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Notice of Annual Meeting of Stockholders

Tuesday, April 30, 2019
11:00 a.m.

Papa John’s International, Inc.
2002 Papa John’s Boulevard
Louisville, Kentucky 40299-2367

·

Election of the ten directors nominated by the Board of Directors named in the attached Proxy Statement;

·

Ratification of the selection of KPMG LLP as the Company’s independent auditors for 2019;

·

Advisory approval of the Company’s executive compensation;

·

Ratification of the Company’s Rights Agreement, as amended; and

·

Such other business as may properly come before the meeting or any adjournment or postponement thereof.

Jeffrey C. Smith

Chairman

March 27, 2019         

Internet

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Visit the Web site noted on
your proxy card to vote via the
Internet.

Use the toll‑free telephone
number on your proxy card to
vote by telephone.

Sign, date and return your
proxy card in the enclosed
envelope to vote by mail.

Attend the meeting and vote in person.

·

Customers want high quality, great tasting products with simple ingredients

·

Customers want convenience of home delivery

·

Customers appreciate terrific service and a great experience

·

We have always been about better, fresher ingredients — and this is much more than an advertising slogan.
As a result of this quality, Papa John’s has a differentiated market position.

-

We lead the pizza category as the first national chain to announce the removal of artificial flavors and synthetic colors from our pizza menu as well as BHA and BHT, cellulose and partially hydrogenated oils, high fructose corn syrup from our pizza menu, and antibiotics from our grilled chicken and poppers.

-

Our original dough is fresh and hand-tossed using just six simple ingredients: flour, water, salt, sugar, yeast, and oil.

-

Our signature sauce is a simple recipe that uses fresh vine-ripened tomatoes and a custom blend of spices.

-

Our onions, peppers, and roma tomatoes are sliced fresh in our restaurants.

-

Our meat toppings are superior-quality proteins with no fillers or synthetic coloring.

-

Our cheese is made from high-quality skim milk.

·

Our global, existing infrastructure gives us a significant platform for growth. This is especially true with the numerous technology and digital-enabled enhancements that we are adding to better connect with consumers, serve our customers, and improve efficiencies at our restaurants.

·

Actions to support our people are helping us attract and retain employees in a highly competitive hiring environment. Our college education partnership with Purdue University Global provides employees and franchisees access to quality education and developmental opportunities. We grant stock to store general managers to keep the ethic of ownership throughout the organization. We have already provided diversity and inclusion training to 14,000 of our people and continue to add to that number; we believe that employees who are well and fairly treated will provide similarly high quality customer experiences.

·

Our investments in technology, data and data analytics are enabling us to:

-

Use media attribution tools to better inform our marketing spend;

-

Enhance our digital ordering platforms: our mobile channels now generate approximately three quarters of our digital sales. On our mobile apps, we’ve integrated Apple Pay and Google, and you can now buy our products via Amazon Alexa and DoorDash;

-

Use analytics to place key data in the hands of restaurant managers and other decision makers;

-

Speed and enhance feedback loops to drive better service and customer satisfaction; and

-

Streamline operations and reduce costs within our restaurants.

·

Our investments in our people are exceptional by any standards but particularly for a sector that historically experiences low wages and high turnover:

-

Over 80% of our restaurants are owned by franchisees. This means we have real owners from the top to the bottom of our company — not something many companies can claim — and we are committed to their long-term financial health, which includes making investments that improve their unit economics. We believe franchise opportunities are a great equalizer in an increasingly polarized society because they enable almost anyone to start a business with expertise and support otherwise beyond their reach;

-

We help our corporate restaurant general managers think like owners via annual stock grants;

-

We combat the sector’s high turnover with a tuition assistance program, in partnership with Purdue University Global. The program covers 100% of tuition cost of undergraduate and graduate online degree programs for Papa John’s 20,000 corporate team members and offers significantly reduced tuition to franchise employees. We believe this program will help us attract and retain employees and enable them to build skills that contribute to our future as well as theirs;

-

We retained independent experts to conduct a company-wide cultural audit, and we are already implementing recommendations to advance diversity, equity and inclusion across the organization; and

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Our more than 5,000 restaurants in 47 countries help create opportunities for individuals in those communities, while also providing us diversification and scale.

·

In addition, there are many more reasons to believe in our future:

-

While the restaurant and grocery worlds are wringing their hands over how to make home delivery possible, we have been doing this as a core competency since our founding 35 years ago;

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Consumers’ heightened interest in fresh foods is a natural match for our founding focus on BETTER, quality ingredients;

-

We have a differentiated market position and the infrastructure, ownership structure and scale to be successful in this highly competitive space; and

-

We are investing in the technological, human capital and operating capabilities necessary to deliver outstanding pizza and profitable, sustainable growth.

A Transformation Is Beginning at Papa John’s

6 New Directors, Including New Independent Chairman*

INDEPENDENT

Jeff Smith

Chairman

(46)

• Extensive experience in capital markets, corporate finance, best-in-class corporate governance practices

• CEO of Starboard Value

• Chair of Advance Auto, member of Perrigo board; previously Chair of Darden and Phoenix Technologies; former director at Yahoo!, Quantum Corporation, Office Depot, Regis Corporation, Surmodics, Zoran Corporation, Actel Corporation, Kensey Nash, S1 Corp, Fresh Juice Company

Michael
Dubin

(40)

• Record of building leading, innovative consumer brands with deep marketing, branding and business operations expertise

• CEO and co-founder of Dollar Shave Club; member of Stance Socks Board

• Previously held marketing, advertising, media and digital commerce positions at NBC, MSNBC, Time Inc. and two advertising agencies

Jocelyn
Mangan

(47)

• Two decades of technology and product strategy experience, including developing mobile apps and market leading software products for consumer, restaurant and marketplace companies

• CEO and founder of Him for Her; director at ChowNow, an online food ordering system and marketing platform

• Previously held executive positions at Snagajob, including COO and Chief Product and Marketing Officer; former SVP Product at Open Table

Shaquille
O’Neal

(47)

• NBA Hall of Famer with strong business track record as an investor, restaurateur and franchise owner

• Expected to become an investor in nine Papa John’s franchises and marketing partner for the Papa John’s brand

• Owner of other restaurant franchises, including Krispy Kreme Doughnuts and previously Five Guys Burgers and Fries; founder and owner of fast casual concept, Big Chicken, and fine dining destination, Shaquille’s. Minority owner of Sacramento Kings NBA franchise. Experience growing other leading consumer brands as a brand partner, endorser and spokesperson

Steve
Ritchie

(44)

• 22-year career at Papa John’s, including as President and COO, and SVP Corporate Operations and Global Operations Support and Training

• Multi-unit Papa John’s franchise owner and operator since 2006

• President and CEO, effective January 2018

Anthony
Sanfilippo

(60)

• 35+ years of board, senior executive and operating expertise in gaming and hospitality industries

• Most recently Chair and CEO of Pinnacle Entertainment

• Former President, CEO and director at Multimedia Games; previously worked in various roles at Harrah’s Entertainment; former director at Jazz Casino

New Leadership

Steve Ritchie

Appointed President and CEO,
effective 1/1/18

Marvin Boakye

Appointed as first Chief People Officer,
effective 1/23/19

Mike Nettles

Appointed Chief Operating & Growth Officer,
effective 10/12/18

Victoria Russell

Appointed as first Chief of Diversity, Equity & Inclusion,
effective 7/23/18

New Financial Flexibility to Support New Operating Priorities –
Extending Our Focus on BETTER Across the Papa John’s Organization

“Our agreement with Starboard provides new expertise and additional financial resources to invest in areas that we believe are important to our customers and the opportunities ahead. Quality and how our product brings people together will be front and center in our efforts.”

STEVE RITCHIE

PRESIDENT AND CEO OF PAPA JOHN’S

Approximately half of the proceeds from the Starboard investment will be used to repay debt, with the remaining proceeds providing financial flexibility that enables Papa John’s to invest capital to further advance its five strategic priorities.

Making People a Priority

Improving Our Brand Differentiation

Creating Accessible Value

People are our most important ingredient

Emphasize our quality position through our creative media to differentiate our brand; it’s more than just a tagline

Drive value perception by providing every day accessible value to our consumers

Implementing Technological Advancements

Improving Unit Economics

Build new technology with enhanced data and analytics capabilities to engage the consumer, create operational efficiencies, and better optimize our marketing spend

Build a stronger unit economic model through new tools, products, equipment and procedures to improve customer experience, sales and overall financial performance

“Papa John’s has always stood for higher quality pizza, and we believe Papa John’s has a strong foundation, with the best product in the space and a strong franchisee and customer base. We applaud the actions that the Board and management have taken to move the Company forward through a difficult transition. We see tremendous potential for the Company both in the U.S. and internationally. We look forward to providing leadership, sponsorship and support to instill operational, financial and corporate governance best practices, and working with the Papa John’s team to develop a disciplined long-term strategic plan while delighting our customers every day.”

JEFF SMITH

CHAIRMAN OF PAPA JOHN’S, STARBOARD VALUE CEO

New Initiatives to Support Our Employees and Franchisees and Put Our Commitment to Diversity, Equity and Inclusion into Action

• First of its kind, fully funded college education partnership with Purdue University Global, providing all corporate employees access to quality education and developmental opportunities with special programs for franchise employees as well

• DE&I training conducted for 14,000 corporate team members and is being rolled out across the country

• New DE&I team established to support the diverse franchise owners and employees who make up Papa John’s

• New Employee Resource Groups established to support and provide voice for the diverse employees who make up our company and our culture: African-American, Hispanic, Women and LGBTQ, multi-generational and Veterans

• New Papa John’s Foundation to support organizations that empower communities to overcome divides through civility and unity. First grant to Bennett College, a private, all-women, historically black liberal arts college in Greensboro, NC

CORPORATE GOVERNANCE

Majority Voting Standard for Director Elections 

Code of Ethics and Business Conduct 

Director Independence 

Hedging and Pledging Policy 

Recent Governance Changes and the Work of the Special Committee 

Board Leadership Structure and Risk Management 

Independent Chairman of the Board 

Meetings of the Board of Directors 

Committees of the Board of Directors 

Communications with the Board 

Nominations for Directors 

ITEM 1. ELECTION OF DIRECTORS 

Nominees for Election to the Board 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

EXECUTIVE COMPENSATION — COMPENSATION DISCUSSION AND ANALYSIS 

Summary Compensation Table 

Grants of Plan‑Based Awards 

Outstanding Equity Awards at Fiscal Year‑End 

Option Exercises and Stock Vested 

Nonqualified Deferred Compensation 

Change in Control and Termination Payments 

CEO Pay Ratio 

Director Compensation 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 

Compensation Committee Interlocks and Insider Participation 

Approval of Related Person Transactions 

Transactions with Related Persons 

AUDIT COMMITTEE REPORT 

ITEM 2. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS 

ITEM 3. ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION 

ITEM 4. RATIFICATION OF THE RIGHTS AGREEMENT, AS AMENDED 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING 

Who is entitled to vote at the Annual Meeting?

What are my voting rights?

How many shares must be present to hold the Annual Meeting?

What is the difference between a stockholder of record and a “street name” holder?

How can I submit my proxy?

How can I submit voting instructions to my broker?

How do I vote if I hold shares in the Papa John’s International, Inc. 401(k) Plan?

What does it mean if I receive more than one set of proxy materials?

Can I vote my shares in person at the Annual Meeting?

How does the Board recommend that I vote?

What if I do not specify how I want my shares voted?

Can I change my vote after submitting my proxy?

What vote is required to approve each item of business included in the Notice of Annual Meeting?

What is householding?

Who pays for the cost of proxy preparation and solicitation?

OTHER MATTERS 

Section 16(a) Beneficial Ownership Reporting Compliance 

Stockholder Proposals for the 2020 Annual Meeting 

Other Business 

Annual Report 

APPENDIX A 

A-1

Proxy Statement

Corporate Governance

·

violations of the federal securities laws;

·

fraud or error in the Company’s accounting, audit or internal controls, financial statements and records; or

·

misconduct by any member of the Company’s senior management.

·

The Audit Committee oversees management of financial risks, legal and regulatory risks, food safety, information technology and cyber security risks, as well as the Company’s Enterprise Risk Management program, reporting on such matters to the full Board. The Audit Committee’s agendas include discussions of individual and emerging risk areas throughout the year, and through its oversight of our Enterprise Risk Management program, the Audit Committee monitors management’s responsibility to identify, assess, manage and mitigate risks. Our Enterprise Risk Management program is comprised of a cross-functional, management-level Enterprise Risk Management team that helps establish a culture of managing and mitigating risk and coordination of risk management between our executive team and the Board.

·

The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s compensation plans and arrangements and also oversees succession planning. The Compensation Committee reviews our compensation policies and practices to determine whether they subject us to unnecessary or excessive risk. As a result of that evaluation, including a review of the plan design and governance aspects of our compensation programs discussed below in the Compensation Discussion and Analysis, the Compensation Committee concluded that the risks arising from those policies and practices are not reasonably likely to have a material adverse effect on the Company.

·

The Corporate Governance and Nominating Committee manages risks associated with potential conflicts of interest and reviews governance and compliance issues with a view to managing associated risks, including oversight of our compliance program with respect to our Code of Ethics and Business Conduct and monitoring of risks associated with workplace discrimination and harassment.

Members:

Laurette T. Koellner (Chair)

Christopher L. Coleman

Mark S. Shapiro

Meetings in Fiscal 2018: 6

The Audit Committee’s purpose is to assist the Board in fulfilling its oversight responsibilities for the accounting, financial reporting and internal control functions of the Company and its subsidiaries. The Audit Committee is responsible for the appointment, compensation and retention of the independent auditors and oversees the performance of the internal auditing function and the Company’s compliance program with respect to legal and regulatory requirements and risk management. The Audit Committee meets with management and the independent auditors to review and discuss the annual audited and quarterly unaudited financial statements, reviews the integrity of our accounting and financial reporting processes and audits of our financial statements, and prepares the Audit Committee Report included in this Proxy Statement. The responsibilities of the Audit Committee are more fully described in the Audit Committee’s Charter.

Each member of the Audit Committee is independent as determined by the Board, based upon applicable laws and regulations and NASDAQ listing standards. In addition, the Board has determined that each of Ms. Koellner and Mr. Coleman is an “audit committee financial expert” as defined by Securities and Exchange Commission (“SEC”) rules.

Members:

Olivia F. Kirtley (Chair)

Christopher L. Coleman

Laurette T. Koellner

Sonya E. Medina

Anthony M. Sanfilippo*

Meetings in Fiscal 2018: 11

The Compensation Committee oversees the Company’s compensation programs and is responsible for overseeing and making recommendations to the Board regarding the Company’s overall compensation strategies and succession planning. Specifically, the Compensation Committee reviews and approves annually the compensation of the Company’s executive officers, including the executive officers named in the Summary Compensation Table below (our “named executive officers” or “NEOs”). The Committee has the authority to administer our equity plans and is responsible for all determinations with respect to participation, the form, amount and timing of any awards to be granted to any such participants, and the payment of any such awards. In addition, the Committee is responsible for recommending stock ownership guidelines for the executive officers and directors, for recommending the compensation and benefits to be provided to non-employee directors, and for reviewing and approving the establishment of broad-based incentive compensation, equity based, and retirement or other material employee benefit plans. The Committee also reviews risks, if any, created by the Company’s compensation policies and practices and provides recommendations to the Board on compensation related proposals to be considered at the Annual Meeting.

The Committee has the authority to retain compensation consultants, outside counsel and other advisers. The Committee has engaged Frederick W. Cook & Company (“FW Cook”) to advise it and to prepare market studies of the competitiveness of components of the Company’s compensation program for its senior executive officers, including the named executive officers. FW Cook does not provide any other services to the Company. The Committee performed an assessment of FW Cook’s independence to determine whether the consultant is independent and, based on that assessment, determined that the firm’s work has not raised any conflict of interest and the firm is independent. See “Compensation Discussion and Analysis” for a further description of the Compensation Committee’s use of FW Cook during 2018, as well as the role of our executive officers in determining or recommending the amount or form of compensation paid to our named executive officers during 2018, and the Committee’s process in setting compensation.

The responsibilities of the Compensation Committee are more fully described in the Committee’s Charter.

* appointed to Committee February 2019

Members:

Christopher L. Coleman (Chair)

Olivia F. Kirtley

Sonya E. Medina

Anthony M. Sanfilippo*

Meetings in Fiscal 2018: 4

The Corporate Governance and Nominating Committee assists the Board in identifying qualified individuals for service as directors of the Company and as Board committee members, evaluates incumbent directors before recommending renomination, and recommends all such approved candidates to the Board for appointment or nomination to the Company’s stockholders. The Corporate Governance and Nominating Committee selects as candidates for appointment or nomination individuals of high personal and professional integrity and ability who can contribute to the Board’s effectiveness in serving the interests of the Company’s stockholders. The Corporate Governance and Nominating Committee recommended the nomination of ten directors for election to the Board at the Annual Meeting.

In addition, the Committee develops and monitors the process for evaluating Board effectiveness, oversees the development and administration of the Company’s corporate governance policies and the Company’s compliance program with respect to the Company’s Code of Ethics and Business Conduct. It also reviews and approves matters pertaining to possible conflicts of interest and related person transactions, and oversees the Company’s commitment to corporate values of diversity, equity and inclusion, and the Company’s human resources compliance programs, including policies and procedures, for monitoring discrimination and harassment. See the discussion under “Approval of Related Person Transactions” below.

The responsibilities of the Corporate Governance and Nominating Committee are more fully described in the Committee’s Charter.

* appointed to Committee February 2019

Item 1. Election of Directors

Christopher L. Coleman

Age:  50

Director since 2012

Committees:  Audit, Compensation, Corporate Governance & Nominating (Chair)

Mr. Coleman is based in the UK, where he is Group Head of Banking at Rothschild & Co. He is a Global Partner of Rothschild & Co, Chairman of Rothschild & Co Bank International and also serves on a number of other boards and committees of the Rothschild & Co Group, which he joined in 1989.

Mr. Coleman’s extensive financial experience and international business acumen provide insight and expertise to the Board in these key areas.

Mr. Coleman currently serves as a non-executive director of Barrick Gold Corporation (and is a member of its compensation committee and its corporate governance and nominating committee). Mr. Coleman was previously non-executive Chairman of Randgold Resources (and was previously a member of its audit and remuneration committees and chairman of its governance and nomination committee).

Michael R. Dubin

Age:  40

Director since 2019

Mr. Dubin currently serves as CEO of Dollar Shave Club, a position he has held since 2011. Dollar Shave Club was acquired by Unilever in 2016. Prior to founding Dollar Shave Club, Mr. Dubin built a career spanning marketing, advertising, media and digital commerce, holding positions at NBC, MSNBC, Time Inc. and two advertising agencies.

Mr. Dubin brings extensive marketing, media, digital commerce and business operations experience to the Board.

Mr. Dubin also currently serves on the Board of Stance Socks, a privately held company, as well as two non-profit organizations.

Olivia F. Kirtley

Age:  68

Director since 2003

Committees: Compensation (Chair), Corporate Governance & Nominating

Ms. Kirtley, a certified public accountant, is a business consultant on strategic and corporate governance issues. She is a former chief financial officer and former senior manager at a predecessor to the accounting firm Ernst & Young LLP (“Ernst & Young”). From 2014 to 2016, she served as President and Board Chairman of the International Federation of Accountants. She has also served as Chairman of the American Institute of Certified Public Accountants and Chairman of the AICPA Board of Examiners.

Ms. Kirtley brings extensive experience, expertise and insight to our Board in the areas of audit, risk management and public company corporate governance and compensation. In addition to her expertise in audit and tax issues developed in part as a senior manager at a predecessor to Ernst & Young, Ms. Kirtley also brings corporate management experience from her tenure at Vermont American Corporation, including the positions of Treasurer, Vice President Finance and Chief Financial Officer at that company.

Ms. Kirtley has served as a director of U.S. Bancorp since 2006 (including service as the chairman of its audit committee, chairman of its risk committee, and member of its governance, compensation and executive committees), as a director of ResCare, Inc. since 1998 (including service as the chairman of its audit committee and member of its governance committee), and as a director of Randgold Resources since 2017 until the Barrick Gold-Randgold merger on January 1, 2019 (including service as a member of its audit and remuneration committees).

Laurette T. Koellner

Age:  64

Director since 2014

Committees:  Audit (Chair), Compensation

Ms. Koellner most recently served as Executive Chairman of International Lease Finance Corporation, a subsidiary of American International Group, Inc. (“AIG”) from June 2012 until its May 2014 sale to AerCap Holdings N.V. Ms. Koellner served as President of Boeing International, a division of The Boeing Company, where she held a variety of financial and business leadership roles from 1997 until 2008, including as a member of the Office of the Chairman and Boeing’s Chief Administration and Human Resources Officer. Prior to her time with Boeing, Ms. Koellner spent 19 years at McDonnell Douglas Corp., which merged with The Boeing Company in 1997.

As a former executive of a publicly traded company, Ms. Koellner brings extensive experience to the Board in the areas of complex business operations, finance and accounting, and international business. In addition, she brings extensive corporate governance and compensation experience and insight as a director of other public companies.

Ms. Koellner served as an independent director of Hillshire Brands, Inc. from 2001 to 2014, at which time it was sold to Tyson Foods. She served as an independent director of AIG from 2009 to 2012. She currently serves on the board of directors of Celestica, Inc. (including service as the chairman of its audit committee, and member of its compensation and corporate governance and nominating committees), The Goodyear Tire & Rubber Company (including service as a member of its audit and finance committees) and Nucor Corporation (including service as a member of its compensation and executive development and corporate governance and nominating committees).

Jocelyn C. Mangan

Age:  47

Director since 2019

Ms. Mangan is the CEO and Founder of Him For Her, a social enterprise whose aim is to change for-profit boards of directors to include the world’s most talented women.  She has served in this capacity since May 2018.  Prior to that, Ms. Mangan held positions at Snagajob, serving as its COO from February 2017 to April 2018 and its Chief Product and Marketing Officer from May 2016 to February 2017.  From May 2014 to October 2015, Ms. Mangan was SVP of Product at OpenTable.

Ms. Mangan’s extensive experience with technology and product strategy will provide insight and expertise to the Board in these key areas.

Ms. Mangan currently serves on the board of ChowNow, an online food ordering system and marketing platform.

Sonya E. Medina

Age:  43

Director since 2015

Committees:  Compensation, Corporate Governance & Nominating

Ms. Medina is a government and public affairs strategist. She has served as a consultant to the City of San Antonio since March 2015, and as a consultant to Silver Eagle Distributors, the nation’s largest distributor of Anheuser-Busch products, since July 2013. She served as Vice President, Community and External Affairs for Silver Eagle Distributors from 2009 to 2013.  Ms. Medina served as a White House Commission Officer from 2001 to 2006 and again in 2008, and as Director of the AT&T Global Foundation from 2006 to 2008.

Ms. Medina brings leadership, strategy and multi-cultural marketing experience to the Board. She also brings insight into government affairs, through her prior experience as a White House Commission Officer.

She is active in community and civic affairs and currently serves on the Next Gen Board Leaders Advisory Council, a joint initiative launched by Nasdaq, Spencer Stuart and Boardroom Resources.

Shaquille R. O’Neal

Age:  47

Director since 2019

Mr. O’Neal’s business career includes success in broadcasting, endorsements, music, television and gaming.  He has served as an analyst on Inside the NBA since 2011.  He has been an investor in franchised and other restaurants since 2010, and actively operates Big Chicken, a fast casual fried chicken restaurant in Las Vegas and Shaquille’s, a fine dining restaurant in Los Angeles.  Mr. O’Neal is considered to be one of the most dominant basketball players in NBA history, drafted by the Orlando Magic with the first overall pick in the 1992 NBA draft. His NBA career spanned from 1992 until 2011.

Mr. O’Neal brings an entrepreneurial background and creative marketing skills to the Board.

He serves on the national board of directors of Communities In Schools, a non-profit devoted to empowering students to stay in school and achieve in life.

Steven M. Ritchie

Age:  44

Director since 2019

President and Chief Executive Officer

Mr. Ritchie currently serves as our President and Chief Executive Officer.  He previously served as President and Chief Operating Officer from July 2015 to December 2017, served as Senior Vice President and Chief Operating Officer from May 2014 to July 2015 and served as a Senior Vice President since 2010 (promoted in December 2010 to SVP, Corporate Operations and Global Operations Support and Training). Since 2006, he also has served as a franchise owner and operator of multiple units in the Company’s Midwest Division.

Mr. Ritchie brings to the Board a deep understanding of the Company’s business and extensive operations and industry experience.

Mr. Ritchie was initially appointed to the Board, and has been selected as a director nominee, pursuant to the Governance Agreement. See “Corporate Governance — Contractual Rights of Starboard to Designate Nominees” above.

Anthony M. Sanfilippo

Age:  60

Director since 2019

Committees:  Compensation, Corporate Governance & Nominating

Mr. Sanfilippo most recently served as a member of the board and Chief Executive Officer of Pinnacle Entertainment, Inc. from March 2010 until its October 2018 sale to Penn National Gaming.  He also served as Pinnacle’s chairman of the board from May 2017 until its sale. Prior to joining Pinnacle, Mr. Sanfilippo served as president, Chief Executive Officer and a board member of Multimedia Games Inc., a creator and supplier of comprehensive systems, content and electronic gaming units for various segments of the gaming industry. Prior to joining Multimedia Games, he served in leadership roles at Harrah's Entertainment, Inc. including serving as president and chief operating officer for Harrah’s New Orleans and a board member of Jazz Casino Corp.

Mr. Sanfilippo brings to the Board significant senior executive and operating expertise from his experience in the gaming and hospitality industries.

Mr. Sanfilippo was initially appointed to the Board, and has been selected as a director nominee, pursuant to the Governance Agreement. See “Corporate Governance — Contractual Rights of Starboard to Designate Nominees” above.

Jeffrey C. Smith

Age:  46

Director since 2019

Chairman of the Board

Mr. Smith is a Managing Member, Chief Executive Officer and Chief Investment Officer of Starboard Value LP, a New York-based investment adviser with a focused and fundamental approach to investing primarily in publicly traded U.S. companies, which he founded in April 2011.  He currently serves as our Chairman.  From January 1998 to April 2011, Mr. Smith was a Partner Managing Director of Ramius LLC, a subsidiary of the Cowen Group, Inc. and the Chief Investment Officer of the Ramius Value and Opportunity Master Fund Ltd. Prior to joining Ramius LLC in January 1998, he served as Vice President of Strategic Development and a director of The Fresh Juice Company, Inc.

Mr. Smith brings extensive experience to the Board as an active change agent investor, having worked with more than 50 different public companies to improve operations, strategy and corporate governance for the benefit of stockholders, including oversight of successful restaurant turnaround and board transformation.

Mr. Smith has served as chairman of the board of Advance Auto Parts, Inc. since May 2016. He has served on the board of Perrigo Company plc. since February 2017. Mr. Smith previously served as chairman of the board of Darden Restaurants, Inc. from October 2014 to April 2016; and as a director of Yahoo! Inc from April 2016 to June 2017. He also previously served as a director of: Quantum Corporation from May 2013 to May 2015; Office Depot, Inc. from August 2013 to September 2014; Regis Corporation from October 2011 until October 2013; and Surmodics, Inc. from January 2011 to August 2012. Mr. Smith also previously served as Chairman of the Board of Directors of Phoenix Technologies Ltd.; and as a director of Zoran Corporation, Actel Corporation, S1 Corporation, Kensey Nash Corporation, and the Fresh Juice Company, Inc.

Mr. Smith was initially appointed to the Board, and has been selected as a director nominee, pursuant to the Governance Agreement. See “Corporate Governance — Contractual Rights of Starboard to Designate Nominees” above.

Security Ownership of Certain Beneficial Owners and Management

Percent of

Amount and Nature of

Common Stock

 Name of Beneficial Owner

Beneficial Ownership(1)(2)

Outstanding

Steven R. Coke

18,605

(3)

*

Christopher L. Coleman

29,877

*

Michael R. Dubin

 —

 —

Olivia F. Kirtley

199,236

(4)

*

Laurette T. Koellner

23,975

(5)

*

Jocelyn C. Mangan

 —

 —

Sonya E. Medina

12,365

*

Michael R. Nettles

37,578

*

Shaquille R. O'Neal

 —

 —

Caroline Miller Oyler

64,378

(6)

*

Steven M. Ritchie

195,125

(7)

*

Anthony M. Sanfilippo

 —

 —

John H. Schnatter

9,965,732

(8)

31

%

Mark S. Shapiro

46,266

*

Jeffrey C. Smith

4,995,007

(9)

9.99

%

Joseph H. Smith

30,411

(10)

*

Jack Swaysland

31,287

*

Lance F. Tucker

 —

(11)

 —

All 19 directors and current executive officers as a group

15,651,843

(12)

43

%

Common Stock Beneficially
Owned

Series B Preferred Stock Beneficially Owned

Amount and Nature of

Percent

Amount and Nature of

Percent

 Other 5% Beneficial Owners

Beneficial Ownership(1)

Outstanding

Beneficial Ownership(1)

Outstanding

Starboard Value LP(13)

777 Third Avenue, 18th Floor

New York, NY 10017

4,995,007

(13)

9.99(14)

%

250,000

%

T. Rowe Price Associates, Inc.(15)

100 E. Pratt Street

Baltimore, MD  21202

3,339,549

%

BlackRock Inc.(16)

55 East 52nd Street

New York, NY 10055

2,567,032

%

The Vanguard Group(17)

100 Vanguard Blvd.

Malvern, PA 19355

2,028,677

%

Legion Partners Asset Management, LLC(18)

9401 Wilshire Blvd, Suite 705

Beverly Hills, CA  90212

1,726,086

%

(1)

Based upon information furnished to the Company by the named persons and information contained in filings with the SEC. Under SEC rules, a person is deemed to beneficially own shares over which the person has or shares voting or investment power or of which the person has the right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the named persons have sole voting and investment power with respect to their shares and such shares are not subject to any pledge.

(2)

Includes the following shares subject to options exercisable within 60 days after March 11, 2019, and time‑based restricted stock over which the named persons have sole voting power.

Options

Options

exercisable

Restricted

exercisable

Restricted

Name

within 60 days

Stock

Name

within 60 days

Stock

Steven R. Coke

8,201

6,779

Caroline Miller Oyler

29,502

20,257

Christopher L. Coleman

22,420

959

Steven M. Ritchie

118,720

47,464

Michael R. Dubin

 —

 —

Anthony M. Sanfilippo

 —

 —

Olivia F. Kirtley

31,958

1,436

John H. Schnatter

516,273

2,116

Laurette T. Koellner

14,468

959

Mark S. Shapiro

21,196

959

Jocelyn C. Mangan

 —

 —

Jeffrey C. Smith

 —

 —

Sonya E. Medina

9,157

959

Joseph H. Smith

6,935

22,020

Michael R. Nettles

9,350

25,815

Jack Swaysland

12,092

17,688

Shaquille R. O'Neal

 —

 —

Lance F. Tucker

 —

 —

(3)

Includes 1,534 shares held in the Company’s 401(k) Plan.

(4)

Ms. Kirtley also holds units deemed invested in 72,865 shares of common stock through a deferred compensation plan provided by the Company, 49,292 of which are distributable in an equivalent number of shares of common stock within 60 days of termination of service on the Board and are included in the shares reported, and 23,573 of which are not included in the shares reported.

(5)

Ms. Koellner also holds units deemed invested in 3,449 shares of common stock through a deferred compensation plan provided by the Company, all of which are distributable in an equivalent number of shares of common stock within 60 days of termination of service on the Board and are included in the shares reported.

(6)

Includes 600 shares held in the Company’s 401(k) Plan.

(7)

Includes 2,456 shares owned by Mr. Ritchie’s spouse of which 1,819 are subject to options exercisable within 60 days after March 11, 2019, and 345 are restricted stock.

(8)

Includes 64,500 shares held in a 501(c)(3) charitable foundation of which Mr. Schnatter has both voting and investment power, and 31,391 shares owned by Mr. Schnatter’s spouse. Information regarding Mr. Schnatter is based on the Schedule 13D/A filed March 5, 2019.

(9)

Includes shares of our common stock issuable upon conversion of 200,000 shares of Series B Preferred Stock directly held by Starboard Value and Opportunity Master Fund Ltd, (“Starboard V&O Fund”), Starboard Value and Opportunity S LLC (“Starboard S LLC”), Starboard Value and Opportunity C LP (“Starboard C LP”), Starboard Value and Opportunity Master Fund L LP (“Starboard L Master”) and Starboard Value LP through a managed account (the “Starboard Value LP Account”, and all such entities collectively, the “Starboard Entities”). Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP LLC ("Starboard Value GP"), the general partner of the investment manager of Starboard V&O Fund, and as a member and member of the Management Committee of Starboard Principal Co GP LLC ("Principal GP"), the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard V&O Fund. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the manager of Starboard S LLC, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard S LLC. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the investment manager of Starboard C LP, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard C LP. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of the investment manager of Starboard L Master, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities directly held by Starboard L Master. Mr. Smith, solely by virtue of his position as a member of the Management Committee of Starboard Value GP, the general partner of Starboard Value LP, and as a member and member of the Management Committee of Principal GP, the general partner of the member of Starboard Value GP, may be deemed to beneficially own the securities held in the Starboard Value LP Account. Also includes shares of our common stock issuable upon conversion of 50,000 shares of Series B Preferred Stock that the Starboard Entities have the option, exercisable at their discretion, to purchase on or prior to March 29, 2019, which shares of Series B Preferred Stock may be allocated among the Starboard Entities at their sole discretion, and for which all closing conditions for the exercise of the option to purchase the Series B Preferred Stock can be satisfied or waived by the Starboard Entities. Mr. Smith expressly disclaims beneficial ownership of the 250,000 shares of Series B Preferred Stock in total, except to the extent of his pecuniary interest therein.

(10)

Includes 1,096 shares held in the Company’s 401(k) Plan. Joseph Smith also holds units deemed invested in 18,671 shares of common stock through a deferred compensation plan provided by the Company, which are not included in the shares reported.

(11)

Mr. Tucker holds units deemed invested in 3,179 shares of common stock through a deferred compensation plan provided by the Company, which are not included in the shares reported. Mr. Tucker’s last day of employment with the Company was March 2, 2018.

(12)

Includes 802,091 shares subject to options exercisable within 60 days, 4,995,007 shares issuable upon conversion of Series B Convertible Preferred Stock, 149,758 shares of unvested restricted stock and 52,741 shares which may be acquired within 60 days of termination of service under the deferred compensation plan, held by all directors and executive officers. Holders of units deemed invested in common stock under the deferred compensation plan have no voting or investment power over any of the shares represented by these units.

(13)

All information regarding Starboard Value LP is based on the Schedule 13D filed with the SEC on February 14, 2019. Starboard Value LP reported that it may be deemed to beneficially own 4,995,007 shares of common stock, over which it has sole dispositive and voting power. The Starboard Entities directly hold 200,000 shares of our Series B Preferred Stock that, as of March 11, 2019, were convertible into 3,995,205 shares of our common stock and have the option, exercisable at their discretion, to purchase up to 50,000 shares of Series B Preferred Stock on or prior to March 29, 2019 that, as of March 11, 2019, were convertible into 998,801 shares of our common stock, and which shares of Series B Preferred Stock may be allocated among the Starboard Entities at their sole discretion, and for which all closing conditions for the exercise of the option to purchase the Series B Preferred Stock can be satisfied or waived by the Starboard Entities. According to the Schedule 13D, the beneficial ownership of our common stock by the Starboard Entities is as follows: (i) Starboard V&O Fund has sole voting and dispositive power over 2,581,902 shares, (ii) Starboard S LLC has sole voting and dispositive power over 387,534 shares, (iii) Starboard C LP has sole voting and dispositive power over 223,731 shares, (iv) Starboard L Master has sole voting and dispositive power over 207,750 shares, (v) Starboard Value R LP (“Starboard R LP”) has sole voting and dispositive power over 223,731 shares, and is the general partner of Starboard C LP (v) Starboard Value R GP LLC (“Starboard R GP”) has sole voting and dispositive power of 431,481 shares, and is the general partner of each of Starboard R LP and Starboard L GP, (vi) Starboard Value L LP (“Starboard L GP”) has sole voting and dispositive power over 207,750 shares and is the general partner of Starboard L Master, (vii) Starboard Value LP has sole voting and dispositive power over 4,995,007 shares and is the investment manager of Starboard V&O Fund, Starboard C LP, Starboard L Master, and the Starboard Value LP Account, and is the manager of Starboard S LLC, (vii) Starboard Value GP has sole voting and dispositive power over 4,995,007 shares and is the general partner of Starboard Value LP, (viii) Starboard Principal Co LP (“Principal Co”) has sole voting and dispositive power over 4,995,007 shares and is a member of Starboard Value GP, (ix) Principal GP has sole voting and dispositive power over 4,995,007 shares and is the general partner of Principal Co, (x) each of Messrs. Jeffrey C. Smith and Peter A. Feld have shared voting and dispositive power over 4,995,007 shares and are members of Principal GP and members of the Management Committee of each of Starboard Value GP and Principal GP. Each of the Starboard Entities and Messrs. Smith and Feld disclaim beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(14)

Reflects a conversion limitation of 9.99% as set forth under the Series B Certificate of Designation (as defined below). The 200,000 shares of Series B Preferred Stock held by certain funds affiliated with, or managed by, Starboard Value LP represent approximately 11.20% of the outstanding voting power on an as-converted basis and, if the option to purchase up to 50,000 shares of Series B Preferred Stock on or prior to March 29, 2019 is exercised in full, the 250,000 shares of Series B Preferred Stock held by certain funds affiliated with, or managed by, Starboard Value LP would represent approximately 13.62% of the outstanding voting power on an as-converted basis.

(15)

All information regarding T. Rowe Price Associates, Inc. is based on an Amendment to Schedule 13G filed with the SEC on February 14, 2019 by T. Rowe Price Associates, Inc. T. Rowe Price Associates, Inc. has sole power to vote 623,609 shares and sole dispositive power over 3,339,549 shares.

(16)

All information regarding BlackRock Inc. and its affiliates is based on an Amendment to Schedule 13G filed with the SEC on February 6, 2019 by BlackRock, Inc. BlackRock has sole power to vote 2,509,060 shares and has sole dispositive power over 2,567,032 shares.

(17)

All information regarding The Vanguard Group is based on an Amendment to Schedule 13G filed with the SEC on February 11, 2019.  The Vanguard Group has sole voting power over 32,742 shares, shared voting power over 3,600 shares, sole dispositive power of 1,994,335 shares, and shared dispositive power of 34,342 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 30,742 shares or 0.09% of the common stock outstanding of the Company as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard

Group, Inc., is the beneficial owner of 5,600 shares or 0.01% of the common stock outstanding of the Company as a result of its serving as investment manager of Australian investment offerings.

(18)

All information regarding Legion Partners Asset Management, LLC (“Legion Partners”) and its affiliates is based on an Amendment to Schedule 13D filed with the SEC on February 6, 2019 by Legion Partners to report that it (including its affiliates) has shared voting power with respect to (i) 880,660 shares beneficially owned by Legion Partners I, (ii) 42,781 shares beneficially owned by Legion Partners II, (iii) 802,545 shares beneficially owned by Legion Partners Special I, and (iv) 100 shares beneficially owned by Legion Partners Holdings, LLC.

s

Executive Compensation —
Compensation Discussion and Analysis

·

base salary;

·

short‑term cash incentives (which may be realized only to the extent quarterly or annual performance targets are met); and

·

long‑term compensation, consisting of equity‑based incentives (a combination of performance‑based units, time‑based restricted stock, and stock options).

·

No tax “gross‑ups” or “single‑trigger” change of control payments.

·

No guaranteed bonus or base pay increases.

·

No repricing or cash buyouts of underwater stock options or granting of stock options with an exercise price less than fair market value at grant.

·

A three‑year graded vesting period for stock options and restricted stock awards and a three-year performance period for full vesting of performance-based restricted stock units. Our retention grants in November 2018 cliff-vest after two years, with half of the CEO’s award, and 25% of the Chief Operating and Growth Officer’s award, also subject to a two-year performance period.

·

“Claw back” of certain performance-based compensation in the event the Company is required to prepare an accounting restatement to the extent the restatement indicates the performance goals were not achieved.

·

Other risk mitigation features include robust stock ownership requirements, multiple performance metrics to deter excessive focus on a singular performance goal, and limits on quarterly payouts under the short-term Management Incentive Plan (“MIP”), as well as an annual risk assessment by the Compensation Committee.

·

The Compensation Committee engages an independent compensation consultant, which provides no other services to the Company.

·

No dividends or dividend equivalent rights on unexercised stock options or unearned performance‑based units.

·

No pledging of Company stock by directors (other than as agreed to under the Securities Purchase Agreement) or executive officers.

·

No hedging or other derivative transactions in Company stock by executive officers or directors.

·

Limited perquisites.

Long-Term Incentive Program

2018*

Performance Based Units

Time-based Restricted Stock

Stock Options

Total Long-Term Incentives

·

Basing the 2018 MIP, our formula‑based annual cash incentive plan, on post-MIP operating income as well as non‑income measures of net global unit development, and North America and international comparable sales, each of which we consider critical to our strategic, financial, and operational success. For the comparable sales performance metric, our first-quarter payout was based on results compared to pre-established targets for performance, directly linking pay to performance. Consistent with our pay for performance philosophy, our second-, third- and fourth-quarter comparable sales metrics and our annual post-MIP operating income and net global unit development metrics did not yield a payout in 2018 since those metrics fell short of threshold performance targets. As a result, 2018 payout for current NEOs ranged from only 1% to 2% of base salary for all NEO’s other than Mr. Swaysland, whose bonus potential includes a component based on international results. The Committee sets targets with the objective of providing challenging yet reasonably achievable goals. The 2018 MIP results reflect the rigor of our objective performance targets.

·

Granting performance‑based restricted stock units (“performance-based units”) that pay out only if the Company achieves targeted goals over three years on three key metrics: North America system comparable sales, international system comparable sales, and net global unit openings. These metrics are the primary drivers of the Company’s business, and the targeted goals are set to align with our strategic plan, align the interests of executives with long-term value creation and promote retention. Payouts under these awards are also subject to a threshold achievement of earnings per share (“EPS”) growth. Payments under the performance-based unit plan for the three-year period ending at 2018 fiscal year end yielded no payout. For 2019, our performance-based unit plan will be based on our relative total shareholder return.

·

Granting stock option and restricted stock awards that typically vest over three years, tying executive compensation to long‑term service and the creation of long‑term stockholder value. Award levels are tied to individual performance and individual success in driving results.

PEER GROUP

BJ's Restaurants, Inc.

Denny’s Corp.

Red Robin Gourmet Burgers, Inc.

Brinker International, Inc.

DineEquity, Inc.

Sonic Corp.

The Cheesecake Factory, Inc.

Domino’s Pizza, Inc.

Texas Roadhouse, Inc.

Chipotle Mexican Grill, Inc.

Dunkin' Brands Group, Inc.

The Wendy’s Company

Cracker Barrel Old Country Store, Inc.

Jack in the Box Inc.

·

As part of the retention program, the Company adopted a Change of Control Severance Plan, effective November 1, 2018. Under the plan, upon the occurrence of any of certain termination events following a change-of-control of the Company (a “double-trigger” event), certain executive officers of the Company, including the NEOs, would be entitled to receive cash severance payments. These payments are equivalent to 36 months of base salary for Mr. Ritchie, 24 months of base salary for Messrs. Smith, Nettles, and Swaysland and Ms. Oyler, and 18 months of base salary for Mr. Coke, plus a pro-rata portion of any quarterly or annual non-equity bonus payout earned by the executive under any non-equity incentive-based compensation plan then in effect (provided that any applicable performance measures are achieved). Such payments in connection with a change-of-control termination event will be paid solely in lieu of, and not in addition to, any other severance payments or benefits payable under any offer letter, employment agreement, severance plan or arrangement, or other program. The plan has a term of 24 months.

·

The Compensation Committee also approved retention equity grants for each current NEO, with a grant date fair value equal to three times base salary for Mr. Ritchie, two times base salary for Messrs. Smith, Nettles, and Swaysland and Ms. Oyler, and eighteen months of base salary for Mr. Coke. One-half of Mr. Ritchie’s and one-quarter of Mr. Nettles’ award was comprised of performance-based restricted stock units that will vest based on the achievement of 20% or greater adjusted operating income growth over the period from December 31, 2018 through December 27, 2020, and the remainder was comprised of time-based restricted stock that will cliff-vest two years from the date of grant, subject in each case to the executive’s continued service with the Company. The other current NEOs’ entire award was comprised of time-based restricted stock that will cliff vest two years from the date of grant, subject to continued service with the Company.

Actual

Payout

Award

Metric

Definition

Target

Actual Results

Percentage

Weighting

Frequency

Post-MIP Operating Income

Consolidated post-MIP operating income.(1)

$

95,017,000

(2)

$

820,000

%

45

%  

Annual

Net Development

Global system-wide store openings less store closings.

248 units

(2)

104 units

(2)

%

25

%  

Annual

North America

North America system-wide

(3.34)

%

(5.26)

%

52

%

3.75

%

Quarter 1

Comparable Sales

comparable sales (average same-

(0.25)

%

(6.13)

%

%

3.75

%

Quarter 2

store, year-over-year sales), an

1.71

%

(9.76)

%

%

3.75

%

Quarter 3

industry standard used to measure company growth.

4.11

%

(8.13)

%

%

3.75

%

Quarter 4

International Comparable

International system-wide

4.13

%

0.33

%

 5

%

3.75

%

Quarter 1

Sales

comparable sales (average same-

4.51

%

(0.83)

%

%

3.75

%

Quarter 2

store, year-over-year sales), an

5.94

%

(3.35)

%

%

3.75

%

Quarter 3

industry standard used to measure company growth.

5.27

%

(2.56)

%

%

3.75

%

Quarter 4

(1)

Our plan design excludes PJ Food Service (commissary) income from the operating income component of the MIP results to appropriately incentivize our management team to control food costs for our franchise and corporate restaurants.

(2)

Any payout under the MIP is subject to threshold levels in each performance metric. For 2018, the threshold levels were Post-MIP Operating Income of $85.5 million and Global Net Development of 124 units. Threshold targets for comparable sales by quarter were:

Q1

Q2

Q3

Q4

North America

-7.34%

-4.25%

-2.29%

0.11%

International

0.13%

0.51%

1.94%

1.27%

Target

Short-Term

Target

Actual

Incentive

Short-Term

Short-Term

Actual

Award

Incentive

Incentive

Award

(% of Base

Award

Award

(% of 2018

 Named Executive Officer

Title

Salary)

$

Base Salary)

 Steven M. Ritchie

President and Chief Executive Officer

75

%  

675,000

14,459

 2

%

 Joseph H. Smith

Senior Vice President and Chief Financial Officer

62

%  

222,197

1,861

 1

%

 Michael R. Nettles

Executive Vice President, Chief Operating and Growth Officer

75

%

302,163

5,623

 1

%

 Caroline Miller Oyler

Senior Vice President and Chief Legal and Risk Officer

67

%

271,039