.5% (125% times 110%) is applied to the target multiples stated above to calculate such executive officer’s payout in respect of adjusted EBITDA. This feature of our long-term retention based restricted stock awards incentivizes our executive officers to strive to exceed our challenging target performance thresholds.
In March 2017 and March 2018, each named executive officer received a tenure-based restricted stock award and a restricted stock award for fiscal 2016 performance and fiscal 2017 performance, respectively. For fiscal 2016, actual adjusted EBITDA and actual adjusted EPS exceeded their respective targets, and for fiscal 2017, actual adjusted EBITDA and actual adjusted EPS fell below their respective targets, which resulted in grants of restricted stock for such performance equal to the percentage of target award value set forth in the following chart. Grants made in March 2017 and March 2018 are included in the Summary Compensation Table for fiscal 2017 and fiscal 2018, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2016 Actual | | | 2016 Target | | | 2016
Percentage of
Target Award
Value | | | 2017 Actual | | | 2017 Target | | | 2017
Percentage of
Target Award
Value | |
Adjusted EBITDA | | $ | 61,658,000 | | | $ | 61,295,000 | | | | 125.7 | % | | $ | 66,431,000 | | | $ | 67,231,000 | | | | 85.7 | % |
Adjusted EPS | | $ | 0.976 | | | $ | 0.945 | | | | 129.1 | % | | $ | 1.102 | | | $ | 1.115 | | | | 91.0 | % |
In recognition of the strong stockholder returns delivered under the tenure of our executive officers, the Compensation Committee retained Willis Towers Watson in 2015 to assist in developing retention grants for these officers. As a result, the Committee awarded certain executive officers specialone-time long-term grants (“Retention Grants”) in June 2015, which will vest over a three- tosix-year period, a significantly longer period than the three-year industry standard. The Retention Grants were designed to ensure that our executive officers remain focused on driving long-term strategic value to the business and to retain those individuals who are critical to our strategy over the next several years. The Retention Grants were awarded in recognition of the strong stockholder returns delivered by the Company under the leadership of senior executives receiving a Retention Grant. In an effort to aid long-term retention, the Retention Grants have significantly longer vesting periods than traditional share grants, which typically have a maximum three-year vesting period. Over the vesting period of the Retention Grants, their value should be considered as part of the total mix of compensation awarded to our executive officers, rather than attributed to just the year of grant.
Benefits
The Company’s benefits philosophy for executive officers is that benefits should provide employees protection from catastrophic events, enable employees to plan for their future and be competitive in order to attract and retain a high-quality workforce. The types of benefits provided to the named executive officers, which are generally the same as those of the entire company, consist of medical benefits plans, life and accidental death and dismemberment insurance plans, long-term disability plans and 401(k) matching contributions. In addition, the executive officers receive automobile allowances.
The Company maintains anon-qualified deferred compensation plan that is unsecured and allows certain high-level employees, including executive officers, to voluntarily defer receipt of their salary above specified amounts and bonus payments into accounts established under the plan. These accounts are credited with earnings from amounts invested in funds available through Fidelity Investments, the plan’s record keeper, as selected by each participant. The Company does not contribute or match contributions to these accounts.
The Company also allows its executive officers to dine in its restaurants as a benefit in order to permit these officers to conduct quality control tests.
Tax and Accounting Implications
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction for compensation in excess of $1.0 million paid to our Chief Executive Officer and to each other officer (other than our Chief Financial Officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act by reason of being among the three most highly paid executive officers. Pursuant to tax legislation signed into law on December 22, 2017 commonly known as the Tax Cuts and Jobs Act (the “Tax Act”), for taxable years beginning after December 31, 2017, the Section 162(m) deduction limitation is expanded so that it also applies to compensation in excess of $1 million paid to a public company’s chief financial officer. Historically, compensation that qualified under Section 162(m) as performance-based compensation was exempt from the deduction limitation. However, subject to certain transition rules, the Tax Act eliminated the qualified performance-based compensation exception. As a result, for taxable years beginning after December 31, 2017, all compensation in excess of $1 million paid to each of the executives described above will not be deductible by us, subject to the transition relief.
Severance and Termination Arrangements
Mr. O’Donnell, Mr. Haak, Ms. Henry and Mr. Toomy have employment agreements that provide for payments upon a termination of employment by the executive for good reason, by the Company without cause or upon death or disability as described later in this proxy statement in the section entitled “Employment Agreements.” Likewise, the Bonus Plan provides for partial payment of bonus amounts to our named executive officers upon death, disability, retirement or change in control based on the bonus amount earned prior to such triggering event. The Company believes that these agreements and plans effectively create incentives for our executives to build stockholder value without the fear of losing employment for situations other than for cause. These arrangements are intended to attract and retain qualified executives who could have other job alternatives that may appear to them to be less risky absent these arrangements.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The Compensation Committee:
Robin P. Selati, Chairman
Mary L. Baglivo
Carla R. Cooper
Bannus B. Hudson
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the total compensation earned in 2015, 2016 and 2017 by our named executive officers:
| | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary | | | Stock
Awards
(1) | | | Non-Equity
Incentive Plan
Compensation
(2) | | | All Other
Compensation | | | Total
($) | |
Michael P. O’Donnell | | | 2017 | | | $ | 675,000 | | | $ | 1,535,119 | | | $ | 433,621 | | | $ | 173,815 | (3) | | $ | 2,817,554 | |
Chairman and Chief Executive Officer | | | 2016 | | | $ | 675,000 | | | $ | 1,607,495 | | | $ | 545,100 | | | $ | 149,195 | | | $ | 2,976,790 | |
| | | 2015 | | | $ | 646,250 | | | $ | 5,905,740 | | | $ | 1,026,620 | | | $ | 102,879 | | | $ | 7,681,489 | |
Arne G. Haak | | | 2017 | | | $ | 375,000 | | | $ | 426,431 | | | $ | 180,675 | | | $ | 84,843 | (4) | | $ | 1,066,949 | |
Executive Vice President and Chief Financial Officer | | | 2016 | | | $ | 375,000 | | | $ | 446,533 | | | $ | 227,125 | | | $ | 68,642 | | | $ | 1,117,300 | |
| | | 2015 | | | $ | 361,731 | | | $ | 2,648,514 | | | $ | 427,758 | | | $ | 45,446 | | | $ | 3,483,449 | |
Cheryl J. Henry | | | 2017 | | | $ | 410,000 | | | $ | 699,338 | | | $ | 210,708 | | | $ | 110,256 | (5) | | $ | 1,430,302 | |
President and Chief Operating Officer of Ruth’s Hospitality Group, Inc. | | | 2016 | | | $ | 344,423 | | | $ | 1,881,223 | | | $ | 264,878 | | | $ | 68,368 | | | $ | 2,558,892 | |
| | | 2015 | | | $ | 291,154 | | | $ | 2,102,310 | | | $ | 342,207 | | | $ | 33,282 | | | $ | 2,768,953 | |
Susan L. Mirdamadi | | | 2017 | | | $ | 284,115 | | | $ | 462,056 | | | $ | 115,632 | | | $ | 38,534 | (6) | | $ | 900,337 | |
Senior Vice President and Chief Services Officer | | | | | | | | | | | | | | | | | | | | | | | | |
Kevin W. Toomy | | | 2017 | | | $ | 335,000 | | | $ | 285,713 | | | $ | 215,204 | | | $ | 43,449 | (7) | | $ | 879,365 | |
Former President and Chief Operating Officer of Ruth’s Chris Steak House | | | 2016 | | | $ | 335,000 | | | $ | 299,170 | | | $ | 270,531 | | | $ | 44,795 | | | $ | 949,495 | |
| | | 2015 | | | $ | 319,519 | | | $ | 1,695,536 | | | $ | 509,508 | | | $ | 31,944 | | | $ | 2,556,507 | |
(1) | Represents the grant date fair value of restricted stock, computed in accordance with ASC Topic 718 (formerly FAS 123R). The grant date fair value is generally the amount that we would expense in our financial statements over the award’s service period, but does not include a reduction for forfeitures. Amounts for fiscal 2017 include the aggregate grant date fair value computed in accordance with ASC Topic 718 of restricted stock granted in March 2017 as tenure-based awards, restricted stock granted in March 2017 for fiscal 2016 performance and a specialone-time long-term retention based restricted stock award granted in July 2015 to certain executive officers. Also includes a grant of restricted stock to Ms. Henry in July 2016 in connection with her promotion to President and Chief Operating Officer and a grant of restricted stock to Ms. Mirdamadi in April 2017 in connection with her promotion to Senior Vice President & Chief Services Officer. See “Grants of Plan-Based Awards” table. |
(2) | The amounts in this column represent amounts earned under the Company’s bonus plan, which are described under “Compensation Discussion and Analysis—Bonuses.” |
(3) | Consists of dividends on unvested restricted stock of $156,263, automobile allowances of $12,000, and group life insurance premium reimbursements of $3,564, and 401(k) matching contributions of $1,988, a portion of which was disallowed and refunded to the executive. |
(4) | Consists of dividends on unvested restricted stock of $71,158, automobile allowances of $10,800, and group life insurance premium reimbursements of $897, and 401(k) matching contributions of $1,988, a portion of which was disallowed and refunded to the executive. |
(5) | Consists of dividends on unvested restricted stock of $99,024, automobile allowances of $10,800, and group life insurance premium reimbursements of $432. |
(6) | Consists of dividends on unvested restricted stock of $28,920, automobile allowances of $8,400, and group life insurance premium reimbursements of $1,214. |
(7) | Consists of dividends on unvested restricted stock of $28,804, automobile allowances of $10,400, and group life insurance premium reimbursements of $2,257, and 401(k) matching contributions of $1,988, a portion of which was disallowed and refunded to the executive. |
Equity Compensation
Amended and Restated 2005 Long-Term Equity Incentive Plan
The Amended and Restated 2005 Long-Term Equity Incentive Plan, as originally approved in 2005 and subsequently amended and restated, provides for grants of stock options, restricted stock, restricted stock units, deferred stock units and other equity-based awards. As of December 31, 2017, there were 15,590 shares of common stock issuable upon exercise of currently outstanding options, 1,184,629 unvested restricted stock awards and 1,807,849 shares available for future grants. Directors, officers and other employees of the Company, as well as others performing services for us, are eligible for grants under the plan. The purpose of the plan is to provide these individuals with incentives to maximize stockholder value and otherwise contribute to our success and to enable us to attract, retain and reward the best available persons for positions of responsibility.
Executive Stock Ownership Guidelines; Anti-Hedging Policy
In July 2012, based on the recommendation of our Compensation Committee’s independent compensation consultant, Willis Towers Watson, our Compensation Committee approved stock ownership guidelines for our executive officers, based on the belief that stock ownership guidelines further align the interests of our executive officers with those of our stockholders. Pursuant to our executive officer stock ownership guidelines, each executive officer is generally expected to accumulate and hold shares of our common stock equal in value to two times his or her annual tenure-based equity grant, with the exception of the Chief Executive Officer who is required to hold shares of our common stock equal in value to three times his or her annual tenure-based equity grant. Shares subject to stock options will not count toward the minimum ownership requirement. Restricted stock (whether or not vested) will count toward the minimum ownership requirement. Executive officers had until 2015 to meet the stock ownership guidelines. As of the end of fiscal 2015, all named executive officers satisfied our stock ownership guidelines and have continued to do so.
Pursuant to our insider trading policy, our executive officers may not engage in any hedging or monetization transactions involving our securities.
Grants of Plan-Based Awards
Fiscal Year 2017
The following table summarizes grants of plan-based awards made to each of the named executive officers during fiscal 2017:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant
Date | | | Estimated Future Payouts
UnderNon-Equity Incentive
Plan Awards (1) | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | | Exercise or
Base Price of
Option Awards
($/Sh) | | | Grant Date
Fair Value
of Stock
and Option
Awards
($) | |
| | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | | | |
Michael P. O’Donnell | | | — | | | | — | | | $ | 675,000 | | | $ | 1,350,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 36,000 | (2) | | | — | | | | — | | | $ | 675,000 | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 45,873 | (3) | | | — | | | | — | | | $ | 860,119 | |
Arne G. Haak | | | — | | | | — | | | $ | 281,250 | | | $ | 562,500 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 10,000 | (2) | | | — | | | | — | | | $ | 187,500 | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 12,743 | (3) | | | — | | | | — | | | $ | 238,931 | |
Cheryl J. Henry | | | — | | | | — | | | $ | 328,000 | | | $ | 656,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 16,400 | (2) | | | — | | | | — | | | $ | 307,500 | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 20,898 | (3) | | | — | | | | — | | | $ | 391,838 | |
Susan L. Mirdamadi | | | — | | | | — | | | $ | 180,000 | | | $ | 360,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 4,240 | (2) | | | — | | | | — | | | $ | 79,500 | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 5,403 | (3) | | | — | | | | — | | | $ | 101,306 | |
| | | 4/25/17 | | | | — | | | | — | | | | — | | | | 15,000 | (4) | | | — | | | | — | | | $ | 281,250 | |
Kevin W. Toomy | | | — | | | | — | | | $ | 335,000 | | | $ | 670,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 6,700 | (2) | | | — | | | | — | | | $ | 125,625 | |
| | | 3/11/17 | | | | — | | | | — | | | | — | | | | 8,538 | (3) | | | — | | | | — | | | $ | 160,088 | |
(1) | Represents possible payouts for 2017 under the Company’snon-equity incentive plans, which we refer to as the Bonus Plan as described under “Compensation Discussion and Analysis—Bonuses.” |
(2) | Represents shares of restricted stock granted as a tenure-based award. |
(3) | Represents shares of restricted stock granted for fiscal 2016 performance. |
(4) | Represents shares of restricted stock granted in connection with Ms. Mirdamadi’s promotion to Senior Vice President & Chief Services Officer. |
Outstanding Equity Awards
at 2017 FiscalYear-End
The following table summarizes the outstanding equity awards held by our named executive officers as of the end of fiscal 2017:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
Name | | Number of Securities
Underlying Unexercised
Options
Exercisable (#) | | | Number of Securities
Underlying Unexercised
Options
Unexercisable (#) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number
of Shares
of Stock
that have
not Vested
(#) | | | Market Value of
Shares of Stock
that have not
Vested
($) | |
Michael P. O’Donnell | | | — | | | | — | | | | — | | | | — | | | | 13,316 | (1) | | $ | 288,291 | |
| | | | | | | | | | | | | | | | | | | 225,000 | (2) | | $ | 4,871,250 | |
| | | | | | | | | | | | | | | | | | | 25,627 | (3) | | $ | 554,825 | |
| | | | | | | | | | | | | | | | | | | 53,103 | (4) | | $ | 1,149,680 | |
| | | | | | | | | | | | | | | | | | | 36,000 | (5) | | $ | 779,400 | |
| | | | | | | | | | | | | | | | | | | 45,873 | (6) | | $ | 993,150 | |
Arne G. Haak | | | — | | | | — | | | | — | | | | — | | | | 3,765 | (1) | | $ | 81,512 | |
| | | | | | | | | | | | | | | | | | | 150,000 | (7) | | $ | 3,247,500 | |
| | | | | | | | | | | | | | | | | | | 7,119 | (3) | | $ | 154,126 | |
| | | | | | | | | | | | | | | | | | | 14,751 | (4) | | $ | 319,359 | |
| | | | | | | | | | | | | | | | | | | 10,000 | (5) | | $ | 216,500 | |
| | | | | | | | | | | | | | | | | | | 12,743 | (6) | | $ | 275,886 | |
Cheryl J. Henry | | | — | | | | — | | | | — | | | | — | | | | 1,833 | (1) | | $ | 39,684 | |
| | | | | | | | | | | | | | | | | | | 125,000 | (7) | | $ | 2,706,250 | |
| | | | | | | | | | | | | | | | | | | 5,695 | (3) | | $ | 123,297 | |
| | | | | | | | | | | | | | | | | | | 11,801 | (4) | | $ | 255,492 | |
| | | | | | | | | | | | | | | | | | | 100,000 | (8) | | $ | 2,165,000 | |
| | | | | | | | | | | | | | | | | | | 16,400 | (5) | | $ | 355,060 | |
| | | | | | | | | | | | | | | | | | | 20,898 | (6) | | $ | 452,442 | |
Susan L. Mirdamadi | | | — | | | | — | | | | — | | | | — | | | | 1,090 | (1) | | $ | 23,599 | |
| | | | | | | | | | | | | | | | | | | 50,000 | (7) | | $ | 1,082,500 | |
| | | | | | | | | | | | | | | | | | | 3,019 | (3) | | $ | 65,361 | |
| | | | | | | | | | | | | | | | | | | 6,254 | (4) | | $ | 135,399 | |
| | | | | | | | | | | | | | | | | | | 4,240 | (5) | | $ | 91,796 | |
| | | | | | | | | | | | | | | | | | | 5,403 | (6) | | $ | 116,975 | |
| | | | | | | | | | | | | | | | | | | 15,000 | (9) | | $ | 324,750 | |
Kevin W. Toomy | | | — | | | | — | | | | — | | | | — | | | | 1,636 | (1) | | $ | 35,419 | |
| | | | | | | | | | | | | | | | | | | 33,332 | (10) | | $ | 721,368 | |
| | | | | | | | | | | | | | | | | | | 4,770 | (3) | | $ | 103,271 | |
| | | | | | | | | | | | | | | | | | | 9,883 | (4) | | $ | 213,967 | |
| | | | | | | | | | | | | | | | | | | 6,700 | (5) | | $ | 145,055 | |
| | | | | | | | | | | | | | | | | | | 8,538 | (6) | | $ | 184,848 | |
(1) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock vested on March 9, 2018. |
(2) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65.One-fourth of these shares of restricted stock vested on June 30, 2017 and the remaining three-fourths will vestpro-rata on June 30, 2018, June 30, 2019 and June 30, 2020. |
(3) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65.One-third of these shares of restricted stock vested on March 3, 2017 and the remainingtwo-thirds will vestpro-rata on March 3, 2018 and March 3, 2019. |
(4) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vest on March 3, 2018. |
(5) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vestpro-rata on an annual basis over a three-year period beginning March 11, 2018. |
(6) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vest on March 11, 2019. |
(7) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vestpro-rata on an annual basis over a four-year period beginning June 15, 2018. |
(8) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vestone-half on July 26, 2018 andone-half on July 26, 2019. |
(9) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vestpro-rata on an annual basis over a four-year period beginning April 25, 2020. |
(10) | Represents restricted stock granted under the Amended and Restated 2005 Long-Term Equity Incentive Plan. Market value calculated based on the closing price on December 29, 2017 of $21.65. These shares of restricted stock will vest on June 15, 2018 |
Option Exercises and Stock Vested
Fiscal Year 2017
The following table summarizes the options that were exercised by our named executive officers and the restricted stock held by our named executive officers that vested during 2017.
| | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
Name | | Number of Shares
Acquired on Exercise(#) | | | Value Realized on
Exercise($)(1) | | | Number of Shares
Acquired on Vesting(#) | | | Value Realized on Vesting($)(1) | |
Michael P. O’Donnell | | | — | | | $ | — | | | | 147,450 | | | $ | 2,948,614 | |
Arne G. Haak | | | — | | | $ | — | | | | 19,870 | | | $ | 361,066 | |
Cheryl J. Henry | | | 21,077 | | | $ | 54,144 | | | | 11,060 | | | $ | 199,716 | |
Susan L. Mirdamadi | | | — | | | $ | — | | | | 5,954 | | | $ | 107,424 | |
Kevin W. Toomy | | | — | | | $ | — | | | | 42,510 | | | $ | 900,518 | |
(1) | The amount has been computed based on the closing price of our common stock on the exercise date or vesting date, as applicable. |
Non-Qualified Deferred Compensation
Fiscal Year 2017
We maintain aNon-Qualified Deferred Compensation plan that is unsecured and allows certain high-level employees, including executive officers, to voluntarily defer receipt of their salary above specified amounts and bonus payments into accounts established under the plan. These accounts are credited with earnings from amounts invested in funds available through Fidelity Investments, the plan’s record keeper, as selected by each participant. The following table summarizes contributions during 2017 by the only named executive officer who participated along with aggregate earnings/losses for the year and the aggregate balance as of December 31, 2017. We did not make any contributions to the deferred compensation plan during 2017. Named executive officers are fully vested in all contributions to the plan. The amounts listed as executive contributions are included as “Salary” in the Summary Compensation Table. The aggregate earnings are not reflected in “Other Compensation” in the Summary Compensation Table. No portion of the aggregate balance was previously reported as compensation of the named executive officer in the Summary Compensation Table for previous years.
| | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | Executive
Contributions in 2017 | | | Company
Contributions in 2017 | | | Aggregate Earnings in
2017 | | | Aggregate
Withdrawals/
Distributions in 2017 | | | Aggregate Balance at
December 31, 2017 | |
Arne G. Haak | | $ | 37,606 | | | $ | — | | | $ | 7,594 | | | $ | — | | | $ | 64,923 | |
Kevin W. Toomy | | $ | 201,000 | | | $ | — | | | $ | 6,151 | | | $ | — | | | $ | 207,151 | |
Pension Benefits
We do not maintain any additional executive retirement programs such as executive pension plans or other executive retirement benefits.
Employment Agreements
Michael P. O’Donnell. In August 2008, we entered into an employment agreement with Mr. O’Donnell outlining the terms by which Mr. O’Donnell would serve as our Chairman and Chief Executive Officer and a member of our Board. Mr. O’Donnell’s current base salary is $675,000 (subject to annual review) and any annual bonus is under the Bonus Plan. Pursuant to his employment agreement, if Mr. O’Donnell’s employment is terminated by us without “cause,” or by Mr. O’Donnell for “good reason” (as those terms are defined below) during the employment term, Mr. O’Donnell will be entitled to continue to receive his base salary for 12 months after the date of such termination and 12 monthly payments in the aggregate equal to 50% of his prior year bonus compensation. Mr. O’Donnell would also receive 12 months of continued health, welfare and retirement benefits, 12 months of automobile allowance pursuant to current Company guidelines, all unreimbursed expenses and continued vesting rights for his options and restricted stock for 12 months. In the event the company is sold at any time during the term of employment, all of Mr. O’Donnell’s equity awards will immediately vest. We have the option of paying the severance on a monthly orlump-sum basis. Mr. O’Donnell has agreed not to compete with us or to solicit any of our employees or persons with whom we have certain business relationships for 12 months following his termination.
Arne G. Haak. In August 2011, we entered into an employment agreement with Mr. Haak under which Mr. Haak agreed to serve as our Executive Vice President and Chief Financial Officer. Mr. Haak’s current base salary is $375,000 (subject to annual review) and any annual bonus is under the Home Office Bonus Program. If Mr. Haak’s employment is terminated by us without “cause,” or by Mr. Haak for “good reason” (as those terms are defined below) during the employment term, then the executive will be entitled to receive (i) his base salary for 12 months after the date of such termination, (ii) 12 monthly payments in the aggregate equal to 50% of his prior year bonus compensation, (iii) continued health, welfare and retirement benefits for 12 months, (iv) 12 monthly payments of his automobile allowance pursuant to current Company guidelines, (v) all unreimbursed expenses, and (vi) continued vesting rights for his options and restricted stock for 12 months. We have the option of paying the severance on a monthly orlump-sum basis. In the event the company is sold at any time during the term of employment, all of Mr. Haak’s equity awards will immediately vest. Mr. Haak has agreed not to compete with us or to solicit any of our employees or persons with whom we have certain business relationships for 12 months following his termination.
Cheryl Henry. In October 2011, we entered into an employment agreement with Ms. Henry under which Ms. Henry agreed to serve as our Senior Vice President and Chief Branding Officer. Ms. Henry’s current base salary is $410,000 (subject to annual review) and any annual bonus is under the Home Office Bonus Program. Pursuant to her employment agreement, if Ms. Henry’s employment is terminated by us without “cause,” or by Ms. Henry for “good reason” (as those terms are defined below) during the employment term, Ms. Henry will be entitled to continue to receive her base salary for 12 months after the date of such termination and 12 monthly payments in the aggregate equal to 50% of her prior year bonus compensation. Ms. Henry would also receive 12 months of continued health, welfare and retirement benefits, 12 months of automobile allowance payments pursuant to current Company guidelines, all unreimbursed expenses and continued vesting rights for her options and restricted stock for 12 months. In the event the company is sold at any time during the term of employment, all of Ms. Henry’s equity awards will immediately vest. We have the option of paying the severance on a monthly orlump-sum basis. Ms. Henry has agreed not to compete with us or to solicit any of our employees or persons with whom we have certain business relationships for 12 months following his termination.
Kevin W. Toomy. In April 2010, we entered into an employment agreement with Mr. Toomy under which Mr. Toomy agreed to serve as our President and Chief Operating Officer of Ruth’s Chris Steak House. Mr. Toomy’s current base salary is $335,000 (subject to annual review) and any annual bonus is under the Home Office Bonus Program. Pursuant to his employment agreement, if Mr. Toomy’s employment is terminated by us without “cause,” or by Mr. Toomy for “good reason” (as those terms are defined below) during the employment term, Mr. Toomy will be entitled to continue to receive his base salary for 12 months after the date of such termination and 12 monthly payments in the aggregate equal to 50% of his prior year bonus compensation. Mr. Toomy would also receive 12 months of continued health, welfare and retirement benefits, 12 months of automobile allowance payments pursuant to
current Company guidelines and continued vesting rights for his options and restricted stock for 12 months. We have the option of paying the severance on a monthly orlump-sum basis. Mr. Toomy has agreed not to compete with us or to solicit any of our employees or persons with whom we have certain business relationships for 12 months following his termination.
We do not have an employment agreement with Susan L. Mirdamadi. Under the terms of the Amended and Restated 2005 Long-Term Equity Incentive Plan, Ms. Mirdamadi’s unvested shares of restricted stock would vest if there is a Change in Control of the Company and she were terminated within one year after such Change in Control. In the event of Ms. Mirdamadi’s death or disability, the Amended and Restated 2005 Long-Term Equity Incentive Plan provides that her unvested shares of restricted stock that would have vested within one year following her termination due to death or disability would accelerate and become fully vested. Under the terms of the Bonus Plan, in the event of her death, disability or in the event of a Change in Control, Ms. Mirdamadi would be entitled to a bonus payment based upon the amount of the bonus actually earned prior to such event.
The employment agreements for our executive officers define “cause” as meaning, subject to any applicable cure periods, (i) an officer’s theft, embezzlement, perpetration of fraud, misappropriation of property or attempts at such; (ii) any act of disloyalty, misconduct or moral turpitude by an officer that is injurious to the Company; or (iii) an officer’s willful disregard of a lawful directive given by a superior or our Board of Directors or a violation of the Company’s employment policy.
The employment agreements for our executive officers define “good reason” to mean (i) the assignment by our Board of Directors to an officer of any material duties that are clearly inconsistent with the officer’s status, title and position or (ii) failure by the Company to pay the officer any amounts required under the officer’s employment agreement with which failure continues uncured for a period of 15 days after written notice is given. Additionally, with respect to our employment agreements with Mr. O’Donnell, Mr. Haak, and Ms. Henry, “good reason” also includes a material relocation of the Company requiring the executive to relocate or upon notice of the Company’s intent not to renew the agreement.
Except as specifically described herein, all options and restricted stock issued under the Company’s equity incentive plans, whether or not then exercisable (as applicable), generally cease vesting when a grantee ceases to be an employee. Options generally expire 30 days after the date of cessation of service, so long as the grantee does not compete with us during that30-day period without our permission. Upon termination for cause, all options will terminate immediately.
Payments Made Upon Termination
Assuming each executive officer’s employment was terminated by us without cause or by the executive for good reason on December 29, 2017, the estimated values of payments and benefits to each named executive officer are set forth in the following table:
| | | | | | | | | | | | | | | | |
| | | Michael P.
O’Donnell | | | Arne G.
Haak | | | Cheryl J.
Henry | | | Kevin W.
Toomy | |
Severance | | $ | 675,000 | | | $ | 375,000 | | | $ | 410,000 | | | $ | 335,000 | |
Bonus(1) | | $ | 272,550 | | | $ | 113,563 | | | $ | 132,439 | | | $ | 135,266 | |
Continued Vesting of Restricted Stock(2) | | $ | 3,598,923 | | | $ | 1,362,002 | | | $ | 2,234,258 | | | $ | 1,071,026 | |
Health and Welfare Benefits(3) | | $ | 20,708 | | | $ | 18,858 | | | $ | 19,108 | | | $ | 18,108 | |
Automobile Allowance(4) | | $ | 12,000 | | | $ | 10,800 | | | $ | 10,800 | | | $ | 10,400 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 4,579,181 | | | $ | 1,880,222 | | | $ | 2,806,605 | | | $ | 1,569,799 | |
| | | | | | | | | | | | | | | | |
(1) | Based on payment of a percentage of the named executive officer’s bonus compensation. |
(2) | Value is based on the closing price on December 29, 2017 of $21.65. Represents continued vesting of restricted stock for twelve months, as provided by employment agreement. |
(3) | Amount represents premiums that will be paid by the Company in respect to health insurance and other medical benefits for one year after termination of employment. |
(4) | Based on the value, as of December 29, 2017, of the currentpre-established automobile allowance that would be received by the executive officer for one year after termination. |
Ms. Mirdamadi is not listed in the above table because she does not have an employment agreement or arrangement which provides for payments upon termination without cause.
Payments Made Upon Death or Disability
In the event of the death or disability of a named executive officer, all named executive officers will receive benefits under our disability plan or payments under our life insurance plan, as appropriate. In the case of a grantee’s death or disability, (a) the number of shares of restricted stock for which the restrictions will have lapsed within one year of the grantee’s death or disability will
become fully vested and (b) a number of options equal to the sum of (1) the number of options that were exercisable on the date of the grantee’s death or disability and (2) the number of options that would become exercisable within one year after the date of the grantee’s death or disability, will become fully vested and exercisable and remain so for up to 180 days after the date of death or disability, provided the grantee does not compete with us during that180-day period without our permission.
Under the Bonus Plan, the executive officer shall receive a vested right to his or her bonus payment in an amount equal to the earned bonus amount as of the time of death or disability. Assuming each executive officer’s triggering event occurred on December 29, 2017, the estimated values of payments and benefits to each named executive officer are set forth in the following table:
| | | | | | | | | | | | | | | | | | | | |
| | | Michael P.
O’Donnell | | | Arne G.
Haak | | | Cheryl J.
Henry | | | Susan L.
Mirdamadi | | | Kevin W.
Toomy | |
Restricted Stock ($)(1) | | $ | 3,598,923 | | | $ | 1,362,002 | | | $ | 2,234,258 | | | $ | 492,906 | | | $ | 1,071,026 | |
Options ($) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Bonus ($)(2) | | $ | 433,621 | | | $ | 180,675 | | | $ | 210,708 | | | $ | 115,632 | | | $ | 215,204 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 4,032,544 | | | $ | 1,542,677 | | | $ | 2,444,966 | | | $ | 608,538 | | | $ | 1,286,230 | |
| | | | | | | | | | | | | | | | | | | | |
(1) | Value is based on the closing price on December 29, 2017 of $21.65. |
(2) | Value is based on the earned bonus amount attributable to the period prior to the triggering event. This table assumes that the triggering event occurred as of December 29, 2017, the last business day of our fiscal year, and thus the earned bonus amounts are equal to the amounts earned under each executive officer’s respective bonus plan for the entirety of fiscal 2017. |
Payments Made Upon a Change in Control
In the event that the Company is sold at any time during Mr. O’Donnell’s, Mr. Haak’s or Ms. Henry’s respective terms of employment, all equity awards held by such officer will immediately vest pursuant to the terms of such officer’s employment agreement. All of the restricted stock and options issued under the Amended and Restated 2005 Long-Term Equity Incentive Plan to Ms. Mirdamadi and Mr. Toomy will become fully vested if she or he is terminated within one year of a change in control. If we undergo a change in control, the committee administering the Amended and Restated 2005 Long-Term Equity Incentive Plan may provide that the options issued under such plan become exercisable and that such options may terminate if not exercised on the date of the change in control. Such committee may also accelerate the vesting of restricted stock grants under the Amended and Restated 2005 Long-Term Equity Incentive Plan.
Under the Bonus Plan, the executive officer shall receive a vested right to his or her bonus payment in an amount equal to the earned bonus amount as of the time of the change in control.
For purposes of the Amended and Restated 2005 Long-Term Equity Incentive Plan and the Bonus Plan, a change in control is triggered if (a) any person or group is or becomes the beneficial owner of 50% or more of the Company’s voting securities, (b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new directors whose election by the Board or nomination for election by the stockholders was approved by at least 2/3 of the directors then still in office who either were directors at the beginning of the period or whose election was previously so approved cease to constitute a majority of the Board, (c) the Company merges or consolidates with any other corporation (unless the Company’s voting securities continue to represent more than 50% of the combined voting power of the surviving entity or the Company’s Chief Executive Officer and directors retain their positions and, in the case of the directors, constitute at least a majority of the new board) or (d) a plan of complete liquidation or a sale or disposition of the Company of all or substantially all of its assets is consummated.
Assuming all outstanding unvested equity awards are accelerated, the table below provides the estimated value to our named executive officers as of December 29, 2017:
| | | | | | | | | | | | | | | | | | | | |
| | | Michael P.
O’Donnell | | | Arne G.
Haak | | | Cheryl J.
Henry | | | Susan L.
Mirdamadi | | | Kevin W.
Toomy | |
Restricted Stock ($)(1) | | $ | 8,636,596 | | | $ | 4,294,884 | | | $ | 6,097,225 | | | $ | 1,840,380 | | | $ | 1,404,197 | |
Options ($) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Bonus ($)(2) | | $ | 433,621 | | | $ | 180,675 | | | $ | 210,708 | | | $ | 115,632 | | | $ | 215,204 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 9,070,217 | | | $ | 4,475,559 | | | $ | 6,307,933 | | | $ | 1,956,012 | | | $ | 1,619,401 | |
| | | | | | | | | | | | | | | | | | | | |
(1) | Value is based on the closing price on December 29, 2017 of $21.65. |
(2) | Value is based on the earned bonus amount attributable to the period prior to the change in control. This table assumes that the change in control occurred as of December 29, 2017, the last business day of our fiscal year, and thus the earned bonus amounts are equal to the amounts earned under each executive officer’s respective bonus plan for the entirety of fiscal 2017. |
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of RegulationS-K, we are required to disclose the ratio of our median employee’s annual total compensation to the annual total compensation of our principal executive officer for the first fiscal year beginning on or after January 1, 2017. Because we have a52/53-week fiscal year ending the last Sunday in December, our 2017 fiscal year began on December 26, 2016. Accordingly, our first pay ratio disclosure will be provided for the 2018 fiscal year, which began January 1, 2018.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related-Party Transactions Policy and Procedure
During fiscal 2017, we were not a party to any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and in which any current director, executive officer, holder of more than 5% of our capital stock, or any member of the immediate family of any of the foregoing, had or will have a direct or indirect material interest.
As part of our quarterly internal certification of our financial statements, officers of the Company must either certify that they are not aware of any related party transactions or they must disclose any such transactions.
The Audit Committee is responsible for review, approval or ratification of “related-person transactions” between Ruth’s Hospitality Group, Inc. or its subsidiaries and related persons, in accordance with the terms of our written Related Party Transactions Policy. Under SEC rules, a related person is a director, officer, nominee for director or 5% stockholder of the company since the beginning of the last fiscal year and their immediate family members. In the course of its review and approval or ratification of a related party transaction, the Audit Committee considers:
the nature of the related party’s interest in the transaction;
the material terms of the transaction, including the amount involved and type of transaction;
the importance of the transaction to the related party and to the Company;
whether the transaction would impair the judgment of a director or executive officer to act in our best interest and the best interest of our stockholders; and
any other matters that the Audit Committee deems appropriate.
Any member of the Audit Committee who is a related party with respect to a transaction under review may not participate in the deliberations or vote on the approval or ratification of the transaction. However, such a director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.
AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors reviewed and discussed the audited financial statements with management, which represented that the financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee discussed with management the effectiveness of our internal control over financial reporting and the quality and acceptability of the accounting principles employed, including all critical accounting policies used in the preparation of the financial statements and related notes, the reasonableness of judgments made and the clarity of the disclosures included in the statements.
The Audit Committee also reviewed our consolidated financial statements for fiscal 2017 and its evaluations of our internal control over financial reporting with KPMG LLP, our independent auditors for fiscal 2017, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States and on the effectiveness of our internal control over financial reporting. The Audit Committee discussed with KPMG LLP the matters required to be discussed by AS 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board and approved by the Securities and Exchange Commission.
The Audit Committee received the written disclosures and the letter from KPMG LLP mandated by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the audit committee concerning independence, discussed with KPMG LLP its independence and considered whether the provision ofnon-audit services provided by KPMG LLP is compatible with maintaining KPMG LLP’s independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board that the audited financial statements be included in our Annual Report on Form10-K for the year ended December 31, 2017 for filing with the SEC. The Audit Committee has selected KPMG LLP as our independent auditor for fiscal 2018.
This report is submitted by the members of the Audit Committee:
Robert S. Merritt, Chairman
Giannella Alvarez
Stephen M. King
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
The following table presents fees for professional services rendered by KPMG LLP for fiscal 2016 and 2017.
| | | | | | | | |
| | | Fiscal Year | |
| Fee Category | | December 31,
2017 | | | December 25,
2016 | |
Audit Fees | | $ | 657,381 | | | $ | 604,850 | |
Audit-Related Fees | | | — | | | | — | |
Tax Fees | | | 72,087 | | | | 135,000 | |
All Other Fees | | | 1,780 | | | | 1,780 | |
| | | | | | | | |
Total Fees | | $ | 731,248 | | | $ | 741,630 | |
| | | | | | | | |
Audit Fees:Consists of fees billed or estimated to be billed for professional services rendered for the integrated audit of our consolidated financial statements and internal control over financial reporting and the review of the interim consolidated financial statements included in quarterly reports.
Audit-Related Fees:None.
Tax Fees:Consists of fees billed for professional services provided by KPMG LLP relating to income tax planning and compliance services.
All Other Fees:Consists of fees billed for a subscription to accounting research software.
Pursuant to the Audit Committee charter, the Audit Committee must approve all audit engagement fees and other significant compensation to be paid to the independent auditor and the terms of such engagement. The Audit Committee’s charter provides that individual engagements must be separately approved. Additionally, the Audit Committee mustpre-approve any permissiblenon-audit services to be provided to the Company by the independent auditor. The policy also authorizes the Committee to delegate to one or more of its memberspre-approval authority with respect to permitted services.
All audit, audit-related and tax services performed by KPMG LLP in fiscal 2017 and 2016 werepre-approved by the Audit Committee, which concluded that the provision of such services by KPMG LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
STOCKHOLDER PROPOSALS FOR THE 2019 MEETING
Stockholder proposals intended for inclusion in our proxy statement pursuant to Rule14a-8 relating to the next annual meeting in 2019 must be received by us no later than November 30, 2018. Any such proposal must comply with Rule14a-8 under the SEC’s proxy rules. Under our bylaws, notice to us of a stockholder nomination or other proposal submitted otherwise than pursuant to Rule14a-8 must be received at our principal executive offices no earlier than January 15, 2019 and no later than February 14, 2019. If not received within this timeframe, the nomination or other proposal will not be placed on the agenda formeeting agenda.
Incorporation by Reference
In accordance with SEC rules, notwithstanding anything to the meeting.
APPENDIX A
RUTH’S HOSPITALITY GROUP, INC.
2018 OMNIBUS INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of this Ruth’s Hospitality Group, Inc. 2018 Omnibus Incentive Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer Eligible Individuals cash andstock-based incentives in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders. The Plan is effective as of the datecontrary set forth in Article XV.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following meanings:
2.1“Affiliate” means each of the following: (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; (d) any trade or business (including, without limitation, a partnership or limited liability company) which directly or indirectly controls 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and (e) any other entity in which the Company or any of its Affiliates has a material equity interest and which is designated as an “Affiliate” by resolution of the Committee; provided that, unless otherwise determined by the Committee, the Common Stock subject to any Award constitutes “service recipient stock” for purposes of Section 409A of the Codeour previous or otherwise does not subject the Award to Section 409A of the Code.
2.2“Award” means any awardfuture filings under the Plan of any Stock Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Other Stock-Based Award or Other Cash-Based Award. All Awards shall be granted by, confirmed by, and subject to the terms of, a written or electronic agreement between the Company and the Participant.
2.3“Award Agreement” means the written or electronic agreement setting forth the terms and conditions applicable to an Award.
2.4“Board” means the Board of Directors of the Company.
2.5“Cause” means, unless otherwise determined by the Committee in the applicable Award Agreement, with respect to a Participant’s Termination of Employment or Termination of Consultancy, the following: (a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to a Participant’s insubordination, dishonesty, fraud,incompetence, moral turpitude, willful misconduct, refusal to perform the Participant’s duties or responsibilities for any reason other than illness or incapacity or materially unsatisfactory performance of the Participant’s duties for the Company or an Affiliate, as determined by the Committee in its good faith discretion; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines “cause” (or words of like import), “cause” as defined under such agreement; provided, however, that with regard to any agreement under which the definition of “cause” only applies on occurrence of a change in control, such definition of “cause” shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. With respect to a Participant’s Termination of Directorship, “cause” means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.
2.6“Change in Control” has the meaning set forth in 11.2.
2.7“Change in Control Price” has the meaning set forth in Section 11.1.
2.8“Code”means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also be a reference to any successor provision and any treasury regulation promulgated thereunder.
2.9“Committee” means any committee of the Board duly authorized by the Board to administer the Plan. If no committee is duly authorized by the Board to administer the Plan, the term “Committee” shall be deemed to refer to the Board for all purposes under the Plan.
2.10“Common Stock” means the common stock, $0.001 par value per share, of the Company.
2.11“Company” means Ruth’s Hospitality Group, Inc., and its successors by operation of law.
2.12“Consultant” means any natural person who is an advisor or consultant to the Company or its Affiliates.
2.13“Disability” means, unless otherwise determined by the Committee in the applicable Award Agreement, with respect to a Participant’s Termination, (a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “disability” (or words of like import)), termination due to a Participant’s permanent and total disability as defined in Section 22(e)(3) of the Code; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines “disability” (or words of like import), “disability” as defined under such agreement. A Disability shall only be deemed to occur at the time of the determination by the Committee of the Disability. Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code.
2.14“Effective Date” means the effective date of the Plan as defined in Article XV.
2.15“Eligible Employees” means each employee of the Company or an Affiliate.
2.16“Eligible Individual” means an Eligible Employee,Non-Employee Director or Consultant who is designated by the Committee in its discretion as eligible to receive Awards subject to the conditions set forth herein.
2.17“Exchange Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the Exchange Act or regulation thereunder shall include such section or regulation, any valid regulation or interpretation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.18“Fair Market Value” means, for purposes of the Plan, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, the last sales price reported for the Common Stock on the applicable date: (a) as reported on the principal national securities exchange in the United States on which it is then traded or (b) if the Common Stock is not traded, listed or otherwise reported or quoted, the Committee shall determine in good faith the Fair Market Value in whatever manner it considers appropriate taking into account the requirements of Section 409A of the Code. For purposes of the grant of any Award, the applicable date shall be the trading day on which the Award is granted or if such date is not a trading day, then the most recent preceding trading day. For purposes of the exercise of any Award, the applicable date shall be the date a notice of exercise is received by the Company or, if not a day on which the applicable market is open, the next day that it is open.
2.19“Family Member” means “family member” as defined in Section A.1.(a)(5) of the general instructions of FormS-8.
2.20“Incentive Stock Option” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries and its Parents (if any) under the Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.
2.21“Lead Underwriter”has the meaning set forth in Section 14.20.
2.22“Lock-Up Period” has the meaning set forth in Section 14.20.
2.23“Non-Employee Director” means a director or a member of the Board of the Company or any Affiliate who is not an active employee of the Company or any Affiliate.
2.24“Non-Qualified Stock Option” means any Stock Option awarded under the Plan that is not an Incentive Stock Option.
2.25“Non-Tandem Stock Appreciation Right” shall mean the right to receive an amount in cash and/or stock equal to the difference between (x) the Fair Market Value of a share of Common Stock on the date such right is exercised, and (y) the aggregate exercise price of such right, otherwise than on surrender of a Stock Option.
2.26“Other Cash-Based Award” means an Award granted pursuant to Section 10.3 of the Plan and payable in cash at such time or times and subject to such terms and conditions as determined by the Committee in its sole discretion.
2.27“Other Stock-Based Award” means an Award under Article X of the Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock.
2.28“Parent” means any parent corporation of the Company within the meaning of Section 424(e) of the Code.
2.29“Participant”means an Eligible Individual to whom an Award has been granted pursuant to the Plan.
2.30“Performance Award” means an Award granted to a Participant pursuant to Article IX hereof contingent upon achieving specified performance goals.
2.31“Performance Period” means the designated period during which the performance goals must be satisfied with respect to the Award to which the performance goals relate.
2.32“Plan” means this Ruth’s Hospitality Group, Inc. 2018 Omnibus Incentive Plan, as amended from time to time.
2.33“Proceeding”has the meaning set forth in Section 14.9.
2.34“Reference Stock Option” has the meaning set forth in Section 7.1.
2.35“Registration Date” means the date on which the Company sells its Common Stock in a bona fide, firm commitment underwriting pursuant to a registration statement under the Securities Act.
2.36“Reorganization” has the meaning set forth in Section 4.2(b)(ii).
2.37“Restricted Stock” means an Award of shares of Common Stock under the Plan that is subject to restrictions under Article VIII.
2.38“Restriction Period” has the meaning set forth in Section 8.3(a) with respect to Restricted Stock.
2.39“Rule16b-3” means Rule16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision.
2.40“Section 409A of the Code” means the nonqualified deferred compensation rules under Section 409A of the Code and any applicable treasury regulations and other official guidance thereunder.
2.41“Securities Act” means the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this proxy statement or future filings made by the Company under those statutes, the information included under the section entitled “Compensation Committee Report” and all rules and regulations promulgated thereunder. Reference to a specific sectionthose portions of the Securities Actinformation included under the section entitled “Audit Committee Report” required by the SEC’s rules to be included therein, shall not be deemed to be “soliciting material” nor be “filed” with the SEC nor be, in addition to the information included under the section entitled “Pay Versus Performance,” deemed incorporated by reference into any of those prior filings or regulation thereunder shall include such section or regulation, any valid regulation or interpretation promulgated under such section, and any comparable provision ofinto any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.42“Stock Appreciation Right” shall mean the right pursuant to an Award granted under Article VII.
2.43“Stock Option” or“Option” means any option to purchase shares of Common Stock granted to Eligible Individuals granted pursuant to Article VI.
2.44“Subsidiary” means any subsidiary corporation offilings made by the Company under those statutes, except to the extent we specifically incorporate these items by reference. Web links throughout this document are provided for convenience only, and the content on the referenced websites does not constitute a part of this proxy statement.
Forward-Looking Statements
This document contains certain “forward-looking statements” within the meaning of Section 424(f) of the Code.
2.45“Tandem Stock Appreciation Right” shall mean the right to surrender to the Company all (or a portion) of a Stock Option in exchange for an amount in cash and/or stock equal to the difference between (i) the Fair Market Value on the date such Stock Option (or such portion thereof) is surrendered, of the Common Stock covered by such Stock Option (or such portion thereof), and (ii) the aggregate exercise price of such Stock Option (or such portion thereof).
2.46“Ten Percent Stockholder”means a person owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, its Subsidiaries or its Parent.
2.47“Termination”means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.
2.48“Termination of Consultancy” means: (a) that the Consultant is no longer acting as a consultant to the Company or an Affiliate; or (b) when an entity which is retaining a Participant as a Consultant ceases to be an Affiliate unless the Participant otherwise is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that a Consultant becomes an Eligible Employee or aNon-Employee Director upon the termination of such Consultant’s consultancy, unless otherwise determined by the Committee, in its sole discretion, no Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant, an Eligible Employee or aNon-Employee Director. Notwithstanding the foregoing, the Committee may otherwise define Termination of Consultancy in the Award Agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Consultancy thereafter, provided that any such change to the definition of the term “Termination of Consultancy” does not subject the applicable Award to Section 409A of the Code.
2.49“Termination of Directorship” means that theNon-Employee Director has ceased to be a director of the Company; except that if aNon-Employee Director becomes an Eligible Employee or a Consultant upon the termination of suchNon-Employee Director’s directorship, suchNon-Employee Director’s ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until the Participant has a Termination of Employment or Termination of Consultancy, as the case may be.
2.50“Termination of Employment” means: (a) a termination of employment (for reasons other than a military or personal leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) when an entity which is employing a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that an Eligible Employee becomes a Consultant or aNon-Employee Director upon the termination of such Eligible Employee’s employment, unless otherwise determined by the Committee, in its sole discretion, no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or aNon-Employee Director. Notwithstanding the foregoing, the Committee may otherwise define Termination of Employment in the Award Agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter, provided that any such change to the definition of the term “Termination of Employment” does not subject the applicable Award to Section 409A of the Code.
2.51“Transfer” means: (a) when used as a noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition (including the issuance of equity in any entity), whether for value or no value and whether voluntary or involuntary (including by operation of law), and (b) when used as a verb, to directly or indirectly transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in any entity) whether for value or for no value and whether voluntarily or involuntarily (including by operation of law). “Transferred” and “Transferable” shall have a correlative meaning.
ARTICLE III
ADMINISTRATION
3.1The Committee.The Plan shall be administered and interpreted by the Committee.
3.2Grants of Awards. The Committee shall have full authority to grant, pursuant to the terms of the Plan, to Eligible Individuals: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock Awards, (iv) Performance Awards; (v) Other Stock-Based Awards; and (vi) Other Cash-Based Awards. In particular, the Committee shall have the authority:
(a) to select the Eligible Individuals to whom Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Awards, or any combination thereof, are to be granted hereunder to one or more Eligible Individuals;
(c) to determine the number of shares of Common Stock to be covered by each Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Award and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion);
(e) to determine the amount of cash to be covered by each Award granted hereunder;
(f) to determine whether, to what extent and under what circumstances grants of Options and other Awards under the Plan are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of the Plan;
(g) to determine whether and under what circumstances a Stock Option may be settled in cash, Common Stock and/or Restricted Stock under Section 6.4(d);
(h) to determine whether a Stock Option is an Incentive Stock Option orNon-Qualified Stock Option;
(i) to determine whether to require a Participant, as a condition of the granting of any Award, to not sell or otherwise dispose of shares acquired pursuant to the exercise of an Award for a period of time as determined by the Committee, in its sole discretion, following the date of the acquisition of such Award;
(j) to modify, extend or renew an Award, subject to Article XII and Section 6.4(l), provided, however, that such action does not subject the Award to Section 409A of the Code without the consent of the Participant; and
(k) solely to the extent permitted by applicable law, to determine whether, to what extent and under what circumstances to provide loans (which may be on a recourse basis and shall bear interest at the rate the Committee shall provide) to Participants in order to exercise Options under the Plan.
3.3Guidelines. Subject to Article XII hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; to construe and interpret the terms andsafe harbor provisions of the PlanU.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current views and any Award issued underinclude statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the Plan (and any agreements relating thereto);words “should,” “expect,” “intend,” “may,” “will,” “would,” or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements may also include statements pertaining to otherwise superviseour strategies for future development of our businesses and products and future environmental, social and governance performance, goals and measures. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the administration ofactual results may differ, possibly materially, from the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistencyanticipated results indicated in the Plan orthese forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in any agreement relating theretoour forward-looking statements is contained in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan. The Committee may adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions. Notwithstanding the foregoing, no action of the Committee under this Section 3.3 shall impair the rights of any Participant without the Participant’s consent. To the extent applicable, the Plan is intended to complyreports we file with the applicable requirements of Rule16b-3.
3.4Minimum Vesting Period. Notwithstanding anything toSEC, including our Annual Report on Form 10-K for the contrary in this Plan, each Award Agreement will require that an Award be subject to a minimum vesting period of at least one (1) year commencing from the date of grant. For the purpose of clarity, this Section 3.4 will (i) not prevent the Committee from accelerating the vesting ofended December 25, 2022. You should read and interpret any Award in accordanceforward-looking statement together with any of the provisions set forth in this Plan, (ii) not be applicable in the case of Awards granted to Participants who ultimately incur a termination of employment or servicesreports we file with the Company dueSEC. We undertake no obligation to deathupdate or Disability, and (iii) not apply to a maximum of five percent (5%) of the Share Reserve.
3.5Decisions Final. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns.
3.6Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company and professional advisors to assist the Committee in the administration of the Plan and (to the extent permitted by applicable law and applicable exchange rules) may grant authority to officers to grant Awards and/or execute agreements or other documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received fromrevise any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Committee or the Board in the engagement of any such counsel, consultant or agent shall be paid by the Company. The Committee, its members and any person designated pursuantforward-looking statement tosub-section (a) above shall not be liable for any action or determination made in good faith with respect to the Plan. To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it.
3.7Repricing. Except as permitted pursuant toSection 4.2 herein, the terms of outstanding Awards reflect subsequent circumstances. Past performance may not be amended to reduce the exercise priceindicative of outstanding Options or Stock Appreciation Rights or cancel, convert, exchange, replace,re-grant, buyout, substitute or surrender outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price that is less than the exercise pricefuture results. Different types of the original Options or Stock Appreciation Rights without stockholder approval.
ARTICLE IV
SHARE LIMITATION
4.1Shares. The aggregate numberinvestments involve varying degrees of shares of Common Stock that may be issued or used for reference purposes or with respect to which Awards may be granted under the Plan (subject to adjustment pursuant to Section 4.2) shall not exceed the sum of (i) 2,500,000 shares, and (ii) any shares underlying outstanding awards as of the Effective Date under the Company’s Amended and Restated 2005 Long-Term Equity Incentive Plan (the “Prior Plan”) which, following the Effective Date, expire, are terminated or are cash-settled or canceled for any reason without having been exercised or settled in full, but not to exceed 1,161,833 shares (collectively, the “Share Reserve”), which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both. The maximum number of shares of Common Stock with respect to which Incentive Stock Options may be granted under the Plan shall be equal to the Share Reserve. With respect to Stock Appreciation Rights settled in Common Stock, upon settlement, only the number of shares of Common Stock delivered to a Participant (based on the difference between the Fair Market Value of the shares of Common Stock subject to such Stock Appreciation Right on the date such Stock Appreciation Right is exercised and the exercise price of each Stock Appreciation Right on the date such Stock Appreciation Right was awarded) shall count against the aggregate and individual share limitations set forth under this Section 4.1. If any Option, Stock Appreciation Right or Other Stock-Based Awards granted under the Plan expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Common Stock underlying any unexercised Award shall again be available for the purpose of Awards under the Plan. If any shares of Restricted Stock, Performance Awards or Other Stock-Based Awards denominated in shares of Common Stock awarded under the Plan to a Participant are forfeited for any reason, the number of forfeited shares of Restricted Stock, Performance Awards or Other Stock-Based Awards denominated in shares of Common Stock shall again be available for purposes of Awards under the Plan. If a Tandem Stock Appreciation Right or a Limited Stock Appreciation Right is granted in tandem with an Option, such grant shall only apply once against the maximum number of shares of Common Stock which may be issued under the Plan. Any Award under the Plan settled in cash shallrisk. Therefore, it should not be counted against the foregoing maximum share limitations. The maximum number of shares of Common Stock subject to any Award of Stock Options, or Stock Appreciation Rights which may be granted under the Plan during any fiscal year of the Company to any Participant shall be 1,000,000 shares (which shall be subject to adjustment pursuant to Section 4.2). Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to anyNon-Employee Director during any single fiscal year (excluding Awards made at the election of the Director in lieu of all or a portion of annual and committee cash retainers pursuant to Section 6.3) shall not exceed $300,000. Notwithstanding the foregoing, any shares of Common Stock previously authorized but not subject to an award under the Prior Plan as of the Effective Date shall no longer be available for issuance under either the Prior Plan or the Plan.
4.2Changes.
(a) The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the
Company’s capital structure or its business, (ii) any merger or consolidation of the Company or any Affiliate, (iii) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock, (iv) the dissolution or liquidation of the Company or any Affiliate, (v) any sale or transfer of all or part of the assets or business of the Company or any Affiliate or (vi) any other corporate act or proceeding.
(b) Subject to the provisions of Section 11.1:
(i) If the Company at any time subdivides (by any split, recapitalization or otherwise) the outstanding Common Stock into a greater number of shares of Common Stock, or combines (by reverse split, combination or otherwise) its outstanding Common Stock into a lesser number of shares of Common Stock, then the respective exercise prices for outstanding Awardsassumed that provide for a Participant elected exercise and the number of shares of Common Stock covered by outstanding Awards shall be appropriately adjusted by the Committee to prevent dilution or enlargement of the rights granted to, or available for, Participants under the Plan.
(ii) Excepting transactions covered by Section 4.2(b)(i), if the Company effects any merger, consolidation, statutory exchange,spin-off, reorganization, sale or transfer of all or substantially all the Company’s assets or business, or other corporate transaction or event in such a manner that the Company’s outstanding shares of Common Stock are converted into the right to receive (or the holders of Common Stock are entitled to receive in exchange therefor), either immediately or upon liquidation of the Company, securities or other property of the Company or other entity (each, a“Reorganization”), then, subject to the provisions of Section 11.1, (A) the aggregate number or kind of securities that thereafter may be issued under the Plan, (B) the number or kind of securities or other property (including cash) to be issued pursuant to Awards granted under the Plan (including as a result of the assumption of the Plan and the obligations hereunder by a successor entity, as applicable), or (C) the purchase price thereof, shall be appropriately adjusted by the Committee to prevent dilution or enlargement of the rights granted to, or available for, Participants under the Plan.
(iii) If there shall occur any change in the capital structure of the Company other than those covered by Section 4.2(b)(i) or 4.2(b)(ii), including by reasonfuture performance of any extraordinary dividend (whether cashspecific investment or equity), any conversion, any adjustment, any issuance of any class of securities convertible or exercisable into, or exercisable for, any class of equity securities of the Company, then the Committee shall adjust any Award and make such other adjustments to the Plan to prevent dilution or enlargement of the rights granted to, or available for, Participants under the Plan.
(iv) Any such adjustment determined by the Committee pursuant to this Section 4.2(b) shall be final, binding and conclusive on the Company and all Participants and their respective heirs, executors, administrators, successors and permitted assigns. Any adjustment to, or assumption or substitution of, an Award under this Section 4.2(b) shall be intended to comply with the requirements of Section 409A of the Code and Treasury Regulation§1.424-1 (and any amendments thereto), to the extent applicable. Except as expressly provided in this Section 4.2 or in the applicable Award Agreement, a Participant shall have no additional rights under the Plan by reason of any transaction or event described in this Section 4.2.
4.3Minimum Purchase Price. Notwithstanding any provision of the Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under the Plan, such shares shall not be issued for a consideration that is less than as permitted under applicable law.
ARTICLE V
ELIGIBILITY
5.1General Eligibility. All current and prospective Eligible Individuals are eligible to be granted Awards. Eligibility for the grant of Awards and actual participation in the Plan shall be determined by the Committee in its sole discretion. The Committee shall have full discretion to treat different Participants under the Plan differently in any circumstance, and will not be required to treat all Participants in a uniform manner.
5.2Incentive Stock Options. Notwithstanding the foregoing, only Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under the Plan. Eligibility for the grant of an Incentive Stock Option and actual participation in the Plan shall be determined by the Committee in its sole discretion.
5.3General Requirement. The vesting and exercise of Awards granted to a prospective Eligible Individual are conditioned upon such individual actually becoming an Eligible Employee, Consultant orNon-Employee Director, respectively.
ARTICLE VI
STOCK OPTIONS
6.1Options. Stock Options may be granted alone or in addition to other Awards granted under the Plan. Each Stock Option granted under the Plan shall be of one of two types: (a) an Incentive Stock Option or (b) aNon-Qualified Stock Option.
6.2Grants. The Committee shall have the authority to grant to any Eligible Employee one or more Incentive Stock Options,Non-Qualified Stock Options, or both types of Stock Options. The Committee shall have the authority to grant any Consultant orNon-Employee Director one or moreNon-Qualified Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not so qualify shall constitute a separateNon-Qualified Stock Option.
6.3Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under such Section 422.
6.4Terms of Options. Options granted under the Plan shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a)Exercise Price. The exercise price per share of Common Stock subject to a Stock Option shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Stock Option shall not be less than 100% (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of the Common Stock on the date of grant.
(b)Stock Option Term. The term of each Stock Option shall be fixed by the Committee, provided that no Stock Option shall be exercisable more than 10 years after the date the Option is granted; and provided further that the term of an Incentive Stock Option granted to a Ten Percent Stockholder shall not exceed five years.
(c)Exercisability. Unless otherwise provided by the Committee in accordance with the provisions of this Section 6.4 (but subject to Section 3.4 hereof), Stock Options granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant. If the Committee provides, in its discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that such Stock Option is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after the time of grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such Stock Option may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.
(d)Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under Section 6.4(c), to the extent vested, Stock Options may be exercised in whole or in part at any time during the Option term, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price as follows: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) solely to the extent permitted by applicable law, if the Common Stock is traded on a national securities exchange, and the Committee authorizes, through a procedure whereby the Participant delivers irrevocable instructions to a broker reasonably acceptable to the Committee to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and conditions as may be acceptable to the Committee (including, without limitation, with the consent of the Committee, having the Company withhold shares of Common Stock issuable upon exercise of the Stock Option, or by payment in full or in part in the form of Common Stock owned by the Participant, based on the Fair Market Value of the Common Stock on the payment date as determined by the Committee). No shares of Common Stock shall be issued until payment therefor, as provided herein, has been made or provided for.
(e)Non-Transferability of Options. No Stock Option shall be Transferable by the Participant other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Participant’s lifetime, only by the Participant. Notwithstanding the foregoing, the Committee may determine, in its sole discretion, at the time of grant or thereafter that aNon-Qualified Stock Option that is otherwise not Transferable pursuant to this Section is Transferable to a Family Member in whole or in part and in such circumstances, and under such conditions, as specified by the Committee. ANon-Qualified Stock Option that is
Transferred to a Family Member pursuant to the preceding sentence (i) may not be subsequently Transferred other than by will or by the laws of descent and distribution and (ii) remains subject to the terms of the Plan and the applicable Award Agreement. Any shares of Common Stock acquired upon the exercise of aNon-Qualified Stock Option by a permissible transferee of aNon-Qualified Stock Option or a permissible transferee pursuant to a Transfer after the exercise of theNon-Qualified Stock Option shall be subject to the terms of the Plan and the applicable Award Agreement.
(f)Termination by Death or Disability. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination is by reason of death or Disability, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant (or in the case of the Participant’s death, by the legal representative of the Participant’s estate) at any time within a period of one (1) year from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options; provided, however, that, in the event of a Participant’s Termination by reason of Disability, if the Participant dies within such exercise period, all unexercised Stock Options held by such Participant shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one (1) year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Options.
(g)Involuntary Termination Without Cause. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination is by involuntary termination by the Company without Cause, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of thirty (30) days from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options.
(h)Voluntary Resignation. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination is voluntary (other than a voluntary termination described in Section 6.4(i)(y) hereof), all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of thirty (30) days from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options.
(i)Termination for Cause. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination (x) is for Cause or (y) is a voluntary Termination (as provided in Section 6.4(h)) after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of such Termination.
(j)Unvested Stock Options. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, Stock Options that are not vested as of the date of a Participant’s Termination for any reason shall terminate and expire as of the date of such Termination.
(k)Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under the Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000, such Options shall be treated asNon-Qualified Stock Options. In addition, if an Eligible Employee does not remain employed by the Company, any Subsidiary or any Parent at all times from the time an Incentive Stock Option is granted until three months prior to the date of exercise thereof (or such other period as required by applicable law), such Stock Option shall be treated as aNon-Qualified Stock Option. Should any provision of the Plan not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.
(l)Form, Modification, Extension and Renewal of Stock Options. Subject to the terms and conditions and within the limitations of the Plan, Stock Options shall be evidenced by such form of agreement or grant as is approved by the Committee, and the Committee may (i) modify, extend or renew outstanding Stock Options granted under the Plan (provided that the rights of a Participant are not reduced without such Participant’s consent and provided further that such action does not subject the Stock Options to Section 409A of the Code without the consent of the Participant), and (ii) accept the surrender of outstanding Stock Options (to the extent not theretofore exercised) and authorize the granting of new Stock Options in substitution therefor (to the extent not theretofore exercised). Notwithstanding the foregoing, an outstanding Option may not be modified to reduce the exercise price thereof nor may a new Option at a lower price be substituted for a surrendered Option (other than adjustments or substitutions in accordance with Section 4.2), unless such action is approved by the stockholders of the Company.
(m)Deferred Delivery of Common Stock. The Committee may in its discretion permit Participants to defer delivery of Common Stock acquired pursuant to a Participant’s exercise of an Option in accordance with the terms and conditions established by the Committee in the applicable Award Agreement, which shall be intended to comply with the requirements of Section 409A of the Code.
(n)Early Exercise. The Committee may provide that a Stock Option include a provision whereby the Participant may elect at any time before the Participant’s Termination to exercise the Stock Option as to any part or all of the shares of Common Stock subject to the Stock Option prior to the full vesting of the Stock Option, provided that such shares underlying the Stock Options have a Fair Market Value greater than the exercise price associated with such Stock Options, and such shares shall be subject to the provisions of Article VIII and be treated as Restricted Stock. Unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Committee determines to be appropriate.
(o)Other Terms and Conditions. The Committee may include a provision in an Award Agreement providing for the automatic exercise of aNon-Qualified Stock Option on a cashless basis on the last day of the term of such Option if the Participant has failed to exercise theNon-Qualified Stock Option as of such date, with respect to which the Fair Market Value of the shares of Common Stock underlying theNon-Qualified Stock Option exceeds the exercise price of suchNon-Qualified Stock Option on the date of expiration of such Option, subject to Section 14.4. Stock Options may contain such other provisions, which shall not be inconsistent with any of the terms of the Plan, as the Committee shall deem appropriate.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1Tandem Stock Appreciation Rights. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a “Reference Stock Option”) granted under the Plan (“Tandem Stock Appreciation Rights”). In the case of aNon-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option. The term of each Tandem Stock Appreciation Right shall be fixed by the Committee, provided that no Tandem Stock Appreciation Right shall be exercisable more than 10 years after the date the Tandem Stock Appreciation Right is granted
7.2Terms and Conditions of Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, and the following:
(a)Exercise Price. The exercise price per share of Common Stock subject to a Tandem Stock Appreciation Right shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Tandem Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant.
(b)Term. A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock Option shall not be reduced until, and then only to the extent that the exercise or termination of the Reference Stock Option causes, the number of shares covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option.
(c)Exercisability. Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable in accordance with the provisions of Article VI, and shall be subject to the provisions of Section 6.4(c).
(d)Method of Exercise. A Tandem Stock Appreciation Right may be exercised by the Participant by surrendering the applicable portion of the Reference Stock Option. Upon such exercise and surrender, the Participant shall be entitled to receive an amount determined in the manner prescribed in this Section 7.2. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent that the related Tandem Stock Appreciation Rights have been exercised.
(e)Payment. Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled to receive up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion) equal in value to the excess of the Fair Market Value of one share of Common Stock over the Option exercise price per share specified in the Reference Stock Option agreement multiplied by the number of shares of Common Stock in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment.
(f)Deemed Exercise of Reference Stock Option. Upon the exercise of a Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Article IV of the Plan on the number of shares of Common Stock to be issued under the Plan.
(g)Non-Transferability. Tandem Stock Appreciation Rights shall be Transferable only when and to the extent that the underlying Stock Option would be Transferable under Section 6.4(e) of the Plan.
7.3Non-Tandem Stock Appreciation Rights.Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Options granted under the Plan.
7.4Terms and Conditions ofNon-Tandem Stock Appreciation Rights.Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, and the following:
(a)Exercise Price. The exercise price per share of Common Stock subject to aNon-Tandem Stock Appreciation Right shall be determined by the Committee at the time of grant, provided that the per share exercise price of aNon-Tandem Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant.
(b)Term. The term of eachNon-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall not be greater than 10 years after the date the right is granted.
(c)Exercisability. Unless otherwise provided by the Committee in accordance with the provisions of this Section 7.4,Non-Tandem Stock Appreciation Rights granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant. If the Committee provides, in its discretion, that any such right is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such right may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.
(d)Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under Section 7.4(c),Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time in accordance with the applicable Award Agreement, by giving written notice of exercise to the Company specifying the number ofNon-Tandem Stock Appreciation Rights to be exercised.
(e)Payment. Upon the exercise of aNon-Tandem Stock Appreciation Right a Participant shall be entitled to receive, for each right exercised, up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion) equal in value to the excess of the Fair Market Value of one share of Common Stock on the date that the right is exercised over the Fair Market Value of one share of Common Stock on the date that the right was awarded to the Participant.
(f)Termination. Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, subject to the provisions of the applicable Award Agreement and the Plan, upon a Participant’s Termination for any reason,Non-Tandem Stock Appreciation Rights will remain exercisable following a Participant’s Termination on the same basis as Stock Options would be exercisable following a Participant’s Termination in accordance with the provisions of Sections 6.4(f) through 6.4(j).
(g)Non-Transferability. NoNon-Tandem Stock Appreciation Rights shall be Transferable by the Participant other than by will or by the laws of descent and distribution, and all such rights shall be exercisable, during the Participant’s lifetime, only by the Participant.
7.5Limited Stock Appreciation Rights. The Committee may, in its sole discretion, grant Tandem andNon-Tandem Stock Appreciation Rights either as a general Stock Appreciation Right or as a Limited Stock Appreciation Right. Limited Stock Appreciation Rights may be exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an Award Agreement, the Participant shall receive in cash and/or Common Stock, as determined by the Committee, an amount equal to the amount (i) set forth in Section 7.2(e) with respect to Tandem Stock Appreciation Rights, or (ii) set forth in Section 7.4(e) with respect toNon-Tandem Stock Appreciation Rights.
7.6Other Terms and Conditions. The Committee may include a provision in an Award Agreement providing for the automatic exercise of a Stock Appreciation Right on a cashless basis on the last day of the term of such Stock Appreciation Right if the Participant has failed to exercise the Stock Appreciation Right as of such date, with respect to which the Fair Market Value of the shares of Common Stock underlying the Stock Appreciation Right exceeds the exercise price of such Stock Appreciation Right on the date of expiration of such Stock Appreciation Right, subject to Section 14.4. Stock Appreciation Rights may contain such other provisions, which shall not be inconsistent with any of the terms of the Plan, as the Committee shall deem appropriate.
ARTICLE VIII
RESTRICTED STOCK
8.1Awards of Restricted Stock. Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the Eligible Individuals, to whom, and the time or times at which, grants of Restricted Stock shall be made, the number of shares to be awarded, the price (if any) to be paid by the Participant (subject to Section 8.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards, subject, however, to Section 3.4 hereof.
The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance targets (including, the performance goals) or such other factor as the Committee may determine in its sole discretion.
8.2Awards and Certificates. Eligible Individuals selected to receive Restricted Stock shall not have any right with respect to such Award, unless and until such Participant has delivered a fully executed copy of the agreement evidencing the Award to the Company, to the extent required by the Committee, and has otherwise complied with the applicable terms and conditions of such Award. Further, such Award shall be subject to the following conditions:
(a)Purchase Price. The purchase price of Restricted Stock shall be fixed by the Committee. Subject to Section 4.3, the purchase price for shares of Restricted Stock may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value.
(b)Acceptance. Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the grant date, by executing a Restricted Stock agreement and by paying whatever price (if any) the Committee has designated thereunder.
(c)Legend. Each Participant receiving Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of shares of Restricted Stock. Such certificate shall be registered in the name of such Participant, and shall, in addition to such legends required by applicable securities laws, bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
“The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Ruth’s Hospitality Group, Inc. (the “Company”) 2018 Omnibus Incentive Plan (the “Plan”) and an Agreement entered into between the registered owner and the Company dated. Copies of such Plan and Agreement are on file at the principal office of the Company.”
(d)Custody. If stock certificates are issued in respect of shares of Restricted Stock, the Committee may require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any grant of Restricted Stock, the Participant shall have delivered a duly signed stock power or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which would permit transfer to the Company of all or a portion of the shares subject to the Restricted Stock Award in the event that such Award is forfeited in whole or part.
8.3Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions:
(a)Restriction Period. The Participant shall not be permitted to Transfer shares of Restricted Stock awarded under the Plan during the period or periods set by the Committee (the “Restriction Period”) commencing on the date of such Award, as set forth in the Restricted Stock Award Agreement and such agreement shall set forth a vesting schedule and any event that would accelerate vesting of the shares of Restricted Stock. Within these limits, based on service, attainment of performance goals and/or such other factors or criteria as the Committee may determine in its sole discretion, the Committee may condition the grant or provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award and/or waive the deferral limitations for all or any part of any Restricted Stock Award.
(b) If the grant of shares of Restricted Stock or the lapse of restrictions is based on the attainment of performance goals, the Committee shall establish the objective performance goals and the applicable vesting percentage of the Restricted Stock applicable to each Participant or class of Participants in writing prior to the beginning of the applicable fiscal year or at such later date as otherwise determined by the Committee. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances or as otherwise determined by the Committee.
(c)Rights as a Stockholder. Except as provided in Section 8.3(a) and this Section 8.3(c) or as otherwise determined by the Committee in an Award Agreement, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company, including, without limitation, the right to receive dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares. The Committee may, in its sole discretion, determine at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period.
(d)Termination. Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, subject to the applicable provisions of the Award Agreement and the Plan, upon a Participant’s Termination for any reason during the relevant Restriction Period, all Restricted Stock still subject to restrictioninvestment strategy will be forfeited in accordance withprofitable or equal the terms and conditions established by the Committee at grant or thereafter.
(e)Lapse of Restrictions. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock, the certificates for such shares shall be delivered to the Participant. All legends shall be removed from said certificates at the time of delivery to the Participant, except as otherwise required by applicable law or other limitations imposed by the Committee.
ARTICLE IX
PERFORMANCE AWARDS
9.1Performance Awards. The Committee may grant a Performance Award to a Participant payable upon the attainment of specifiedcorresponding indicated performance goals. If the Performance Award is payable in shares of Restricted Stock, such shares shall be transferable to the Participant only upon attainment of the relevant performance goal in accordance with Article VIII. If the Performance Award is payable in cash, it may be paid upon the attainment of the relevant performance goals either in cash or in shares of Restricted Stock (based on the then current Fair Market Value of such shares), as determined by the Committee, in its sole and absolute discretion. Each Performance Award shall be evidenced by an Award Agreement in such form that is not inconsistent with the Plan and that the Committee may from time to time approve.
9.2Terms and Conditionslevel(s). Performance Awards awarded pursuant to this Article IX shall be subject to the following terms and conditions:
(a)Earning of Performance Award. At the expiration of the applicable Performance Period, the Committee shall determine the extent to which the performance goals established pursuant to Section 9.1 are achieved and the percentage of each Performance Award that has been earned.
(b)Non-Transferability. Subject to the applicable provisions of the Award Agreement and the Plan, Performance Awards may not be Transferred during the Performance Period.
(c)Dividends. Unless otherwise determined by the Committee at the time of grant, amounts equal to dividends declared during the Performance Period with respect to the number of shares of Common Stock covered by a Performance Award will not be paid to the Participant.
(d)Payment. Following the Committee’s determination in accordance with Section 9.2(a), the Company shall settle Performance Awards, in such form (including, without limitation, in shares of Common Stock or in cash) as determined by the Committee, in an amount equal to such Participant’s earned Performance Awards.
(e)Termination. Subject to the applicable provisions of the Award Agreement and the Plan, upon a Participant’s Termination for any reason during the Performance Period for a given Performance Award, the Performance Award in question will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant.
(f)Accelerated Vesting. Based on service, performance and/or such other factors or criteria, if any, as the Committee may determine, the Committee may, at or after grant, accelerate the vesting of all or any part of any Performance Award.
ARTICLE X
OTHER STOCK-BASED AND CASH-BASED AWARDS
10.1Other Stock-Based Awards. Subject to Section 3.4, the Committee is authorized to grant to Eligible Individuals OtherStock-Based Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Common Stock, including but not limited to, shares of Common Stock awarded purely as a bonus and not subject to restrictions or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company or an Affiliate, stock equivalent units, restricted stock units, and Awards valued by reference to book value of shares of Common Stock. Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards granted under the Plan.
Subject to the provisions of the Plan, the Committee shall have authority to determine the Eligible Individuals, to whom, and the time or times at which, such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards. The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified Performance Period.
The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified performance goals as the Committee may determine, in its sole discretion.
10.2Terms and Conditions. Other Stock-Based Awards made pursuant to this Article X shall be subject to the following terms and conditions:
(a)Non-Transferability. Subject to the applicable provisions of the Award Agreement and the Plan, shares of Common Stock subject to Awards made under this Article X may not be Transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.
(b)Dividends. Unless otherwise determined by the Committee at the time of Award, subject to the provisions of the Award Agreement and the Plan, the recipient of an Award under this Article X shall not be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents in respect of the number of shares of Common Stock covered by the Award.
(c)Vesting. Subject to Section 3.4, any Award under this Article X and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Committee, in its sole discretion, but subject to Section 3.4 hereof.
(d)Price. Common Stock issued on a bonus basis under this Article X may be issued for no cash consideration. Common Stock purchased pursuant to a purchase right awarded under this Article X shall be priced, as determined by the Committee in its sole discretion.
10.3Other Cash-Based Awards. The Committee may from time to time grant Other Cash-Based Awards to Eligible Individuals in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as it shall determine in its sole discretion. Other Cash-Based Awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of such Awards at any time in its sole discretion. The grant of an Other Cash-Based Award shall not require a segregation of any of the Company’s assets for satisfaction of the Company’s payment obligation thereunder.
ARTICLE XI
CHANGE IN CONTROL PROVISIONS
11.1Benefits. In the event of a Change in Control of the Company (as defined below), and except as otherwise provided by the Committee in an Award Agreement, a Participant’s unvested Awards shall not vest automatically and a Participant’s Awards shall be treated in accordance with one or more of the following methods as determined by the Committee:
(a) Awards, whether or not then vested, shall be continued, assumed, or have new rights substituted therefor, as determined by the Committee in a manner consistent with the requirements of Section 409A of the Code, and restrictions to which shares of Restricted Stock or any other Award granted prior to the Change in Control are subject shall not lapse upon a Change in Control and the Restricted Stock or other Award shall, where appropriate in the sole discretion of the Committee, receive the same distribution as other Common Stock on such terms as determined by the Committee; provided that the Committee may decide to award additional Restricted Stock or other Awards in lieu of any cash distribution. Notwithstanding anything to the contrary herein, for purposes of Incentive Stock Options, any assumed or substituted Stock Option shall comply with the requirements of Treasury RegulationSection 1.424-1 (and any amendment thereto).
(b) The Committee, in its sole discretion, may provide for the purchase of any Awards by the Company or an Affiliate for an amount of cash equal to the excess (if any) of the Change in Control Price (as defined below) of the shares of Common Stock covered by such Awards, over the aggregate exercise price of such Awards. For purposes hereof, “Change in Control Price” shall mean the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company.
(c) The Committee may, in its sole discretion, terminate all outstanding and unexercised Stock Options, Stock Appreciation Rights, or any Other Stock-Based Award that provides for a Participant elected exercise, effective as of the date of the Change in Control, by delivering notice of termination to each Participant at least twenty (20) days prior to the date of consummation of the Change in Control, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Change in Control, each such Participant shall have the right to exercise in full all of such Participant’s Awards that are then outstanding (without regard to any limitations on exercisability otherwise contained in the Award Agreements), but any such exercise shall be contingent on the occurrence of the Change in Control, and, provided that, if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void.
(d) Notwithstanding any other provision herein to the contrary, the Committee may, in its sole discretion, provide for accelerated vesting or lapse of restrictions, of an Award at any time.
(e) Notwithstanding the foregoing, any escrow, holdback, earnout or similar provisions in the definitive documents relating to such Change in Control may apply to any payment to Participants to the same extent and in the same manner as such provisions apply to the holders of Common Stock. In addition, Participants will be required to execute any definitive transaction documents in connection with any Change in Control at the request of the Company or its Subsidiaries or Affiliates, or any of their collective successors.
11.2Change in Control. Unless otherwise determined by the Committee in the applicable Award Agreement, any employment agreement with the Company (if applicable), or other written agreement with a Participant approved by the Committee, a “Change in Control” shall be deemed to occur upon:
(a) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company or its affiliates, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the beneficial owner (as defined in Rule13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;
(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c), or (d) of this Section 11.2 or a director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such term is used in Rule14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors at the beginning of thetwo-year period or whose election or nomination for election was previously so approved, ceasing for any reason to constitute at least a majority of the Board;
(c) consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in Section 11.2(a)) acquires more than 50% of the combined voting power of the Company’s then outstanding securities shall not constitute a Change in Control of the Company; or
(d) a complete liquidation or dissolution of the Company or the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets other than the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, 50% or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.
Notwithstanding the foregoing, with respect to any Award that is characterized as “nonqualified deferred compensation” within the meaning of Section 409A of the Code, an event shall not be considered to be a Change in Control under the Plan for purposes of payment of such Award unless such event is also a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.
ARTICLE XII
TERMINATION OR AMENDMENT OF PLAN
Notwithstanding any other provision of the Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XIV or Section 409A of the Code), or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant and, provided further, that without the approval of the holders of the Company’s Common Stock entitled to vote in accordance with applicable law, no amendment may be made that would (i) increase the aggregate number of shares of Common Stock that may be issued under the Plan (except by operation of Section 4.2); (ii) change the classification of individuals eligible to receive Awards under the Plan; (iii) decrease the minimum option price of any Stock Option or Stock Appreciation Right; (iv) extend the maximum option period under Section 6.4; (v) award any Stock Option or Stock Appreciation Right in replacement of a canceled Stock Option or Stock Appreciation Right with a higher exercise price than the replacement award; or (vi) require stockholder approval in order for the Plan to continue to comply with the applicable provisions of Section 422 of the Code. In no event may the Plan be amended without the approval of the stockholders of the Company in accordance with the applicable laws of the State of Delawareto increase the aggregate number of shares of Common Stock that may be issued under the Plan, decrease the minimum exercise price of any Award, or to make any other amendment that would require stockholder approval underFinancial Industry Regulatory Authority (FINRA) rules and regulations or the rules of any exchange or system on which the Company’s securities are listed or traded at the request of the Company. Notwithstanding anything herein to the contrary, the Board may amend the Plan or any Award Agreement at any time without a Participant’s consent to comply with applicable law including Section 409A of the Code. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holder’s consent.
ARTICLE XIII
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payment as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any right that is greater than those of a general unsecured creditor of the Company.
ARTICLE XIV
GENERAL PROVISIONS
14.1Legend. The Committee may require each person receiving shares of Common Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by the Plan, the certificates for such shares may include any legend that the Committee deems appropriate to reflect any restrictions on Transfer. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities exchange system upon whose system the Common Stock is then quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
14.2Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.
14.3No Right to Employment/Directorship/Consultancy. Neither the Plan nor the grant of any Option or other Award hereunder shall give any Participant or other Employee, Consultant orNon-Employee Director any right with respect to continuance of employment, consultancy or directorship by the Company or any Affiliate, nor shall there be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or a Consultant orNon-Employee Director is retained to terminate such employment, consultancy or directorship at any time.
14.4Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to the Plan, or to otherwise require, prior to the issuance or delivery of shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock (or other Award that is taxable upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required withholding to the Company. Any minimum statutorily required withholding obligation with regard to any Participant may be satisfied, unless otherwise prohibited by the Committee, by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned, provided, however, that, at the Participant’s discretion (unless otherwise prohibited by the Committee), the number of shares of Common Stock otherwise deliverable to the Participant may be further reduced in an amount up to the maximum individual tax rate in the Participant’s particular jurisdiction, and only if the Company has a statutory obligation to withhold taxes on the Participant’s behalf, in such case only if such reduction would not result in adverse financial accounting treatment, as determined by the Company (and in particular in connection with the effectiveness of the amendments to FASB Accounting Standards Codification Topic 718, Compensation – Stock Compensation, as amended by FASB Accounting Standards UpdateNo. 2016-09, Improvements to Employee Share-Based Payment Accounting). Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant.
14.5No Assignment of Benefits. No Award or other benefit payable under the Plan shall, except as otherwise specifically provided by law or permitted by the Committee, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person.
14.6Listing and Other Conditions.
(a) Unless otherwise determined by the Committee, as long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities association, the issuance of shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange or system. The Company shall have no obligation to issue such shares unless and until such shares are so listed, and the right to exercise any Option or other Award with respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Option or other Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act or otherwise, with respect to shares of Common Stock or Awards, and the right to exercise any Option or other Award shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section 14.6, any Award affected by such suspension which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension, but no such suspension shall extend the term of any Award.
(d) A Participant shall be required to supply the Company with certificates, representations and information that the Company requests and otherwise cooperate with the Company in obtaining any listing, registration, qualification, exemption, consent or approval the Company deems necessary or appropriate.
14.7Stockholders Agreement and Other Requirements. Notwithstanding anything herein to the contrary, as a condition to the receipt of shares of Common Stock pursuant to an Award under the Plan, to the extent required by the Committee, the Participant shall execute and deliver a stockholder’s agreement or such other documentation that shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise or purchase, and such other terms as the Board or Committee shall from time to time establish. Such stockholder’s agreement or other documentation shall apply to the Common Stock acquired under the Plan and covered by such stockholder’s agreement or other documentation. The Company may require, as a condition of exercise, the Participant to become a party to any other existing stockholder agreement (or other agreement).
14.8Governing Law. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delawareprinciples of conflict of laws).
14.9Jurisdiction; Waiver of Jury Trial. Any suit, action or proceeding with respect to the Plan or any Award Agreement, or any judgment entered by any court of competent jurisdiction in respect of any thereof, shall be resolved only in the courts of the State of Delawareor the United States District Court for the District of Delawareand the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, the Company and each Participant shall irrevocably and unconditionally (a) submit in any proceeding relating to the Plan or any Award Agreement, or for the recognition and enforcement of any judgment in respect thereof (a “Proceeding”), to the exclusive jurisdiction of the courts of the State of Delaware, the court of the United States of America for the District of Delaware, and appellate courts having jurisdiction of appeals from any of the foregoing, and agree that all claims in respect of any such Proceeding shall be heard and determined in such DelawareState court or, to the extent permitted by law, in such federal court, (b) consent that any such Proceeding may and shall be brought in such courts and waives any objection that the Company and each Participant may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agree not to plead or claim the same, (c) waive all right to trial by jury in any Proceeding (whether based on contract, tort or otherwise) arising out of or relating to the Plan or any Award Agreement, (d) agree that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, in the case of a Participant, at the Participant’s address shown in the books and records of the Company or, in the case of the Company, at the Company’s principal offices, attention General Counsel, and (e) agree that nothing in the Plan shall affect the right to effect service of process in any other manner permitted by the laws of the State of Delaware.
14.10Construction. Wherever any words are used in the Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply.
14.11Other Benefits. No Award granted or paid out under the Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefit under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation.
14.12Costs. The Company shall bear all expenses associated with administering the Plan, including expenses of issuing Common Stock pursuant to Awards hereunder.
14.13No Right to Same Benefits. The provisions of Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years.
14.14Death/Disability. The Committee may in its discretion require the transferee of a Participant to supply it with written notice of the Participant’s death or Disability and to supply it with a copy of the will (in the case of the Participant’s death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award. The Committee may also require that the agreement of the transferee to be bound by all of the terms and conditions of the Plan.
14.15Section 16(b) of the Exchange Act. All elections and transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition underRule 16b-3. The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder.
14.16Section 409A of the Code. The Plan is intended to comply with or be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. To the extent that any Award is subject to Section 409A of the Code, it shall be paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the contrary, any provision in the Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee or the Company and, in the event that any amount or benefit under the Plan becomes subject to penalties under Section 409A of the Code, responsibility for payment of such penalties shall rest solely with the affected Participants and not with the Company. Notwithstanding any contrary provision in the Plan or Award Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) that are otherwise required to be made under the Plan to a “specified employee” (as defined under Section 409A of the Code) as a result of such employee’s separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award Agreement) upon expiration of such delay period.
14.17Successor and Assigns. The Plan shall be binding on all successors and permitted assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate.
14.18Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.
14.19Payments to Minors, Etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipt thereof shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates and their employees, agents and representatives with respect thereto.
14.20Lock-Up Agreement. As a condition to the grant of an Award, if requested by the Company and the lead underwriter of any public offering of the Common Stock (the “Lead Underwriter”), a Participant shall irrevocably agree not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of, any interest in any Common Stock or any securities convertible into, derivative of, or exchangeable or exercisable for, or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during such period of time following the effective date of a registration statement of the Company filed under the Securities Act that the Lead Underwriter shall specify (the “Lock-Up Period”). The Participant shall further agree to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agree that the Company may impose stop-transfer instructions with respect to Common Stock acquired pursuant to an Award until the end of suchLock-Up Period.
14.21Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
14.22Company Recoupment of Awards. A Participant’s rights with respect to any Award hereunder shall in all events be subject to (i) any right that the Company may have under any Company recoupment policy or other agreement or arrangement with a Participant, or (ii) any right or obligation that the Company may have regarding the clawback of “incentive-based compensation” under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
ARTICLE XV
EFFECTIVE DATE OF PLAN
The Plan shall become effective on March 28, 2018, which is the date of its adoption by the Board, subject to the approval of the Plan by the stockholders of the Company in accordance with the requirements of the laws of the State of Delaware.
ARTICLE XVI
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the earlier of the date that the Plan is adopted or the date of stockholder approval, but Awards granted prior to such tenth anniversary may extend beyond that date.
ARTICLE XVII
NAME OF PLAN
The Plan shall be known as the “Ruth’s Hospitality Group, Inc. 2018 Omnibus Incentive Plan.”
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The Board of Directors recommends you vote FOR
all nominees in proposal 1 and FOR proposals 2,
3 and 4.
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1.
| | Election of Directors | | | | 77 | | Nasdaq: RUTH | | | | |
| | Nominees | | For | | Against | | Abstain | | | | |
1a.
| | Michael P. O’Donnell | | ☐ | | ☐ | | ☐ | | | | | | For | | Against | | Abstain | |
1b.
| | Robin P. Selati
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| | 2. | | Approval of the advisory resolution on the compensation of the Company’s named executive officers. | | ☐ | | ☐ | | ☐ | |
1c.
| | Giannella Alvarez | | ☐ | | ☐ | | ☐ | | | | | | | | | | | |
1d.
| | Mary L. Baglivo
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| | 3.
| | Approval of the Company’s 2018 Omnibus Incentive Plan.
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1e.
| | Carla R. Cooper
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| | 4.
| | Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2018.
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1f.
| | Stephen M. King
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please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or
partnership, please sign in full corporate or partnership name by authorized officer.
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