UNITED STATES
SECURITIES AND EXCHANGE COMMISSION​

Washington, D.C. 20549

SCHEDULE 14A​

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

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The Cheesecake Factory Incorporated

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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No fee required.

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Fee paid previously with preliminary materials.

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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

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April 7, 2022

Dear Stockholder:

You are cordially invited to virtually attend The Cheesecake Factory Incorporated, a Delaware corporation (the “Company” and “we,” “us” or “our”), annual meeting of stockholders on Thursday, May 19, 2022 at 10:00 a.m., Pacific Daylight Time (“Annual Meeting”). We are holding a virtual-only meeting. Stockholders can attend the Annual Meeting via the Internet at www.virtualshareholdermeeting.com/​CAKE2022 by using the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials. The matters to be acted upon at the Annual Meeting are described in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.

Pursuant to rules adopted by the Securities and Exchange Commission, we are providing you access to our proxy materials over the Internet. This method allows us to deliver the proxy materials to you more quickly, lowers our costs and helps to conserve natural resources. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (“Notice of Availability”) to our stockholders who have not asked us to provide proxy materials in printed form. All stockholders receiving the Notice of Availability can request a printed set of proxy materials. All stockholders can access the proxy materials at www.proxyvote.com, irrespective of whether they receive the Notice of Availability or a printed copy of the proxy materials. Instructions on how to access the proxy materials online or request a printed copy may be found in the Notice of Availability and in the attached Proxy Statement. In addition, stockholders may request proxy materials in printed form by mail or electronically by email on an ongoing basis.

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting via the Internet, we urge you to vote and submit your proxy online, by telephone or by mail (see below for instructions) in order to ensure the presence of a quorum. If you attend the Annual Meeting, you will have the right to revoke your proxy and vote your shares via the Internet. If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares. Additionally, if you hold your shares through an account with a brokerage firm, bank or other nominee, you may not vote these shares online at the Annual Meeting unless you obtain a “legal proxy” from the organization that holds your shares, giving you the right to vote the shares at the Annual Meeting.

Sincerely,

/s/ David Overton
Chairman of the Board and Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to Be Held on May 19, 2022:
The Proxy Statement and Annual Report to Stockholders are available at www.proxyvote.com.

 

 

THE CHEESECAKE FACTORY INCORPORATED​

26901 Malibu Hills Road
Calabasas Hills, California 91301

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
on
May 19, 2022

The 2022 annual meeting of stockholders of The Cheesecake Factory Incorporated, a Delaware corporation (the “Company” and “we,” “us” or “our”), will be held virtually at www.virtualshareholdermeeting.com/CAKE2022, on Thursday, May 19, 2022, beginning at 10:00 a.m., Pacific Daylight Time (“Annual Meeting”), for the following purposes:

1.

To elect ten (10) nominees to serve as directors of the Company for a term to expire at the Company’s 2023 annual meeting of stockholders or until their respective successors shall be elected and qualified;

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2.

To ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2022, ending January 3, 2023;

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3.

To approve the amendment to The Cheesecake Factory Incorporated Stock Incentive Plan (the “Amendment”);

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4.

To approve, on a non-binding, advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission;

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5.

To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

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There will be no physical meeting location. The meeting will only be conducted via a webcast. The Board of Directors has fixed the close of business on March 23, 2022 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.

By Order of the Board of Directors,

/s/ Scarlett May
Secretary

Calabasas Hills, California
April 7, 2022

 

 

TABLE OF CONTENTS

 

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THE CHEESECAKE FACTORY INCORPORATED

PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON May 19, 2022

INTRODUCTION

General

This Proxy Statement is furnished to the stockholders of The Cheesecake Factory Incorporated, a Delaware corporation (the “Company” and “we,” “us” or “our”), in connection with the solicitation of proxies by our Board of Directors (“Board”) for use at the annual meeting of stockholders to be held virtually at www.virtualshareholdermeeting.com/CAKE2022, on Thursday, May 19, 2022, beginning at 10:00 a.m., Pacific Daylight Time, and at any adjournment or postponement thereof  (“Annual Meeting”). There will be no physical meeting location. The meeting will only be conducted via a webcast. We intend this Proxy Statement and proxy voting materials to be available to stockholders on or about April 8, 2022.

Internet Availability of Proxy Materials

The Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 28, 2021 (the “Annual Report”) are available at www.proxyvote.com.

Householding of Proxy Materials

Pursuant to the rules adopted by the Securities and Exchange Commission (the “SEC”), we may deliver one copy of each of the Notice of Annual Meeting, this Proxy Statement and Annual Report to two or more stockholders sharing the same address. This process, which is commonly referred to as “householding,” helps lower our costs and conserve natural resources. In accordance with these rules, only one Proxy Statement and Annual Report, or Notice of Availability, will be delivered to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Proxy Statement and Annual Report, or Notice of Availability, please notify your broker or direct your written request to Etienne Marcus, Vice President of Finance and Investor Relations, The Cheesecake Factory Incorporated, 26901 Malibu Hills Road, Calabasas Hills, California 91301, (818) 871-3000. Stockholders who currently receive multiple copies of the Proxy Statement and Annual Report, or Notice of Availability, at their address and would like to request “householding” of their communications should contact their broker.

Voting; Quorum; Abstentions and Broker Non-Votes

As of the close of business on March 23, 2022, the record date fixed by the Board for the Annual Meeting (“Record Date”), 52,751,228 shares of our common stock were outstanding, and there were no outstanding shares of any other class of stock. Each holder of common stock as of the Record Date is entitled to one vote for each share of common stock held of record. Only stockholders of record at the close of business on March 23, 2022 will be entitled to notice of and to vote at the Annual Meeting or any postponement or adjournment thereof. Stockholders do not have cumulative voting rights and will not be entitled to appraisal or similar dissenters’ rights in connection with the proposals to be voted on at the Annual Meeting.

The representation of a majority of the shares entitled to vote at the Annual Meeting, present in person (including via the virtual platform) or represented by proxy will represent a quorum for the transaction of business. Shares of common stock represented by a properly signed and returned proxy will be treated as present at the Annual Meeting for purposes of determining a quorum, regardless of whether the proxy is marked as casting a vote or abstaining or constitutes a broker non-vote. Brokers or other nominees may not vote on non-routine matters without instructions from beneficial owners. As a result, if you are a beneficial

 

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owner and do not instruct your broker or other nominee how to vote on a non-routine matter, your broker or other nominee will not vote for you. A “broker non-vote” occurs when a broker or other nominee does not receive voting instructions from the beneficial owner and is not otherwise permitted to vote the underlying shares on a given matter.

For Proposal 1, our Bylaws provide that, in the election of directors, nominees shall be elected by a plurality of the votes cast by the holders of shares entitled to vote thereon, present in person (including via the virtual platform) or represented by proxy at the Annual Meeting; provided, that each nominee has agreed that if elected, he or she will submit an irrevocable resignation for consideration by the Board promptly following an uncontested election if he or she fails to receive a majority of votes cast. An uncontested election (such as the election held at this Annual Meeting) means that the number of nominees for director does not exceed the number of directors to be elected at that meeting. A majority of votes cast means that the number of shares cast “FOR” a nominee’s election exceeds the number of votes cast “AGAINST” that nominee. Abstentions are not considered votes cast and, therefore, will have no effect on the outcome of the vote. The election of directors is not a routine matter under applicable rules. As a result, there may be broker non-votes on Proposal 1. However, broker non-votes are not considered votes cast and, therefore, will have no effect on the outcome of the vote.

Proposals 2, 3 and 4 require the approval of a majority of the outstanding shares of stock present in person (including via the virtual platform) or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions as to these proposals will count as shares present and entitled to vote on the proposals and, accordingly, will count as votes “AGAINST” the proposal. The ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year 2022 (Proposal 2) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected on Proposal 2. Proposals 3 and 4 are not routine matters under applicable rules. As a result, there may be broker non-votes on Proposals 3 and 4. However, broker non-votes are not considered shares entitled to vote on these proposals and will have no effect on the outcome of the vote on these proposals.

How to Vote at the Annual Meeting

If you are the record holder of your stock as of the Record Date, you may submit a proxy by executing and returning the enclosed proxy card(s) in the provided postage-paid envelope. You may also attend the Annual Meeting virtually and vote your shares at www.virtualshareholdermeeting.com/CAKE2022 during the Annual Meeting. You will need the 16-digit control number which appears on your proxy card (printed in the box and marked by the arrow) and the instructions that accompanied your proxy materials.

If a bank, broker or other nominee is the record holder of your stock on the Record Date, you will be able to vote by following the instructions on the voting instruction form or notice that you receive from your bank, broker or other nominee. If a bank, broker or other nominee is the record holder of your stock on the Record Date you must obtain and submit a legal proxy from your broker or other nominee as the record holder and a letter from your broker or other nominee showing that you were the beneficial owner of your shares on the Record Date.

Proxies

Proxies delivered pursuant to this solicitation are revocable prior to their exercise and at the stockholder’s option by (i) attending and voting at the Annual Meeting (which will be held virtually), as described above (although attending the Annual Meeting via the Internet itself will not revoke a proxy), or (ii) filing a written notice with Scarlett May, our Secretary, revoking the proxy, or (iii) submitting another duly executed proxy bearing a later date. Unless previously revoked, all proxies representing shares entitled to vote delivered pursuant to this solicitation will be voted at the Annual Meeting by the named attorneys-in-fact and agents, to the extent authorized, in accordance with the directions contained therein.

If no directions are given, the shares represented by such proxies will be voted:

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FOR the election of the Board’s nominees for director: Mses. Edie A. Ames, Khanh Collins and Janice L. Meyer and Messrs. Alexander L. Cappello, Paul D. Ginsberg, Jerome I. Kransdorf, Laurence B. Mindel, David Overton, David B. Pittaway and Herbert Simon;

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FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2022, ending January 3, 2023;

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FOR approval of the Amendment; and

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FOR approval of, on a non-binding, advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the SEC.

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The named proxy holders may vote in their discretion upon such other matters as may properly come before the Annual Meeting, including any motion made for adjournment or postponement (including for purposes of soliciting additional votes).

How do I attend the Annual Meeting?

The live audio webcast of the Annual Meeting will begin promptly at 10:00 a.m. Pacific Daylight Time on May 19, 2022. Online access to the audio webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for our stockholders to log in and test their devices’ audio system. We encourage our stockholders to access the meeting in advance of the designated start time. If you encounter any difficulties accessing the webcast, please call the technical support number that will be posted on the Virtual Shareholder Meeting login page.

To attend the Annual Meeting, stockholders will need to log-in to www.virtualshareholdermeeting.com/​CAKE2022 using the 16-digit control number on the proxy card or voting instruction form.

Can I submit questions prior to or at the Annual Meeting?

Stockholders may submit questions in writing in advance or during the Annual Meeting at the following website: www.virtualshareholdermeeting.com/CAKE2022. Stockholders will need the 16-digit control number which appears on their proxy card (printed in the box and marked by the arrow) and the instructions that accompanied their proxy materials. As part of the Annual Meeting, we will hold a live Q&A session, during which we will answer questions pertinent to the Company and the meeting matters, as time permits.

Solicitation

We pay for the cost of preparing, assembling and mailing the Notice of Internet Availability, the Notice of Annual Meeting and Proxy Statement and the cost of this solicitation. Our directors, officers and other staff members may solicit proxies, without additional remuneration, in person or by telephone, facsimile or email transmission. Banks, brokerage houses and other custodians, nominees or fiduciaries will be asked to forward soliciting material to their principals and to obtain authorization for the execution of proxies, and we will reimburse them for their reasonable out-of-pocket expenses incurred in that regard.

 

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ITEMS TO BE VOTED ON

PROPOSAL ONE
Election of Directors

General.   Our Bylaws provide for a board of directors consisting of no less than five and no more than thirteen members. The exact number within this range is determined by resolution of the Board. The Board currently has set the number of directors at ten.

Nominees.   Our Director nominees exhibit diverse backgrounds, experience, skills, tenure and perspectives that uniquely contribute to the success of our business.

BOARD DIVERSITY MATRIX

The Corporate Governance and Nominating Committee of the Board (“Governance Committee”) recommended the nomination, which the Board approved, of the following individuals for re-election to the Board for a term that will expire at the 2023 annual meeting of stockholders or until their respective successors shall be elected and duly qualified: Edie A. Ames; Alexander L. Cappello; Khanh Collins; Paul D. Ginsberg, Jerome I. Kransdorf; Janice L. Meyer; Laurence B. Mindel; David Overton; David B. Pittaway; and Herbert Simon. All nominees are current directors of the Company. For biographical information regarding the director nominees, please see the section entitled “Our Board of Director Nominees” in this Proxy Statement.

Unless a stockholder specifies otherwise, the shares represented by each returned proxy will be voted FOR the election of Mses. Edie A. Ames, Khanh Collins and Janice L. Meyer, and Messrs. Alexander L. Cappello, Paul D. Ginsberg, Jerome I. Kransdorf, Laurence B. Mindel, David Overton, David B. Pittaway and Herbert Simon.

In the event any of the nominees becomes unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders will vote the proxies for any substitute nominee designated by the Board to fill the vacancy.

Required Vote.   Our Bylaws provide that, in the election of directors, nominees shall be elected by a plurality of the votes cast by the holders of shares present in person (including via the virtual platform) or represented by proxy at the Annual Meeting; provided that each nominee must agree that, in an uncontested election, if elected, he or she will submit an irrevocable resignation for consideration by the Board promptly

 

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following the election if he or she fails to receive a majority of votes cast. Each of the nominees included in this proposal has so agreed. An uncontested election (such as the election held at this Annual Meeting) means that the number of nominees for director does not exceed the number of directors to be elected at that meeting. A majority of votes cast means that the number of shares cast “FOR” a nominee’s election exceeds the number of votes cast “AGAINST” that nominee. Abstentions and broker non-votes are not considered votes cast and, therefore, will have no effect on the outcome of the vote.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EDIE A. AMES, ALEXANDER L. CAPPELLO, KHANH COLLINS, PAUL D. GINSBERG, JEROME I. KRANSDORF, LAURENCE B. MINDEL, JANICE L. MEYER, DAVID OVERTON, DAVID B. PITTAWAY AND HERBERT SIMON TO THE BOARD.

 

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PROPOSAL TWO
Ratification of Selection of Independent Registered Public Accounting Firm

The Audit Committee of our Board (“Audit Committee”) has selected KPMG LLP (“KPMG”) as our independent registered public accounting firm to conduct the audit of our books and records for the fiscal year ending January 3, 2023. KPMG has served as our independent registered public accounting firm since fiscal year 2018. Representatives of KPMG are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire.

Although our governing documents do not require us to submit this matter to stockholders, the Board believes that asking stockholders to ratify the appointment is consistent with best practices in corporate governance. If stockholders do not ratify the selection of KPMG, the Audit Committee will regard such vote as a direction to consider the selection of a different independent registered public accounting firm. Even if the selection of KPMG is ratified by the stockholders, the Audit Committee has the discretion to select a different independent registered public accounting firm at any time if it determines that a change would be in our and our stockholders’ best interests.

Independent Registered Public Accounting Firm Fees and Services.   The following table shows the fees for professional services by KPMG for the audit of our annual financial statements for the fiscal years ended December 28, 2021 and December 29, 2020, and fees for other services rendered by KPMG during that period. There were no fees related to tax compliance, advice or planning.

(1)

Audit Fees represent fees for the audit of our annual financial statements, reviews of the related quarterly financial statements and services normally provided by the independent accountants in connection with statutory and regulatory filings or engagements, including reviews of documents filed with the SEC and costs associated with our issuance of convertible debt and common stock.

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(2)

All Other Fees represent fees for access to KPMG’s accounting literature research tool and accounting advisory services.

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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Our Independent Registered Public Accounting Firm.   The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of our independent registered public accounting firm. The Audit Committee also evaluates our independent registered public accounting firm’s lead engagement partner, who is rotated every five years. The Audit Committee’s charter grants to the Audit Committee sole authority to approve the independent auditor’s fee arrangements and other terms of service, and to preapprove any permitted non-audit services to be provided by the independent auditor. The charter allows the Audit Committee to delegate the preapproval of audit and permitted non-audit services to one or more of its members, provided that such members shall report any such approvals to the full Audit Committee at its next regularly scheduled meeting. The Audit Committee considers whether such services are consistent with SEC rules on auditor independence as well as whether the independent auditor can provide the most effective and efficient service, for reasons such as familiarity with our business, staff members, culture, accounting systems, risk profile and other factors, and input from our management. The Audit Committee delegated the authority to address any requests for pre-approval of services between Audit Committee meetings to its Chair, provided that the amount of such fees for both audit and non-audit accounting services requested does not exceed $25,000 per fiscal quarter. The Chair is also required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee’s charter does not provide the Audit Committee with authority to delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the independent registered public accounting firm. The waiver of pre-approval provisions set forth in applicable rules of the SEC was not used to approve any of the services described above in fiscal 2021.

 

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Required Vote.   The ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2022 requires the affirmative vote of a majority of the shares present in person (including via the virtual platform) or by proxy and entitled to vote on the proposal at the Annual Meeting. Abstentions will be included in the number of shares present and entitled to vote on this Proposal 2 and will have the effect of a vote “AGAINST” Proposal 2. This Proposal 2 is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected on Proposal 2.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF KPMG AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2022.

 

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PROPOSAL THREE
Approval of the Amendment to the Stock Plan

Summary.

On April 4, 2019 the Board adopted, and, on May 30, 2019, our stockholders approved, The Cheesecake Factory Incorporated Stock Incentive Plan (the “Stock Plan”). The maximum number of common shares that can be issued under the Stock Plan is 4,800,000 plus any shares which, as of the effective date of the Stock Plan were available for issuance under our 2010 Stock Incentive Plan (as amended, the “2010 Stock Plan”) (1,784,569 shares) or were subject to awards under the 2010 Stock Plan which are forfeited or lapse unexercised and which following the effective date of the Stock Plan are not issued under the 2010 Stock Plan. The Stock Plan authorizes the Compensation Committee of the Board to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock and restricted stock units structured by the Compensation Committee within parameters set forth in the Stock Plan, for the purpose of providing equity compensation, incentives and rewards for superior performance to our employees, non-employee directors, and consultants.

Our Board believes that a balanced approach to compensation requires both short-term and long-term incentives. We provide long-term incentives in the form of equity compensation, which we believe aligns management’s interests with the interests of our stockholders and fosters an ownership mentality that drives optimal decision-making for the long-term health and profitability of our Company. Equally important, equity compensation is critical to our continuing ability to attract, retain and motivate qualified corporate executives and restaurant management, as well as other restaurant, bakery and corporate employees. Utilizing equity compensation as a part of our total compensation strategy has been important to our past success, and we expect it to be crucial to achieving our long-term growth strategy. However, the current authorized share reserve under the Stock Plan is limited, and we project that the current share reserve will provide only enough shares for us to grant equity compensation in accordance with our total compensation strategy through the end of fiscal 2023 based on the current scope and structure of our equity incentive programs and the rate at which we expect to grant awards under the Amended Plan.

Accordingly, on March 24, 2022 our Board adopted the First Amendment to the Stock Plan (the “Amendment”), subject to approval by the stockholders. The Stock Plan as amended by the Amendment is hereinafter referred to as the “Amended Plan.” As more fully described below and if approved by the stockholders, the Amendment will:

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Increase the aggregate number of shares authorized for issuance pursuant to the Stock Plan by 2,350,000 shares, from 4,800,000 shares to 7,150,000 shares (the “Share Reserve Increase”); and

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Increase the limit on the number of shares that may be granted pursuant to (i) options and stock appreciation rights (“SARs”) to 600,000 and (ii) restricted stock and restricted stock units awards to 300,000 in each case, to an individual employee in any fiscal year; and

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Eliminate general references to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) other than certain provisions intended to ensure good governance.

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The complete text of the Amended Plan is attached as Appendix C to this Proxy Statement. Stockholders are urged to review the Amended Plan, together with the following information, which is qualified in its entirety by reference to Appendix C. If there is any inconsistency between this Proposal 3 and the Amended Plan terms, or if there is any inaccuracy in this Proposal 3, the terms of the Amended Plan shall govern.

Background for the Amendment.   As of March 23, 2022, the Record Date, the following equity awards were outstanding under the 2010 Stock Plan and the Stock Plan (the Stock Plan is our only active plan under which we can grant equity-based awards):

 

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The share amounts in the above table represent the actual number of shares and do not reflect the Stock Plan fungible share counting methodology which is described below in the “Shares Subject to the Amended Plan” section.

The proposed Amendment is intended to, among other things, provide us with a sufficient number of shares to satisfy our equity grant requirements until at least our 2025 annual meeting of stockholders, based on the current stock price and the 2021 grant activity, although this could vary due to changes in stock price, participation rates, forfeiture rates, new hire and promotional activity and other related factors. If we do not receive approval of the proposed Amendment at this Annual Meeting, we expect to exhaust the shares we have available for grant before the 2024 annual meeting. As a result, if the Amendment is not approved prior to the 2024 annual meeting we would not be able to make our annual equity grants to executives and other key employees in the first fiscal quarter of 2024. Without the ability to grant equity, we would need to shift our historically-successful compensation program from a balanced mix of equity and cash compensation to one that is primarily cash-based. We believe this would be detrimental to our goal of aligning executives and employees’ interests with that of stockholders, as well as negatively impacting our earnings per share growth.

On March 24, 2022, our Board adopted the Amendment subject to approval by the stockholders. The Amendment will, among other things, increase the aggregate number of shares authorized for issuance pursuant to the Amended Plan by 2,350,000 shares from 4,800,000 shares to 7,150,000 shares. This increase in the number of shares available for grant constitutes approximately 4.5% of our issued and outstanding shares of common stock as of the Record Date.

When adopting the Amendment, the Board considered a number of factors, including those set forth below:

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Alignment with our Stockholders.   Achieving superior, long-term results for our stockholders remains one of our primary objectives. In order for our employees to think and act like owners, we use equity as a central component of our overall compensation strategy at multiple levels of management within our Company. We believe that stock ownership enhances the alignment of the long-term economic interests of our employees and our stockholders.

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We historically grant our annual equity awards in the first quarter of each fiscal year, which is also when we determine other components of compensation. We make additional grants periodically in connection with corporate management promotions, new hires and restaurant management entry into our Managing Equity Program, the program under which we grant equity awards to our General Managers (“GM”), Executive Kitchen Managers (“EKM”), Area Directors of Operation (“ADO”) and Area Kitchen Operations Managers (“AKOM”) who satisfy all applicable eligibility requirements of the program. As of March 23, 2022, the Record date, only 2,809,014 unissued shares were available for future equity grants under the Stock Plan (such share amount does not reflect the Stock Plan fungible share counting methodology which is described below in the “Shares Subject to the Stock Plan” section). We project that between our 2022 Annual Meeting and 2023 annual meeting, awards covering approximately 1,700,000 shares (applying the Stock Plan’s fungible share counting methodology) will be granted under the Stock Plan. If the Amendment is not approved by stockholders, we project that we would be unable to grant equity as part of our total compensation strategy by the first quarter of fiscal 2024. As a result, our ability to maintain our total compensation strategy, including adequately planning for annual grants in fiscal 2024 would be jeopardized. If we are unable to continue our current equity compensation program, our ability to align our employees’ long-term economic interests with those of our stockholders will be significantly hampered.

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Attract, Motivate and Retain High Performers.   We compete for corporate and restaurant management talent in a variety of geographic and talent markets and strive to maintain compensation programs that are competitive in our industry in order to attract, motivate and retain high performers. Our use of equity compensation is not limited to corporate executives, but also extends to our restaurant management personnel, specifically our GMs and EKMs — the individuals responsible for the day-to-day operations in our restaurants. As of the Record Date, approximately 625 corporate

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executives, restaurant management, bakery management and corporate support staff members have outstanding equity awards under the Stock Plan. We believe that the equity component of our total compensation package contributes to the retention of these talented employees and helps us maintain one of the lowest turnover rates in our industry for these positions. If we are unable to grant equity as part of our overall compensation strategy due to the lack of adequate share authorization under our Stock Plan, we may not be able to effectively attract and retain the talented individuals we rely on to successfully operate our business.

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Equity vs. Cash Compensation.   If the proposed Amendment is not approved by stockholders in 2022, we will need to substantially alter our historically-successful compensation program which includes equity as well as cash compensation. If we adopt alternative compensation programs that are more cash-based, we believe that the level of cash compensation required to offset the lack of availability of equity grants could result in (i) an increase in our compensation costs, which would be detrimental to our future operating results, and (ii) a decrease in our cash flow, which would reduce the cash available to return to stockholders through such things as dividends and share repurchase plans.

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Balanced Approach to Compensation.   We believe that a balanced approach to compensation — using a mix of salaries, performance-based bonus incentives and long-term equity incentives (including performance-based equity) — encourages management to make decisions that favor long-term stability and profitability, rather than short-term results. If the proposed Amendment is not approved by stockholders, our ability to continue to retain this balanced approach to compensation would be hampered.

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Burn Rate and Dilution.   When determining the number of additional shares to make available for grant under the Stock Plan, the Board evaluated the current number of shares available to grant, our projected need for equity grants over the next four years, our three-year historical average and our most current fiscal year burn rates and the dilutive impact of the proposed share increase.

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Burn rate is the ratio of the number of shares underlying awards granted in a given year (with the number of full-value awards adjusted as described below) to the number of weighted average shares outstanding for the corresponding fiscal year expressed as a percentage. Grants of full-value awards (e.g., restricted stock or stock units) are adjusted in this computation and are multiplied by a factor based on our stock price volatility. Canceled or forfeited equity compensation awards are excluded from this calculation. Our three-year average burn rate for fiscal years 2021, 2020 and 2019 is 2.91% versus an industry cap of 3.7%, as set forth by ISS for 2022. Additionally, our one-year burn rate was 2.09% using the same methodology. We estimate that based on our projected share usage for fiscal 2022, our current year burn rate will remain about the same as the prior year. Therefore, the Board determined that our current and projected rates of equity compensation usage are reasonable.

In addition, the Board considered whether the potential dilutive effect to stockholders is reasonable. Dilution is calculated by adding the number of shares subject to outstanding awards plus shares available to grant plus the proposed additional shares and expressing such sum as a percentage of the total number of diluted outstanding shares. The Board considered that if we were to increase the number of shares available under the Stock Plan by 2,350,000 shares (which itself represents only 4.5% of our total number of outstanding shares as of the Record Date), from 4,800,000 shares to 7,150,000 shares, dilution would be approximately 17.5% for 2021 including this new request. This represents a decrease from 22.2% dilution in 2020 and an increase from 8.2% dilution in 2019.

The material features of the Amended Plan are summarized below. This summary is not intended to be complete and is qualified in its entirety by reference to the full text of the Amended Plan. A copy of the Amendment is attached to this proxy statement as Appendix B and you are advised to review the actual terms of the Amendment. A copy of the Amended Plan is attached to this proxy statement at Appendix C.

Summary of the Stock Plan as Amended.

Background and Purpose of the Amended Plan.   The purpose of the Amended Plan is to promote our long-term success and the creation of stockholder value by:

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Attracting and retaining the services of employees, non-employee-directors, consultants and certain key service providers who may be eligible to receive grants under the Amended Plan,

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•

Aligning the interests of eligible employees, non-employee directors and consultants selected to receive grants under the Amended Plan (“Selected Individuals”) with the interests of our stockholders through compensation that is based upon the performance of our common stock,

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•

Motivating Selected Individuals to achieve long-term performance goals,

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•

Providing a vehicle to grant equity compensation awards, which allows us to provide a balanced mix of compensation to our Selected Individuals, and

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•

Providing a long-term compensation program that is competitive compared to other companies.

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Eligibility to Receive Awards.   Our employees, non-employee directors and consultants, and employees and consultants of our parents, subsidiaries and affiliates, are eligible to receive awards under the Amended Plan. As of March 23, 2022, we had approximately 800 employees, nine non-employee directors and no consultants eligible to participate in the Amended Plan. The Stock Plan Committee (defined below) determines, in its discretion, the Selected Individuals to be granted awards under the Amended Plan.

Shares Subject to the Amended Plan.   If stockholders approve the proposed Amendment, the maximum number of common shares that can be issued under the Amended Plan (the “Share Issuance Limit”) will increase by 2,350,000 shares, from 4,800,000 shares to 7,150,000 shares, plus any shares which, as of the date on which the Stock Plan originally became effective, were available for issuance under the 2010 Stock Plan or were subject to awards under the 2010 Stock Plan which are forfeited or lapse unexercised and which following the Effective Date are not issued under the 2010 Stock Plan (the “Share Issuance Limit”). We recognize the greater intrinsic value of restricted stock and stock units and, accordingly, we designed the Amended Plan with a fungible share counting methodology such that shares issued as restricted stock and stock units, and which are not forfeited, count as two shares against this limit. The number of shares available for issuance shall be reduced: by one share for each share issued pursuant to an exercise of an option or a SAR and by two shares for each share issued pursuant to a restricted stock grant or settlement of stock units. In addition, the following shares shall count against the Share Issuance Limit to the same extent as if the shares had been issued: (i) shares tendered or not issued or delivered as a result of the net settlement of an outstanding option, (ii) shares tendered or withheld to pay the withholding taxes related to an outstanding award, (iii) shares subject to a SAR that are not issued in connection with its stock settlement on exercise thereof; or (iv) shares repurchased on the open market with the proceeds of an option’s exercise price. If restricted stock grants or 2010 Stock Plan awards are forfeited, settled in cash, or are terminated for any reason other than being exercised (in whole or in part), then the shares underlying such awards shall become available for issuance under the Amended Plan. Any shares that are added to the Share Issuance Limit shall be added as one share for every one share subject to an option or stock appreciation right granted under the 2010 Stock Plan and as two shares for every share subject to a restricted stock grant or award other than an option or stock appreciation right under the 2010 Stock Plan.

Award Vesting Limitations.   The award agreement that evidences an award granted pursuant to the Amended Plan must provide that such award (or any portion thereof) shall vest no earlier than the first anniversary of the date the award is granted; provided, however, that: (i) awards that result in the issuance of an aggregate of up to 5% of the shares available for issuance as of the effective date of the Amended Plan may be granted without respect to such minimum vesting requirement; and (ii) awards to non-employee directors may vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of shareholders (provided that such vesting period may not be less than 50 weeks after grant). The Stock Plan Committee may also provide in an award agreement that the award will accelerate in the event of a participant’s death, disability or other terminations of service.

Administration of the Amended Plan.   The Amended Plan is administered by a committee (the “Stock Plan Committee”) of the Board. To the extent required, the Stock Plan Committee shall have membership composition which enables grants of awards to Section 16 persons to qualify as exempt from liability under Section 16(b) of the Exchange Act.

The Board has designated its Compensation Committee as the Stock Plan Committee, all of whose members are independent directors in accordance with the Nasdaq Listing Rules; however the Board may reassume administration of the Amended Plan. With respect to awards granted to our non-employee directors, the full Board, acting by majority, will administer the Stock Plan. Subject to the terms of the

 

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Amended Plan, the Stock Plan Committee (or the full Board in the case of awards to non-employee directors) has the sole discretion, among other things, to:

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Determine who will qualify as Selected Individuals,

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Determine the terms and conditions of awards (for example, performance conditions, if any, and vesting schedule),

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Correct any defect, supply any omission or reconcile any inconsistency in the Amended Plan or any award agreement,

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•

Accelerate the vesting, extend the post-termination exercise term or waive restrictions of any awards at any time and under such terms and conditions as it deems appropriate, subject to the limitations set forth in the Amended Plan,

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•

Interpret the provisions of the Amended Plan and outstanding awards, and

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Make all other decisions relating to the operation of the Amended Plan.

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The Stock Plan Committee also may use the Amended Plan to issue shares under plans or subplans as may be deemed necessary or appropriate, such as to provide for participation by non-U.S. employees and those of any of our subsidiaries and affiliates. The Stock Plan Committee may adopt such rules or guidelines, as it deems appropriate to implement the Plan and its determinations (or the Board’s) under the Amended Plan shall be final, conclusive and binding on all persons. The Stock Plan Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend awards or to take other administrative actions pursuant to Amended Plan and to the extent permitted by applicable law; provided, however, that in no event shall an officer of the Company be delegated the authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, or (b) officers of the Company (or non-employee directors) to whom authority to grant or amend awards has been delegated under the Amended Plan.

In addition, awards may be subject to recoupment as required by law or pursuant to Company policies (including without limitation the Company’s Policy on Reimbursement of Incentive Payments and Equity Awards (each, a “Clawback Policy”)), as may be in effect at the time of grant. The members of the Board, the Stock Plan Committee and their delegates are indemnified by the Company to the maximum extent permitted by applicable law for actions taken or not taken with respect to the Amended Plan.

Types of Awards.   The Amended Plan permits the discretionary award of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock, stock units and/or SARs to Selected Individuals. As of the Record Date, the Amended Plan has only included grants of nonqualified stock options, restricted stock and stock units. Awards issued under the Amended Plan are evidenced by a written agreement executed by and between the Company and the Selected Individual. The written agreement recites the specific terms and conditions of the award.

Stock Options.   A stock option is the right to acquire shares at a fixed exercise price over a fixed period of time. The Stock Plan Committee determines the number of shares covered by each stock option and the exercise price of the shares subject to each stock option, provided that the per share exercise price cannot be less than the fair market value of a share of our common stock on the date of grant of the stock option.

Stock options granted under the Amended Plan may be either ISOs or NSOs. As required by the Code and applicable regulations, ISOs may only be granted to our employees or employees of our subsidiaries and are subject to various limitations not imposed on NSOs. For example, the exercise price for any ISO granted to any employee owning more than 10% of our common stock may not be less than 110% of the fair market value of the common stock on the date of grant, and such ISO must expire not later than five years after the grant date. The aggregate fair market value (determined at the date of grant) of common stock subject to all ISOs held by a participant that are first exercisable in any single calendar year cannot exceed $100,000. The Amended Plan provides that no more than 7,150,000 shares may be issued pursuant to the exercise of ISOs.

A stock option granted under the Amended Plan cannot be exercised until it vests. The Stock Plan Committee establishes the vesting schedule of each stock option at the time of grant, subject to the one-year minimum vesting requirement described above. The maximum term for stock options granted under

 

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the Amended Plan is ten years from the date of grant (or five years in the case of ISOs granted to 10% shareholders), although the Stock Plan Committee may establish a shorter period at its discretion. As of the Record Date, no ISOs have been granted under the Stock Plan.

The exercise price of each stock option granted under the Amended Plan must be paid in full at the time of exercise, either with cash, through a broker-assisted “cashless” exercise and sale program, net settlement, surrender of stock, or through another method approved by the Stock Plan Committee. The optionee must pay any taxes that we are required to withhold at the time of exercise. The Company may not, without the approval of our stockholders, (i) lower or reduce the exercise price of outstanding options and/or outstanding SARs for any participant(s) in a manner described by SEC Regulation S-K Item 402(d)(2)(viii) (or as described in any successor definition(s)) or (ii) except in the event of a change in control, exchange, cancel, substitute, buy out or surrender an option or SAR which has an exercise price that is greater than the fair market value for a new Award or for cash.

Restricted Stock.   Awards of restricted stock are shares of common stock that vest in accordance with the terms and conditions established by the Stock Plan Committee. The Stock Plan Committee also determines any other terms and conditions of a restricted stock award, including the vesting period, subject to the one-year minimum vesting requirement described above. In determining whether a restricted stock award should be made, and/or the vesting schedule for any such award, the Stock Plan Committee may impose whatever conditions to vesting it determines to be appropriate, subject to the minimum vesting requirement described above. The Stock Plan Committee may determine that an award of restricted stock will vest only if we satisfy performance goals established by the Stock Plan Committee.

Stock Units.   Stock units are the right to receive an amount of shares or cash or any combination thereof equal to the fair market value of the shares covered by the stock unit at some future date after the grant. The Stock Plan Committee determines all of the terms and conditions of an award of stock units, including the vesting period, subject to the one-year minimum vesting requirement described above. Upon each vesting date of a stock unit, a Selected Individual will be entitled to receive an amount of shares or cash, or any combination thereof, equal to the then fair market value of the shares on the settlement date. The Stock Plan Committee may determine that an award of stock units will vest only if we satisfy performance goals established by the Stock Plan Committee. Settlement of stock units generally occurs within thirty days of vesting, unless the award otherwise provides or the Selected Individual has timely elected to defer such compensation to the extent permitted by the award or a deferred compensation plan of the Company.

Stock Appreciation Rights.   A SAR is the right to receive, upon exercise, an amount equal to the difference between the fair market value of the shares covered by the SAR on the date of exercise and the fair market value of those shares on the date of grant. The Stock Plan Committee determines the terms of SARs, including the exercise price (provided that the exercise price per share may not be less than the fair market value of a share of our common stock on the date of grant), the vesting schedule and the term of the SAR (subject to the one-year minimum vesting requirement described above). The maximum term for SARs granted under the Amended Plan is ten years from the date of grant, subject to the Stock Plan Committee’s discretion to establish a shorter period. The Stock Plan Committee may determine that a SAR will only be exercisable if we satisfy performance goals established by the Stock Plan Committee. The exercise price of outstanding SARs may not be reduced or lowered without the approval of the Company’s stockholders. Settlement of a SAR may be in shares of common stock or in cash, or any combination thereof, as the Stock Plan Committee may determine. As of the Record Date, no SARs have been granted under the Amended Plan.

Other Provisions of the Amended Plan.

Performance Conditions.   The Stock Plan Committee may, in its discretion, include specific performance conditions in awards, including, but not limited to, one or more of the following target objectives involving us or a subsidiary or affiliate of ours: return on equity; earnings per share; net income; earnings per share growth; return on invested capital; return on assets; economic value added; earnings before interest and taxes (“EBIT”); revenue growth; gross margin return on inventory investment; fair market value or price of the Company’s shares (including, but not limited to, growth measures and total stockholder return); operating profit; consolidated income from operations; cash flow (including, but not limited to, cash flow from operations and free cash flow); cash flow return on investments (which equals net cash flow divided by total

 

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capital); internal rate of return; net present value; costs or expenses; market share; guest satisfaction; environmental, social, or governance initiatives; cybersecurity or infrastructure technology initiatives; strategic initiatives; corporate transactions including without limitation mergers, acquisitions, dispositions and/or joint ventures; product development; capital expenditures; earnings before interest, taxes, depreciation and amortization (“EBITDA”), earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”), and/or revenues. The Stock Plan Committee may adjust the evaluation of performance under a performance goal to remove the effects of certain events including the following: asset write-downs or discontinued operations; litigation or claim judgments or settlements; material changes in or provisions under tax law, accounting principles or other such laws or provisions affecting reported results; reorganizations or restructuring programs or divestitures or acquisitions; extraordinary non-recurring items as described in applicable accounting principles and/or items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence; and/or any other items of significant income or expenses which are determined to be appropriate adjustments.

Dividend Rights.   Under the Amended Plan, any dividends (or dividend equivalents) on shares of unvested awards issued under the Amended Plan are accrued rather than paid to the holder and are subject to the same vesting conditions and restrictions as the underlying award with respect to which the dividends (and dividend equivalents) are paid. Accrued dividends (or dividend equivalents) are payable at the time the underlying award vests, and such dividends are forfeited if the grant does not vest according to its terms. Dividend equivalents may not be granted in connection with a stock option or SAR granted under the Amended Plan.

Limited Transferability of Awards.   Awards granted under the Amended Plan generally are not transferrable other than by will. However, the Stock Plan Committee may, in its discretion, permit the transfer of awards other than ISOs. Generally, where transfers are permitted, they will be permitted only by gift to a member of the Selected Individual’s immediate family or to a trust or other entity for the benefit of the Selected Individual and/or members of his or her immediate family. In no event may an award be transferred to a third-party financial institution for value.

Termination of Service.   Unless an applicable award agreement or a Selected Individual’s employment agreement, if any, provides otherwise, the rules of the Amended Plan govern the vesting, exercisability and the term of any outstanding awards held by a Selected Individual who experiences a termination of service. The effect of such rules depends on the cause of a Selected Individual’s termination of service. For instance, a termination of service for cause may be treated differently than a termination of service due to retirement, death or disability, which may be treated differently than a termination of service for any other reason.

Adjustments upon Changes in Capitalization.   In the event of a stock split of our outstanding shares, stock dividend, dividend payable in a form other than shares in an amount that has a material effect on the price of the shares, consolidation, combination or reclassification of the shares, recapitalization, spin-off, or other similar occurrence, the number and class of shares issued under the Amended Plan and subject to each award and any applicable exercise price for any outstanding award, as well as the number and class of shares available for issuance under the Amended Plan and the per-participant fiscal grant limits, shall each be equitably and proportionately adjusted by the Stock Plan Committee.

Change in Control.   In the event of a change in control of the Company, unless otherwise provided in an award agreement or other agreement with the Company, if outstanding awards under the Amended Plan are not continued, converted, assumed or replaced by the surviving or successor entity, then outstanding awards will fully vest immediately prior to such change in control; provided that, to the extent the vesting of any award is subject to the satisfaction of specified performance goals, such award shall vest at the greater of: (i) the target level of performance, pro-rated based on the period elapsed between the beginning of the applicable performance period and the date of the change in control, or (ii) the actual performance level as of the date of the change in control (as determined by the Committee) with respect to all open performance periods (which shall constitute “full vesting”). If outstanding awards are continued assumed or replaced and a participant experiences a termination of service without “cause” or terminates service for “good reason” ​(as defined in the Amended Plan) within twelve months following the change in control, the participant’s awards will vest in full.

 

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Term of the Amended Plan.   The Amended Plan is effective until terminated by the Board. Provided, however, that ISOs may not be issued under the Amended Plan after the tenth anniversary of the date the plan is adopted by the Board. Awards that are outstanding as of the termination of the Amended Plan shall continue to remain outstanding in accordance with their terms.

Governing Law.   The Amended Plan is governed by the laws of the State of Delaware (which is the state of our incorporation), except for conflict of law provisions.

Amendment and Termination of the Amended Plan.   The Board generally may amend or terminate the Amended Plan at any time and for any reason, except that it must obtain stockholder approval as required under the Amended Plan or applicable law.

Limitations on the Magnitude of Grants to Non-Employee Directors.   The Amended Plan provides that the total compensation which any non-employee director may receive in one fiscal year, for their services on the Board or any committee of the Board, including the grant date fair value of any Awards and cash retainers or other fees paid for service, shall not exceed $750,000.

Limitations on the Magnitude of Grants to Individual Employees.   The Amended Plan imposes the following fiscal year grant limits on individual employees’ awards (without giving effect to the Amendment, the limitations below would apply only to awards intended to qualify as performance-based compensation under state law with similar effect to Section 162(m) granted to covered employees):

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Options and SARs.   No selected employee shall receive stock options to purchase SARs during any fiscal year that in the aggregate cover in excess of 600,000 shares (300,000 shares without giving effect to the Amendment).

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Restricted Stock and Stock Units.   No selected employee shall receive restricted stock or stock units during any fiscal year that in the aggregate cover in excess of 300,000 shares (150,000 shares without giving effect to the Amendment).

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The above share grant limits are doubled for awards that are granted (i) in the fiscal year the covered employee commences employment, (ii) to an employee who is promoted to the position of our Chief Executive Officer, or (iii) when an employee first becomes a “covered employee” within the meaning of such state statute.

Features of the Amended Plan.   The Amended Plan includes features designed to protect shareholder interests and reflect our compensation and governance principles, including the following:

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One-Year Minimum Vesting Requirement.   Subject to certain limited exceptions, equity awards are required to have minimum vesting periods that are not less than one year from the date an award is granted.

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No Dividends on Unvested Awards.   Dividends and dividend equivalents are not payable with respect to awards prior to the award becoming vested and are subject to forfeiture to the same extent as the underlying award.

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Director Compensation Limit.   The plan contains an aggregate compensation limit applicable to director equity awards and all other cash compensation payable to each non-employee director of $750,000 per year.

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Individual Award Limits.   No more than 600,000 shares subject to options and stock appreciation rights and no more than 300,000 shares subject to other awards, in each case, may be granted to any individual employee during any calendar year under the plan.

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No Liberal Recycling.   Shares tendered or withheld to cover taxes or pay the exercise of an award count against the share limit under the plan.

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Clawback Policy.   Awards granted under the Amended Plan may be subject to recoupment as required by law or pursuant to the Company’s Clawback Policy, as may be in effect at the time of grant.

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No Discounted Options or Stock Appreciation Rights.   Options and stock appreciation rights must have an exercise price or base price at or above the fair market value per share of our common stock on the date of grant.

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•

Prohibition on Repricing.   The plan prohibits the repricing of stock options and stock appreciation rights without the approval of our shareholders.

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No Single Trigger Acceleration and No Liberal Change-in-Control Definition.   Awards are not automatically vested upon a change in control, and the plan does not contain a “liberal” change in control definition (e.g., mergers require actual consummation).

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No Excise Tax Gross-ups.   The plan does not contain, and we do not provide, any excise tax gross-up payments.

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Transfer Restrictions.   The plan contains robust transfer restrictions, including that no award may be transferred to a third-party financial institution for value.

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Fixed Share Authorization.   The plan has no evergreen feature (i.e., the share request is fixed and can only be increased with shareholder approval).

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Certain Federal Income Tax Information.   The following is a general summary, as of December 28, 2021, of the federal income tax consequences to us and to U.S. participants for awards granted under the Amended Plan. The federal tax laws may change and the federal, state and local tax consequences for any participant will depend upon his or her individual circumstances. This summary is not intended to be exhaustive and does not discuss the tax consequences of a participant’s death or provisions of income tax laws of any municipality, state or other country. We advise participants to consult with a tax advisor regarding the tax implications of their awards under the Amended Plan.

Incentive Stock Options.   For federal income tax purposes, the holder of an ISO has no taxable income at the time of the grant or exercise of the ISO. If such person retains the common stock acquired under the ISO for a period of at least two years after the stock option is granted and one year after the stock option is exercised, any gain upon the subsequent sale of the common stock will be taxed as a long-term capital gain. A participant who disposes of shares acquired by exercise of an ISO prior to the expiration of two years after the stock option is granted or before one year after the stock option is exercised will realize ordinary income equal to the lesser of  (i) the excess of the fair market value over the exercise price of the shares on the date of exercise, or (ii) the excess of the amount realized on the disposition over the exercise price for the shares. Any additional gain or loss recognized upon any later disposition of the shares would be a short- or long-term capital gain or loss, depending on whether the shares have been held by the participant for more than one year. Utilization of losses is subject to special rules and limitations. The difference between the option exercise price and the fair market value of the shares on the exercise date of an ISO is an adjustment in computing the holder’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the participant’s regular income tax for the year.

Nonqualified Stock Options.   A participant who receives a nonqualified stock option generally will not realize taxable income on the grant of such option, but will realize ordinary income at the time of exercise of the stock option equal to the difference between the option exercise price and the fair market value of the stock on the date of exercise.

Restricted Stock.   A participant will generally not have taxable income upon grant of unvested restricted shares unless he or she elects to be taxed at that time pursuant to an election under Code Section 83(b). Instead, he or she will recognize ordinary income at the time(s) of vesting equal to the fair market value (on each vesting date) of the shares or cash received minus any amount paid for the shares.

Stock Units.   No taxable income is generally reportable when unvested stock units are granted to a participant. Upon settlement of the vested stock units, the participant will recognize ordinary income in an amount equal to the fair market value of the shares issued or payment received in connection with the vested stock units.

Stock Appreciation Rights.   No taxable income is generally reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received plus the fair market value of any shares received.

Income Tax Effects for the Company.   We generally will be entitled to a tax deduction in connection with an award under the Amended Plan in an amount equal to the ordinary income realized by a participant at the

 

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time the participant recognizes such income (for example, upon the exercise of an nonqualified stock option or vesting of restricted stock).

Internal Revenue Code Section 162(m) Limits.   Section 162(m) of the Code places a limit of  $1 million on the amount of compensation that we may deduct in any one fiscal year with respect to each individual who is a covered employee within the meaning of Section 162(m). Prior to the enactment of the Tax Cuts and Jobs Act, this limit did not apply to compensation that satisfied the applicable requirements for the “qualified performance-based compensation” exception to the Section 162(m) deductibility limitation. However, under the Tax Cuts and Jobs Act enacted in 2017, effective for tax years commencing after December 31, 2017, the performance-based compensation exception, and our ability to rely on this exception, were eliminated (other than with respect to certain grandfathered arrangements in effect on November 2, 2017), and the limitation on deductibility generally was expanded to include all named executive officers. As a result, under current tax law, the Compensation Committee is not able to grant awards under the Amended Plan that will qualify for the former performance-based compensation exception to the Section 162(m) deductibility limit.

Internal Revenue Code Section 280G.   For certain persons, if a change in control of the Company causes an award to vest or become newly payable, or if the award was granted within one year of a change in control and the value of such award or vesting or payment, when combined with all other payments in the nature of compensation contingent on such change in control, equals or exceeds the safe harbor dollar limit provided in Section 280G of the Code, then the entire amount in excess of one-third of this dollar limit will be considered an excess parachute payment. Generally, the safe harbor dollar limit is equal to three times the five-year historical average of the individual’s annual compensation received from the Company. The recipient of an excess parachute payment must pay a 20% excise tax on this excess amount, and the Company cannot deduct the excess amount from its taxable income.

Internal Revenue Code Section 409A.   Section 409A of the Code governs the federal income taxation of certain types of nonqualified deferred compensation arrangements. A violation of Section 409A of the Code generally results in an acceleration of the recognition of income of amounts intended to be deferred and the imposition of a federal additional tax on the employee of 20% over and above the income tax owed, plus possible penalties and interest. The types of arrangements covered by Section 409A of the Code are broad and may apply to certain awards available under the Amended Plan (such as stock units). The intent is for the Amended Plan, including any awards available thereunder, to comply with, or be exempt from, the requirements of Section 409A of the Code to the extent applicable. If we determine, following the date of Board approval, that any award may be subject to Code Section 409A, the Stock Plan Committee may, but is not required to, amend the Amended Plan or award to take other such action as the Stock Plan Committee determines is reasonably necessary to exempt to the award from Code Section 409A or comply with its requirements. As required by Code Section 409A, certain nonqualified deferred compensation payments to specified employees may be delayed to the seventh month after such employee’s separation from service.

New Plan Benefits.   All Amended Plan awards are granted at the Stock Plan Committee’s discretion, subject to the limitations contained in the Amended Plan. Therefore, future benefits and amounts that will be received or allocated under the Amended Plan are not presently determinable. For information with respect to equity grants made to our principal executive officer, our principal financial officer and our three most highly compensated executive officers (“Named Executive Officers”) in fiscal 2021 under the Stock Plan, please see the sections entitled “Executive Compensation” and “Compensation of Named Executive Officers” in this Proxy Statement. As of the Record Date, the fair market value of a share of our common stock (as determined by the closing price quoted by the Nasdaq Global Select Market on that date) was $37.76.

Existing Plan Benefits.   The following table sets forth the number of shares subject to all equity awards granted through March 23, 2022 under the Stock Plan. The per share market value of our stock on that date was $37.76.

 

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(1)

For performance-vesting awards, reflects target number of restricted shares.

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Required Vote.   Under this Proposal 3, we are asking you to approve the Amendment. Approval of this Proposal 3 constitutes approval of the Amendment and requires the affirmative vote of a majority of the shares of our common stock present in person (including via the virtual platform) or represented by proxy at the Annual Meeting and entitled to be voted on Proposal 3. Abstentions will be included in the number of shares present and entitled to vote on this Proposal 3 and will have the effect of a vote “AGAINST” this Proposal 3. Broker non-votes will not be considered shares entitled to vote on this Proposal 3. Therefore, broker non-votes will not be counted and will have no effect on this Proposal 3.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE STOCK PLAN TO, AMONG OTHER THINGS, INCREASE THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR GRANT BY 2,350,000 SHARES

 

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PROPOSAL FOUR
Non-Binding, Advisory Vote on Executive Compensation

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and as a matter of good corporate governance practices, we are asking our stockholders to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the SEC (commonly referred to as a “say-on-pay vote”). Accordingly, you may vote on the following resolution at the 2022 Annual Meeting:

“RESOLVED, that the compensation paid to the Company’s Named Executive Officers as disclosed pursuant to the compensation disclosure rules, including the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure contained in this Proxy Statement, is hereby APPROVED.”

As described in detail in the “Compensation Discussion and Analysis” section of this Proxy Statement, our compensation programs are designed to motivate our executives to drive the success of our Company. We believe that our compensation programs play a material role in our ability to achieve strong financial results, even during difficult economic times, and attract, retain and motivate a highly experienced and successful team to manage our Company. Our compensation programs reward sustained performance that is aligned with long-term stockholder interests, with a balance of:

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short-term incentives (including annual cash incentives tied to pre-established adjusted earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) and strategic performance goals),

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long-term incentives (including stock options, restricted stock and restricted stock units, that each generally fully vest over five years; with 50% of the annual grant value being comprised of restricted stock subject to achievement of pre-established total annual revenue growth, adjusted average annual sales per productive square foot and annual controllable profit performance conditions for three fiscal years), and

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sound governance features to mitigate the potential for compensation-related risk, including executive stock ownership guidelines.

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Stockholders are encouraged to read the “Compensation Discussion and Analysis,” the accompanying compensation tables, and the related narrative disclosure contained in this Proxy Statement for a full description of our executive compensation programs.

This vote is advisory only and non-binding. The Board and the Compensation Committee, which is comprised solely of independent directors, will consider the outcome of this vote when making future executive compensation decisions to the extent appropriate. We currently ask our stockholders to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers on an annual basis, and we expect to hold the next such vote at the 2023 annual meeting of stockholders.

Required Vote.   The approval of the resolution set forth above requires the affirmative vote of a majority of the shares present in person (including via the virtual platform) or by proxy and entitled to vote on the proposal at the Annual Meeting. Abstentions will be included in the number of shares present and entitled to vote on this Proposal 4 and will have the same effect as a vote “AGAINST” Proposal 4. Broker non-votes will not be considered shares entitled to vote on this Proposal 4. Therefore, broker non-votes will not be counted and will have no effect on this Proposal 4.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL,
ON A NON-BINDING, ADVISORY BASIS, OF THE COMPENSATION PAID TO THE COMPANY’S
NAMED EXECUTIVE OFFICERS.

 

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FORWARD-LOOKING STATEMENTS

Certain information included in this Proxy Statement, including the sections entitled “Corporate Social Responsibility” ​(also referred to as “CSR”) and “Compensation Discussion and Analysis” ​(also referred to as “CD&A”) set forth below, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements include, without limitation, statements regarding corporate social responsibility in this Proxy Statement and in our CSR report, the effects of the COVID-19 pandemic on our financial condition and our results of operations, accelerated and diversified revenue growth as a result of the acquisition of North Italia and Fox Restaurant Concepts (also referred to as “FRC”), financial guidance and projections as well as expectations of our future financial condition, results of operations, sales, target growth rates, cash flows, corporate strategy, plans, targets, goals, objectives, performance, growth potential, competitive position and business, and statements regarding our ability to: leverage our competitive strengths, including investing in or acquiring new restaurant concepts and expanding The Cheesecake Factory® brand to other retail opportunities; maintain our aggregate sales volumes; deliver comparable sales growth; provide a differentiated experience to customers; outperform the casual dining industry and increase our market share; leverage sales increases and manage flow through; manage cost pressures, including increasing wage rates, insurance costs and legal expenses, and stabilize margins; grow earnings; remain relevant to consumers; attract and retain qualified management and other staff; manage risks associated with the magnitude and complexity of regulations in the jurisdictions where our restaurants are located; increase stockholder value; find suitable sites and manage increasing construction costs; profitably expand our concepts domestically and in Canada, and work with our licensees to expand our concept internationally; support the growth of North Italia and other FRC restaurants; operate Social Monk Asian Kitchen and Grand Lux Cafe; and utilize our capital effectively. These forward-looking statements may be affected by various factors including: the rapidly evolving nature of the COVID-19 pandemic and related containment measures, including the potential for a complete shutdown of our restaurants, international licensee restaurants and our bakery operations; supply chain disruptions, demonstrations, political unrest, potential damage to or closure of our restaurants and potential reputational damage to us or any of our brands; economic, public health and political conditions that impact consumer confidence and spending, including the impact of the COVID-19 pandemic and other health epidemics or pandemics on the global economy; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the FRC concepts, Social Monk Asian Kitchen and other concepts; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; changes in laws impacting our business, including laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premises dining; increases in minimum wages and benefit costs; the economic health of our landlords and other tenants in retail centers in which our restaurants are located, and our ability to successfully manage our lease arrangements with landlords; unanticipated costs that may arise in connection with a return to normal course of business, including potential negative impacts from furlough actions; the economic health of suppliers, licensees, vendors and other third parties providing goods or services to us; the timing of our new unit development; compliance with debt covenants; strategic capital allocation decisions including any share repurchases or dividends; the ability to achieve projected financial results; economic and political conditions that impact consumer confidence and spending; the resolution of uncertain tax positions with the Internal Revenue Service and the impact of tax reform legislation; adverse weather conditions in regions in which our restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the risks, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in our filings with the SEC. Such forward-looking statements include all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar expressions. These statements are based on our current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements. Forward-looking statements speak only as of the dates on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in our latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC, which are available at www.sec.gov.

 

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THE BOARD AND CORPORATE GOVERNANCE

Director Nominations Process

The Board has adopted “Policies and Procedures Regarding Board of Director Candidates” ​(the “Nominations Policy”), which describes the process by which candidates are selected for possible inclusion in the Board’s recommended slate of director nominees. Our Nominations Policy expresses the Board’s commitment to actively seek highly-qualified candidates possessing diversity of gender and ethnicity to include in the pool from which nominees are chosen. The Nominations Policy is available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.” The Board also considers stockholder guidelines, developments in state laws, and Nasdaq listing standards with respect to board diversity. The Governance Committee administers the Nominations Policy and is responsible for identifying candidates for nomination or appointment to the Board. To fulfill this function, the Governance Committee reviews, at least annually, the size and composition of the Board and its committees, including the number of directors eligible for election at the annual meeting of stockholders. The Governance Committee may solicit recommendations for nominees from directors, members of management or others. In addition, the Governance Committee will consider recommendations of a stockholder of record or beneficial owner that complies with the Nominations Policy.

Minimum Qualifications.   The Nominations Policy contains the following minimum qualifications for candidates for nomination to the Board:

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Pursuant to our Bylaws, each candidate nominated by a stockholder must consent in writing to be named in our proxy statement as a nominee and to serve as a director of the Company if elected.

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Pursuant to our Bylaws, each candidate must agree that if elected he or she will submit an irrevocable resignation to our Company’s Secretary promptly following his or her election or reelection that will be effective upon (i) such director’s failure to receive a “majority vote” for reelection in any “uncontested election” ​(as those terms are defined in our Bylaws) at which he or she is subject to reelection; and (ii) acceptance of that resignation by the Board in accordance with the Bylaws and any policies and procedures adopted by the Board for such purposes.

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Each candidate shall be an individual who has demonstrated integrity and ethics in his or her personal and professional life and has established a record of professional accomplishment in his or her chosen field.

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Each candidate shall be prepared to represent the best interests of all of our stockholders and not just one particular constituency.

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Each candidate must be prepared to participate fully in Board activities, including (with respect to non-employee candidates) active membership on Board committee(s) if appointed as a committee member, and not have other personal or professional commitments that would, in the Governance Committee’s sole judgment, interfere with or limit his or her ability to do so.

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Criteria for Evaluating Candidates; Diversity.   Our Board believes director diversity enhances dialogue in the boardroom, contributing to thorough analysis of proposals and informed decision-making. The Governance Committee seeks to further develop the diverse characteristics of the Board with the goal of enhancing the Board’s ability to adequately perform its responsibilities and adhere to good corporate governance practices.

In evaluating nominations, the Governance Committee takes into consideration the overall composition of the Board, the balance of different capabilities and overall diversity in its broadest sense including in the areas of personal and professional experiences, age, gender, ethnicity, geography, financial and managerial and operational knowledge; variety of opinions and perspectives; and other differentiating characteristics.

In addition, the Governance Committee is committed to actively seeking highly-qualified candidates who reflect diversity of gender and ethnicity to include in the pool from which Board nominees are chosen, including candidates from non-executive corporate positions and non-traditional environments.

 

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The Governance Committee periodically reviews and assesses the effectiveness of the practices used in considering potential director candidates. Following this review, the Governance Committee presents any recommendation for changes of the policy or protocols to the Board.

The Governance Committee considers the following criteria, among other factors, in evaluating candidates for nomination in light of the size and composition of the Board and its committees:

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Satisfaction of the minimum qualifications established by the Governance Committee.

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Education and other training.

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Relevant personal and professional background, including financial, managerial and operational skills and knowledge and experience in both corporate and non-traditional environments, such as government, academia and non-profit organizations.

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Whether the candidate would qualify as an “independent” director as defined by Nasdaq’s listing standards.

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The candidate’s reputation for judgment and honesty.

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The existence of any of the relationships described in Item 407(e)(4) of Regulation S-K (“Compensation Committee Interlocks and Insider Participation”).

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The number and identity of any other boards of directors of which the candidate is a member.

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Other professional and personal commitments that could affect the candidate’s ability to serve.

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Stockholder Recommendations to the Governance Committee for Nomination of Directors.   The Nominations Policy provides that the Governance Committee will consider recommendations for nominations submitted by stockholders of record or beneficial owners. In order to give the Governance Committee sufficient time to evaluate a recommended candidate, the recommendation should be received by our Secretary at our principal executive offices not later than the 120th calendar day before the date of our proxy statement release to stockholders in connection with the previous year’s annual meeting of stockholders. With respect to the 2023 annual meeting of stockholders, recommendations must be received on or before December 8, 2022. In the case of a special meeting called for the election of one or more directors, a recommendation should be received by our Secretary no later than the close of business on the tenth day following the date on which we make public disclosure of the meeting date. The stockholder’s recommendation must include all of the following:

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The stockholder’s name, address and telephone number.

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The recommended candidate’s name, address and telephone number.

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The written consent of the recommended candidate to be named in our proxy statement and to serve as a director if nominated, elected or appointed, and qualified to serve.

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A description of all arrangements or understandings in connection with such recommendation between the stockholder and the recommended candidate or between the stockholder and any other person or persons (including their names).

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A description of any business, familial or other financial or personal relationship between the stockholder and the recommended candidate.

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Information regarding the recommended candidate as to each of the criteria identified above for evaluating recommendations.

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Evaluation of Candidates.   All qualified candidates identified through the process outlined above, including incumbents, will be evaluated based on the same criteria. If, based on the initial evaluation, a new candidate continues to be of interest, the Chair of the Governance Committee will interview the candidate and communicate his or her evaluation to the other committee members and the Chairman of the Board. Other members of the Governance Committee and senior management will conduct subsequent interviews. Ultimately, background and reference checks will be conducted, and the Governance Committee will meet to finalize its list of recommended candidates for consideration by the full Board. If an incumbent is nominated, the interview process may be abbreviated at the discretion of the Chair of the Governance Committee. If the

 

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Chair of the Governance Committee is being considered for re-nomination, the other Governance Committee members may appoint another member of the Governance Committee to head the review process for the Chair’s reconsideration.

Future Revisions to the Nominations Policy.   The Governance Committee’s Nominations Policy is intended to provide a flexible set of guidelines for the effective functioning of the director nominations process. The Governance Committee intends to review this policy and procedure at least annually and anticipates that modifications will be necessary from time to time as our needs and circumstances evolve, and to conform with changes in applicable legal or listing standards.

General Nomination Right of All Stockholders.   Stockholders may nominate one or more persons for election as a director of the Company at an annual meeting of stockholders if the stockholder complies with the advance notice, information and consent provisions contained in our Bylaws. Stockholder nominations for the election of directors may be made only by a stockholder of record on both the date of giving notice and on the record date for such meeting by giving timely written notice to our Secretary at our principal executive offices. Such notice must be received by the Secretary no less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. If notice or prior public disclosure of the date of the annual meeting is given or made to the stockholders for a meeting date that is not within 30 days before or after the anniversary of the immediately preceding annual meeting of stockholders, notice by the stockholder will be timely if received not later than the close of business on the tenth day following the day on which such notice was mailed or such public disclosure was made, whichever is first, or no less than 90 days nor more than 120 days prior to the annual meeting. For further information on the timely nomination of a person for election as a director of the Company at the 2023 annual meeting of stockholders, see “Stockholder Proposals for the 2023 Annual Meeting of Stockholders.”

In the event we increase the number of directors to be elected and we make no public announcement at least 100 days prior to the first anniversary of the preceding year’s annual meeting that names all of the nominees for director or specifies the size of the increased Board, a stockholder’s notice will be considered timely, but only with respect to nominees for any new positions created by the increase, if the notice is delivered to, or mailed and received at, our principal executive offices (addressed to our Secretary) not later than ten days following the day on which we make the public announcement. In the case of a special meeting of stockholders called for the purpose of electing directors, notice will be timely if the stockholder provides written notice to our Secretary not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or such public disclosure of the meeting date was made, whichever first occurs, or no less than 90 or more than 120 days prior to the meeting. The stockholder’s notice must include all of the information required by our Bylaws. If the stockholder provides a statement that the stockholder intends to deliver a proxy statement and form of proxy, the nomination may not be brought before the meeting unless the stockholder has delivered a proxy statement and form of proxy to a sufficient number of holders of a percentage of our voting shares to elect the nominee or nominees proposed by the stockholder.

The foregoing summary is not a complete description of the provisions of our Bylaws pertaining to stockholder nominations and proxies. Stockholders may obtain, without charge, a copy of our Bylaws upon written request to our Secretary at our principal executive offices. Our Bylaws are also available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.”

Qualifications of Current Directors and Director Nominees.   The Governance Committee of the Board evaluates the qualifications of our director nominees prior to each annual meeting of stockholders. As part of this evaluation process, the Governance Committee reviews the current composition of the Board and assesses whether the qualifications of each director continue to meet the Governance Committee’s requirements for Board service. The following is a description of the particular experience, qualifications, attributes and skills that led the Governance Committee to recommend, and the Board to nominate, each person listed below as a director of the Company.

Our Board of Director Nominees

The Governance Committee recommended, and our Board nominated, ten of our current directors for re-election at the Annual Meeting to serve a one-year term expiring at the 2023 annual meeting of

 

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stockholders or until their respective successors shall be elected and qualified. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the ten nominees named in Proposal 1 to this Proxy Statement.

David Overton
Director since 1992

David Overton, age 75, has served as our Chairman of the Board and Chief Executive Officer since our incorporation in 1992. He co-founded the Company with his parents, Evelyn and Oscar Overton. Mr. Overton created the namesake concept and opened the first The Cheesecake Factory restaurant in 1978 in Beverly Hills, California. He has grown The Cheesecake Factory® into an international brand and created three other concepts, Grand Lux Cafe®, RockSugar Southeast Asian Kitchen® and Social Monk Asian Kitchen®. Under Mr. Overton’s leadership, the Company acquired the North Italia® brand and the balance of Fox Restaurant Concepts. Among Mr. Overton’s many professional honors, he has received the International Foodservice Manufacturers Association “Silver Plate Award,” recognizing the most outstanding and innovative talent in foodservice operations; the “Executive of the Year Award” from Restaurants & Institutions Magazine; the “MenuMasters Hall of Fame Award” and “Golden Chain Award” from Nation’s Restaurant News, for his outstanding contributions to menu design and foodservice research and development; the “Entrepreneur of the Year” in the Food Services category for the Los Angeles region by Ernst & Young, for his demonstrated excellence and extraordinary success in innovation, performance and personal commitment to The Cheesecake Factory and the communities our restaurants serve; and the “Leadership Roundtable-Industry Leadership Award.” Mr. Overton is also one of the founding members and directors of The Cheesecake Factory Oscar and Evelyn Overton Charitable Foundation, a 501(c)(3) qualified, non-profit charitable organization which raises funds for a variety of worthy causes and provides a means for our approximately 45,800 staff members to perform charitable work in their communities.

When evaluating Mr. Overton’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Overton’s essential leadership role with us, his unique perspective and understanding of our mission, vision and values, the extent and depth of his knowledge and experience related to us and our concepts and the importance of Mr. Overton’s strategic vision.

Edie A. Ames
Director since 2016

Edie A. Ames, age 55, brings over 34 years of restaurant industry experience across the casual dining, fast-casual and fine dining segments. Ms. Ames currently serves as CEO of Tastes on the Fly Airport Restaurant Group, a San Francisco based company. Previously, she held numerous leadership roles, including Chief Executive Officer of The Pie Hole, a Los Angeles based fast casual dining restaurant, President of The Counter and BUILT® Custom Burgers, Executive Vice President of Wolfgang Puck Catering, Chief Operating Officer of both Real Mex Restaurants and Del Frisco’s Restaurant Group, and President of Morton’s Restaurant Group. Earlier in her career she spent 11 years at California Pizza Kitchen, Inc. where she held positions of increasing responsibility.

When evaluating Ms. Ames’ qualifications for Board service, the Governance Committee and the Board considered Ms. Ames’ more than 34 years of restaurant industry experience, including operational experience, domestic and international licensing and franchise experience, numerous leadership roles with a variety of restaurant concepts across the casual dining, fast-casual and fine dining segments and her current status as an “independent director” under Nasdaq rules.

Alexander L. Cappello
Director since 2008

Alexander L. Cappello, age 66, has led several public and private companies over the past 47 years, including Cappello Global, LLC, a global investment bank, whose principals have transacted business in over 50 countries. He is also lead director of Virco Manufacturing Corporation (Nasdaq), Nano Financial Holdings, The Agnew Companies and Caldera Medical Corp, and an advisor to the board of Gusmer Enterprises. Mr. Cappello is a director of RAND Corporation’s Center for Middle East Public Policy, the Center for Global Risk and Security, and the RAND-Russia Forum. Mr. Cappello is a former Chairman of

 

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Intelligent Energy, PLC (London), Inter-Tel (Nasdaq), and Geothermal Resources Intl. (AMEX), and a former director of California Republic Bank.

When evaluating Mr. Cappello’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Cappello’s extensive executive management and financial background, international business experience, international management and marketing experience, prior service as Lead Director of our Company, service as the Chair of our Compensation Committee and member of our Audit Committee, designation by our Board as an “audit committee financial expert,” former service on the boards of other public companies, including another restaurant company, corporate governance expertise and his current status as an “independent director” under Nasdaq rules.

Khanh Collins
Director since 2021

Khanh Collins, age 58, brings over 31 years of restaurant industry experience in fine casual, full service casual and fine dining. Ms. Collins currently serves as Senior Vice President, Retail Food Group for Thompson Hospitality, which is the largest minority-owned food service management company in the United States, based out of Reston, Virginia. Previously, Ms. Collins held leadership positions including Vice President of U.S. Operations and Global Training for the ONE Group/STK, Chief Operating Officer and Senior Vice President of Bravo Brio Restaurant Group as well as various roles at McCormick and Schmick Seafood Restaurants.

When evaluating Ms. Collins’ qualification for Board service, the Governance Committee and the Board considered Ms. Collins’ more than 31 years’ experience in the restaurant industry, expertise in human capital management, and her current status as an “independent director” under Nasdaq rules.

Paul D. Ginsberg
Director since 2020

Paul D. Ginsberg, age 59, is the President of Roark Capital Group, having joined the firm in 2014. Prior to joining Roark, he was a partner, Co-Head of the Global Mergers & Acquisitions Group and a member of the Management Committee and Partnership Committee at Paul, Weiss, Rifkind, Wharton & Garrison LLP, an international law firm, which he joined in 1987 immediately upon graduating from law school. Mr. Ginsberg received his B.A., with honors in his major, magna cum laude, Phi Beta Kappa, from Union College and his J.D. from the University of Chicago Law School.

When evaluating Mr. Ginsberg’s qualifications for Board service, the Governance Committee and the Board considered his extensive legal and investment experience, his perspective as the President of Roark Capital Group, (an affiliate of Roark, which is a significant investor in our Company) and his current status as an “independent director” under Nasdaq rules.

Jerome L. Kransdorf
Director since 1997

Jerome I. Kransdorf, age 83, has more than 48 years of investment management experience. Mr. Kransdorf retired in 2014 as President of JaK Direct, a division of Muriel Siebert & Co., Inc. where he worked from 2001 to 2014. From 1997 to 2001, Mr. Kransdorf served as Senior Vice President of J. & W. Seligman & Co. Incorporated, an investment advisory firm. From 1959 to 1997, he was employed in investment and senior management positions at Wertheim & Co. and its successor companies. Mr. Kransdorf serves as our Lead Director.

When evaluating Mr. Kransdorf’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Kransdorf’s more than 48 years’ of investment management experience, his depth of knowledge and experience specific to us, his current service as Lead Director, Chair of the Governance Committee and member of the Compensation Committee and his current status as an “independent director” under Nasdaq rules.

 

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Janice L. Meyer
Director since 2020

Janice L. Meyer, age 62, brings over 27 years of restaurant investment experience. She is currently Co-Founder and Managing Partner of Rellevant Partners, a private equity firm. Prior to founding Rellevant, Ms. Meyer was a Managing Director and Senior Restaurant Analyst in the Equity Research Department of Donaldson Lufkin & Jenrette, which was acquired by Credit Suisse Group AG (NYSE) in 2000. She was also a Managing Director in the investment banking division of Morgan Stanley (NYSE). She was formerly a Director of Chopt Creative Salad Co. (now known as Founders Table Restaurant Group), a fast casual restaurant group, and is currently a Director of Tillster, Inc., a food ordering and delivery technology company, and a Director of Rasa Worldwide, Inc, a company specializing in fast-casual Indian food. She is also a trustee of the Windward School in New York.

When evaluating Ms. Meyer’s qualifications for Board service, the Governance Committee and the Board considered Ms. Meyer’s more than 27 years’ experience in the restaurant industry, extensive restaurant specific financial background, experience as a restaurant stock analyst and her current status as an “independent director” under Nasdaq rules.

Laurence B. Mindel
Director since 2012

Laurence B. Mindel, age 84, has more than 52 years of experience as a restaurant creator, developer and operator and is currently the Managing Partner of Poggio Trattoria, an award-winning Italian restaurant, and Copita Tequileria Y Comida, a “modern” Mexican restaurant, both located in Sausalito and Convivo, a “nomad Italian” restaurant in Santa Barbara, California. In 1970, he co-founded Spectrum Foods whose restaurant portfolio included, among others, California-based restaurants Ciao, Prego, MacArthur Park, Guaymas and Harry’s Bar. Following the acquisition of Spectrum Foods by Saga Corp. (NYSE) in 1984, Mr. Mindel served as President of Saga’s restaurant group where he directed the operations of more than 200 restaurants with combined revenue of over $375 million. When Saga was acquired in 1986, Mr. Mindel founded Il Fornaio, a restaurant and bakery company which became public in 1997 (Nasdaq) and was subsequently taken private in 2001. His professional honors include Nation’s Restaurant News “Golden Chain” award, International Foodservice Manufacturers Association “Gold Plate” award, Food Arts Magazine “Silver Spoon” award, Leadership Roundtable Conference award for Distinguished & Exemplary Leadership in the Food Service Industry and, in 1998, he was inducted into the California Restaurant Association’s Hall of Fame. In 1985, Mr. Mindel became the first American and the first person of non-Italian descent to be awarded the Caterina de Medici Medal from the Italian government, recognizing excellence in the preservation of Italian heritage outside of Italy.

When evaluating Mr. Mindel’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Mindel’s more than 52 years’ experience in the restaurant industry, both as a concept creator and an operator, his experience guiding a publicly-traded restaurant company, his current service as a member of the Compensation Committee and Governance Committee, his prior service as a member of the Compensation Committee and his current status as an “independent director” under Nasdaq rules.

David B. Pittaway
Director since 2009

David B. Pittaway, age 70, is Vice Chairman, Senior Managing Director, Senior Vice President, Secretary and Chief Compliance Officer of Castle Harlan, Inc., a private equity firm. He has been with Castle Harlan since 1987. Mr. Pittaway also has served as Vice Chairman and Senior Managing Director of Branford Castle, Inc., an investment company, since October 1986. From 1987 to 1998, Mr. Pittaway was Vice President, Chief Financial Officer and a director of Branford Chain, Inc., a marine wholesale company, where he is now a director and Vice Chairman. Previously, Mr. Pittaway was Vice President of Strategic Planning and Assistant to the President of Donaldson, Lufkin & Jenrette, Inc., an investment banking firm. Mr. Pittaway is a member of the board of Shelf Drilling, Inc. He was formerly a director of Bravo Brio Restaurant Group, Morton’s Restaurant Group, McCormick & Schmick’s Seafood Restaurants, and Dave & Buster’s, Inc. In addition, he is a director and co-founder of the Armed Forces Reserve Family Assistance Fund.

 

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When evaluating Mr. Pittaway’s qualifications for continuation of his Board service, the Governance Committee and the Board considered his extensive financial and industry experience, including his service on audit committees of other public restaurant companies, his legal background and familiarity with SEC rules and regulations related to public companies, his service as a member and Chair of our Audit Committee, his designation by our Board as an “audit committee financial expert” and his current status as an “independent director” under Nasdaq rules.

Herbert Simon
Director since 2011

Herbert Simon, age 87, is the Chairman Emeritus of the board of Indianapolis-based Simon Property Group, Inc., a member of the S&P 500 and the largest U.S.A. publicly-traded real estate investment trust. Mr. Simon has served on its board since 1993. Throughout his career, Mr. Simon has maintained a leadership position within the retail property industry by developing high profile retail facilities, including, but not limited to, The Forum Shops at Caesars, Roosevelt Field in Long Island, and The Fashion Centre at Pentagon City. Additional diversified business interests beyond real estate include ownership of a National Basketball Association’s franchise, the Indiana Pacers. Mr. Simon also served as the former Chairman of the National Basketball Association’s Board of Governors and continues to serve as a member of such board. Mr. Simon also is the owner of the Indiana Fever, a women’s National Basketball Association Franchise. He is also active in numerous community and civic organizations.

When evaluating Mr. Simon’s qualifications for continuation of his Board service, the Governance Committee and the Board considered Mr. Simon’s considerable domestic and international commercial real estate experience, including his tenure with Simon Property Group, Inc., a publicly-held real estate investment trust of which he is Chairman Emeritus and a member of the board of directors, his service as a member of the Compensation Committee and the Governance Committee, and his current status as an “independent director” under Nasdaq rules.

Except as set forth above, each nominee has been engaged in his or her principal occupation described above during the past five years. There are no family relationships between any of our directors or executive officers as defined under SEC rules.

Director Independence

The Board has determined each of the following directors to be an “independent director” as defined under Nasdaq rules: Edie A. Ames; Alexander L. Cappello; Khanh Collins; Paul D. Ginsberg; Jerome I. Kransdorf; Janice L. Meyer; Laurence B. Mindel; David B. Pittaway; and Herbert Simon. In this Proxy Statement, each of these nine directors is referred to individually as an “Independent Director” and they are referred to collectively as the “Independent Directors.”

Board Leadership Structure and Lead Director

Our Chief Executive Officer, David Overton, also serves as Chairman of our Board. Mr. Overton, who founded the Company along with his parents, Oscar and Evelyn Overton, was the driving force behind the creation and opening of The Cheesecake Factory restaurant concept and has served in a combined role as Chief Executive Officer and Chairman since 1992. We believe this leadership structure enables Mr. Overton to function as the critical link between the Board and the operating organization. It also streamlines communications with and among the Board on key topics such as our strategic objectives, long-term planning, capital allocation, and enterprise risk management.

In addition to Mr. Overton’s leadership on the Board, we determined that the appointment of an independent, lead director (“Lead Director”) would be appropriate in order to establish another layer of Board oversight, share certain responsibilities with, and facilitate communication between, our Chairman and our Independent Directors, and continue to follow best practices in corporate governance. To this end, the Board adopted a policy regarding the appointment of a Lead Director—one Independent Director who is selected annually by the Independent Directors. Mr. Kransdorf currently serves as Lead Director.

 

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The Lead Director presides at executive sessions of the Independent Directors, serves as principal liaison between the Independent Directors and the Chairman, works with the Chairman to set and approve the schedule and agenda for meetings of our Board and its committees, directs the retention of advisors and consultants who report directly to the Board, serves as liaison for consultation and communication with stockholders, oversees the annual evaluation of our Board and its committees and evaluates, in cooperation with the Compensation Committee and all members of the Board, the Chief Executive Officer’s performance. For information on our Board leadership, including the role of our Chairman and Lead Director, please see the section below entitled “Corporate Governance Principles and Guidelines; Corporate Governance Materials Available on Our Website.”

Role of the Board in Risk Oversight

While the Audit Committee monitors risks related to our financial statements, the Board has determined that oversight of Company-wide risk should remain with the full Board due to the strategic nature of enterprise risk management and the Board’s desire to receive feedback from a broad spectrum of disciplines regarding management’s plans with respect thereto. The Board meets periodically with our management to review the effectiveness of processes for identifying and managing significant risks, including cybersecurity risk. The Board also reviews with management the strategic objectives that may be affected by identified risks, the level of appropriate risk tolerance, our plans for monitoring, mitigating and controlling risk, the effectiveness of such plans and our disclosure of risk.

Meeting Attendance

During fiscal 2021, the Board held eight meetings and the Independent Directors held two executive sessions without management present. Meetings include both in-person, telephonic, and video conference meetings. For information regarding committee composition and number of committee meetings held during fiscal 2021, please see the section below entitled “Committees of the Board of Directors.” All of our directors attended at least 76% of the aggregate number of meetings of the Board and the committees on which he or she served while they were on the Board in fiscal 2021.

Our Board members are encouraged to attend our annual meeting of stockholders and all of our directors were present virtually at the 2021 virtual annual meeting.

Committees of the Board of Directors

The Board has three standing committees: the Audit Committee, the Compensation Committee and the Governance Committee. Committee membership as of the date of this Proxy Statement is as follows, except as otherwise indicated:

COMMITTEES OF THE BOARD OF DIRECTORS

 

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​

*

Designated by the Board as an “audit committee financial expert.”

​

**

Ms. Ames ceased being a member of the Corporate Governance and Nominating Committee effective May 26, 2021.

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***

Ms. Collins was appointed to the Corporate Governance and Nominating Committee effective July 22, 2021.

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The Board determined that each member of the committees of the Board in service for all of fiscal 2021 met the independence requirements applicable to those committees under SEC and Nasdaq rules. The Governance Committee recommends committee membership and chair assignments to the Board, which the Board considers when making committee membership and committee chair assignments at its meeting generally held in conjunction with each annual meeting of stockholders. Changes to committee assignments are also made from time to time during the course of the year, as deemed appropriate by the Board. The role of each committee is described below.

Audit Committee.   The Audit Committee operates pursuant to a written charter and is primarily responsible for monitoring the quality and integrity of our financial statements and internal controls over financial reporting; our compliance with legal and regulatory requirements; our independent registered accounting firm’s qualifications and independence; and the performance of our internal audit function and independent registered accounting firm. The Audit Committee provides an avenue of communication among our independent registered accounting firm, management, the internal audit function and the Board and issues the report of the Audit Committee required by the SEC to be included in this Proxy Statement. Our Vice President of Internal Audit reports directly to the Audit Committee and is responsible for conducting comprehensive audits of our internal financial controls and the operational effectiveness of related activities and systems.

The Audit Committee conducts an annual performance evaluation of its composition, compliance procedures, financial oversight responsibilities and other matters. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered accounting firm engaged to issue an audit report or perform other audit, review or attest services. The Audit Committee pre-approves the audit work, as well as all non-audit work, to be performed by our external auditors after considering its permissibility under SEC rules and its impact on our independent registered accounting firm’s independence. The Audit Committee also reviews material written communications our independent registered accounting firm may provide to management and discusses any concerns with the auditors and management.

Our Audit Committee also has oversight over the recoupment of any bonus awards paid to our executive officers if we were required by applicable law or applicable accounting or auditing principles to restate our financial statements to correct an accounting error in any interim or annual financial statement filed with the SEC as a result of material noncompliance with applicable financial reporting requirements and the bonus was directly based on such financial statements.

Pursuant to its charter, the Audit Committee reviews our policies and procedures relating to conflicts of interest and approves any proposed “related party transaction.” For this purpose, “related party transaction” means a transaction between the Company and a related person that is required to be disclosed pursuant to Item 404 of Regulation S-K adopted by the SEC. For a discussion of our policies with respect thereto, see “Policies Regarding Review, Approval or Ratification of Transactions with Related Persons” in this Proxy Statement. The Audit Committee conducts an annual evaluation of its charter.

Compensation Committee.   The Compensation Committee operates pursuant to a written charter. The Compensation Committee is responsible for determining the compensation of our Chief Executive Officer and all of our other executive officers. The Compensation Committee reviews and approves all employment,

 

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retention and severance agreements for executive officers and causes to be prepared the report of the Compensation Committee required by the SEC to be included in this Proxy Statement. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any compensation advisor retained by the Compensation Committee. The Compensation Committee also makes recommendations to the Board concerning non-employee director compensation.

The Compensation Committee regularly reviews and discusses with management the Company’s compensation policies to assess any risks reasonably likely to have a material adverse effect on the Company. The Compensation Committee is also tasked with overseeing or making recommendations to the Board with respect to: (i) stock ownership guidelines for executive officers and monitoring compliance therewith; (ii) policies governing “insider” trading, hedging and pledging of Company stock and reviewing compliance therewith; and (iii) any clawback policies. The Compensation Committee also advises the Board on management proposals to stockholders on executive compensation matters, including advisory votes on executive compensation and frequency of such votes, and proposals received from stockholders on executive compensation matters. The Compensation Committee is charged with reviewing the results of such votes and considering any implications in connection with the Compensation Committee’s ongoing determinations and recommendations regarding the Company’s executive compensation policies and practice.

The Compensation Committee approves and administers our incentive compensation programs, including our long-term equity and short-term bonus incentive plans. The Compensation Committee makes recommendations to the Board with respect to incentive and equity compensation plan structure and periodically reviews and makes recommendations concerning existing or new executive compensation, performance incentives, employee benefits, stock plans and management perquisites. The Compensation Committee authorizes and approves all grants of equity compensation to our employees under our equity compensation plan. See “Oversight of Named Executive Officer Compensation” for additional information regarding our process for determining executive compensation, including the role of Frederic W. Cook & Co., Inc., the Compensation Committee’s independent compensation consultant, and the Chief Executive Officer. The Compensation Committee conducts an annual evaluation of its charter.

Governance Committee.   The Governance Committee operates pursuant to a written charter. The Governance Committee is responsible for evaluating issues and developments related to corporate governance and making recommendations to the Board with respect to corporate governance standards, corporate governance proposals from stockholders, and policies on environmental, social and governance (“ESG”) matters and CSR practices, and the establishment and composition of committees of the Board. The Governance Committee is responsible for overseeing and recommending programs and activities for the continuing education of directors. The Governance Committee also identifies potential candidates for nomination or appointment as directors and makes recommendations to the Board concerning nominees to be presented for stockholder approval and to fill any vacancies. The Governance Committee assists the Chief Executive Officer in succession planning for key executive positions. The Governance Committee conducts an annual evaluation of its charter.

Committee Charters.   All of our committee charters are available on our website. For information on where to access these documents, please see the section entitled “Corporate Governance Principles and Guidelines; Corporate Governance Materials Available on Our Website.”

Designation of Audit Committee Financial Experts

With the assistance of our outside legal counsel, the Board has determined that David B. Pittaway and Alexander L. Cappello are each an “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K adopted by the SEC.

Corporate Governance Principles and Guidelines; Corporate Governance Materials Available on Our Website

Our Board is committed to ethical business practices and believes that good corporate governance is important to ensure that we are managed for the long-term benefit of our stockholders. In the spirit of this commitment, the Board has adopted a “Summary of Corporate Governance Principles and Guidelines”

 

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(“Corporate Governance Guidelines”) which includes, among other topics, the size and operations of our Board and its committees, independence of directors, selection and responsibilities of our Lead Director, Board membership criteria, service by our directors on boards of other publicly-traded companies, director and executive officer stock ownership guidelines and our policy on communicating concerns to our Board.

Our Corporate Governance Guidelines, as well as other corporate governance information listed below, are available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance”:

•

Bylaws

​

•

Code of Ethics for Executive Officers, Senior Financial Officers and Directors

​

•

Code of Ethics and Code of Business Conduct

​

•

Committee Charters (Audit Committee, Compensation Committee and Governance Committee)

​

•

Policies and Procedures Regarding Board of Director Candidates

​

Throughout this Proxy Statement, we may refer to various documents that are available on our website. The contents posted on, or accessible through, our website are not incorporated by reference into this Proxy Statement or any of our filings with the SEC and may be revised by us (in whole or in part) at any time and from time to time.

Stockholder Engagement

We appreciate the relationships we have been able to foster with our stockholders and value their input. Members of our senior leadership team regularly engage in meaningful dialogue with our stockholders throughout the year on topics including business initiatives and results, strategy and capital allocation; and environment, social and governance initiatives. On occasion, members of the Board participate in these engagements with stockholders. In addition, we have developed an ongoing practice of discussing important governance issues with our stockholders in an effort to continuously improve our governance processes and communication. These engagements routinely cover corporate governance, executive compensation, environmental and social programs and goals and other topics that may be important to us or our stockholders at the time. We generally hold these discussions during the fall but may request engagement at other times if warranted. We share feedback we receive with other members of our senior leadership team and board of directors for consideration and discussion.

Stockholder Communications with the Board

Our Corporate Governance Guidelines described above include the policy our Board has adopted for stockholders and employees who wish to communicate any concern directly to the Board. Please refer to Section VI of our Corporate Governance Guidelines at investors.thecheesecakefactory.com for a description of this process.

Corporate Social Responsibility

For us, the term “Corporate Social Responsibility” informs how we operate in relation to our people and communities, natural environment and our supply chain. We evaluate our business and how we operate our corporate-owned restaurants in an effort to identify, create and implement meaningful and sustained change and are pleased to share the progress we have made.

In 2021, the Board charged the Corporate Governance and Nominating Committee with reviewing and making recommendations to the Board regarding the Company’s policies on ESG matters and CSR practices.

Additionally, in 2021, we updated on our progress toward our CSR goals through our Corporate Social Responsibility Progress Update, which, along with our 2019 Corporate Social Responsibility Report (which published in 2020), details programs and initiatives across our operations with respect to our staff, our sourcing, our environmental impact, our support for the communities where we operate, and our corporate governance. We plan to issue another update on our progress later this year. The report and updates contain an appendix with both a corporate materiality assessment as well as matrixes for several leading ESG

 

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frameworks. Our CSR report and progress update are available on our website at https://​www.thecheesecakefactory.com/assets/pdf/2019-CSR-Report-The-Cheesecake-Factory.pdf and https://​www.thecheesecakefactory.com/assets/pdf/2020-CSR-Progress-Report-The-Cheesecake-Factory.pdf. The contents posted on, or accessible through, our website are not incorporated by reference into this Proxy Statement or any of our filings with the SEC and may be revised by us (in whole or in part) at any time and from time to time. A selection of our CSR progress and highlights over the last year is provided below.

People and Communities

•

In 2021, we were recognized by FORTUNE® Magazine as one of the “100 Best Companies to Work For®” for an eighth consecutive year. We were also recognized on FORTUNE® Magazine’s “Best Workplaces for Millennials” list for a sixth consecutive year and on PEOPLE® Magazine’s list of Companies that Care®.

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•

At the heart of our culture is the belief that our people are our most important resource. We depend on our staff members to successfully execute our day-to-day operations, which differentiate our concepts. While we continue to operate in a competitive labor environment, we believe our people practices contribute significantly to our ability to attract talent and to The Cheesecake Factory restaurants’ industry-leading retention rates, which are consistently in or near the top tenth percentile of the upscale casual dining industry with respect to both restaurant management and hourly staff.

​

•

We strive to offer an atmosphere of inclusion and belonging for all. Our Diversity, Inclusion and Belonging Steering Committee is responsible for establishing strategy, goals and accountability around this important area of focus. In 2021, key activities included conducting an assessment of our diversity and inclusion efforts and providing in-depth diversity, inclusion and bias training to our above-restaurant operational leadership. We sponsor developmental support groups, such as The Cheesecake Factory Women’s Network Group, with the goal of advancing women into senior-level positions. Our Female Kitchen Leader’s Program pairs new female managers with an advisor to provide extra support with navigating kitchen environments and our Leaders of Color Program provides networking and development opportunities for managers from diverse racial or ethnic groups.

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•

We invest significant resources to ensure our people receive what we believe is industry-leading training in order to maximize their potential. Our hourly staff members and managers receive a considerable amount of training through a combination of in-person learning and development and online coursework. We also strive to provide our staff with career advancement opportunities, and our internal management promotion rate for fiscal 2021 was 53%.

​

•

We offer healthcare benefits to our hourly staff members who work a minimum of 25 hours per week, on average and provide a robust suite of benefits and wellness offerings, including free mental health resources, free tutoring to support our staff and managers, and access to chronic disease care management, a maternal health program, financial wellness resources and adoption assistance.

​

•

We have developed programs to promote enthusiasm and commitment, while providing a sense of belonging. We measure our performance in this area through an annual engagement survey and pulse surveys throughout the year. These surveys give staff company-wide the opportunity to share honest feedback about their work experience. Based on survey results, leaders across the Company are tasked with responsibility for creating action plans to address and respond to staff feedback.

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•

In fiscal 2021, we donated over $425,000 to Feeding America through sales of our Chocolate Caramelicious made with Snickers Cheesecake and our Coconut Cream Pie Cheesecake as well as a special promotion on July 30, 2021, National Cheesecake Day, when we donated $1 from the sale of any flavor of cheesecake. Additionally, we donated more than $19,000 to Feeding America in connection with our Random Acts of Kindness promotion February 16 through 21, 2021. In total, we have contributed over $5.9 million to Feeding America over the past fourteen years.

​

•

The Cheesecake Factory and Grand Lux Cafe restaurants participate in a food donation program which redirects surplus food away from landfills to local food banks and non-profit organizations. Since the program’s inception in 2007, we have donated more than 6.4 million pounds of food, including approximately 614,000 pounds in calendar 2021.

​

 

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•

In fiscal 2021, our North Italia brand continued its commitment to contribute 2% of all gift card sales from November 1, 2020 through October 31, 2021 to FoodCorps, a non-profit organization whose charitable purpose is to connect kids to healthy food in school so they can lead healthier lives and reach their full potential, with a minimum guaranteed contribution of  $100,000 over the length of the commitment. In fiscal 2021 we contributed $50,000.

​

•

Our restaurants participate in a gift card donation program, providing gift cards to local schools and charities for fundraisers and auctions. This program was suspended during 2021 due to challenges related to the COVID-19 pandemic but has been reinstated for 2022.

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•

Every September, which is nationally recognized as Hunger Action Month, we invite all staff to participate in our Peanut Butter Drive. Our staff members collect jars of peanut butter (a favorite staple of food banks) and monetary donations during the month to donate to their local Feeding America food banks. Nationwide in fiscal 2019, our staff members collected approximately 250,000 pounds of peanut butter for donation to Feeding America’s annual campaign. Due to challenges related to the COVID-19 pandemic, our efforts to collect peanut butter were significantly hampered in 2020 and 2021. We look forward to again achieving our historic level of donation when circumstances allow.

​

Our Environment and Supply Chain

We are committed to promoting environmental and social responsibility in our supply chain. Some highlights of our efforts and accomplishments in this regard are included below and further information, including what we are doing to improve animal welfare in our supply chain, our efforts to reduce the use of antibiotics in our supply chain and our expectations with respect to treatment of workers in our supply chain are described in our CSR report.

•

We have implemented food waste and organic diversion programs in 61 of our restaurants, which, combined with our recycling and food donation programs, helped us divert approximately 25% of our waste stream away from landfills in 2021.

​

•

We achieved our goal of sourcing 100% cage-free eggs for our U.S. and Canadian restaurant operations in 2020, three years ahead of schedule. We accelerated our goal to transition all bakery operations to cage-free eggs by the end of 2022, after completion of which, 100% of eggs in the company’s baked goods worldwide will come from cage-free hens. We are also working with our international licensees to transition all eggs used in their restaurant operations to cage-free and are currently discussing a plan and timeline for reaching that goal by or before 2030.

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•

We have been ranked by the Business Benchmark for Farm Animal Welfare at a tier 3 level for a third year.

​

•

We are members of the Global Coalition for Animal Welfare and the Monterey Bay Aquarium—​Seafood Watch program.

​

Compensation Committee Interlocks and Insider Participation

During fiscal 2021, Ms. Edie A. Ames, Messrs. Jerome I. Kransdorf, Laurence B. Mindel and Herbert Simon served on the Compensation Committee, with Mr. Alexander L. Cappello serving as its Chair. During fiscal 2021, no member of the Compensation Committee was an officer or employee of ours, a former officer of ours or of our subsidiaries or had a relationship requiring disclosure by us under Item 404 of Regulation S-K. None of our executive officers served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board or the Compensation Committee during fiscal 2021.

Director Compensation

The Compensation Committee is responsible for periodically reviewing compensation payable to its non-employee directors for service on the Board or its designated committees and making recommendations to the Board concerning such compensation. In doing so, the Compensation Committee considers

 

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recommendations by Frederic W. Cook & Co., Inc. (“FW Cook”), its independent compensation consultant, which were informed by competitive analysis conducted by them as well as other factors, including, without limitation, each director’s responsibilities. The analysis conducted by FW Cook considers non-employee director compensation practices at the same peer companies used for the Compensation Committee’s evaluation of executive compensation and addresses prevalent market practices for non-employee director compensation. The Compensation Committee intends to set director compensation levels at or near the market median relative to non-employee directors at companies of comparable size, industry and scope of operations in order to ensure directors are paid competitively for their time commitment and responsibilities. Providing a competitive compensation package is important because it enables us to attract and retain highly-qualified non-employee directors who are critical to our long-term success. The Board reviews recommendations by the Compensation Committee and ultimately approves the non-employee director compensation program.

The FW Cook analysis conducted for fiscal 2021 affirmed that our director compensation program continues to be aligned with best practices as follows:

•

Annual fees.   No separate meeting fees are provided for Board meeting attendance.

​

•

Deferred Compensation Plan.   Board members are eligible to participate in our Executive Savings Plan, a nonqualified deferred compensation plan, by contributing all or a portion of their director fees and equity awards in the form of stock units to the plan. We do not match Board member contributions. See “Executive Compensation-Retirement Plans-Nonqualified Deferred Compensation” for more information.

​

•

Minimal Perquisites.   Each Independent Director is entitled to reimbursement for reasonable out-of-pocket expenses incurred in connection with travel to and from, and attendance at, meetings of the Board or its committees and related activities, including director education courses and materials. Independent Directors also receive dining privileges at our restaurants.

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•

Stock Ownership Guidelines.   Pursuant to our stock ownership guidelines our Independent Directors are required to acquire (and thereafter maintain ownership of) a minimum number of shares of our common stock with a fair market value equal to four times the then applicable annual base cash retainer ($360,000 as of the end of fiscal 2021). Newly appointed directors are required to meet the guideline within three years of being appointed. For purposes of this policy, ownership includes any shares owned by a director or his or her immediate family members or held by him or her as part of a tax or estate plan in which the director retains beneficial ownership and unvested restricted stock or restricted stock units. The value of shares held is calculated annually. In the event acquiring shares would result in a violation of our Special Trading Policy and Procedures, the director is required to comply with the guidelines as soon as reasonably feasible. In addition, the stock ownership guidelines require each director who acquires shares of our common stock through the exercise of a stock option to retain 33% of the shares so acquired (net of tax obligations resulting from such exercise) for at least nine months following such exercise, unless the individual ceases to be a member of our board of directors. As of December 28, 2021, one of our Independent Directors was out of compliance with the guidelines based on the sudden reduced price of our stock due to the COVID-19 pandemic. The director has taken steps to be back in compliance as of the date of the Annual Meeting. Given Mr. Ginsberg’s prior designation as a Series A Director, Mr. Ginsberg is not subject to our stock ownership guidelines for directors.

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•

Prohibitions on Hedging and Pledging.   Members of our Board and our officers and staff members are prohibited from trading in any interest or position relating to the future price of our securities, such as a put, call or short sale, or using our stock as collateral for margin loans.

​

The following table sets forth information regarding the non-employee director compensation program during fiscal 2021. Any member of the Board who is also an employee (for example, Mr. Overton) does not receive additional compensation for service on the Board or its committees.

 

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(1)

All fees and cash payments are payable in equal monthly installments, as earned, following the end of each calendar month.

​

(2)

For fiscal 2021, directors had the option to elect to receive either (i) an equity grant of fully vested shares of Company stock immediately following the Annual Shareholders meeting or (ii) a cash payment in lieu of such equity grant payable in equal monthly installments, as earned, following the end of each calendar month. Any Independent Director who has not acquired a sufficient number of shares of Company stock to satisfy the Company’s stock ownership guidelines by the end of 2021 (or in the case of a new director, within three years of their appointment) will no longer be eligible to receive the cash payment in lieu of equity and will receive their annual equity award in fully-vested common shares having a value equal to $115,000 until he or she satisfies such guidelines.

​

The following table sets forth certain information regarding the compensation earned by each non-employee director who served on our Board in fiscal 2021. Mr. Overton, as our employee, is not a non-employee director and is not paid additional compensation for his services on our Board. None of our non-employee directors held stock options or restricted stock as of the end of fiscal 2021.

(1)

The amounts in this column represent the grant date fair value, computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of grants of fully vested shares of stock made to the applicable director in 2021. See Note 18 of the Notes to Consolidated Financial Statements in our Annual Report for information, including assumptions made, regarding the valuation of equity awards.

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(2)

All or a portion of these fees were paid into a nonqualified deferred compensation plan account administered under The Cheesecake Factory Incorporated Executive Savings Plan. See “Director Eligibility for Participation in the Executive Savings Plan.”

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(3)

Mr. Ginsberg’s fees are paid to Roark. See “Policies Regarding Review, Approval or Ratification of Transactions with Related Persons.”

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Indemnification of Officers and Directors

As permitted by the Delaware General Corporation Law, our Certificate of Incorporation limits the personal liability of our directors for monetary damages for breach of fiduciary duty of care as a director.

 

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Liability is not eliminated for (a) any breach of the director’s duty of loyalty to us or our stockholders, (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) unlawful payment of dividends or stock purchases or redemptions pursuant to Section 174 of the Delaware General Corporation Law, and/or (d) any transaction from which the director derived an improper personal benefit. Our Certificate of Incorporation also provides that we shall indemnify and advance indemnification expenses on behalf of all directors and officers of ours to the fullest extent permitted by Delaware law. Article VIII of our Bylaws also requires us, subject to certain limitations, to indemnify directors and officers and advance expenses. The indemnification and advancement of expenses provisions of Article VIII are not exclusive of any other rights of indemnification or advancement of expenses.

We also entered into indemnification agreements with all of our directors and Named Executive Officers. Each indemnification agreement requires us to indemnify and hold harmless the director or Named Executive Officer to the fullest extent authorized by the laws of the State of Delaware. Each indemnification agreement also requires us, subject to specific terms and conditions, to advance expenses to the director or officer. Each indemnification agreement also sets forth various procedures and definitions with respect to indemnification and advancement of expenses. We also are obligated to maintain directors’ and officers’ liability insurance. With specified exceptions, we are not obligated to provide indemnification or advance expenses with respect to actions initiated by the director or officer or to indemnify the director or officer in connection with proceedings by us to enforce non-compete or non-disclosure agreements. To the extent the provisions of the indemnification agreements exceed the indemnification permitted by applicable law, such provisions may be unenforceable or may be limited to the extent they are found by a court of competent jurisdiction to be contrary to public policy.

Policies Regarding Review, Approval or Ratification of Transactions with Related
Persons

In accordance with its charter, our Audit Committee reviews and approves any proposed transactions with a “related person.” Any related person transaction will be disclosed in the applicable filing as required by the rules promulgated by the SEC. For purposes of these procedures, “related person” and “transaction” have the meanings as defined in Item 404 of Regulation S-K.

On April 20, 2020, we entered into the Subscription Agreement with RC Cake Holdings LLC (“Roark”) pursuant to which we sold 200,000 shares of Series A preferred stock to Roark for an aggregate purchase price of  $200 million. In connection with this transaction, the Board appointed Paul D. Ginsberg to the Board. Mr. Ginsberg is the President of Roark Capital Group, an affiliate of Roark.

Pursuant to the Subscription Agreement, subject to certain customary exceptions, Roark is prohibited from, among other things, (i) acquiring securities, assets or indebtedness of the Company, (ii) effecting a tender offer, merger or acquisition of the Company and (iii) soliciting proxies or seeking a director/​management change in the Company until the later of  (x) three years after the date of the Subscription Agreement and (y) such time as Roark holds record and beneficial ownership of Conversion Shares that constitute less than 5% of the outstanding Common Stock.

On June 10, 2021, we entered into a Repurchase Agreement with RC CAKE 1 LLC, RC CAKE 2 LLC and RC CAKE 3 LLC, entities affiliated with Roark, pursuant to which we agreed to a cash-settled conversion of 150,000 shares of our outstanding Series A preferred stock for approximately $443.8 million in cash. On the same date, we also entered into a Conversion Agreement with RC Cake Holdings LLC, an entity affiliated with Roark, pursuant to which the holder of the stock agreed to convert the remaining 50,000 shares of our outstanding Series A preferred stock into 2,400,864 shares of our common stock. We paid $13.6 million in connection with the conversion of the Series A preferred stock (consisting of  $3.9 million of accrued dividends and a $9.7 million inducement, which is also deemed to be a dividend). The cash-settled and share-settled conversions closed on June 15, 2021.

We had no other reportable transactions with related persons required to be disclosed under Item 404 of Regulation S-K since the beginning of fiscal 2021.

 

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Policies Regarding Hedging, Short Sales, Publicly Traded Derivatives, Margin Accounts
and Pledges

The Board believes that ownership of the Company’s stock by the Company’s Board members, executive officers, and other staff members promotes alignment of interest with stockholders. The Board recognizes that transactions that are designed to hedge, establish downside price protection or otherwise offset declines in the market value of the Company’s stock owned by such persons can disrupt this alignment, undermine stock ownership guidelines and encourage imprudent risk-taking. The Board also recognizes that pledging the Company’s stock as collateral for indebtedness can be adverse to the interests of the Company’s stockholders because it creates the risk of unplanned and forced sales that could adversely impact the value of the Company’s stock. For these reasons, we have a policy prohibiting our Board members, executive officers and all other employees from engaging in short-term or speculative transactions in Company securities, including short sales and other forms of hedging (e.g., zero-cost collars and forward sale contracts), and trading in puts, calls or other derivative securities of the Company (other than stock purchases and sales in the listing market). In addition, no Board member or employee may hold the Company’s securities in a margin account or pledge such securities as collateral for a loan.

 

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NON-GAAP FINANCIAL MEASURES

In addition to the results determined in accordance with generally accepted accounting principles (“GAAP”), this Proxy Statement includes certain non-GAAP financial measures that exclude the impact of items we do not consider indicative of our ongoing operations. We believe these adjusted measures provide additional information to facilitate the comparison of our past and present financial results. We utilize results that both include and exclude the identified items in evaluating business performance. Our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses or generate income similar to the adjusted items. Non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of performance prepared in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

A reconciliation of the non-GAAP financial measures used in this Proxy Statement to the closest GAAP financial measure is included in Appendix A which is attached to this proxy statement.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This “Compensation Discussion and Analysis” explains our strategy, design, and decision-making related to our compensation programs and practices for our Named Executive Officers. This “Compensation Discussion and Analysis” also explains how the compensation of our Named Executive Officers aligns with the interests of our stockholders and is intended to provide perspective on the compensation information contained in the tables that follow this discussion.

For fiscal 2021, our Named Executive Officers were:

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David Overton, Chairman of the Board and Chief Executive Officer;

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David M. Gordon, President, The Cheesecake Factory Incorporated;

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Matthew E. Clark, Executive Vice President and Chief Financial Officer;

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Scarlett May, Executive Vice President, General Counsel and Secretary; and

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Keith T. Carango, President, The Cheesecake Factory Bakery Incorporated.

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While the principal purpose of this “Compensation Discussion and Analysis” is to review Named Executive Officer compensation, many of the programs discussed herein apply to other members of senior management who, combined with the Named Executive Officers, are collectively referred to herein as “executives.”

Executive Summary

COVID-19 and its variants presented various challenges in 2021, including, without limitation, changes to consumer behavior, capacity restrictions, mask and vaccination mandates, wage inflation, our ability to continue to staff our restaurants and disruptions in the supply chain. Despite this, we accomplished many important financial, strategic and operational objectives in fiscal 2021, including:

Financial Highlights.

Highlights of our fiscal 2021 financial performance are illustrated below. Revenues increased by 48% over fiscal 2020, reaching a new company best of  $2.9 billion. Additionally, we generated nearly $250 million in cash flow from operating activities after adjusting for the payroll tax repayment related to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the amount of  $37 million, despite continuing to face significant challenges related to the COVID-19 pandemic. This performance was primarily driven by an increase in The Cheesecake Factory restaurants comparable sales which outperformed the casual dining

 

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industry indices. Average sales per location for The Cheesecake Factory restaurants opened for the full year increased to $11.1 million in fiscal 2021 from $7.8 million in fiscal 2020, and also exceeded pre-pandemic levels.

Strategic and Operating Highlights.   Our significant strategic and operating achievements for fiscal 2021, which support our objectives for continued growth, efficiency in our operations and creating an exceptional workplace culture, are highlighted below.

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Implemented next generation supply chain system and processes — These improvements will enhance the resiliency, scalability and economics of our supply chain in order to support our growth strategy.

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Substantially completed development of a new rewards program — Our new rewards program, which is scheduled to launch in a pilot phase in the middle of the year in 2022 is designed to improve sales by enhancing our engagement with our customers.

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Improved technology infrastructure — In 2021 we significantly improved our technology infrastructure by commencing the redesign of our website in Q3 2021 and by selecting and developing the foundation for implementing a new Enterprise Resource Planning (ERP) system. Our fully redesigned website launched on February 1, 2022.

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Opened 14 new company-owned restaurants — As of the Record Date, we owned and operated 306 restaurants throughout the United States and Canada. New restaurants opened in 2021 included two The Cheesecake Factory restaurants, six North Italia restaurants and six FRC concepted restaurants.

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Two new restaurants opened internationally — As of the end of 2021, we had 29 The Cheesecake Factory restaurants operated under licensing agreements internationally.

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Environmental, Social and Governance — Published an update to the 2019 CSR report, continued work toward ESG initiatives.

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Named one of the “100 Best Companies to Work For®” by Fortune® Magazine for the eighth consecutive year — We continue to be the only restaurant company to be included and were also recognized as a FORTUNE® Magazine Best Workplaces for Millennials for a sixth consecutive year and on PEOPLE® Magazine’s list of Companies that Care®.

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2021 Annual Incentive/2019-2021 Long-Term Incentive Plan Outcomes.   Based on the performance outlined above, payouts under our incentive plans were as follows for 2021:

 

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(1)

The Company adjusted EBITDAR financial performance portion of the bonus was broken into two halves of the fiscal year, the percentage payout achieved for each period was weighted as 50% of the Company adjusted EBITDAR financial performance goal. In the first half of fiscal 2021, we achieved 127.5% of the first-half Company adjusted EBITDAR financial performance goal, resulting in a 150% payout. In the second half of fiscal 2021, we achieved 92.3% of the second-half Company adjusted EBITDAR financial performance goal, resulting in an 86% payout for the second half of the fiscal year and an overall Company adjusted EBITDAR financial performance goal payout of 118%.

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(2)

The Bakery division adjusted EBITDAR financial portion of the bonus was broken into two halves of the fiscal year, the percentage payout achieved for each period was weighted as 50% of the Bakery division adjusted EBITDAR financial performance goal. In the first half of fiscal 2021, we achieved 94.2% of the first-half Bakery division adjusted EBITDAR financial performance goal, resulting in a 90% payout. In the second half of fiscal 2021, we achieved 75.2% of the second-half Bakery division adjusted EBITDAR financial performance goal, resulting in a 25% payout for the second half of the fiscal year and an overall Bakery division adjusted EBITDAR financial performance goal payout of 57.5%.

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(3)

The Sales Per Productive Square Foot goal and the Annual Controllable Profit goal measured performance by Company owned and operated The Cheesecake Factory restaurants.

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2021 Compensation Program Changes and Other Pay Actions.   Our executive compensation program was designed to drive strong results and was built upon our performance-driven culture and long-standing executive compensation philosophies and objectives. We modified the program in 2021 to reflect our evolving business strategy and to align management’s focus with our business challenges, especially in connection with the COVID-19 pandemic and its impact on the industry in general.

 

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Emphasis on Performance-Based Compensation and Pay Delivery.   For fiscal 2021, on average, 70% of the target direct compensation of our Named Executive Officers, other than our Chief Executive Officer, was performance-based. Mr. Overton continues to have a proportionately greater percentage of performance-based compensation (86%) as compared to other Named Executive Officers because we believe he has a greater ability to influence both short-term and long-term performance.

 

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The following charts show each element of the target total direct compensation (comprised of base salary, target bonus and grant date fair value of equity awards) for our Chief Executive Officer and other Named Executive Officers (on average) for fiscal 2021 (equity awards are depicted at grant date fair value).

Alignment of Company Performance and Pay Delivery

Consistent with our pay-for-performance philosophy, 86% of our CEO’s target total direct compensation is at-risk and aligned with our actual performance. The table below demonstrates such alignment, showing that “actual” pay for the CEO in each of the past three years has been lower than the “targeted” amounts, which is consistent with our total stockholder return performance over the same period. “Target” pay consists of annual salary, target bonus and grant date value of equity awards granted during 2021.

(1)

Actual pay for 2021 includes base salary, actual bonus paid for performance during the year shown, the intrinsic value of stock options and RSUs as of December 28, 2021, the intrinsic value of earned performance shares as of December 28, 2021 for 2019 grants (which was 100% of target), and the intrinsic value of target performance shares as of December 28, 2021 for 2020 and 2021 grants.

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2021 “Say-on-Pay” Advisory Vote on Executive Compensation.   We provide stockholders a “say-on-pay” advisory vote regarding our Named Executive Officers’ compensation on an annual basis. At our 2021 annual meeting of stockholders, our stockholders approved, by a vote of approximately 96% of shares represented in person or by proxy, the say-on-pay proposal regarding the compensation of our Named Executive Officers as presented in the 2021 proxy statement. We believe this level of approval indicates that stockholders strongly support our executive compensation programs and policies. The Compensation Committee will consider the

 

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results of this year’s say-on-pay proposal, as well as feedback from our stockholders, when making future executive compensation decisions.

Alignment with Stockholder Interests.   Our executive compensation program is aligned with stockholder interests, as described in the summary below:

Overview of Compensation Program

Compensation Philosophy.   In order to maintain a leadership position in our industry and to continue growing our concepts, both domestically and internationally, we need to attract and retain highly motivated executives who bring experience, innovation and operational excellence to us. With this in mind, we strive to:

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Attract and retain industry-leading executives by paying competitive compensation relative to other companies within the restaurant industry and other industries with which we compete for talent;

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•

Drive high performance by connecting compensation to our financial, operating, and strategic goals and results and by appropriately rewarding high performance;

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Tie executive pay to Company performance goals that drive stock price performance; and

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Align the interests of our executives with those of our stockholders by tying a portion of our executive compensation to long-term equity incentives and requiring stock ownership for our Named Executive Officers.

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Elements of Compensation Program.   Our 2021 executive compensation program consisted of the following:

FISCAL 2021 PRINCIPAL ELEMENTS OF EXECUTIVE COMPENSATION

 

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Factors Considered in Making Compensation Decisions.   Our compensation strategy enables us to appropriately differentiate and reward executives by taking into account:

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Our financial and operational performance;

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The executive’s individual performance, experience and qualifications;

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The scope of the executive’s role;

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•

The level of total compensation for our other executives; and

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Competitive market data, which helps us evaluate how our executive pay levels compare to others in our industry and within the markets in which we compete for talent.

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All of the factors set forth above are considered by the Compensation Committee in establishing Named Executive Officer compensation, in a subjective manner, without any specific formula.

Market Positioning

Our Compensation Committee, in collaboration with our Chief Executive Officer and Senior Vice President of Human Resources, reviews market data related to pay practices among comparable companies but does not target specific market positioning of pay when determining compensation for individual Named Executive Officers. Rather, the Compensation Committee uses comparative market data as one of several factors when making individual compensation decisions.

As part of its compensation review process for fiscal 2021, the Compensation Committee reviewed an analysis prepared by its independent compensation consultant of market pay practices for positions similar to the positions of our Named Executive Officers, adjusted to take into account differences if any, between the scope of our Named Executives Officers’ responsibilities compared to their counterparts in positions with similar titles in comparable companies. This analysis used pay comparisons from comparable companies in the restaurant and hotel industry as compiled from their proxy disclosures and other SEC filings as well as survey data from FW Cook’s proprietary library. For the Chief Executive Officer, the President of The Cheesecake Factory Incorporated and the Chief Financial Officer, publicly available data from the comparable companies listed below was used in such analysis. For the General Counsel and President of our bakery division, publicly available data was weighted at 50% and the survey data was weighted at 50% for purposes of determining market pay positions in such analysis.

2021 Executive Compensation Peer Group.   When we compare ourselves to other companies, we must account for differences between us and others in terms of ownership structure, dining industry segment, size and complexity of operations, sourcing pool for executive talent, and other differentiators. We use the “Executive Compensation Peer Group” for executive compensation comparisons and compensation program design comparisons, as we believe this group reflects companies most similar to us in terms of size and complexity of operations and with which we compete for executive talent. The Executive Compensation Peer Group approved by the Compensation Committee for 2021 consisted of publicly-traded companies in the restaurant and hotel/hospitality industries with annual revenue between $480 million and $6 billion (approximately 0.2 times to 2.5 times our revenue), and in the aggregate, had an overall median revenue of $2.4 billion, which was slightly lower than our revenue, as follows:

(1)

Included in our comparison group because of its importance as an industry leader in casual dining, even though its revenues are greater than the $6 billion upper range limit.

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For the 2021 Executive Compensation Peer Group, the Compensation Committee made no changes from the prior year.

While this comparison group provides the Compensation Committee with an important general frame of reference, as described above, the Compensation Committee does not target our Named Executive

 

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Officers’ compensation at any specific percentile or within a specific range of the Executive Compensation Peer Group’s pay levels.

Principal Elements of Compensation

Base Salary.   In accordance with our compensation objectives, base salaries for our Named Executive Officers are determined by the Compensation Committee and administered to reflect the individual executive’s career experience, contribution to our performance, overall Company performance, as well as the market data as compared to the Executive Compensation Peer Group. During its annual review of base salaries, the Compensation Committee also considers the recommendations of our Chief Executive Officer (except with respect to his own compensation).

The following chart shows the annualized base salaries for our Named Executive Officers for fiscal year 2021 and the percentage changes as compared to the prior year, which the Compensation Committee determined were reasonable and appropriate based on the factors described above.

Annual Cash Performance Incentive Compensation.   Executives and a significant number of other employees that are essential to the success of our business are eligible to receive an annual cash performance incentive bonus under the Performance Incentive Plan (“Bonus”) based on our performance against specific financial and strategic objectives. In addition, we use quarterly cash performance incentive compensation for all of our management positions in our restaurants. At the beginning of each fiscal year, the Compensation Committee establishes both the performance objectives and the formula for determining potential Bonus payments. However, given the extreme uncertainty regarding the ongoing impacts of the COVID-19 pandemic on our business in fiscal 2021, the Compensation Committee decided, with the assistance of its independent compensation consultant, to establish two separate performance periods for the adjusted EBITDAR financial performance goal for fiscal 2021. The first performance period covered the first half of fiscal 2021 beginning on December 30, 2020 and ending on June 29, 2021, and the second performance period covered the second half of fiscal 2021 beginning on June 30, 2021 and ending on December 28, 2021. In contrast, as in prior years, strategic goals were based on annual performance and were measured at the end of the fiscal year. Bonuses are payable, if at all, in the first quarter of the fiscal year following the year in which such Bonuses were earned, after the Compensation Committee certifies performance relative to the pre-established objectives.

Under the terms of our Performance Incentive Plan, the amount of any individual Bonus in any fiscal year may not exceed $2.5 million.

Fiscal 2021 Performance Incentive Plan Design.   Bonus opportunities (as a percentage of base salary) by position for our Named Executive Officers are set forth below, which reflects changes made to the payout scale for the adjusted EBITDAR financial performance goals and increased bonus payout opportunity for our Chief Financial Officer (Matthew E. Clark), all as more fully described above, in the section entitled “2021 Compensation program Changes and Other Pay Actions.” Actual payouts depend upon performance results with ranges as follows:

 

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(1)

Awards are based on salaries in effect on February 24, 2021.

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(2)

The threshold award assumes the average achievement of 75% of the Company-wide adjusted EBITDAR (and, with respect to Mr. Carango, additionally Bakery division adjusted EBITDAR) objectives for the full fiscal year and none of the strategic objectives.

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(3)

The target award assumes the average achievement of 100% of the Company-wide adjusted EBITDAR (and, with respect to Mr. Carango, additionally Bakery division adjusted EBITDAR) objectives for of the full fiscal year and 100% of the strategic objectives.

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(4)

The maximum award assumes the average achievement of 115% or more of the Company-wide adjusted EBITDAR (and, with respect to Mr. Carango, additionally Bakery division adjusted EBITDAR) objectives for the full fiscal year and 100% of the strategic objectives.

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Payouts under the fiscal 2021 Performance Incentive Plan are based 75% on the Company’s level of achievement of financial performance objectives (or, with respect to Mr. Carango, 50% on the Company’s level of achievement of financial performance objectives and 25% on Bakery division’s level of achievement of a financial performance objectives), and 25% on the Company’s level of achievement of certain strategic objectives. For corporate executives (including each of our Named Executive Officers other than Mr. Carango), the financial objective is company-wide adjusted EBITDAR, and the strategic objectives relate to company-wide initiatives. For bakery executives (i.e., Mr. Carango), the payout is based 50% on a company-wide adjusted EBITDAR objective, 25% on a bakery-division adjusted EBITDAR objective, and 25% on strategic objectives specific to the bakery division. The financial objective component can be earned from 0-150% of target based on level of achievement, and the strategic objective can be earned from 0-100% of target based on level of achievement, resulting in a total bonus opportunity from 0-137.5% of target.

The Compensation Committee selected adjusted earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) as the most heavily weighted performance target in our annual plan for fiscal 2021. EBITDAR is a key driver of stockholder value in that it (i) affects not only earnings per share but also overall cash flow from operations, (ii) supports return on invested capital percentage rates and (iii) is a key driver of a publicly-traded restaurant company’s stock multiple. The Compensation Committee selected EBITDAR over EBITDA because EBITDAR removes the impact of lease accounting rules, to focus more specifically on our operating priorities for the year. Taking into consideration the projected operating environment for casual dining and specific Company objectives for fiscal 2021, the Compensation Committee established adjusted EBITDAR goals that were consistent with our annual operating plan approved by the Board for fiscal 2021. For purposes of the bonus plans, adjusted EBITDAR excludes the effects of items we do not consider indicative of our ongoing operations such as impairment charges, acquisitions and the effect of health and welfare plan related costs. EBITDAR is a non-GAAP measure and is defined and reconciled from GAAP in Appendix A of this proxy statement.

 

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For the Company-wide and bakery division adjusted EBITDAR objective, a threshold award of 25% of target would pay out upon 75% performance achievement, and a maximum award of 150% of target would pay out upon 115% performance achievement. For bakery division and other executives alike, strategic objectives could not pay out above 100% of target.

Fiscal 2021 Performance Achievement.   In February 2022, the Compensation Committee reviewed our performance against the Company’s objectives for fiscal 2021. For purposes of the Performance Incentive Plans, adjusted EBITDAR excludes the effects of items we do not consider indicative of our ongoing operations such as impairment charges, acquisitions and the effect of health and welfare plan related costs. EBITDAR is a non-GAAP measure and is defined and reconciled from GAAP in Appendix A of this proxy statement. Following this review, the Committee certified that we achieved the following results:

 

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The Compensation Committee also reviewed our bakery division’s performance against its objectives for fiscal 2021 and certified that the bakery division achieved the following results:

(1)

In July 2021, the Compensation Committee revised the objectives under this initiative to better align management’s focus with the needs of the business in light of challenges caused by the COVID-19 pandemic and related staffing shortages. Prior to this change, the objectives under this initiative were as follows: Assess current state of Strengths, Weaknesses, Opportunities and Threats analysis, sales and go to market, and supply chain opportunities; 5-year demand and capacity planning; develop plan for capacity expansion and update 5-year long-range plan. Notwithstanding this revision, the Bakery division completed all objectives under the original initiative as well as under the revised initiative.

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As a result of our 2021 performance, our Named Executive Officers received Bonuses under our fiscal 2021 Performance Incentive Plan, as follows:

2022 Performance Incentive Plan.   For fiscal 2022, the Compensation Committee, with the assistance of its independent compensation consultant, and based on continued challenges and uncertainty facing our business and the industry overall from the pandemic, decided to maintain the same general structure of the Performance Incentive Plan in effect for fiscal 2021.

 

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Long-Term Equity-Based Compensation

We believe that equity-based compensation should be a significant component of total executive compensation to align executive compensation with our long-term performance and to encourage executives to make value-enhancing decisions for the benefit of our stockholders. Each of our Named Executive Officers is eligible to receive equity compensation, which may consist of a mix of stock options, restricted stock, and restricted stock units, to encourage a focus on long-term stockholder value and to foster long-term retention.

We approach equity compensation grants by considering the overall value of the grant (as opposed to the number of shares granted). Equity grants to all staff members, including Named Executive Officers and other executives require approval from the Compensation Committee and, in considering whether to approve such equity grants, the Compensation Committee considers past grants, corporate and individual performance, the valuation of grants, and recommendations of our Chief Executive Officer and the Compensation Committee’s compensation consultant. The Compensation Committee has not established formal guidelines for the size of individual equity grants for our Named Executive Officers, but considers the factors listed above as well as market data in making such decisions. See “Market Positioning” above.

Our Compensation Committee generally makes grants to our corporate executives, including our Named Executive Officers, on an annual basis, except in the case of newly hired executives, promotions or other extraordinary events. Our equity grant procedures are available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.”

Equity Grants in 2021.   For fiscal 2021, the Compensation Committee determined, with the assistance of its independent compensation consultant, that Named Executive Officers should continue to receive a designated value of equity comprised of a mix of 50% performance-based restricted stock subject to achievement of three equally weighted performance conditions (total annual revenue growth; adjusted average annual sales per productive square foot; and annual controllable profit goals, as described in further detail below, in each case, over a three-year performance period), and 50%, based upon each executive’s designated preference, of all stock options (with the number of options to be granted determined based on a Black Scholes valuation), an equal mix between stock options, time-based restricted stock, or all restricted stock (see table below for actual equity awards granted based on each executive’s election). The Compensation Committee believes that regardless of the choice elected by each executive, the resulting mix would strongly align the interests of our executives with those of our stockholders and our long-term performance. In the future, this allocation may vary, new performance targets may be chosen, and other forms of equity may be used.

Nonqualified Stock Options.   The Compensation Committee believes that stock options are an appropriate vehicle for a portion of long-term equity compensation because they provide value only if our stock price increases over time, which aligns our executives’ interests with those of our stockholders. The exercise price of our stock options is the closing price of our stock on the grant date. None of our Named Executive Officers’ elected to receive stock options in 2021. Generally, our stock options vest 20% on each of the first five anniversaries of the grant date.

Time-Based Restricted Stock Awards.   The time-based restricted stock granted to our Named Executive Officers during 2021 vest as to 60% of the shares on the third anniversary of the grant date, and 20% on each of the fourth and fifth anniversaries of the grant date. All our Named Executive Officers elected to receive 50% of their 2021 long-term equity grant value in the form of restricted stock awards.

Performance-Based Restricted Stock.   As described above, the performance-based restricted stock awards granted to the Named Executive Officers in 2021 are subject to the achievement of three equally weighted performance conditions, which are described below. The total annual revenue growth, adjusted average annual sales per productive square foot and annual controllable profit goals are collectively referred to as the “Performance Conditions” and are subject to threshold and maximum potential payouts. Performance achievement is measured at the end of each fiscal year against pre-determined performance goals for each year of the three-year performance period, which are set for the full three-year period at the beginning of the three-year performance period. The number of shares earned at the end of the three-year performance period (if any) will be determined by averaging performance achievement for each of the three individual years. After the conclusion of the performance period, any earned shares are then subject to time-based vesting at

 

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the rate of 60% of the shares on April 1, 2024 and 20% of the shares on each of April 1, 2025 and April 1, 2026. If the threshold goal is achieved, between 60—150% of the target shares will be eligible to vest, based on level of achievement. If the threshold goal is not achieved, the target shares are forfeited. We are not disclosing threshold goals at this time due to the sensitivity of these forecasts and correlation between our projected performance vis-à-vis the Performance Conditions and our stock price. The threshold goals will be disclosed at the end of the performance period along with the achievement levels and corresponding vesting of the performance-based restricted stock awards, if any.

•

“Total Annual Revenue Growth Goal” is based upon the Company’s total annual revenue growth for fiscal years 2021, 2022, and 2023. This metric was selected to support strategic growth objectives within the pandemic environment.

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•

“Adjusted Average Annual Sales Per Productive Square Foot Goal” is based upon The Cheesecake Factory Restaurants’ adjusted average annual sales per productive square foot for fiscal years 2021, 2022, and 2023. Sales per productive square foot was selected as it is a stated goal of the company and a strong driver of long-term financial performance. In response to the COVID-19 pandemic, occupancy restrictions were enacted in many jurisdictions where we operate, affecting our ability to utilize all square footage that otherwise would have been available for dine-in guests. As a result, achievement of this goal will be determined based upon average annual sales per productive square foot available for use during the applicable measurement period.

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“Annual Controllable Profit Goal” is based upon The Cheesecake Factory Restaurants’ annual controllable profit for fiscal years 2021, 2022, and 2023. “Controllable profit” only includes expenses over which restaurant management has direct control (e.g. ingredient costs, labor, dining room expenses, etc.). This metric was selected as it is the key profit metric managed at the restaurant level and aligns with our stated priorities.

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In February and April 2021, the following grants were made to our Named Executive Officers under the Stock Plan in recognition of their performance and expected future contributions, to target competitive compensation levels appropriate to the executive’s tenure in his or her role, and to align their interests with the long-term interests of our stockholders:

(1)

See “Long-Term Equity-Based Compensation — Performance-Based Restricted Stock” above for a description of performance-based vesting conditions.

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(2)

See “Long-Term Equity-Based Compensation — Time-Based Restricted Stock” above for a description of time -based vesting conditions.

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Attainment of 2019 Grant Performance Condition.   In 2019, as part of our annual long-term incentive program, certain of our Named Executive Officers were granted performance-based restricted shares (the “2019-2021 RSAs”), which were eligible to be earned based on achievement of three equally weighted performance goals during a performance period beginning January 2, 2019 and ending December 28, 2021 (the “2019-2021 Performance Period”). The three performance goals were average annual fully-diluted adjusted earnings per share (“EPS”) growth, adjusted average sales per square foot from Company owned and operated The Cheesecake Factory Restaurants as reported in the Company’s Form 10-K (“Sales Per Square Foot”) , and average annual controllable profit margins for Company owned and operated The Cheesecake Factory Restaurants (“2019-2021 Controllable Profit”). During the 2019-2021 Performance Period, the Company’s EPS growth was 30% resulting in 150% of the target number of 2019-2021 RSAs

 

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subject to this metric being earned, the Company’s Sales Per Square Foot amount was $1,102 resulting in 150% of the target number of the 2019-2021 RSAs subject to this metric being earned, and the Company’s average annual 2019-2021 Controllable Profit amount was 27.33% resulting in 0% of the target number of 2019-2021 RSAs subject to this metric being earned. Accordingly, an aggregate of 100% of the target number of 2019-2021 RSAs were earned based on achievement of the three performance goals.

Retirement Plans

Nonqualified Deferred Compensation Plan.   The Cheesecake Factory Executive Savings Plan (“Executive Savings Plan”) is a nonqualified deferred compensation plan that provides a tax-deferred savings vehicle for our “highly compensated” executives (as defined in the Executive Savings Plan), as well as our non-employee directors. At the end of fiscal 2021, approximately 360 staff members, all of our Independent Directors, and all of our Named Executive Officers were eligible to participate. Approximately 480 staff members and two Independent Directors maintained account balances. Additional information regarding this plan appears in this Proxy Statement in the section below entitled “Compensation of Named Executive Officers-Nonqualified Deferred Compensation.”

The Executive Savings Plan permits us to match a portion of participants’ contributions with Company contributions, on a pre-tax basis to participants (other than Independent Directors). Since inception, we made a partial matching contribution to the Executive Savings Plan each year, except during the period of May 2009 through October 2011, when the Company match was suspended. We currently match 25% of the first 4% of salary and/or Bonus deferred. One hundred percent of a participant’s Bonus, if any, and up to 50% salary may be deferred.

Pension Benefits.   We do not maintain a pension plan for executives or staff members. However, in order to continue to retain Mr. Overton’s services as our Chief Executive Officer and in recognition of his unique contributions as our founder, Mr. Overton’s employment agreement provides for a “Founder’s Retirement Benefit” pursuant to which Mr. Overton (or his beneficiary or estate, if he is deceased) is entitled to fixed annual payments of  $650,000 for a period of ten years following his separation from service for any reason, payable in equal monthly installments, as further described in his employment agreement. Our obligation with respect to the Founder’s Retirement Benefit is unfunded and unsecured, and is payable from our general, unrestricted assets. For additional information concerning Mr. Overton’s employment agreement, see the section in this Proxy Statement entitled “Compensation of Named Executive Officers-Employment Agreements.”

Other Benefits and Perquisites

All of our executives, including our Named Executive Officers, are eligible to participate in our broad-based benefit programs, which include medical, dental, vision, life insurance and long-term disability programs, as well as paid vacation and a sabbatical leave program. We also provide group term life insurance to our executives, including each of our Named Executive Officers, as well as all other salaried staff members, at the lesser of one-times base salary or $750,000. The life insurance benefit is reduced to 65% of base salary at age 65 and 50% of base salary at age 70. The IRS requires that the portion of the value of such policy exceeding $50,000 be deemed imputed income to the staff member and provides a formula by which the imputed income is calculated.

We also provide the following limited perquisites to our executives, including Named Executive Officers, that vary based on the executive’s level:

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The choice of a company-leased vehicle or automobile allowance. This program also is offered to certain other executives and selected additional management positions. Each individual participating in our leased car program is assigned imputed income, according to IRS regulations, for his or her personal use of the automobile or is provided with an automobile allowance, which is subject to taxation at the individual’s tax rate. The type of vehicle and amount of allowance varies with the executive’s level.

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•

A company-paid executive physical every two years. This program is offered to staff members at the level of Senior Vice President and above, including our Named Executive Officers.

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Relocation expenses. Relocation expenses are reimbursed in accordance with the terms of any employment agreement or as determined on a case-by-case basis.

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We believe that these benefits enhance our ability to attract and retain high-quality talent at a modest cost and help to elevate our Company as an employer of choice among our competitors, including continuing to be recognized by FORTUNE® Magazine as one of the “100 Best Companies to Work For®” for eight consecutive years. The amounts we paid related to perquisites provided to our Named Executive Officers in fiscal 2021 are disclosed in the section entitled “Compensation of Named Executive Officers—Summary Compensation Table.”

Potential Benefits Upon Termination and Change in Control

The Compensation Committee recognizes that the possibility of the termination of an executive officer’s employment, and the uncertainty it creates, may result in the loss or distraction of the executive officer, and present challenges in recruiting potential executive officers, all to the detriment of the Company and its stockholders. To help ensure that the Company has the continued attention and dedication of these executives and the availability of their continued service, and to focus executive officers on stockholder interests when considering strategic alternatives, the Named Executive Officers are eligible for certain payments and benefits upon a qualifying termination of employment that are consistent with the Company’s overall philosophy and market practices.

These potential severance payments are provided under the terms of our existing employment agreements with our Named Executive Officers. For more information, see “Compensation of Named Executive Officers-Potential Payments upon Termination or Change in Control” in this Proxy Statement.

Furthermore, we do not provide for any automatic “single trigger” equity vesting or other payments upon a change in control and we do not provide for any tax gross-up payments that could be related to change in control excise taxes. Our Stock Plan provides for a “double trigger,” such that equity awards will automatically accelerate if a participant incurs a qualifying termination of employment (without cause or for good reason) within a specified time period following a change in control of the Company. In addition, in the event of a change in control of the Company, if outstanding awards issued under the Stock Plan are not continued, converted, assumed or replaced by the surviving or acquiring entity, then such outstanding awards will fully vest as of immediately prior to such change in control.

Oversight of Named Executive Officer Compensation

Compensation Committee.   Our Compensation Committee determines the compensation of our Named Executive Officers, including their base salaries, bonus, and equity-based compensation, and is supported in that process by an independent compensation consultant and members of senior management, including our Chief Executive Officer, Senior Vice President of Human Resources and Vice President of Total Rewards. The Compensation Committee regularly evaluates our compensation programs to ensure they support our business objectives. The Compensation Committee’s charter is available on our website at investors.thecheesecakefactory.com, by clicking on the link for “Governance.”

Role of Outside Consultants.   For fiscal 2021, the Compensation Committee engaged FW Cook to serve as its independent compensation consultant. Our independent compensation consultant provides detailed evaluation and recommendations regarding our executive and Board compensation programs and advises the Compensation Committee with respect to structuring our compensation plans to achieve our business objectives. FW Cook was retained by and reports directly to the Compensation Committee and does not provide any other services to the Company. The Compensation Committee assessed the independence of its compensation consultants and analyzed whether the work of FW Cook raised any conflict of interest, pursuant to the rules of the SEC and Nasdaq. Based on this review, the Compensation Committee did not identify any conflict of interest or concerns as to whether FW Cook is independent with respect to the work of FW Cook as compensation consultant to the Compensation Committee.

Role of Chief Executive Officer in Compensation Decisions.   Our Chief Executive Officer provides the Compensation Committee with his assessment of the performance of each Named Executive Officer (other than himself) and his perspective on the factors described above under “Overview of Compensation Program-Factors Considered in Making Compensation Decisions” when developing his recommendations for each Named Executive Officer’s compensation (other than his own). Our Senior Vice President of Human Resources and our Vice President of Total Rewards work with our Chief Executive Officer during this process

 

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by reviewing market data and other performance factors. The Compensation Committee discusses our Chief Executive Officer’s recommendations, consults with its outside compensation consultant, and then approves or modifies the recommendations in collaboration with the Chief Executive Officer.

Compensation of our Chief Executive Officer.   The Compensation Committee determines the compensation of our Chief Executive Officer (including the terms of his employment agreement), following the same principles as are applied to compensation determinations for the other Named Executive Officers. The Compensation Committee solicits our Chief Executive Officer’s perspective on his own compensation but makes determinations regarding his compensation independently and without him or other Named Executive Officers present.

Governance Considerations

Risk Considerations.   The Compensation Committee reviews our employee compensation policies and practices, including those for non-executive officers, on an annual basis to assess how those policies and practices may affect risk-taking by employees. During its review in fiscal 2021, the Compensation Committee determined that our compensation programs are appropriately weighted toward long-term incentives and include policies designed to deter undue risk-taking by employees. These policies include the Clawback Policy, stock retention and ownership policies, and policies against short sales and hedging (see “Policies Regarding Hedging, Short Sales, Publicly Traded Derivatives, Margin Accounts and Pledges”). Based on this assessment, we determined that our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Clawback Policy; Forfeitures.   Our Clawback Policy requires certain of our executives to agree in writing to repay all or a portion of any Bonus payments and/or equity award(s), to the extent permitted by law and deemed appropriate by the Audit Committee, when we are required by applicable law or applicable accounting or auditing principles to restate our financial statements to correct an accounting error in any interim or annual financial statement filed with the SEC as a result of material noncompliance with applicable financial reporting requirements and the bonus and/or equity award(s) were directly based on those financial statements. Additionally, the Compensation Committee may (i) cause the cancellation of any award of any Option, SAR, Restricted Stock Grant or Stock Unit under the Stock Plan (“Award”), (ii) require reimbursement of any Award by a participant under the Stock Plan and (iii) effect any other right of recoupment of equity or other compensation provided under the Stock Plan or otherwise in accordance with Company policies (including without limitation the Company’s Clawback Policy) and/or applicable law. If the service of a Stock Plan participant is terminated for Cause (as defined under the Stock Plan), then all Options, SARs, unvested portions of Stock Units and unvested portions of Restricted Stock Grants terminate and are forfeited immediately without consideration as of the termination date.

Stock Ownership Requirements.   Stock ownership guidelines applicable to certain of our executive officers, including all current Named Executive Officers, provide that certain executives are required to acquire (and thereafter maintain ownership of) a minimum number of shares of our common stock with a value equal to the multiple of such executive’s annual base salary, as follows:

A newly appointed covered officer (other than a newly appointed Chief Executive Officer) has five years to comply with the guidelines. A newly-appointed Chief Executive Officer has seven years to comply with these guidelines. For purposes of this policy, stock ownership includes (i) any shares owned by an executive or his or her immediate family members or held by him or her as part of a tax or estate plan in which the executive retains beneficial ownership, and (ii) unvested restricted stock or restricted stock units. Compliance is calculated annually, on the first day of the fiscal year. For purposes of determining compliance with the policy, “value” means an assumed per-share value based on the average of the closing price of our common

 

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stock on the last day of each of the previous four fiscal quarters. An exception to the policy exists if acquisition of shares would result in a violation of our Special Trading Policy and Procedures. Certain hardship exceptions are also available at the discretion of the Compensation Committee. All of our Named Executive Officers are in compliance with our executive stock ownership policy as of the Record Date.

Other Considerations

Impact of Accounting and Tax Treatments on Compensation.   Accounting and tax considerations play a role in the design of our executive compensation program. Accounting rules, such as FASB ASC Topic 718, require us to expense the estimated fair market value of our stock-based compensation, which reduces the amount of our reported profits. The Compensation Committee considers the amount of this expense and the financial impact to us in determining the amount of equity compensation awards to grant to executives.

Section 162(m) of the Code and the regulations promulgated thereunder limit to no more than $1 million per taxable year, the allowable Company deduction for compensation paid to certain current and former executive officers of the Company. As a result, we expect that compensation paid per year to our Named Executive Officers and certain other current and former executive officers in excess of  $1 million generally will not be deductible. The Compensation Committee generally seeks to preserve tax deductions for executive compensation where available but may make compensation decisions based on other factors when it believes doing so is in the best interest of the Company and its stockholders. Further, the Compensation Committee also reserves the right to make changes or amendments to existing compensation programs and arrangements, including changes or amendments that may result in the loss of tax deductions, if the Compensation Committee believes it is in the best interests of the Company and its stockholders to do so.

Code Section 409A limits flexibility with respect to the time and form of payment of nonqualified deferred compensation. If a payment or award is subject to Code Section 409A but does not meet the requirements that exempt such amounts from taxation under that section, the recipient is subject to (i) income tax at the time the payment or award is not subject to a substantial risk of forfeiture, (ii) an additional 20% federal tax at that time, (iii) possible interest and penalties, and (iv) possible additional state taxes. While Code Section 409A is very complex and we cannot guarantee compliance with all of its requirements, we have made modifications to our plans and arrangements such that payments or awards under those arrangements either are intended not to constitute “deferred compensation” for Code Section 409A purposes (and will thereby be exempt from the requirements of Code Section 409A) or, if they constitute “deferred compensation,” are intended to comply with the Code Section 409A statutory provisions and final regulations.

The NEO Employment Agreements provide that, if a Named Executive Officer (other than our Chief Executive Officer) is subject to additional taxes imposed by Code Section 409A which relate solely to the timing of payment for the severance benefits under his or her prior employment agreement (if any), then within 60 days after the determination that such Code Section 409A taxes are due, we would pay the executive a cash payment so that the Named Executive Officer would be in the same position on an after-tax basis that the executive would have been in if no Code Section 409A taxes and related interest and/or penalties had been imposed.

 

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COMPENSATION COMMITTEE REPORT

The following Compensation Committee report does not constitute soliciting material and is not deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this Compensation Committee report by reference thereto.

The Compensation Committee has reviewed the Compensation Discussion and Analysis and has discussed its content with management. Based on this review and our discussions with management, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement and be incorporated by reference in the Company’s Annual Report on Form 10-K.

 

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COMPENSATION OF NAMED EXECUTIVE OFFICERS

The following table sets forth summary compensation information with respect to our Named Executive Officers for the fiscal years ended December 28, 2021, December 29, 2020 and December 31, 2019.

Summary Compensation Table