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2016 MSU Grant. Under the 2016 MSU Grant, the executive officer is eligible to receive a target award of MSUs that is calculated by dividing (i) the product of (x) the executive’s MSU Percentage for the plan year multiplied by (y) his or her base salary at the time the MSU Grant target award is determined by (ii) the average closing price of the Company’s common stock during the last 30 calendar days of fiscal 2015 and the first 30 calendar days of fiscal 2016, which was $150.835. Under the 2016 MSU grant, the MSUs will vest so long as the participant remains with the Company until the end of the three-year period. The ultimate number of MSUs received will vary based on change in the Company’s cumulative TSR over the same three-year period. The number of MSUs possible can range from 0 to 150% of the target number of shares. Actual awards based on these targets are distributable at the end of the performance period and are forfeited (with the exception of awards granted to Ms. Cochran) if, prior to that time, a participant is terminated or voluntarily resigns (other than as a result of retirement by an individual who meets the retirement-eligible conditions of 60 years of age and at least five years of service, for which such awards will be prorated for time served and based on actual performance determined at the end of the performance period). No MSUs will be earned unless a pre-established operating income performance threshold is achieved.
Each Named Executive Officer’s target and maximum eligible award under the 2016 MSU Grant are as follows:
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Payment of 2014 MSU Grants
On September 15, 2016, the Compensation Committee reviewed and certified the awards granted to executive officers under the 2014 MSU (the “2014 MSU Grants”). The performance metric for MSU awards is the Company’s cumulative TSR for the period, which is calculated as follows:
(Change in price of our common stock during 3-year performance period + dividends paid during 3-year performance period)
Price of our common stock at the start of the performance period
The Company achieved positive change in cumulative TSR of 78.31% for the three-year performance period of fiscal years 2014, 2015 and 2016, resulting in 2014 MSU Grants that were capped at the maximum possible award amount of 150% of the target number of 2014 MSU Grants originally allocated in fiscal 2014. Under the terms of the plan, an increase in cumulative TSR of 50% or more from the beginning of the three-year performance period results in a maximum award payment of 150% of target shares.
Market Stock Units (MSU)
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Payment of 2015 LTPP Awards
On September 15, 2016, the Compensation Committee reviewed and certified the awards granted to executive officers under the 2015 LTPP (the “2015 LTPP Awards”). The Compensation Committee set a cumulative ROIC target under the 2015 LTPP of 19.07% for the two-year performance period of fiscal years 2015 and 2016. The Company achieved a cumulative ROIC of 21.69% for this two-year performance period, resulting in 2015 LTPP Awards that were 188.65% of the target number of 2015 LTPP Awards originally allocated in fiscal 2015.
Long-term Performance Plan (LTPP)
Illustrative Award Curve
The performance metric for LTPP awards is an internal ROIC-based metric to measure effective returns from working capital and capital investments. For the purposes of the 2015 LTPP Awards, the Company achieved a 21.69% ROIC during the applicable two-year performance period. The Company calculates ROIC as follows:
The average fiscal year end balance for 2015 and 2016 adjusted operating incomes + rents
The average for fiscal years 2014, 2015 and 2016 of
(Inventory + Net Property Held for Sale – Accounts Payable + Net PP&E + Capitalized leases)
Health and Welfare Benefits
We offer a group insurance program consisting of life, disability and health insurance benefit plans that cover all full-time management and administrative employees and a supplemental group term life insurance program, which covers our Named Executive Officers and certain other management personnel. Aside from the annual recalibration of benefit costs and the associated premium changes that affect all participants, no significant changes were made to our health and welfare benefits for our Named Executive Officers during 2016.
Severance and Change in Control Provisions
None of our current Named Executive Officers has an employment agreement, other than Ms. Cochran, whose agreement is described beginning on page 38 of this proxy statement and governs her arrangement relating to severance and/or a change in control of the Company.
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All of our other Named Executive Officers have entered into management retention agreements. Under these agreements, which expire in May 2018, such Named Executive Officers receive severance benefits of 12-18 months’ base salary, depending on their length of service, as a result of termination of their employment by the Company other than for “cause” (as defined in the agreements). In addition, these management retention agreements contain certain change in control provisions that require a “double trigger” (change in control of the Company coupled with termination of employment without cause or for “good reason” (as defined in the agreements)) before the Named Executive Officer will receive the following benefits:
These agreements do not contain an “evergreen” feature (i.e., they do not automatically renew) and do not provide for excise tax gross-up protection.
Potential payments pursuant to these agreements under various termination scenarios are more fully described under “—C OMPENSATION T ABLES AND I NFORMATION —Potential Payments Upon Termination or Change in Control” below, including the table on page 37 of this proxy statement.
Additionally, these agreements obligate such Named Executive Officers (i) not to work as an employee or consultant for any “multi-unit restaurant business that offers full service family or casual dining” for a period of one year following the severance event and (ii) not to solicit the employees or customers of the Company for a period of 18 months following the severance event.
These agreements are intended to ensure that the Company will have the continued dedication, undivided loyalty, and objective advice and counsel from these key executives in the event of a proposed transaction, or the threat of a transaction, which could result in a change in control of the Company. When establishing our management retention agreements, the Compensation Committee intended to provide our Named Executive Officers with adequate financial security so that they could focus on achieving successful business continuity. We believe that the provision of severance and benefits and change in control protection for our Named Executive Officers is consistent with market practice, is a valuable executive talent retention provision, and is consistent with the objectives of our overall executive compensation program.
We provide very limited perquisites and other benefits to our Named Executive Officers aside from participation in benefit plans that are broadly applicable to our full-time employees. Any perquisites that are received by Named Executive Officers are reflected in the Summary Compensation Table on pages 31 and 32 of this proxy statement under the “All Other Compensation” column and related footnote. In particular: