DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

  Filed by the registrant                      Filed by a party other than the registrant

 

Check the appropriate box:
  Preliminary Proxy Statement
  CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to Section 240.14a-12

JACK IN THE BOX INC.

(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):
  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
   

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(2) Aggregate number of securities to which transaction applies:

 

   

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

   

(4) Proposed maximum aggregate value of transaction:

 

   

(5) Total fee paid:

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
   

(1) Amount Previously Paid:

 

   

(2) Form, Schedule or Registration Statement No.:

 

   

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(4) Date Filed:

 


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LOGO

January 25, 2017

Dear Fellow Stockholder:

We invite you to attend the Jack in the Box Inc. 2017 Annual Meeting of Stockholders. The meeting will be held on Tuesday, February 28, 2017, at 8:30 a.m. Pacific Standard Time at the offices of Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123. In the following pages, you will find the Notice of Annual Meeting of Stockholders as well as a Proxy Statement describing the business to be conducted at the meeting. We have also enclosed a copy of our Annual Report on Form 10-K for the fiscal year ended October 2, 2016, for your information.

To assure that your shares are represented at the meeting, please mark your choices on the enclosed proxy card, sign and date the card, and return it promptly in the postage-paid envelope provided. We also offer stockholders the opportunity to vote their shares over the Internet or by telephone. Please see the Proxy Statement and the enclosed proxy card for details about voting. If you hold your shares through an account with a broker, bank, or other financial institution, please follow the instructions you receive from them to vote your shares. If you are able to attend the meeting and wish to vote your shares in person, you may do so at any time before the proxy is voted at the meeting.

Sincerely,

 

LOGO

Leonard A. Comma

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 February 28, 2017

The Jack in the Box Inc. Proxy Statement and Annual Report on Form 10-K for the

fiscal year ended October 2, 2016, are available electronically at

http://investors.jackinthebox.com

 

INFORMATION REGARDING ADMISSION TO THE ANNUAL MEETING

Everyone attending the 2017 Annual Meeting of Stockholders will be required to present both proof of ownership of Jack in the Box Inc. Common Stock and a valid picture identification, such as a driver’s license or passport. If your shares are held in the name of a bank, broker or other financial institution, you will need a recent brokerage statement or letter from such entity reflecting your stock ownership as of the record date. If you do not have both proof of ownership of Jack in the Box Inc. stock and a valid picture identification, you may be denied admission to the Annual Meeting.

Cameras, sound or video recording devices, and large bags or packages will not be allowed in the meeting room.


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TABLE OF CONTENTS

     Page  

Notice of 2017 Annual Meeting of Stockholders

     1   

Proxy Summary

     2   

Questions and Answers

     8   

Proxy Materials and Voting Information

     8   

Annual Meeting Information

     12   

Communications and Stockholder Proposals

     13   

Proposal 1  — Election of Directors

     14   

Nominees for Director

     14   

Director Qualifications and Biographical Information

     15   

Corporate Governance

     20   

Directors’ Independence

     20   

Board Meetings, Annual Meeting of Stockholders and Attendance

     20   

Determination of Current Board Leadership Structure

     20   

Lead Director

     21   

Board’s Role in Succession Planning

     21   

Board’s Role in Risk Oversight

     21   

Executive Sessions

     22   

Committees of the Board

     22   

Board Composition and Refreshment

     23   

Stockholder Recommendations and Board Nominations

     24   

Code of Conduct

     25   

Compensation Committee Interlocks and Insider Participation

     25   

Additional Corporate Governance Principles and Practices

     25   
Director Compensation and Stock Ownership Guidelines      26   
Report of the Audit Committee      29   
Proposal 2 — Ratification of the Appointment of Independent Registered Public Accountants      31   
Proposal 3 — Advisory Vote on Executive Compensation      32   
Proposal 4 —  Re-approval of Certain Terms and Conditions Set Forth in Our 2004 Stock Incentive Plan That Will Permit Us to Grant Awards That May Qualify as “Performance-Based Compensation” Within the Meaning of Section 162(m) of The Code      34   
Proposal 5 — Advisory Vote on the Frequency of an Advisory Vote on Executive Compensation      43   
     Page  

Compensation Discussion & Analysis

     44   

I.    Executive Summary

     44   

II.   Compensation Principles and Objectives

     48   

III.  Compensation Competitive Analysis

     49   

IV.  Elements of Compensation

     50   

V.   Compensation Decision-Making Process

     51   

VI.  Fiscal 2016 Compensation

     52   

VII. Additional Compensation Information

     56   

Compensation Committee Report

     60   

Compensation Risk Analysis

     61   

Executive Compensation

     62   

Summary Compensation Table

     62   

Grants of Plan-Based Awards

     64   

Outstanding Equity Awards at Fiscal Year-End 2016

     65   

Option Exercises and Stock Vested in Fiscal 2016

     66   

Retirement Plan Benefits

     66   

Non-Qualified Deferred Compensation

     67   

Potential Payments on Termination of Employment or Change in Control

     68   
Security Ownership of Certain Beneficial Owners and Management      72   
Other Information      75   

Section 16(a) Beneficial Ownership Reporting Compliance

     75   

Certain Relationships and Related Transactions

     75   
Exhibit A — Jack in the Box Inc. 2004 Stock Incentive Plan Amended and Restated effective February 17, 2012      A-1   
 


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JACK IN THE BOX INC.

9330 Balboa Avenue

San Diego, California 92123

 

LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held February 28, 2017

The 2017 Annual Meeting of Stockholders of Jack in the Box Inc. will be held on Tuesday, February 28, 2017, at 8:30 a.m. Pacific Standard Time, at the offices of Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123 for the following purposes:

 

1. To elect the eight Directors specified in this Proxy Statement to serve until the next Annual Meeting of Stockholders and until their respective successors are elected and qualified;

 

2. To ratify the appointment of KPMG LLP as our independent registered public accountants for the fiscal year ending October 1, 2017;

 

3. To provide an advisory vote regarding the compensation of our named executive officers (“Say on Pay”) for the fiscal year ended October 2, 2016, as set forth in the Proxy Statement;

 

4. To re-approve the Jack in the Box Inc. 2004 Stock Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code;

 

5. To provide an advisory vote on the frequency of the vote on executive compensation (“Say on Pay vote”); and

 

6. To consider such other business as may properly come before the meeting and any adjournments or postponements thereof.

These matters are more fully described in the attached Proxy Statement, which is made a part of this notice.

Our Board of Directors recommends a vote “FOR” proposals 1 through 4, and for “ONE YEAR” frequency on proposal 5. You are entitled to vote at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) only if you were a Jack in the Box Inc. stockholder as of the close of business on December 30, 2016, the record date for the Annual Meeting. A complete list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder, for any purpose relating to the Annual Meeting, at the Annual Meeting, and for a period of ten days prior to the Annual Meeting, during regular business hours at our principal offices located at 9330 Balboa Avenue, San Diego, CA 92123.

Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares via the toll-free telephone number, over the Internet, or by signing, dating, and returning the enclosed proxy card as promptly as possible in the envelope provided.

San Diego, California

January 25, 2017

By order of the Board of Directors,

 

LOGO

Phillip H. Rudolph

Executive Vice President, Chief Legal & Risk Officer and Corporate Secretary

 

INFORMATION REGARDING ADMISSION TO THE ANNUAL MEETING

Everyone attending the 2017 Annual Meeting of Stockholders will be required to present both proof of ownership of Jack in the Box Inc. Common Stock and a valid picture identification, such as a driver’s license or passport. If your shares are held in the name of a bank, broker or other financial institution, you will need a recent brokerage statement or letter from such entity reflecting your stock ownership as of the record date. If you do not have both proof of ownership of Jack in the Box Inc. stock and a valid picture identification, you may be denied admission to the Annual Meeting.

Cameras, sound or video recording devices, and large bags or packages will not be allowed in the meeting room.


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    PROXY SUMMARY          

 

PROXY SUMMARY

This is a summary only, and does not contain all of the information that you should consider in connection with this proxy statement. Please read the entire proxy statement carefully before voting.

Annual Meeting of Stockholders

 

   Time and Date

   8:30 a.m. P.S.T., February 28, 2017

   Place

   9330 Balboa Avenue, San Diego, California 92123

   Record date

   December 30, 2016

   Voting

   Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals.

   Admission

   Proof of ownership and picture identification is required to enter Jack in the Box Inc.’s annual meeting.

Voting Matters

 

Stockholders are being asked to vote on the following matters:

 

  Items of Business

   Our Board’s Recommendation

  1.   Election of Directors (page 14)

   FOR all Nominees

  2.   Ratification of KPMG LLP as Independent Registered Public Accountants for FY 2017 (page 31)

   FOR

  3.   Advisory Vote to Approve Executive Compensation (page 32)

   FOR

  4.   Re-approval of Stock Incentive Plan for Purposes of IRC Section 162(m) (page 34)

   FOR

  5.   Advisory Vote on Frequency of Say on Pay Vote (page 43)

   ONE YEAR

Stockholders also will transact any other business that may properly come before the meeting.

How to Vote

 

You are entitled to vote at the 2017 Annual Meeting of Stockholders if you were a stockholder of record at the close of business on December 30, 2016, the record date for the meeting. On the record date, there were 31,630,525 shares of the Company’s common stock outstanding and entitled to vote at the annual meeting. For more details on voting and the annual meeting logistics, refer to pages 8-13 of this proxy statement.

 



 

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            PROXY SUMMARY  

 

Corporate Governance Highlights

 

We are committed to good corporate governance, which we believe promotes the long-term interests of stockholders and strengthens Board and management accountability. We believe good governance also fosters trust in the Company by all our stakeholders, including our guests, employees, franchisees and the communities we serve. The “Corporate Governance” section, beginning on page 20, describes our governance framework, which includes the following features:

 

      Annual election of directors, with majority voting

  

     Annual assessment of board leadership structure

      7 of 8 independent directors

  

     Annual board, committee and individual director evaluations

      Regular executive sessions of independent directors

  

     Lead independent director with restaurant and franchise experience and oversight of independent directors’ executive sessions and information flow to the Board

      Board annual evaluation of CEO/Chairman

  

      Policy restricting directors to service on no more than three other public company boards, and requiring long-tenured directors (more than 12 years on the Board) to submit voluntary offer to resign and be reviewed by Nominating & Governance Committee with respect to continued effectiveness

  

     Risk oversight by full Board and designated committees

      No supermajority standards — stockholders may amend bylaws or charter by majority vote

  

     Prohibition of hedging, pledging and short sales by Section 16 officers and directors

      Stockholder right to act by written consent

  

     No poison pill in place

      CEO/Chair and other members of Management regularly meet with the investment community, and Board is informed of feedback through Investor Relations update at each Board meeting

  

     Formal ethics Code of Conduct, ethics hotline and ethics training and communications to all employees to reinforce a culture of integrity

 



 

JACK IN THE BOX INC.   ï  2017 PROXY STATEMENT    3


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    PROXY SUMMARY          

 

Fiscal 2016 Performance

 

Returns to Stockholders

 

    The Company’s stock price increased 20.4% to $95.94 per share at fiscal year-end (“FYE”) 2016, versus $79.71 at FYE 2015.

 

    We returned more than $330 million in cash to stockholders during fiscal 2016, including over $290 million in share buybacks and over $40 million in dividends. The stock also hit a then all-time high of $102.68 during the fiscal year.

 

Financial Highlights

  

 

LOGO

 

 

(1)      Operating EPS refers to diluted EPS from continuing operations on a GAAP basis excluding restructuring charges and gains/losses from refranchising. For a reconciliation, please see the Company’s current report on Form 8-K and accompanying press release filed November 21, 2016.

 

   Operating Earnings Per Share (“Operating EPS”)(1) increased to $3.86 per share for fiscal 2016 (versus $3.00 for fiscal 2015), representing an increase of more than 25%, excluding the $0.09 benefit from the 53rd week in fiscal 2016. This was the Company’s fifth consecutive year of growth in excess of 20%.

  

 

   Systemwide same-store sales grew 1.4% at Qdoba (on top of a 9.3% increase the prior year) and 1.2% at Jack in the Box (“JIB”) (on top of the 6.5% increase in fiscal 2015).

  

 

   Consolidated restaurant operating margin (“ROM”) was 20.2% of sales, with margins at JIB increasing by 50 basis points to 21.2%.

  

 

   During fiscal 2016, the Company made progress on key strategic initiatives, including reducing our G&A, increasing our borrowing capacity and beginning to implement plans to bring the JIB franchise mix to over 90% of the system.

  

 

   Consolidated franchise margin, as a percentage of franchise revenues, improved 140 basis points to 52.9%.

  

Consistent with the fundamental principle that compensation programs should align pay with performance, the Company’s fiscal 2016 performance directly impacted compensation decisions and pay outcomes as described in our Compensation Discussion and Analysis (CD&A) starting on page 44.

 



 

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            PROXY SUMMARY  

 

Board Nominees (Proposal 1)

 

We understand the importance of having a Board comprised of talented people with the highest integrity and the necessary skills and qualifications to oversee our business. The following table provides summary information about our director nominees (all current Directors), who have a diverse and balanced skill set including extensive financial, marketing, consumer brand, franchise, restaurant and retail experience. We encourage you to review the qualifications, skills and experience of each of our Directors on pages 15-19.

 

Name   Age     Director  
Since  
  Principal Occupation   Independent     Committee Memberships    

Other Public  

Company

Boards

          AC   CC   NG   FC   EC  
                     

  Leonard A. Comma

  (Chairman of the Board)

  47   2014  

CEO,

Jack in the Box Inc.

  No                   LOGO     -
                     

  David L. Goebel

  (Lead Director)

  66   2008  

Partner & Faculty Member,

Merryck & Co. Ltd.

  Yes       x   x       x   -
                     

  Sharon P. John

  52   2014  

President & CEO,

Build-A-Bear Workshop, Inc.

  Yes       x   x           Build-a-Bear

Workshop, Inc. 

                     

  Madeleine A. Kleiner

  65   2011  

Director

(Retired hotel & banking

executive attorney)

  Yes       x   LOGO             Northrop

Grumman

Corp.

                     

  Michael W. Murphy

  59   2002  

President & CEO,

Sharp HealthCare

  Yes   LOGO         x       x   -
                     

  James M. Myers

  59   2010  

Chairman & CEO,

Petco

  Yes   x           x       -
                     

  David M. Tehle

  60   2004  

Director

(Retired retail CFO)

  Yes   x           LOGO         Genesco Inc.,

US Foods

Holding Corp.

                     

  John T. Wyatt

  61   2010  

CEO, Knowledge Universe

— United States

  Yes       LOGO         x       -

 

LOGO    Chair

  

AC    Audit Committee

x   Member

  

CC    Compensation Committee

  

NG    Nominating and Governance Committee

  

FC     Finance Committee

  

EC     Executive Committee

Director Attendance — During the time each director nominee served on the Board in fiscal 2016, each attended more than 75% of the meetings of the Board and committees on which he or she sits.

Board Composition — Our Board has a mix of relatively newer and longer-tenured directors. The charts below show board makeup by various characteristics. For more information on our philosophy regarding the recruitment and diversity of board members and our board refreshment policies, please see pages 23-25.

 

LOGO

 



 

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    PROXY SUMMARY          

 

Auditors (Proposal 2)

 

 

We are asking our stockholders to ratify the selection of KPMG LLP as our independent registered public accountants for fiscal 2017. Although stockholder ratification of the appointment is not required, the Audit Committee believes it is appropriate to seek such ratification. Additional information is provided on pages 29-31.

2016 Auditor Fees

  Audit Fees

   $1,003,001  

  Tax or Other Fees

   $       8,750  

  KPMG Total Fees

   $1,011,751  
 

 

Executive Compensation Highlights (Proposal 3)

 

The Company seeks a non-binding advisory vote from its stockholders to approve the compensation of our named executive officers (“NEOs”) for fiscal 2016 (“Say on Pay”). The Board values stockholders’ opinions, and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.

 

  Our CD&A describes the compensation decision-making process, details our programs and policies, and includes a chart showing our compensation framework and key fiscal 2016 performance measures and pay actions on page 45.

 

  Our executive compensation programs are built on the following principles and objectives:

 

    Competitive target pay structure, including base salary, annual incentive, and long-term incentives that enable us to attract and retain talented, experienced executives who can drive long-term stockholder value.

 

    Pay for performance alignment, with a higher percentage of executive pay in the form of annual and long-term incentives that directly tie payouts to the achievement of incentive goals.

 

    Comprehensive goal setting, with financial, operating, and strategic performance metrics that drive long-term stockholder value.

 

    Incentivizing balanced short- and long-term executive decision making, through variable compensation components using varying timeframes.
    Executive alignment with stockholders, through stock ownership and holding requirements.

 

    Sound governance practices and principles in plan design and pay decisions, with the Committee considering both what and how performance is achieved.

 

    Management of compensation risk, by establishing incentive goals that avoid placing too much emphasis on any one metric or performance time horizon, thereby discouraging excessive or unwise risk-taking.
 

 

  Our stockholders approved each of the prior three years’ Say on Pay proposals by over 97% of votes cast.

 



 

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            PROXY SUMMARY  

 

Compensation Governance Practices

 

The company has several governance practices which we believe support the soundness and efficacy of our compensation programs. In short:

 

   What We Do

 

   What We Don’t Do

   Compensation Committee composed entirely of independent directors, who meet regularly in executive session without management present. Pages 22, 51.

 

   Section 16 officers and directors are prohibited from hedging, pledging or holding Company stock in margin accounts. Page 57.

   Independent compensation consultant who works exclusively for the Committee (no other work for the Company). Page 51.

 

   No dividends or dividend equivalents are paid on unvested restricted stock units (RSUs) or performance share units. Page 50.

   Robust stock ownership and holding requirements. Page 56.

 

   No re-pricing of equity without stockholder approval. Pages 35-36.

   Compensation Risk Committee that analyzes compensation plans, programs, policies and practices. Page 61.

 

   The Company ceased providing tax gross-up provisions in compensation arrangements entered into in 2009 and later, except related to relocation expenses (which require Compensation Committee approval in the case of executive officers). Page 59.

   Compensation Committee discretion to reduce payouts under incentive plans. Page 61.

 

   No single trigger on RSUs and options. Since 2014, all RSUs and Options awards that provide for vesting upon a change in control require a “double trigger” (termination and consummation of the change in control). Page 69.

   Clawback policy providing ability to recover incentive cash compensation and performance-based equity awards based on financial results that were subsequently restated due to fraud or intentional misconduct. Page 58.

 

Re-approval of 2004 Stock Incentive Plan for Purposes of IRC 162(m) (Proposal 4)

 

The Company seeks stockholder re-approval of the Jack in the Box Inc. Stock Incentive Plan (“2004 Stock Incentive Plan”). Re-approval will allow compensation awarded under the Plan to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code (“IRC”). Stockholders are not being asked to approve an increase in the number of shares available for grant under the 2004 Stock Incentive Plan or any other amendment to the terms of the plan. See pages 34-42 for a summary of the Plan, and Exhibit A for the complete Plan.

Frequency of Say on Pay Vote (Proposal 5)

 

The Company is required to provide stockholders with the opportunity to vote, on a non-binding, advisory basis, for their preference as to the frequency of future advisory votes on the compensation of our named executive officers (NEOs) (“Say on Pay” votes). Stockholders may indicate whether they would prefer that we conduct future Say on Pay votes every one, two or three years, or abstain from casting a vote on this proposal. The Board recommends a one year vote as the preferred frequency.

Additional Information

 

Please see the “Questions and Answers” section that immediately follows for important information about the proxy materials, voting, the annual meeting, Company documents, communications and the deadlines to submit stockholder proposals for the 2018 Annual Meeting of Stockholders.

 



 

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    QUESTIONS AND ANSWERS          

 

JACK IN THE BOX INC.

9330 Balboa Avenue

San Diego, California 92123

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

February  28, 2017

QUESTIONS AND ANSWERS

Proxy Materials and Voting Information

 

1. Why am I receiving these materials?

 

 

We sent you these proxy materials because the Board of Directors (sometimes referred to as the “Board”) of Jack in the Box Inc. (sometimes referred to as the “Company,” “Jack in the Box,” “we,” “us,” or “our”) is soliciting your proxy to vote at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) and at any postponements or adjournments of the Annual Meeting. The Annual Meeting will be held on February 28, 2017, at 8:30 a.m. Pacific Standard Time at our corporate headquarters located at 9330 Balboa Avenue, San Diego, CA 92123. If you held shares of our common stock on December 30, 2016 (the “Record Date”), you are invited to attend the Annual Meeting and vote on the proposals

described below under the heading “What are my voting choices for each of the items to be voted on at the 2017 Annual Meeting?” However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may complete, sign, date, and return the enclosed proxy card. You may also vote over the Internet or by telephone.

The Notice of Annual Meeting of Stockholders (the “Notice”), Proxy Statement, the enclosed proxy card, and our Annual Report on Form 10-K for the fiscal year ended October 2, 2016, will be mailed to stockholders on or about January 25, 2017.

 

 

2. Who can vote at the Annual Meeting?

 

 

If you were a holder of Jack in the Box common stock (the “Common Stock”) either as a stockholder of record or as the beneficial owner of shares held in Street name as of the close of business on December 30, 2016, the Record Date for the Annual Meeting, you may vote your shares at the Annual Meeting. As of the Record Date, there were 31,630,525

shares of Common Stock outstanding, excluding treasury shares. Company treasury shares will not be voted. Each stockholder has one vote for each share of Common Stock held as of the Record Date. As summarized below, there are some distinctions between shares held of record and those owned beneficially in Street name.

 

 

3. What does it mean to be a “stockholder of record”?

 

 

If, on the Record Date, your shares were registered directly in your name with the Company’s transfer agent, Computershare, then you are a “stockholder of record.” As a stockholder of record, you may vote in person at the Annual

Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card, or vote by telephone or Internet, to ensure your vote is counted.

 

 

4. What does it mean to beneficially own shares in “Street name”?

 

 

If, on the Record Date, your shares were held in an account at a broker, bank, or other financial institution (we will refer to those organizations collectively as “broker”), then you are the

beneficial owner of shares held in “Street name” and these proxy materials are being forwarded to you by that broker. The broker holding your account is considered the stockholder of

 

 

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            QUESTIONS AND ANSWERS  

 

record for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker on how to vote the shares in your account. As a beneficial owner, you are invited to attend the Annual Meeting. However, since you are not a stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker giving you the legal right to vote the shares at the Annual Meeting, as well as satisfy the Annual Meeting admission criteria set out in

the Notice. Under the rules that govern brokers, your broker is not permitted to vote on your behalf on any matter to be considered at the Annual Meeting (other than the ratification of the appointment of KPMG LLP as our independent registered public accountants for fiscal 2017) unless you provide specific instructions to the broker as to how to vote. As a result, we encourage you to communicate your voting decisions to your broker before the date of the Annual Meeting to ensure that your vote will be counted.

 

 

5. What are my voting choices for each of the items to be voted on at the 2017 Annual Meeting?

 

 

Item 1: Election of Directors      

  Vote in favor of all nominees;

 

  Vote in favor of specific nominees;

 

  Vote against all nominees;

 

  Vote against specific nominees;

 

  Abstain from voting with respect to nominees; or

 

  Abstain from voting with respect to specific nominees.

 

The Board recommends a vote FOR all Director nominees.

 

     
Item 2: Ratification of the Appointment of KPMG LLP as Independent Registered Public Accountants      

  Vote in favor of ratification;

 

  Vote against the ratification; or

 

  Abstain from voting on the ratification.

 

The Board recommends a vote FOR the ratification.

 

     
Item 3: Advisory Vote to Approve Executive Compensation (“Say on Pay”)      

  Vote in favor of the advisory proposal;

 

  Vote against the advisory proposal; or

 

  Abstain from voting on the advisory proposal.

 

The Board recommends a vote FOR the advisory approval of executive compensation.

 

     
Item 4: Re-approval of Stock Incentive Plan for Purposes of IRC Section 162(m)      

  Vote to approve the Plan;

 

  Vote against approval of the Plan; or

 

  Abstain from voting on the Plan.

 

The Board recommends a vote FOR approving the Plan.

 

     
Item 5: Advisory Vote on Frequency of Say on Pay Vote      

  Vote for annual votes on compensation;

 

  Vote for every two year votes on compensation;

 

  Vote for every three year votes on compensation; or

 

  Abstain from voting on the advisory proposal.

 

The Board recommends a vote for the option ONE YEAR as the preferred frequency for advisory votes on compensation.

 

 

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    QUESTIONS AND ANSWERS          

 

 

6. What if I return the proxy card to the Company but do not make specific choices?

 

If you return a signed, dated, proxy card to the Company without making any voting selections, the Company will vote your shares as follows:

 

  “FOR” the election of all director nominees;

 

  “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accountants for the fiscal year ending October 1, 2017;

 

  “FOR,” on an advisory basis, approval of the compensation awarded to our named executive officers for
   

the fiscal year ended October 2, 2016, as set forth in this Proxy Statement;

 

  FORre-approval of the Stock Incentive Plan for purposes of 162(m); and

 

  “FOR,” on an advisory basis, a “ONE YEAR” vote on Say on Pay.
 

 

7. Could any additional matters be raised at the 2017 Annual Meeting?

 

 

We are not aware of any other matters to come before the Annual Meeting. If any matter not mentioned herein is properly brought before the Annual Meeting, the persons named in the

enclosed proxy will have discretionary authority to vote all proxies with respect thereto and in accordance with their best judgment.

 

 

8. What does it mean if I received more than one proxy card?

 

 

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different

accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

 

 

9. How are votes counted?

 

 

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count “FOR,” “AGAINST,” abstentions and broker non-votes (and in the case of the Say on Pay Frequency vote, 1-YEAR, 2-YEAR, and 3-YEAR votes and abstentions). A “broker non-vote” occurs when your broker submits a proxy card for your shares of Common Stock held in Street name, but does not vote on a particular proposal because the broker has not received voting instructions from you and does not have the authority to vote on that matter without instructions. Under the rules that govern brokers who are voting shares held in Street name, brokers have the discretion to vote those shares on routine matters but not on non-routine matters.

For purposes of these rules, the only routine matter in this Proxy Statement is the ratification of the appointment of our independent registered public accountants. Therefore, if you hold your shares in Street name and do not provide voting instructions to your broker, your broker does not have discretion to vote your shares on any of the proposals at the Annual Meeting except the ratification of the appointment of independent registered public accountants. However, your shares will be considered present at the Annual Meeting for purposes of determining the existence of a quorum, as provided below.

 

 

Proposal

Number

  Item        Votes Required for Approval   Abstentions   Uninstructed
Shares
           
1   Election of 8 Directors     Majority of votes cast.   No effect.   No effect.
         
   
           
2   Ratification of the Appointment of KPMG LLP as Independent Registered Public Accountants     Majority of the voting power of the shares present in person or by proxy and entitled to vote.  

Count as

votes against.

  Discretionary voting by broker permitted.
         
   
           
3   Advisory Vote to Approve Executive Compensation     Majority of the voting power of the shares present in person or by proxy and entitled to vote.  

Count as

votes against.

  No effect.
         
   
           
4   Advisory Vote on Frequency of Say on Pay Vote     The choice of frequency that receives the highest number of votes will be considered the advisory vote of the stockholders.   No effect.   No effect.
         
   
           
5   Re-approval of Stock Incentive Plan for Purposes of IRC Section 162(m)     Majority of the voting power of the shares present in person or by proxy and entitled to vote.  

Count as

votes against.

  No effect.
         
           

 

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            QUESTIONS AND ANSWERS  

 

 

10. How many shares must be present or represented to conduct business at the Annual Meeting?

 

 

A quorum of stockholders is necessary to hold a valid annual meeting. A quorum will be present if the holders of at least a majority of the total number of shares of Common Stock entitled to vote are present, in person or by proxy, at the Annual Meeting. Abstentions and shares represented by

broker non-votes are counted for the purpose of determining whether a quorum is present. If there are insufficient votes to constitute a quorum at the time of the Annual Meeting, we may adjourn the Annual Meeting to solicit additional proxies.

 

 

11. How do I vote my shares of Jack in the Box Common Stock?

 

 

If you are a stockholder of record, you can vote in the following ways:

 

  By Internet: by following the Internet voting instructions included in the proxy card at any time up until 11:59 p.m., Eastern Time, on February 27, 2017.

 

  By Telephone: by following the telephone voting instructions included in the proxy card at any time up until 11:59 p.m., Eastern Time, on February 27, 2017.

 

  By Mail: if you have received a printed copy of the proxy materials from us by mail, you may vote by mail by marking, dating, and signing your proxy card in accordance with the instructions on it and returning it by mail in the pre-addressed reply envelope provided with the proxy materials. The proxy card must be received prior to the Annual Meeting.

 

  In Person: if you satisfy the admission requirements to the Annual Meeting, as described in the Notice, you may vote your shares in person at the meeting. Even if you plan to
   

attend the Annual Meeting, we encourage you to vote in advance by Internet, telephone or mail so that your vote will be counted in the event you later decide not to attend the Annual Meeting.

If you are a beneficial owner, you can vote in the following way:

If your shares are held in Street name or through a benefit or compensation plan, your broker or your plan trustee should give you instructions for voting your shares. In these cases, you may vote by Internet, telephone or mail, as instructed by your broker, trustee, or other agent. Shares beneficially held through a benefit or compensation plan cannot be voted in person at the Annual Meeting. You may vote your shares beneficially held through your broker in person if you satisfy the admission requirements to the Annual Meeting, as described in the Notice, and you obtain a valid proxy from your broker giving you the legal right to vote the shares at the Annual Meeting.

 

 

12. May I change my vote or revoke my proxy?

 

Yes.

 

If you are a stockholder of record, you may change your vote or revoke your proxy by:

 

  filing a written statement to that effect with our Corporate Secretary before the taking of the vote at the Annual Meeting;

 

  voting again via the Internet or telephone but before the closing of those voting facilities at 11:59 p.m. Eastern Time on February 27, 2017;

 

  attending the Annual Meeting, revoking your proxy and voting in person (attendance at the Annual Meeting, in and of itself, will not constitute a revocation of a proxy); or

 

  timely submitting a properly signed proxy card with a later date that is received at or prior to the Annual Meeting.

The written statement or subsequent proxy should be delivered to Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123, Attention: Corporate Secretary, or hand delivered to the Corporate Secretary before the taking of the vote at the Annual Meeting.

If you are a beneficial owner and hold shares through a broker, bank, or other financial institution, you may submit new voting instructions by contacting your broker, bank, or other nominee. You may also change your vote or revoke your voting instructions in person at the Annual Meeting if you obtain a signed proxy from the broker, bank, or other nominee giving you the right to vote the shares.

 

 

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    QUESTIONS AND ANSWERS          

 

 

13. Who will pay for the cost of soliciting proxies?

 

 

The Company will pay the cost of preparing, printing, and mailing the Notice and the proxy materials. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries, and custodians holding shares of Common Stock beneficially owned by others, to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to the beneficial owners. If you choose to access proxy materials or vote over the Internet or by telephone, you are responsible for Internet or

telephone charges. We have engaged Innisfree M&A Incorporated (“Innisfree”), a proxy-solicitation firm, to provide advice to the Company with respect to the 2017 Annual Meeting of Stockholders and to assist us in the solicitation of proxies, for which the Company will pay a fee of $15,000 plus reimbursement of certain out-of-pocket expenses. In addition to solicitation by mail, proxies may be solicited personally, by telephone, or by Innisfree. They may also be solicited by directors, officers, or employees of the Company, who will receive no additional compensation for such activities.

 

 

14. How can I find out the results of the Annual Meeting?

 

 

Preliminary voting results will be announced at the Annual Meeting. We will publish final results in a Current Report on Form 8-K that we expect to file with the Securities and Exchange Commission (“SEC”) within four business days of the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting the SEC’s website at www.sec.gov,

visiting our website or contacting our Investor Relations Department by writing to Investor Relations Department, Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123, or by sending an email to http://investors.jackinthebox.com.

 

 

15. How can I obtain copies of the proxy statement or 10-K?

 

 

A copy of this Proxy Statement and the Company’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended October 2, 2016, are available free of charge on our website. These filings and all of our filings that are made electronically with the SEC, including Forms 10-K, 10-Q and 8-K may be found at http://investors.jackinthebox.com. Form 10-K, excluding exhibits, may also be obtained by stockholders without charge by written request sent to Investor Relations Department, Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123.

As permitted by SEC rules, if your stock is held by a brokerage firm or bank, a single copy of this proxy statement may be delivered to an address shared by two or more stockholders. If you prefer to receive separate copies of a Proxy Statement and/or Annual Report either now or in the future, please contact your brokerage or bank. The voting instruction sent to a Street-name stockholder should provide information on how to request (i) householding of future Company materials or (ii) separate materials if only one set of documents is being sent to a household.

 

 

Annual Meeting Information

 

16. How do I attend the 2017 Annual Meeting of Stockholders in person?

 

 

IMPORTANT NOTE: If you plan to attend the Annual Meeting, you must follow these instructions to gain admission.

All attendees will need to present proof of ownership of Jack in the Box Inc. Common Stock and a valid picture identification, such as a driver’s license or passport. If you do not have both proof of ownership of Jack in the Box Inc. stock and a valid picture identification, you may be denied admission to the Annual Meeting.

Beneficial owners: If you are a beneficial owner, you will need to bring the notice or voting instruction form you received from your bank, broker or other nominee to be admitted to the meeting. You also may bring your bank or brokerage account statement reflecting your ownership of Common Stock as of December 30, 2016.

Attendance at the meeting is limited to stockholders as of the Record Date (December 30, 2016) or their authorized named representatives. Cameras, sound or video recording devices, and large bags or packages will not be allowed in the meeting room.

 

 

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            QUESTIONS AND ANSWERS  

 

Communications and Stockholder Proposals

 

17. How can I communicate with the Company’s Directors?

 

 

The Board is committed to continuing to engage with stockholders and encourages an open dialogue about compensation, governance and other matters. We value your input, your investment and your support. The Board has established a process to facilitate communication by stockholders with Directors.

Stockholders or others who wish to communicate any concern of any nature to the Board of Directors, any Committee of the Board, or any individual director or group of directors, may write to a director or directors in care of the Office of the Corporate Secretary, Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123, or telephone 888-613-5225. Your letter should indicate whether or not you are a stockholder of the Company.

Comments or questions regarding our accounting, internal controls or auditing matters will be referred to members of our

Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to members of the Nominating and Governance Committee. For all other matters, our Corporate Secretary will, depending on the subject matter:

 

  forward the communication to the director or directors to whom it is addressed;

 

  forward the communication to the appropriate management personnel;

 

  attempt to handle the inquiry directly, for example where it is a request for information about our Company, or it is a stock-related matter; or

 

  not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.
 

 

18. How do I submit a proposal for action at the 2018 Annual Meeting?

 

 

A proposal for action to be presented by any stockholder at the 2018 Annual Meeting of Stockholders will be acted upon only:

 

  If a proposal is to be included in the proxy statement, pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, the proposal is received by the Corporate Secretary no later than 120 calendar days prior to the anniversary of this year’s mailing date, so no later than 5:00 p.m. Pacific Time, on September 27, 2017.

 

  If the proposal is not to be included in the proxy statement, the proposal is delivered to the Corporate Secretary not less than 120 days and not more than 150 days prior to the first anniversary of the date of the previous year’s Annual Meeting, or not later than October 31, 2017, and not earlier than October 1, 2017; in addition such proposal is, under
   

Delaware General Corporation Law, an appropriate subject for stockholder action; and must also comply with the procedures and requirements set forth in as well as the applicable requirements of our Bylaws.

In addition, the stockholder proponent, or a representative who is qualified under state law, must appear in person at the 2018 Annual Meeting of Stockholders to present such proposal.

All proposals must be in writing and should be sent to Jack in the Box Inc., to the attention of Phillip H. Rudolph, Corporate Secretary, at 9330 Balboa Avenue, San Diego, CA 92123.

A copy of the Bylaws may be obtained by written request to the Corporate Secretary at the same address. The Bylaws are also available at http://investors.jackinthebox.com.

 

 

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    PROPOSAL ONE — ELECTION OF DIRECTORS          

 

PROPOSAL ONE — ELECTION OF DIRECTORS

All of the directors of the Company are elected annually and serve until the next Annual Meeting and until their respective successors are elected and qualified. The current nominees for election as directors (each of whom is currently serving as a Director of the Company) are set forth below. All of the nominees have indicated their willingness to serve, and have consented to be named in the Proxy Statement. If any should be unable or unwilling to stand for election, the shares represented by proxies may be voted for a substitute designated by the Board, unless a contrary instruction is indicated in the proxy.

Nominees for Director

 

The following table provides certain information about each nominee for director as of January 1, 2017.

 

Name      Age        Position(s) with the Company     

Director

Since

 

Leonard A. Comma

       47         Chairman of the Board & Chief Executive Officer        2014   

David L. Goebel

       66         Independent Director        2008   

Sharon P. John

       52         Independent Director        2014   

Madeleine A. Kleiner

       65         Independent Director        2011   

Michael W. Murphy

       59         Independent Director        2002   

James M. Myers

       59         Independent Director        2010   

David M. Tehle

       60         Independent Director        2004   

John T. Wyatt

       61         Independent Director        2010   

Vote Required for Approval

In the election of directors, you may vote FOR, AGAINST, or ABSTAIN. The Company’s Bylaws require that, in an election such as this, where the number of director nominees does not exceed the number of directors to be elected, each director will be elected by the vote of the majority of the votes cast (in person or by proxy) with respect to the director. A “majority of votes cast” means that the number of shares cast “FOR” a director’s election exceeds the number of votes cast “AGAINST” that director. For purposes of determining the votes cast, only those votes cast “FOR” or “AGAINST” are included. Neither a vote to ABSTAIN nor a broker non-vote will count as a vote cast FOR or AGAINST a director nominee and, as a result, will have no direct effect on the outcome of the election of directors. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present.

In an uncontested election, a nominee who does not receive a majority of the votes cast will not be elected. An incumbent director who is not elected because he or she does not receive a majority of the votes cast will continue to serve, but shall tender his or her resignation to the Board. The Nominating and Governance Committee will take action to determine whether to accept or reject the director’s resignation, or whether other action is appropriate, and will make a recommendation to the Board. Within ninety (90) days following the date of the certification of the election results, the Board will act on the Committee’s recommendation and publicly disclose its decision and the rationale for such decision.

ON PROPOSAL ONE, ELECTION OF DIRECTORS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES.

 

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            PROPOSAL ONE — ELECTION OF DIRECTORS  

 

Director Qualifications and Biographical Information

 

Our Board includes individuals with expertise in executive leadership and management, accounting and finance, marketing and branding, and across restaurant, franchise, hospitality, retail, manufacturing, and healthcare industries. Our Directors have a diversity of backgrounds and experiences. We believe that, as a group, they work effectively together in overseeing our business, hold themselves to the highest standards of integrity, and are committed to representing the long-term best interests of our stockholders.

Biographical information for each of the Director nominees, including the key qualifications, experience, attributes, and skills that led our Board to the conclusion that each of the Director nominees should serve as a director, is set forth on the pages below. In addition to the business and professional experiences described below, our Director nominees also serve on the boards of various civic and charitable organizations.

Director Nominees

 

 

LOGO

 

Leonard A. Comma

Director Since January 2014

 

Mr. Comma was appointed a Director, Chairman of the Board and Chief Executive Officer, effective January 1, 2014, and since that date has served as a member of the Executive Committee. From May 2012

   

Qualifications:

 

    Mr. Comma has more than 25 years of experience at two major public companies with extensive retail and franchise operations, including for the past three years as Chairman and CEO of Jack in the Box Inc. In his prior executive-level role as President and Chief Operating Officer for Jack in the Box Inc., Mr. Comma was responsible for the operations of all Company and franchised Jack in the Box restaurants — more than 2,200 locations — as well as: Menu Innovation, including Menu Strategy, Operations Support, and Research & Development; Marketing Communications, including Merchandising; Consumer Intelligence & Analytics; and Internal Brand Communications. Mr. Comma also gained extensive experience in restaurant and retail operations and franchising in his previous roles with the Company as well as with ExxonMobil. His professional expertise and knowledge of our business, our competition and our competitive positioning, along with his deep understanding of our values and culture, bring an important Company perspective to the Board.

     
until October 2014, Mr. Comma served as President, and from November 2010 to January 1, 2014, as Chief Operating Officer of Jack in the Box Inc. Mr. Comma joined the Company in 2001 as Director of Convenience Store & Fuel Operations for the Company’s proprietary chain of Quick Stuff convenience stores, which included more than 60 locations at the time it was sold in 2009. In 2004, he was promoted to Division Vice President of Quick Stuff Operations, and in 2006 he was promoted to Regional Vice President of Quick Stuff and the Company’s Southern California region, which included more than 150 Jack in the Box restaurants. In 2007, Mr. Comma was promoted to Vice President of Operations, Division II, and had oversight of nearly 1,200 company and franchised Jack in the Box restaurants in the Western U.S. Prior to joining Jack in the Box Inc., Mr. Comma worked for ExxonMobil Corporation since 1989, most recently as a Regional Manager with responsibility for supporting more than 300 franchisees in California, Nevada and Arizona.    

 

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    PROPOSAL ONE — ELECTION OF DIRECTORS          

 

 

 

LOGO

 

David L. Goebel

Lead Director;

Director Since December 2008

 

Mr. Goebel has been a director of the Company since December 2008, and currently serves as Lead Director. He is a partner and Faculty Member for Merryck & Co. Ltd., a worldwide firm that provides

   

Qualifications:

 

    Mr. Goebel’s qualifications to serve on our Board include his business, operational, management, and leadership development experience in the retail, food service, and hospitality industries, and as an executive consultant, including experience in restaurant operations, restaurant and concept development, supply chain management, franchising, executive development, risk assessment, risk management, succession planning, executive compensation and strategic planning.

     
peer to peer mentoring services for CEOs and senior business executives. He has held that position since May 2008. In 2008, Mr. Goebel became the founding principal and President of Santoku, Inc., a private company that operates sandwich shops under the name Goodcents® Deli Fresh Subs (“Goodcents”), catering and cafeteria operations under the name Y-Leave Cafe, catering services under the name Prime Catered Events, and a fast-casual pizza concept under the name Pie Five® Pizza Company. Mr. Goebel also served as acting President and CEO of Mr. Goodcents Franchise Systems, Inc., the franchisor of Goodcents, from 2010 until December 2014. Since September 2014, he has served on the board of directors of QuickChek, a privately held company in the gas/convenience food category. Mr. Goebel has more than 40 years of experience in the retail, food service, and hospitality industries. From 2001 until 2007, he served in various executive positions at Applebee’s International, Inc., including as President and Chief Executive Officer in 2006-2007, during which time the company operated nearly 2,000 restaurants in the United States and internationally. Previous to that, Mr. Goebel was President of Summit Management, Inc., a consulting group specializing in executive development and strategic planning. Prior to that, Mr. Goebel was the Chief Operating Officer of Finest Foodservice, LLC, a Boston Chicken/Boston Market franchise that he founded and co-owned, which was responsible for developing 80 restaurants within a seven-state area from 1994 until 1998.    

 

 

LOGO

 

Sharon P. John

Director Since September 2014

 

Ms. John has been a director of the Company since September 2014. Ms. John has been the Chief Executive Officer and a member of the Board of Directors of Build-A-Bear Workshop, Inc. since June 2013, and was additionally named President effective

   

Qualifications:

 

    Ms. John’s qualifications to serve on our Board include her current role as CEO and director of a publicly traded global retail company and her broad merchandising, marketing, branding, sales and executive management experience, including key roles at well-known consumer brands.

     
March 2016. From January 2010 through May 2013, Ms. John served as President of Stride Rite Children’s Group LLC, a division of Wolverine Worldwide, Inc., a global designer, manufacturer and marketer of footwear and apparel. From 2002 through 2009, she held positions of broadened portfolio and increased responsibility at Hasbro, Inc., a multinational toy and board game company, including as General Manager & Senior Vice President of its U.S. Toy Division from 2006 to 2008 and General Manager & Senior Vice President of its Global Preschool unit from June 2008 through 2009. Ms. John also founded and served as Chief Executive Officer of Checkerboard Toys; served as Vice President, U.S. Toy Division with VTech Industries, Inc.; and served in a range of roles at Mattel, Inc. She started her career in advertising.    

 

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            PROPOSAL ONE — ELECTION OF DIRECTORS  

 

 

 

LOGO

 

Madeleine A. Kleiner

Director Since September 2011

 

Ms. Kleiner has been a director of the Company since September 2011 and is currently Chair of the Nominating and Governance Committee. From 2001 to 2008, Ms. Kleiner was Executive Vice President,

   

Qualifications:

 

  Ms. Kleiner’s qualifications to serve on our Board include her experience as general counsel for two public companies, as outside counsel to numerous public companies and her past and current experience on public company boards. She brings to our Board experience as an executive for a major franchisor in the hospitality industry, as well as expertise in corporate governance, risk management, securities laws disclosure, securities transactions, mergers and acquisitions, Sarbanes-Oxley compliance, human resources and executive compensation, government relations and crisis management.

     
General Counsel and Corporate Secretary for Hilton Hotels Corporation, a hotel and resort company. At Hilton, Ms. Kleiner oversaw the company’s legal affairs and the ethics, privacy and government affairs functions. She was also a member of the executive committee with significant responsibility for board of directors matters. From 1999 through 2001, Ms. Kleiner served as a director of a number of Merrill Lynch mutual funds operating under the Hotchkiss and Wiley name. From 1995 to 1998, Ms. Kleiner served as Senior Executive Vice President, Chief Administrative Officer and General Counsel of H. F. Ahmanson & Company and its subsidiary, Home Savings of America, where she was responsible for oversight of legal, human resources, legislative and government affairs and corporate communications. Previous to that, from 1977 to 1995, Ms. Kleiner was with the law firm of Gibson, Dunn & Crutcher, including as partner from 1983 to 1995, where she advised corporations and their boards primarily in the areas of mergers and acquisitions, corporate governance, securities transactions and compliance. Ms. Kleiner has served on the board of directors of Northrop Grumman Corporation since 2008, where she is a member of the audit committee.    

 

 

LOGO

 

Michael W. Murphy

Director Since September 2002

 

Mr. Murphy has been a director of the Company since September 2002, and is currently Chair of the Audit Committee. Since April 1996, Mr. Murphy has been President and Chief Executive Officer of Sharp HealthCare, a comprehensive healthcare delivery

   

Qualifications:

 

  Mr. Murphy’s qualifications to serve on our Board include his business and management experience leading Sharp HealthCare, an integrated healthcare delivery system with multiple facilities and more than 17,000 employees, his experience as a senior financial officer of Sharp HealthCare, and his experience as a Certified Public Accountant, and former partner at Deloitte. He also serves on the Board of Directors and executive committee of the California Chamber of Commerce. The Board benefits from Mr. Murphy’s extensive experience in accounting, finance, financial reporting, auditing, governance, labor relations, human resources and compensation, marketing, risk assessment and risk management, strategic planning and quality initiatives.

     
system in San Diego which has been recognized with the Malcolm Baldrige National Quality Award, the nation’s highest Presidential honor for quality and organizational performance excellence. Prior to his appointment to President and Chief Executive Officer, Mr. Murphy served as Senior Vice President of Business Development and Legal Affairs for Sharp HealthCare. He began his career at Sharp in 1991 as Chief Financial Officer of Grossmont Hospital before moving to a system-wide role as Vice President of Financial Accounting and Reporting. Prior to this, Mr. Murphy provided certified public accounting services, including as a partner at Deloitte.    

 

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    PROPOSAL ONE — ELECTION OF DIRECTORS          

 

 

 

LOGO

 

James M. Myers

Director Since December 2010

 

Mr. Myers has been a director of the Company since December 2010. Mr. Myers has served as Chief Executive Officer of Petco, the national pet supplies retailer, since 2004, and as Petco Chairman since

   

Qualifications:

 

  Mr. Myers’ qualifications to serve on our Board include more than 35 years of financial and retail operations experience, including 10 years as a CPA and public company auditor with KPMG LLP and 25 years with Petco, a national specialty retail chain with more than 1,470 stores in all 50 states, Puerto Rico and Mexico. Mr. Myers brings to the Board his prior experience of serving on a public company board and audit committee, as well as experience with marketing and consumer brands, human resources and compensation, mergers and acquisitions, capital markets, financial reporting, financial oversight, and the financial and strategic issues facing public and private companies.

     
July 2015. Petco has announced, effective February 1, 2017, Mr. Myers will step down as CEO and continue to serve as Chairman of the Board. Previously, Mr. Myers held the title of President from 2004 until July 2015. Previously, he served as Chief Financial Officer for Petco from 1998 to 2004. He began his career at Petco as Vice President and Controller in 1990. Previously, Mr. Myers was a Certified Public Accountant with KPMG LLP. Mr. Myers serves on the board of the Retail Industry Leaders Association, and previously served on the board of Provide Commerce, an e-commerce retailer and public company, from 2004 to 2006, when Provide Commerce was acquired. Mr. Myers served on the audit committee at Provide Commerce.    

 

 

LOGO

 

David M. Tehle

Director Since December 2004

 

Mr. Tehle has been a director of the Company since December 2004, and is currently Chair of the Finance Committee. He served as Executive Vice President and Chief Financial Officer of Dollar General

   

Qualifications:

 

  Mr. Tehle’s qualifications to serve on our Board include his lengthy experience in senior financial management at public companies in the retail and manufacturing industries, and his service on two other boards of public companies in the retail and food service sectors. As an active CFO through June 2015, he was responsible for the overall financial management of a large retail organization. Mr. Tehle has experience in the oversight of strategic planning, human resources and compensation, finance, accounting, information systems, investor relations, treasury and internal audit functions. He brings valuable financial expertise and retail and management experience to the Board.

     
Corporation, a publicly traded company, from June 2004 until his retirement in June 2015. Mr. Tehle served from 1997 to June 2004 as Executive Vice President and Chief Financial Officer of Haggar Corporation, a manufacturing, marketing, and retail corporation. From 1996 to 1997, he was Vice President of Finance for a division of The Stanley Works, one of the world’s largest manufacturer of tools, and from 1993 to 1996, he was Vice President and Chief Financial Officer of Hat Brands, Inc. Since February 2016, Mr. Tehle has served on the board of directors of Genesco Inc., a specialty retailer, selling footwear, headwear, sports apparel and accessories, where he serves on the audit committee. Since July 2016, he has served on the board of US Foods Holding Corp., where he chairs the audit committee.    

 

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            PROPOSAL ONE — ELECTION OF DIRECTORS  

 

 

 

LOGO

 

John T. Wyatt

Director Since May 2010

 

Mr. Wyatt has been a director of the Company since May 2010, and is currently Chair of the Compensation Committee. Mr. Wyatt has served as the Chief Executive Officer of KinderCare

   

Qualifications:

 

  Mr. Wyatt’s qualifications to serve on our Board include his experience in senior management for major consumer brands in large global retail companies, including strategy and business development, marketing and brand building, product development, supply chain, finance and capital markets, labor relations, human resources and compensation, organizational development and succession planning, and his prior public company board experience. He brings extensive experience in growing consumer brands to the Board.

     
Education, an early childhood education company, since February 2012. From 2008 through February 2012, Mr. Wyatt was president of the Old Navy division of Gap Inc. He joined Gap Inc. in 2006, and previously served as President of the company’s GapBody division, and President of the company’s Outlet division. From 2004 to 2006, Mr. Wyatt was President and Chief Executive Officer at Cutter & Buck Inc., a designer and marketer of upscale apparel, including serving on the publicly held company’s board of directors. From 2002 to 2004, he served as President of Warnaco Intimate Apparel, a global designer and manufacturer, and from 1999 to 2002, he was Executive Vice President for Strategic Planning and eBusiness Strategies in the Saks family of companies. Additionally, Mr. Wyatt spent more than 20 years with VF Corporation, serving ultimately as President of Vanity Fair Intimates and Vanity Fair Intimates Coalition.    

 

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    CORPORATE GOVERNANCE          

 

CORPORATE GOVERNANCE

We operate within a comprehensive corporate governance structure driving and expecting the highest standards of professional and personal conduct. Our Corporate Governance Principles and Practices, our ethics Code of Conduct, the charters for our Audit, Compensation, Finance, and Nominating and Governance Committees, and other corporate governance information, are available at http://investors.jackinthebox.com. These materials are also available in print to any stockholder upon written request to the Company’s Corporate Secretary, Jack in the Box Inc., 9330 Balboa Avenue, San Diego, CA 92123. The information on our website is not a part of this Proxy Statement and is not incorporated into any of our filings made with the Securities and Exchange Commission.

Directors’ Independence

 

 

The Jack in the Box Inc. Director Independence Guidelines provide that a director is not independent if he or she is: (a) a director, executive officer, partner or owner of 5% or greater interest in a company that either purchases from or makes sales to our Company that total more than one percent of the consolidated gross revenues of such company for that fiscal year; (b) a director, executive officer, partner or owner of 5% or greater interest in a company from which our Company borrows an amount equal to or greater than one percent of the consolidated assets of either our Company or such other company; or (c) a trustee, director or executive officer of a charitable organization that has received in that fiscal year discretionary donations from our Company that total more than one percent of the organization’s latest publicly available national annual charitable receipts.

The Board has analyzed the independence of each Director. It has determined that all but Mr. Comma are independent directors under the NASDAQ Listing Rules, as well as the additional Director Independence Guidelines adopted by the Board. As part of its analysis, the Board determined that none of these Directors have a material relationship with the Company. Mr. Comma is our current Chief Executive Officer and an employee, and therefore he is not considered “independent” as that term is defined by the relevant listing rules and governance guidelines.

 

 

Board Meetings, Annual Meeting of Stockholders, and Attendance

 

 

In fiscal 2016, each director attended more than 75% of the meetings of the Board and of the committees on which he or she served. The Board held five meetings in fiscal 2016.

All of the directors standing for election in 2017 attended the 2016 Annual Meeting, and we currently expect all of our directors standing for election to be present at the 2017 Annual Meeting.

 

 

Determination of Current Board Leadership Structure

 

 

The Nominating and Governance Committee’s Charter provides that the Committee will annually assess the leadership structure of the Board and recommend a structure to the Board for approval. In November 2016, the Board of Directors, with the counsel of the Nominating and Governance Committee, conducted this assessment, including assessing whether (i) the roles of Chief Executive Officer (“CEO”) and Chairman of the Board should continue to be combined, and (ii) the Board should continue to have an independent Lead Director. Based on the recommendation of the Nominating and Governance Committee, the Board believes that continuing with a combined Chairman/CEO is in the best interests of the Company and its stockholders.

The Board determined that having one individual serve in both roles provides for clear leadership, accountability, and alignment on corporate strategy. The Board believes that combining the roles of Chairman and CEO puts Mr. Comma in the best position to use his in-depth knowledge of our industry, our business and its challenges, and our stakeholders, including our stockholders, employees, franchisees and guests, to provide the Board with the information and leadership needed to set agendas and direction for the Company. The Board does not believe that having an independent Chairman would make the Board’s risk oversight processes more effective. The Board noted that, during Mr. Comma’s tenure as Chairman and CEO, and Mr. Goebel’s service as Lead Director, the Board has received timely and relevant information regarding the Company’s business.

 

 

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In reaching its conclusion, the Board also considered the longstanding policies and practices at Jack in the Box Inc. for strong, independent oversight, including:

 

  a Board with a high degree of independence, including only one non-independent member;

 

  Board Committees (other than the Executive Committee) that are composed entirely of independent directors;

 

  Board Committee Chairs who review and approve agendas before Committee meetings;

 

  an annual evaluation of the performance of the Chairman and Chief Executive Officer by the Compensation Committee, which evaluation is then discussed with the independent directors of the Board in executive session;
  regular executive sessions held by the Board and key Board Committees, attended only by independent directors;

 

  the ability of the independent directors to call meetings of the Board and recommend agenda topics to be considered by the Board;

 

  a strong, independent Lead Director who has oversight responsibility for executive sessions and information flow to the Board.

Based on these factors, the Board has concluded that retaining the current Board leadership structure provides valuable stability and effective leadership.

 

 

Lead Director

 

 

The independent directors have appointed Mr. Goebel to serve as Lead Director. Our Corporate Governance Principles and Practices provide for the Lead Director to fulfill the following functions:

 

  set agendas for the executive sessions of the Board;

 

  serve on the Executive Committee;

 

  preside at the executive sessions of the independent directors held following each scheduled board meeting;

 

  act as a key communication channel between the Board and the CEO;
  lead the Board in determining the format and adequacy of information the directors receive;

 

  provide the Chairman with input on agendas for Board meetings and the schedule of meetings in order to assure sufficient time for discussion of all agenda items;

 

  call meetings of independent directors; and

 

  if requested by major stockholders, ensure that he or she is available for consultation and direct communication.

The Lead Director may perform other functions as the Board may direct.

 

 

The Board’s Role in Succession Planning

 

 

The Board expects Management to have an ongoing program for effective senior leadership development and succession. As reflected in our Corporate Governance Principles and Practices, the Board’s practice is to have the CEO review annually with the full Board the abilities of the key senior managers and their likely successors. The Board also considers management succession issues when meeting in executive session at each Board meeting. Additionally, the

Board oversees ongoing plans for management development and retention, as well as executive succession, including CEO succession. At times, the Board will delegate to the Compensation Committee responsibility to review and advise on succession planning, in which case the Board expects the Committee to review such plans with Management and the Board and to make recommendations to the Board with respect thereto.

 

 

The Board’s Role in Risk Oversight

 

 

Management is responsible for the Company’s day-to-day risk management. The Board’s role is to provide oversight of the processes designed to identify, assess and monitor key risks and risk mitigation activities. The Board fulfills its risk oversight responsibilities through (i) quarterly reports from the Vice President of Internal Audit (VP, Internal Audit) to the Audit Committee relating to risk management and oversight;

(ii) annual enterprise risk management discussions by the full Board with the VP, Internal Audit and Company leadership; (iii) receiving reports directly from managers responsible for the management of particular business risks; and (iv) reports by each Committee Chair regarding the respective Committee’s oversight of specific risk topics.

 

 

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The Board reviews cybersecurity risk with the Chief Information Officer at least annually and has delegated oversight of other specific risk areas to Committees of the Board. For example, the Audit Committee discusses with Management the Company’s major financial risk exposures and the steps Management has taken to monitor and mitigate those risks. As another example, the Compensation Committee discusses with its independent consultant, Management and the Compensation Risk Committee the risks arising in connection

with the design of the Company’s compensation programs and succession planning. The risk oversight responsibility of each Board Committee is described in its committee charter available at http://investors.jackinthebox.com.

A more detailed discussion of the Compensation Committee’s oversight of compensation risk is found in the Section “Risk Analysis of Compensation Programs” contained later in this proxy.

 

 

Executive Sessions

 

 

Our independent, non-employee Directors meet in executive session without Management present at each regularly scheduled meeting of the Board. Mr. Goebel is currently designated by the Board to act as the Lead Director for such executive sessions.

 

The Audit Committee also holds executive sessions at each regularly scheduled meeting, and the other Committees of the Board meet in executive session as they deem appropriate.

 

 

Committees of the Board

 

 

The Board of Directors has five standing committees: Audit, Compensation, Nominating and Governance, Finance, and Executive. The Board considers new committee and chair assignments, and the designation of a Lead Director, effective each February. Effective February 2016, the Board of Directors approved the Board Committee assignments for the year and re-designated David Goebel as the Lead Director. The committee makeup is provided in the table on page 5 of the Proxy Summary.

The authority and responsibility of each Committee is summarized below. A more detailed description of the functions of the Audit, Compensation, Nominating and Governance, and Finance Committees is included in each Committee charter available at http://investors.jackinthebox.com.

Committee Member Independence. The Board has determined that each member of the Audit, Compensation, Nominating and Governance, and Finance Committees is an independent director for purposes of the NASDAQ Listing Rules as well as under the additional Director Independence Guidelines adopted by the Board. In addition, the members of the Audit Committee are all independent as required under Rule 10A-3(b)(1)(ii) under the Securities Exchange Act of 1934, and the members of the Compensation Committee meet the definitions of (i) a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, (ii) an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“IRC”), and (iii) the requirements of Rule 10C-1 under the Securities Exchange Act of 1934.

Audit Committee. As more fully described in its charter, the Audit Committee assists the Board of Directors with overseeing:

 

  the integrity of the Company’s financial reports;

 

  the Company’s compliance with legal and regulatory requirements;

 

  the independent registered public accountant’s performance, qualifications and independence;

 

  the performance of the Company’s internal auditors; and

 

  the Company’s processes for identifying, evaluating, and addressing major financial, legal, regulatory compliance, and enterprise risks.

The Audit Committee has sole authority to select, evaluate, and, when appropriate, replace the Company’s independent registered public accountants. The Audit Committee has appointed KPMG LLP (“KPMG”) as its independent registered public accountants for fiscal 2017 and is asking the stockholders to ratify this appointment in Proposal 2. In the event the stockholders fail to ratify the appointment, the Audit Committee will reconsider the selection to determine, in its discretion, whether to retain KPMG or to select a different registered public accountant. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent auditing firm at any time during the year.

The Audit Committee meets at least each quarter with KPMG, Management and the Company’s VP, Internal Audit, to review the Company’s annual and interim consolidated financial results before the publication of quarterly earnings press releases and the filing of quarterly and annual reports with the

 

 

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            CORPORATE GOVERNANCE  

 

Securities and Exchange Commission. The Audit Committee also meets at least each quarter in private sessions with KPMG, Management, and the VP, Internal Audit. The Audit Committee also oversees the Company’s Business Ethics Program, which includes receiving a quarterly report from the Ethics Officer. The Board of Directors has determined that each member of the Audit Committee qualifies as an “audit committee financial expert” as defined by SEC rules.

Additional information regarding the Audit Committee is set forth in the “Report of the Audit Committee” on page 29.

The Audit Committee held four meetings in fiscal 2016.

Compensation Committee. As more fully described in its charter, the Compensation Committee assists the Board in discharging the Board’s responsibilities relating to Director and executive officer compensation, and it oversees the performance evaluation of Management. The Compensation Committee reviews and approves the Company’s compensation philosophy, and the compensation of executive officers, including short- and long-term goals, and metric and compensation components (e.g., cash, equity and other forms of compensation). The Compensation Committee discusses with Management and reports to the Board any significant risks associated with the design and administration of the Company’s compensation programs and succession planning, and actions taken by Management to mitigate such risks. The Committee has approved the disclosures in the Company’s “Compensation Discussion and Analysis” that begins on page 44 of this Proxy Statement. The Compensation Committee held six meetings in fiscal 2016.

Executive Committee. The Executive Committee is authorized to exercise all powers of the Board in the management of the business and affairs of the Company while the Board is not in session. The Executive Committee did not meet in fiscal 2016.

Finance Committee. As more fully described in its charter, the Finance Committee assists the Board in advising and consulting with Management concerning financial matters of importance to the Company. Topics considered by the Committee include the Company’s capital structure, financing arrangements, stock repurchase programs, capital investment policies, investment performance oversight for the Company’s

retirement plans, the budget process, and the financial implications of major acquisitions and divestitures. The Finance Committee discusses with Management and reports to the Board major risk exposures and the monitoring and mitigation activities undertaken by Management in connection with the matters overseen by the Committee, including proposed major transactions, capital structure, investment portfolio including employee benefit plan investments, financing arrangements, and share repurchase programs. The Finance Committee held five meetings in fiscal 2016.

Nominating and Governance Committee. As more fully described in its charter, the Nominating and Governance Committee duties include assessing the makeup and diversity of the Board, identifying and recommending qualified candidates to be nominated for election as directors at the Annual Meeting or to be appointed by the Board to fill an existing or newly created vacancy on the Board; recommending members of the Board to serve on each Board committee; and annually reviewing and recommending the leadership structure of the Board. The Nominating and Governance Committee discusses with Management and reports to the Board major risk exposures in connection with matters overseen by the Committee. Its activities include:

 

  evaluating director candidates for nomination;

 

  evaluating the appropriate Board size;

 

  reviewing and recommending corporate governance guidelines to the Board;

 

  providing oversight with respect to the annual evaluation of Board, Committee and individual director performance;

 

  overseeing the Company’s political and charitable contributions;

 

  assisting the Board in its oversight of the Company’s insider trading compliance program; and

 

  recommending director education.

All nominees for election as directors currently serve on the Board of Directors and are known to the Nominating and Governance Committee in that capacity. The Nominating and Governance Committee held four meetings in fiscal 2016.

 

 

Board Composition and Refreshment

 

 

Policy Regarding Consideration of Director Candidates and Makeup and Diversity of the Board. The Nominating and Governance Committee has the responsibility to identify, screen, and recommend qualified candidates to the Board for nomination as directors. In evaluating director candidates, the Nominating and Governance Committee considers the qualifications listed in the Jack in the Box Inc. Corporate Governance Principles and Practices, which are available at http://investors.jackinthebox.com.

The following are some of the factors generally considered by the Nominating and Governance Committee in evaluating director candidates:

 

  the appropriate size of the Board;

 

  the perceived needs of the Company for particular skills, background, and business experience;
 

 

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    CORPORATE GOVERNANCE          

 

  the skills, background, reputation and experience of the nominees, including whether those qualities add to a diversity of experiences, backgrounds, individuals, viewpoints and perspectives on the Board;

 

  leadership, character and integrity;

 

  independence from Management and from potential conflicts of interest with the Company;

 

  experience with accounting rules and practices;

 

  experience with executive compensation;

 

  applicable regulatory and listing requirements, including independence requirements and legal considerations;

 

  interpersonal and communications skills and the benefits of a constructive working relationship among directors; and

 

  the desire to balance the considerable benefits of continuity with the periodic injection of the fresh perspective provided by new members.

The Nominating and Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its stockholders.

Retirement Policy. The Board has adopted a retirement policy under which directors may not stand for election or be appointed after age 73. The Board does not believe it should establish term limits which could disadvantage the Company by forcing out directors whose tenure and experience continue to add value to the workings of the Board.

Board Tenure Review Policy. Beginning in fiscal 2016, the Company adopted a tenure review policy pursuant to which any director who has served more than 12 years on the Board shall submit his or her voluntary offer to resign to the Committee. The Committee will undertake a thorough review of the director’s continued effectiveness and appropriateness for service, and recommend to the full Board that it either accept or reject the offer of resignation; in the latter event, the long-tenured director may continue to serve on the Board and must re-submit his or her resignation offer every three years for subsequent review.

 

 

Stockholder Recommendations and Board Nominations

 

 

In order to be evaluated pursuant to the Nominating and Governance Committee’s established procedures, stockholder recommendations for candidates for the Board must be sent in writing to the following address at least 120 days prior to the first anniversary of the date of the previous year’s Annual Meeting of Stockholders:

Nominating and Governance Committee of the Board of

Directors c/o Office of the Corporate Secretary

Jack in the Box Inc.

9330 Balboa Avenue

San Diego, CA 92123

Any recommendation submitted by a stockholder to the Nominating and Governance Committee must include the same information concerning the potential candidate and the recommending stockholder as would be required under Article III, Section 3.16 of the Jack in the Box Inc. Bylaws if the stockholder wished to nominate the candidate directly.

The Committee considers all candidates regardless of the source of the recommendation. In addition to stockholder recommendations, the Committee considers recommendations from current directors, Company personnel and others. The Company generally retains a search firm to assist it in identifying and screening candidates, and in conducting reference checks. The Committee applies the same standards in evaluating candidates submitted by stockholders as it does in evaluating candidates submitted by other sources.

A candidate nominated by a stockholder for election at an Annual Meeting of Stockholders will not be eligible for election unless the stockholder proposing the nominee has provided timely notice of the nomination in accordance with the deadlines (at least 120 days and no more than 150 days prior to the first anniversary of the date of the previous year’s Annual Meeting of Stockholders) and other requirements set forth in the Company’s Bylaws. Article III, Section 3.16 of the Company’s Bylaws provides that, in order to be eligible for election as a director, a candidate must deliver to the Corporate Secretary statements indicating whether the candidate:

 

  is a party to any voting commitment that has not been disclosed to the Company;

 

  is a party to any voting commitment that could limit the nominee’s ability to carry out a director’s fiduciary duties;

 

  is a party to any arrangements for compensation, reimbursement, or indemnification in connection with service as a director and has committed not to become a party to any such arrangement;

 

  will comply with the Company’s publicly disclosed policies and guidelines.

The foregoing is a summary of provisions of the Company’s Bylaws, and is qualified by reference to the actual provisions of Article III, Section 3.16.

 

 

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            CORPORATE GOVERNANCE  

 

Code of Conduct

 

 

Jack in the Box Inc. is committed to establishing and maintaining an effective ethics and compliance program that is intended to increase the likelihood of preventing, detecting, and correcting ethical lapses and violations of law or Company policy. In 1998, the Company adopted a Code of Conduct (the “Code”) which applies to all officers, and employees, as well as to our Board of Directors. The Company also provides our franchisees and significant vendors with our Code and with procedures for communicating any ethics or compliance concerns to the Company. The Code is revised from time to time, most recently with non-substantive updates in May 2014.

The Code is available on the Company’s website at http://investors.jackinthebox.com. We will disclose amendments to, or waivers of our Code that are required to be disclosed under the securities rules, by posting such information on the Company’s website, www.jackintheboxinc.com. Any waiver of our Code for directors or executive officers must be approved by the Board of Directors. The Company did not grant any such waivers in fiscal 2016 and does not anticipate granting any such waiver in fiscal 2017.

 

 

Compensation Committee Interlocks and Insider Participation

 

 

No member of our Compensation Committee is an officer, former officer, or employee of the Company. During fiscal 2016, no member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. During fiscal 2016, no

interlocking relationship existed between any of our executive officers or Compensation Committee members, on the one hand, and the executive officers or Compensation Committee members of any other entity, on the other hand.

 

 

Additional Corporate Governance Principles and Practices

 

The Company has adopted Corporate Governance Principles and Practices (the “Principles and Practices”) which contain general principles and practices regarding the functioning of the Board of Directors and the Board Committees. The Nominating and Governance Committee regularly reviews the Principles and Practices and recommends revisions if and as appropriate. The full text of the Principles and Practices may be found at http://investors.jackinthebox.com. The Principles and Practices address many of the items discussed above, and also include the following items:

 

Limitation on Other Board Service. Non-employee directors may not serve on the boards of more than three other public companies. Our corporate officers are generally limited to serving on no more than one outside public company board, taking into consideration the time commitment and potential business conflicts inherent in such service.

Review of Director Skill Matrix. The Nominating and Governance Committee annually utilizes a skill matrix to assess the capabilities of the current directors and any needs for the board as a whole. The matrix itself is updated if and as necessary to assure that it remains relevant to the evolving needs of the Company and the Board.

Board, Committee, and Individual Director Evaluations. The directors annually participate in a robust evaluation process focusing on an assessment of Board operations as a whole and the service of each director. Additionally, each of the Audit, Compensation, Finance, and

Nominating and Governance Committees conducts a separate evaluation of its own performance and the adequacy of its charter. The Nominating and Governance Committee coordinates the evaluation of individual directors and of the Board operations, and reviews and reports to the Board on the outcome of these self-evaluations. As part of the evaluation process most years, the Lead Director will meet individually with each director to generate and discuss any ideas for improving the effectiveness of the director and/or the Board.

New Director Orientation and Continuing Education. The Board works with Management to schedule new-director orientation programs and continuing education programs for directors. Orientation is designed to familiarize new directors with the Company and the franchise restaurant industry as well as Company personnel, facilities, strategies and challenges, and corporate governance practices, including board ethics. Continuing education programs may include in-house and third-party presentations and programs.

 

 

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    DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES          

 

DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES

The Compensation Committee of the Board of Directors (the “Committee”) is responsible for reviewing and recommending to the Board the form and amount of compensation for our non-employee directors. The following discussion of compensation and stock ownership guidelines applies only to our non-employee directors and does not apply to Mr. Comma. Mr. Comma is an employee of the Company. He is compensated as an executive officer and does not receive additional compensation for service as a director.

The Board believes that total compensation for directors should reflect the work required in both (i) their ongoing oversight and governance role and (ii) their continuous focus on driving long-term performance and stockholder value. The compensation program is designed to provide pay that is competitive with directors in the Company’s peer group (which is described in the Compensation Discussion & Analysis (“CD&A”) in this Proxy Statement). It consists of a combination of cash retainers and equity awards in the form of time-vested restricted stock units (“RSUs”). “Competitive” is defined as approximating the 50th percentile of pay of Peer Group directors.

Director Compensation Program Review and Changes

 

 

Director compensation is reviewed by an independent compensation consultant every two to three years. Any changes to director cash retainers and/or annual stock award

values generally occur only after such review. The most recent review was completed during fiscal 2014. There were no changes to director compensation for fiscal 2016.

 

 

Annual Compensation Program

 

a. Cash Retainers

 

Each director receives an annual cash retainer for his or her service on the Board, service on Board committees, service as chair of a Board committee, and service as Lead Director, as applicable. There are no meeting fees. Retainers are paid in a single installment on the first business day of the month following the Annual Stockholder Meeting each year. Each new director receives a prorated retainer that is paid on the first business day of the month following his or her appointment to the Board.

2016 RETAINERS

 

Annual Board Service:      $65,000   
Lead Director:      $17,500   
Committee    Committee
Chair (1)
     Committee
Membership
 

Audit

   $ 25,000       $ 10,000   

Compensation

   $ 25,000       $ 7,500   

Finance

   $ 12,500       $ 5,000   

Nominating & Governance

   $ 12,500       $ 5,000   
(1)  Includes Committee membership retainer

Directors may elect to defer receipt of some or all of their cash retainers in the form of Common Stock equivalents under the

Jack in the Box Inc. Deferred Compensation Plan for Non-Management Directors (the “Director Deferred Compensation Plan”). The number of Common Stock equivalents credited to a director’s account is based on a per share price equal to the average of the closing price of Common Stock on the NASDAQ Stock Market for the 10 trading days immediately preceding the date the deferred compensation is credited to the director’s account. Under the Director Deferred Compensation Plan, to the extent dividends are paid, dividend equivalents and fractions thereof are converted to additional Common Stock equivalents and are credited to a director’s deferred compensation account as of the dividend payment dates. Each director’s account is settled in an equal number of shares of Common Stock upon the director’s termination of service from the Board. The Director Deferred Compensation Plan is a non-qualified plan under the Internal Revenue Code.

b. Expenses

The Company reimburses directors for customary and usual travel and out-of-pocket expenses incurred in connection with attendance at Board and committee meetings.

 

 

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c. Annual Equity Grant — Restricted Stock Units

 

Each director receives an annual grant of RSUs under the 2004 Stock Incentive Plan. We grant RSUs for the following reasons:

 

  RSUs cause the value of directors’ share ownership to rise and fall with that of other stockholders, serving the objective of alignment with stockholder interests.

 

  RSUs are a prevalent form of director compensation among the Company’s Peer Group.

The Company determines the number of RSUs to be granted by dividing the annual equity award value of $90,000 by the

closing price of Common Stock on the date of the annual grant, which is the second business day of the next “window period” opened in accordance with the Company’s Employee/Insider Trading Policy. RSUs vest on the earlier of the first business day 12 months from the date of grant or upon the director’s termination of service with the Board, unless deferred. Directors may elect to defer receipt of shares issuable under RSU awards to termination of their board service; and beginning with the February 2015 RSU awards, shares that have vested and been deferred earn a dividend (in the form of Common Stock equivalents) to the same extent the Company pays a dividend on outstanding shares.

 

 

Director Ownership and Stock Holding Requirements

 

The Board believes that all directors should maintain a meaningful personal financial stake in the Company to align their long-term interests with those of our stockholders. Pursuant to our Corporate Governance Principles and Practices, the Board desires that, within a reasonable period after joining the Board, each non-employee director hold Common Stock with a value of at least three times the annual cash Board service retainer. Direct holdings, unvested and deferred RSUs, and Common Stock equivalents count toward ownership value. In addition, each director is required to hold at least 50% of the shares resulting from all RSU grants until termination of his or her Board service. The table below shows each non-employee director’s ownership value as of fiscal year end 2016, based on a closing stock price of $95.94 on the last trading day of fiscal 2016, September 30, 2016. Each of our directors meets the stock holding requirement.

 

Name    Board Service
Effective Date
    

Direct Holdings/

Unvested RSUs

     Deferred
Units &
Common Stock
Equivalents
    

Total

Value

 

Mr. Goebel

     Dec. 2008       $ 2,018,961       $ 223,828       $ 2,242,789   

Ms. John

     Sept. 2014       $ 233,422       $ 0       $ 233,422   

Ms. Kleiner

     Sept. 2011       $ 724,923       $ 542,733       $ 1,267,656   

Mr. Murphy

     Sept. 2002       $ 438,926       $ 5,410,248       $ 5,849,174   

Mr. Myers

     Dec. 2010       $ 2,270,036       $ 666,303       $ 2,936,339   

Mr. Tehle

     Dec. 2004       $ 1,268,039       $ 4,264,149       $ 5,532,188   

Mr. Wyatt

     May 2010       $ 714,753       $ 690,768       $ 1,405,521   

 

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    DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES          

 

Fiscal 2016 Compensation

 

The table below shows the compensation amounts for each of the Company’s non-employee directors. Each director received an annual equity award of 1,406 RSUs, valued at $90,000 on the date of grant, February 22, 2016. The RSUs vest 100% on the earlier of the first business day 12 months from the date of grant or upon the director’s termination of service with the Board.

For fiscal 2016, the average annual compensation of directors was $177,857 (excluding the dividend payments on deferred accounts), comprised of (i) $87,857 in cash and (ii) $90,000 in RSUs.

 

Name    Fees Earned or
Paid in Cash  (1)
     Stock
Awards (2)
     All Other
Compensation (3)
     Total  

Mr. Goebel

   $ 95,000       $ 90,000       $ 2,086       $ 187,086   

Ms. John

   $ 77,500       $ 90,000       $ 0       $ 167,500   

Ms. Kleiner

   $ 85,000       $ 90,000       $ 838       $ 175,838   

Mr. Murphy

   $ 95,000       $ 90,000       $ 55,514       $ 240,514   

Mr. Myers

   $ 80,000       $ 90,000       $ 6,068       $ 176,068   

Mr. Tehle

   $ 87,500       $ 90,000       $ 37,949       $ 215,449   

Mr. Wyatt

   $ 95,000       $ 90,000       $ 838       $ 185,838   
  (1)  “Fees Earned or Paid in Cash” reflects Board and Committee retainers paid to each director in 2016 either in cash or deferred at the director’s election.  
  (2)  “Stock Awards” reflects the grant date fair value of RSUs granted under the 2004 Stock Incentive Plan, computed in accordance with ASC 718.  
  (3)  The amount reported in the “All Other Compensation” column reflects four dividend payments made during fiscal 2016 that were credited to the applicable directors’ common stock equivalent accounts, in connection with (1) the respective director’s prior deferral of cash retainers, under the Director Deferred Compensation Plan described in the above section “a. Cash Retainers” and/or (2) beginning with the February 2015 RSU award, vested deferred RSUs as described in section c. “Annual Equity Grant – Restricted Stock Units.” Dividends are paid only to the same extent the Company pays a dividend on outstanding shares.  

Outstanding Equity at Fiscal Year End

 

The table below sets forth the aggregate number of unvested and deferred RSUs held by our non-employee directors at the end of fiscal 2016.

 

Name   

Unvested

RSUs

    

Deferred

RSUs

 

Mr. Goebel

     1,406         927   

Ms. John

     1,406         0   

Ms. Kleiner

     1,406         5,647   

Mr. Murphy

     1,406         10,065   

Mr. Myers

     1,406         1,551   

Mr. Tehle

     1,406         13,234   

Mr. Wyatt

     1,406         7,190   

 

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            REPORT OF THE AUDIT COMMITTEE  

 

REPORT OF THE AUDIT COMMITTEE

 

The following is the report of the Audit Committee with respect to Jack in the Box Inc.’s audited consolidated financial statements for the fiscal year ended October 2, 2016.

The Audit Committee has reviewed and discussed the annual consolidated financial statements with Management and KPMG LLP, the Company’s independent registered public accounting firm (the “independent auditor”). Management is responsible for the financial reporting process, the system of internal controls, including internal control over financial reporting, risk management and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The independent auditor is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America, as well as expressing an opinion on the effectiveness of internal control over financial reporting. The Audit Committee is responsible for the appointment, compensation and oversight of the independent auditor. The Committee was also involved in selection of the firm’s lead engagement partner for fiscal 2017. The Audit Committee met on four occasions in the fiscal year ended October 2, 2016. The Audit Committee met with the independent auditor, with and without Management present, to discuss the results of its audits and quarterly reviews of the Company’s financial statements. The Audit Committee also discussed with the independent auditor the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Statement on Auditing Standards No. 16 Communications with Audit Committees. The Audit Committee also received from the Company’s independent auditor the written disclosures and the letter required by applicable requirements of the PCAOB regarding

their communications with the Audit Committee concerning independence, and has discussed with the independent auditor its independence from the Company. The Audit Committee also has considered whether the provision of non-audit services to the Company is compatible with the independence of the independent auditor.

In performing its functions, the Audit Committee acts only in an oversight capacity and necessarily relies on the work and assurances of the Company’s management and internal audit group as well as the Company’s independent auditor whose reports express opinions on the conformity of the Company’s annual financial statements with U.S. generally accepted accounting principles and on the effectiveness of internal control over financial reporting.

Based on the reviews and discussions referred to above, and the reports of KPMG LLP, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, the inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2016, for filing with the SEC.

THE AUDIT COMMITTEE

Michael W. Murphy, Chair

James M. Myers

David M. Tehle

This report is not deemed to be incorporated by reference in any filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this report by reference.

 

 

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    INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FEES AND SERVICES          

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FEES AND SERVICES

 

The following table presents fees billed for professional services rendered by KPMG, the Company’s independent registered public accountants, for the fiscal years ended October 2, 2016 and September 27, 2015.

 

      2016      2015  

Audit Fees (1)

   $ 1,003,001       $ 923,980   

Audit Related Fees

               

Tax Fees (2)

     8,750         29,667   

All Other Fees

               

KPMG Total Fees

   $ 1,011,751       $ 953,647   
(1)  Audit fees include fees for the audit of the Company’s consolidated annual financial statements and the audit of the effectiveness of internal controls over financial reporting. Audit fees also include fees for review of the interim financial statements included in our Form 10-Q quarterly reports and the issuance of consents and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
(2)  Tax fees include fees for services rendered for tax advice in connection with amendment to the Company’s credit facility, sales tax audit defense, and interest rate swaps.

Registered Public Accountants’ Independence. The Audit Committee has considered whether the provision of the above-noted services, other than audit services, is compatible with maintaining KPMG’s independence, and has determined that the provision of such services has not adversely affected KPMG’s independence.

Policy on Audit Committee Pre-Approval of Services. The Company and its Audit Committee are committed to ensuring the independence of the independent registered public accountants, both in fact and in appearance. In this regard, the Audit Committee has established a pre-approval policy in accordance with applicable securities rules. The Audit Committee’s pre-approval policy is set forth in the Audit Committee Pre-Approval Policy, which is available on our website at http://investors.jackinthebox.com.

 

 

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            PROPOSAL TWO — RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC  ACCOUNTANTS  

 

PROPOSAL TWO — RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

The Audit Committee has appointed the firm of KPMG LLP as the Company’s independent registered public accountants for fiscal year 2017. Although action by stockholders in this matter is not required, the Audit Committee believes it is appropriate to seek stockholder ratification of this appointment.

KPMG LLP has served as the Company’s independent auditor since 1986. One or more representatives of KPMG LLP is expected to be present at the Annual Meeting and will have the opportunity to make a statement and to respond to appropriate questions from stockholders present at the meeting. The following proposal will be presented at the Annual Meeting:

Action by the Audit Committee appointing KPMG LLP as the Company’s independent registered public accountants to conduct the annual audit of the consolidated financial statements of the Company and its subsidiaries for the fiscal year ending October 1, 2017, is hereby ratified, confirmed and approved.

Vote Required for Ratification

Ratification requires the affirmative vote of a majority of the votes present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions will be included in the number of shares present and entitled to vote, and will have the same effect as a vote “AGAINST” this proposal. Brokers have discretionary authority to vote uninstructed shares on this matter.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.

 

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    PROPOSAL THREE — ADVISORY VOTE ON EXECUTIVE COMPENSATION          

 

PROPOSAL THREE — ADVISORY VOTE ON EXECUTIVE COMPENSATION

As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), stockholders have the opportunity to cast an advisory vote on the compensation of our named executive officers (“NEOs”) as disclosed in the CD&A, the compensation tables, narrative disclosures, and related footnotes included in this Proxy Statement. This “Say on Pay” vote is advisory, and therefore nonbinding on the Company; however, the Compensation Committee of the Board of Directors, which is comprised entirely of independent directors, values the opinions of our stockholders and will take into account the outcome of the vote when considering future executive compensation decisions. We received a 98.6% favorable vote on Say on Pay at our February 2016 Annual Meeting of Stockholders.

The Compensation Committee engages the services of an independent compensation consultant to advise on executive compensation matters, including competitive compensation targets within the marketplace, and Company performance goals and analysis.

As discussed in more detail in the CD&A, our executive compensation program is designed to attract and retain a talented team of executives who can deliver on our commitment to build long-term stockholder value. The Compensation Committee believes our program is competitive in the marketplace, links pay to performance by rewarding our NEOs for achievement of short-term and long-term financial and operational goals (and, in some years, strategic goals), and aligns our NEOs’ interests with the long-term interests of our stockholders by providing a mix of performance and service-based equity awards. Specifically, a significant portion of compensation paid to our NEOs is based on the Company’s business performance.

Our fiscal 2016 NEOs consist of four Brand Services executives supporting both brands, namely our Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Legal and Risk Officer (CLO), and Chief People, Culture and Corporate Strategy Officer, along with our Jack in the Box Brand President.

The Compensation Committee believes stockholders should consider the following key components of our compensation programs and governance practices when voting on this proposal:

 

Pay for Performance Orientation

 

  Competitive, Targeted Pay. We target executive base salary, total cash compensation, and total direct compensation to deliver competitive pay for performance that meets expectations, and the opportunity for higher pay only if performance exceeds expectations.

 

  Pay Mix. Our executive compensation program includes a mix of fixed and variable compensation, with a majority of target compensation in the form of annual and long-term incentives that directly tie to key Company goals and drive long-term stockholder value.

 

  Long-Term Incentives (“LTI”). Annual equity awards for our NEOs included a mix of stock options, performance shares (“PSUs”) and time-vested restricted stock units (“RSUs”) with holding requirements. The PSUs vest three years after the grant, depending on the Company’s achievement of goals over a three-fiscal year period. The grant guidelines, goals, and performance metrics for the LTI awards granted in November 2015 for the performance period fiscal 2016-18 are further described in the CD&A.
  2016 Annual Incentives. In 2016, our NEOs’ annual incentive was based partly on Operating Earnings Per Share (“EPS”), with (a) the Brand Services executives’ incentive also partly based on a consolidated Restaurant Operating Margin (“ROM”) target; and (b) the Jack in the Box Brand President’s annual incentive partly based on the Jack in the Box brand’s Earnings from Operations and ROM.

 

    Each of the Brand Services NEOs earned an annual incentive payment in fiscal 2016 based on the Company substantially exceeding its financial performance target for EPS and meeting its consolidated ROM target.

 

    The JIB Brand President earned an incentive based on EPS achievement and the brand performing just above its Earnings from Operations target, and exceeding its maximum ROM target.
 

 

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Alignment with Long-Term Stockholder Interests

 

  Equity Awards. The largest portion of our NEOs’ total pay is delivered in equity awards (including options, PSUs and RSUs), with such equity awards accounting for 66% of the CEO’s total direct compensation in 2016 (excluding a special one-time retention stock award).

Option awards and time-vested RSUs have multi-year vesting; performance awards are based on achievement of financial goals over a three-fiscal year period.

All RSUs – and PSUs beginning in fiscal 2016 — are subject to a holding requirement of at least 50% of after-tax net shares until termination or retirement.

  Stock Ownership Requirement. Our NEOs and other senior executives are required to own a significant amount of the Company’s stock, based on a multiple of salary.

 

  No Evergreen – No Repricing. We do not have an evergreen plan, and we prohibit repricing equity awards without stockholder approval.

 

  No Pledging or Hedging. We prohibit Section 16 officers and Corporate Vice Presidents from pledging Company stock as collateral for any obligation or engaging in hedging transactions involving our stock.
 

 

Recommendation

With the assistance of its independent compensation consultant, the Committee has thoughtfully developed our executive compensation programs, setting NEO compensation that links pay to performance and provides an appropriate balance of short-term and long-term incentives that are aligned with long-term stockholder interests. Accordingly, the Board of Directors recommends that you vote in favor of the following resolution:

“RESOLVED, that Jack in the Box Inc. stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the Company’s Compensation Discussion and Analysis, tabular disclosures, and other narrative disclosures in this Proxy Statement for the 2017 Annual Meeting of Stockholders.”

Approval of the Say on Pay proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal. Abstentions will be included in the number of shares present and entitled to vote, and will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will not count as votes cast “FOR” or “AGAINST” the proposal, and will not be included in calculating the number of votes necessary for approval for this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

 

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    PROPOSAL FOUR – RE-APPROVAL OF STOCK INCENTIVE PLAN           

 

PROPOSAL FOUR – RE-APPROVAL OF CERTAIN TERMS AND CONDITIONS SET FORTH IN OUR 2004 STOCK INCENTIVE PLAN THAT WILL PERMIT US TO GRANT AWARDS THAT MAY QUALIFY AS “PERFORMANCE-BASED COMPENSATION” WITHIN THE MEANING OF SECTION 162(m) OF THE CODE

Overview

In 2004 the Board adopted and our stockholders approved, the 2004 Stock Incentive Plan (the “Plan”). The Plan was amended and restated in 2012 (the Plan as amended and restated, the “Amended 2004 Plan”). To allow for certain awards under the Amended 2004 Plan to qualify as tax-deductible “performance-based compensation” within the meaning of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code, as amended, (the “Code”), we are asking stockholders to re-approve certain terms and conditions under the Amended 2004 Plan that are described below. Stockholders are not being asked to approve an increase in the number of shares available for grant under the Amended 2004 Plan or any other amendment to the Amended 2004 Plan.

The Amended 2004 Plan provides for performance-based awards that are intended to satisfy the requirements for “performance-based compensation” within the meaning of Section 162(m). The Board believes that it is in the best interests of the Company and our stockholders to maintain a plan under which performance-based stock and cash compensation awards made to certain executive officers may be deducted by the Company for federal income tax purposes, as further described below.

Proposal 4 must receive the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal in order to be approved. In the event that our stockholders do not approve Proposal 4, the Amended 2004 Plan will not be available for future grants of performance-based awards, and we may not be entitled to a tax deduction for some or all of the compensation paid to our chief executive officer and our other most highly compensated officers.

Continued Ability to Grant Qualified Performance-Based Compensation under Section 162(m)

 

Section 162(m) disallows a U.S. tax deduction to any publicly held corporation and its affiliates for certain compensation paid to any “covered employee” (the chief executive officer and the next three most highly compensated officers other than the chief financial officer) to the extent that the compensation paid to the covered employee for the taxable year exceeds $1,000,000. However, certain kinds of compensation, including qualified “performance-based compensation,” are not subject to this deduction limitation.

In order for compensation awarded under a plan to qualify as “performance-based compensation” under Section 162(m), among other requirements, the following terms and conditions must be disclosed to and approved by the stockholders before the compensation is paid: (i) a description of the employees eligible to receive such awards; (ii) a description of the business criteria upon which the performance goals for performance-based awards may be based; and (iii) a per-employee limit on the number of shares subject to performance-based stock awards and the amount of cash subject to performance-based cash awards that may be

granted or paid to any employee under the plan during any specified period.

In 2012, our public company stockholders approved the Amended 2004 Plan, including the terms and conditions necessary for us to grant awards under the Amended 2004 Plan that may qualify as “performance-based compensation” under Section 162(m). Under U.S. tax rules, in order for us to continue to grant performance-based stock and cash awards under the Amended 2004 Plan that may qualify as “performance-based compensation” under Section 162(m), our stockholders must reapprove such terms and conditions no later than the first stockholder meeting that occurs in the fifth year following the year in which our stockholders previously approved such terms and conditions.

Accordingly, we are requesting that our stockholders re-approve the terms and conditions of the Amended 2004 Plan regarding eligibility for performance-based awards, the business criteria upon which the performance goals for performance-based awards may be based, and annual

 

 

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            PROPOSAL FOUR – RE-APPROVAL OF STOCK INCENTIVE PLAN  

 

per-employee limits on performance-based awards (as described in the summary below). We believe that it is in the best interests of the Company and our stockholders to preserve the ability to grant awards in the future that may qualify as “performance-based compensation” under Section 162(m). However, in certain circumstances, we may determine to grant awards to our covered employees that are not intended to qualify as “performance-based compensation” under Section 162(m). Moreover, even if we grant awards that are intended to qualify as “performance-based compensation” under Section 162(m), we cannot guarantee that such compensation ultimately will be deductible by us under U.S. tax rules.

Description of Amended 2004 Plan

The material features of the Amended 2004 Plan are summarized below. This summary is qualified in its entirety by reference to the complete text of the Amended 2004 Plan, which is appended to this proxy statement as Exhibit A and may be accessed from the SEC’s website at www.sec.gov.

Purpose of the Amended 2004 Plan. The purpose of the Amended 2004 Plan is to advance the interests of the Company by providing an incentive program that will enable the Company to attract, retain, and motivate employees, consultants and directors upon whose judgment, interest and efforts the Company’s success is dependent, and to provide them with an equity interest in the success of the Company in order to motivate superior performance. These incentives may be provided through the grant of stock options (including indexed options), stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, and performance units.

Key Features of the Amended 2004 Plan Designed to Protect Stockholders’ Interests. The Amended 2004 Plan includes provisions that reflect our commitment to strong corporate governance and the desire to preserve stockholder value as demonstrated by the following features:

 

  No Evergreen Feature. The maximum number of shares available for issuance under the Amended 2004 Plan is fixed and cannot be increased without stockholder approval. In addition, unless extended by a vote of our stockholders, no awards may be granted under the Amended 2004 Plan after November 16, 2021.

 

  Repricing Prohibited. Stockholder approval is required for any repricing, replacement, or buyout of underwater awards.

 

  No Discount Awards; Maximum Term Specified. Stock options and stock appreciation rights generally must have an exercise price no less than the closing price of the Company’s stock on the date the award is granted and, starting in November 2009, a term no longer than seven years from the date of grant.
  Per-Employee Limits on Awards. The Amended 2004 Plan limits the size of awards that may be granted to any one employee within any fiscal year of the Company.

 

  Minimum Three-Year Vesting Period. Restricted shares and RSUs granted to employees and vesting solely on the basis of continued service require a minimum three years of employment, from date of grant, to vest (with the exception of a maximum of 10% of the total shares being available for full value awards with a vesting period of less than three years).

 

  Award Design Flexibility. Different kinds of awards may be granted under the Amended 2004 Plan, giving the Company the flexibility to design our equity incentives to complement the other elements of compensation and to support our attainment of strategic goals.

 

  Performance-Based Awards. The Amended 2004 Plan permits the grant of performance-based stock awards that are payable upon the attainment of specified performance goals.

 

  Responsible Share Counting. Any shares of common stock tendered or withheld to pay taxes or an option’s exercise price are not available for re-issuance.

 

  Responsible Change in Control Provisions. The Amended 2004 Plan’s definition of a change-in-control transaction provides that any award benefits triggered by such a transaction are contingent upon the actual consummation of the transaction, not merely its approval by our Board or stockholders. Additionally, since 2014, all grants of options and restricted stock units provide that unvested awards that continue after a “Change in Control” (as defined below) are “double-trigger”, requiring both a Change in Control and qualifying termination of service for vesting to accelerate. Since 2014, the terms of performance awards provide for vesting upon a Change in Control that pays out at actual levels achieved for completed performance periods and at target level for incomplete periods.

 

  Deductibility of Awards. The Amended 2004 Plan includes provisions intended to meet the requirements for deductibility of executive compensation under Section 162(m), including by qualifying payments under the Amended 2004 Plan as “performance-based compensation.”

 

  Independent Committee. The Amended 2004 Plan is administered by our Compensation Committee or other committee of the Board as duly appointed to administer the Amended 2004 Plan.

Share Reserve. As of the record date, of the shares of our common stock approved for issuance under the Amended 2004 Plan, 826,955 shares are subject to issuance or release under outstanding awards and 2,062,864 shares of our common stock remain available for future awards (not

 

 

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    PROPOSAL FOUR – RE-APPROVAL OF STOCK INCENTIVE PLAN           

 

including any shares that might in the future be returned to the Amended 2004 Plan as a result of awards expiring, being forfeited or otherwise terminating).

The Amended 2004 Plan provides that grants or settlement of full value awards (such as restricted stock bonus awards, restricted stock purchase rights, restricted stock units, performance shares or performance units settled in shares) made on or after February 10, 2010 are counted against the Amended 2004 Plan’s share reserve on a one-and-three-quarters-for-one basis (i.e. each full value award is counted against the share limit as 1.75 shares). If any award expires, lapses or otherwise terminates or is forfeited for any reason without having been exercised or settled in full, the shares subject to the award will again become available for issuance under the Amended 2004 Plan. To the extent a share that was subject to an Award that counted as one share is returned to the Amended 2004 Plan, the share reserve will be credited with one share. To the extent that a share that was subject to an Award that counts as 1.75 shares is returned to the Amended 2004 Plan, the share reserve will be credited with 1.75 shares. Upon any stock dividend, stock split, reverse stock split, recapitalization, or similar change in our capital structure, appropriate adjustments will be made to the shares subject to the Amended 2004 Plan, to the award grant limitations, and to all outstanding awards.

Administration. The Amended 2004 Plan has been and will continue to be administered by the Compensation Committee or other Committee of the Board of Directors duly appointed to administer the Amended 2004 Plan, or, in the absence of such committee, by the Board of Directors. In the case of awards intended to qualify for the performance-based compensation exemption under Section 162(m), administration must be by a compensation committee comprised solely of two or more “outside directors” within the meaning of Section 162(m). (For purposes of this summary, the term “Committee” will refer to either such duly appointed committee or to the Board of Directors.) Subject to the provisions of the Amended 2004 Plan, the Committee determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. The Committee may, subject to certain limitations on the exercise of its discretion required by Section 162(m) and the repricing and vesting restrictions described below, amend, cancel, renew, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The Amended 2004 Plan provides, subject to certain limitations, for indemnification by the Company of any director, officer, or employee against all reasonable expenses, including attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the Amended 2004 Plan. The Committee will interpret the Amended 2004 Plan and awards granted thereunder, and all determinations of the Committee will be final and binding on all persons having an interest in the Amended 2004 Plan or any award.

Eligibility. Awards may be granted to employees, directors and consultants of the Company or of any present or future parent or subsidiary corporations of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of October 2, 2016, the Company had approximately 22,200 employees, including ten executive officers, and seven non-management directors who would be eligible under the Amended 2004 Plan.

Repricing and Vesting Restrictions. The Amended 2004 Plan forbids, without stockholder approval, the repricing of any outstanding stock option and/or stock appreciation right. In addition, the Amended 2004 Plan forbids (1) any acceleration of vesting of awards by the Committee for any reason other than upon a Change in Control or after a participant’s death, retirement or disability, (2) vesting of full value shares on the basis of continued service any more rapidly than annual pro rata vesting over three years (with the exception of no more than 10% of the total shares being available for full value awards that have a vesting period of less than three years) and (3) vesting on the basis of performance over a performance period of less than 12 months.

Stock Options. Each option granted under the Amended 2004 Plan must be evidenced by a written agreement between the Company and the optionee specifying the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the Amended 2004 Plan. The exercise price of each option may not be less than the fair market value of a share of Common Stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a “Ten Percent Stockholder”) must have an exercise price equal to at least 110% of the fair market value of a share of Common Stock on the date of grant. The exercise price of each indexed stock option, and the terms and adjustments which may be made to such an option, will be determined by the Committee in its sole discretion at the time of grant.

On December 30, 2016, the closing price of the Company’s Common Stock on the NASDAQ stock market was $111.64 per share. Subject to appropriate adjustment in the event of any change in the capital structure of the Company, no employee may be granted in any fiscal year of the Company options and/or freestanding stock appreciation rights which in the aggregate are for more than 500,000 shares.

The Amended 2004 Plan provides that the option exercise price may be paid in cash, by check, or in cash equivalent, by the assignment of the proceeds of a sale with respect to some or all of the shares being acquired upon the exercise of the option, to the extent legally permitted, by tender of shares of Common Stock owned by the optionee having a fair market

 

 

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value not less than the exercise price, by such other lawful consideration as approved by the Committee, or by any combination of these. Nevertheless, the Committee may restrict the forms of payment permitted in connection with any option grant. No option may be exercised unless the optionee has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by the Company, through the optionee’s surrender of a portion of the option shares to the Company.

Options will become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The maximum term of any option granted before November 12, 2009 under the Amended 2004 Plan is ten years, and the maximum term of any option granted on or after November 12, 2009 under the Amended 2004 Plan is seven years, provided, however, that an incentive stock option granted to a Ten Percent Stockholder must have a term not exceeding five years. The Committee will specify in each written option agreement, and solely in its discretion, the period of time post-termination that an optionee may exercise the option before it expires.

Stock options are nontransferable by the optionee other than by will or by the laws of descent and distribution, and are exercisable during the optionee’s lifetime only by the optionee. However, a nonstatutory stock option may be assigned or transferred to the extent permitted by the Committee and set forth in the option agreement, subject to applicable limitations of securities law.

Stock Appreciation Rights. Each stock appreciation right granted under the Amended 2004 Plan must be evidenced by a written agreement between the Company and the participant specifying the number of shares subject to the award and the other terms and conditions of the award, consistent with the requirements of the Amended 2004 Plan. A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of Company Common Stock between the date of grant of the award and the date of its exercise. The Company may pay the appreciation either in cash, in shares of Common Stock or in any combination thereof as set out in the award agreement. The Committee may grant stock appreciation rights under the Amended 2004 Plan in tandem with a related stock option or as a freestanding award. A tandem stock appreciation right is exercisable only at the time and to the same extent that the related option is exercisable, and its exercise causes the related option to be canceled. Freestanding stock appreciation rights vest and become exercisable at the times and on the terms established by the Committee. The maximum term of any stock appreciation right granted before November 12, 2009 under the Amended 2004 Plan is ten years, and the maximum term of any stock appreciation right

granted on or after November 12, 2009 under the Amended 2004 Plan is seven years. Subject to appropriate adjustment in the event of any change in the capital structure of the Company, no employee may be granted in any fiscal year of the Company freestanding stock appreciation rights and/or options which in the aggregate are for more than 500,000 shares. Stock appreciation rights are nontransferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participant’s lifetime only by the participant.

Restricted Stock Awards. The Committee may grant restricted stock awards under the Amended 2004 Plan, either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase Common Stock, or in the form of a restricted stock bonus, for which the participant furnishes consideration in the form of services to the Company. The Committee determines the purchase price, if any, payable under restricted stock purchase awards. Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Committee specifies, and the shares acquired may not be transferred by the participant until vested, other than pursuant to an ownership change event as described in the Amended 2004 Plan. Unless otherwise provided by the Committee, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed prior to the participant’s termination of service. Participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award.

The Committee also may grant restricted stock awards under the Amended 2004 Plan in the form of restricted stock units which represent a right to receive shares of Common Stock at a future date determined in accordance with the participant’s award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant’s services to the Company. The Committee may grant restricted stock unit awards subject to the attainment of performance goals similar to those described below in connection with performance shares and performance units, or may make the awards subject to vesting conditions similar to those applicable to other restricted stock awards. Participants have no voting rights or rights to receive dividends with respect to restricted stock unit awards until shares of Common Stock are issued in settlement of such awards. However, the Committee may grant restricted stock units that entitle their holders to receive dividend equivalents, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any dividends we pay. Dividend equivalents shall only be payable to the extent the Participant’s right to any stock is nonforfeitable.

 

 

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Subject to appropriate adjustment in the event of any change in the capital structure of the Company, no employee may be granted in any fiscal year of the Company restricted stock awards in the aggregate for more than 200,000 shares of stock on which the restrictions are based on performance criteria.

Performance Awards. The Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between the Company and the participant. These awards may be designated as performance shares or performance units. The PSUs granted to executive officers as part of our long-term incentive program fit within the definition of performance shares under the Amended 2004 Plan.

Performance shares and performance units represent a right to receive a share of common stock, an equivalent amount of cash, or a combination of shares and cash as determined by the Committee, if vesting conditions are satisfied. The initial values of such awards are equal to the fair market value of a share of stock on the grant date and $100 per unit, respectively.

Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more predetermined performance goals are attained within a predetermined performance period. Subject to appropriate adjustment in the event of any change in the capital structure of the Company, for each fiscal year of the Company contained in the applicable performance period, no employee may be granted performance shares that could result in the employee receiving more than 200,000 shares of Common Stock or performance units that could result in the employee receiving more than $1,000,000.

Prior to the beginning of the applicable performance period or such later date as permitted under Section 162(m), the Committee will establish one or more performance goals applicable to the award. Performance goals will be based on the attainment of specified target levels with respect to one or more measures of business or financial performance of the Company and each parent and subsidiary corporation consolidated therewith for financial reporting purposes, or such division or business unit of the Company as may be selected by the Committee. The Committee, in its discretion, may base performance goals on one or more of the following such measures: sales, revenue, gross margin, operating margin, operating income, pre-tax profit, earnings before interest, taxes, depreciation and/or amortization, net earnings, net income, cash flow, expenses, expense management, stock price, earnings per share, operating earnings per share, defined operating earnings per share, average unit sales or volume, return on stockholders’ equity, return on capital, return on assets, return on invested capital, economic value added, number of customers, market share, same store sales, average restaurant margin, restaurant operating margin,

return on investment, profit after tax, customer satisfaction, guest transactions, number of restaurants franchised, number of restaurants remodeled or reimaged, franchise revenues, gains on restaurants sold, cash proceeds on restaurants sold, return on equity, cash on cash return, and system-wide sales. The target levels with respect to these performance measures may be expressed on an absolute basis or relative to a standard specified by the Committee. The degree of attainment of performance measures will, according to criteria established by the Committee, be computed before the effect of changes in accounting standards, restructuring charges and similar extraordinary items occurring after the establishment of the performance goals applicable to a performance award.

The Committee may also provide that one or more of the following objectively determinable adjustments shall be made to one or more of the performance goals: items related to a change in accounting principle; items relating to financing activities; expenses for restructuring or productivity initiatives; other non-operating items; items related to acquisitions; items attributable to the business operations of any entity acquired by the Company during the performance period; items related to the disposal of a business or segment of a business; items related to discontinued operations that do not qualify as a segment of a business under United States generally accepted accounting principles; items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period; any other items of significant income or expense which are determined to be appropriate adjustments; items relating to unusual or extraordinary corporate transactions, events or developments; items related to amortization of acquired intangible assets; items that are outside the scope of the Company’s core, on-going business activities; or items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.

Following completion of the applicable performance period, the Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant. The Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable to the participant on the basis of the performance goals attained. However, no such reduction may increase the amount paid to any other participant. In its discretion, the Committee may provide for the payment to a participant awarded performance shares of dividend equivalents with respect to dividends paid on the Company’s Common Stock, however, dividend equivalents shall only be payable to the extent the Participant’s right to any performance award is earned and nonforfeitable.

Unless otherwise provided by the Committee, if a participant’s service terminates due to the participant’s death, disability or retirement prior to completion of the applicable performance period, the final award value will be determined at the end of

 

 

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the performance period on the basis of the performance goals attained during the entire performance period but will be prorated for the number of months of the participant’s service during the performance period. If a participant’s service terminates prior to completion of the applicable performance period for any other reason, the Amended 2004 Plan provides that, unless otherwise determined by the Committee, the performance award will be forfeited. No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

Change in Control. The Amended 2004 Plan defines a “Change in Control” of the Company as any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event (in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the event) direct or indirect beneficial ownership of a majority of the total combined voting power of the voting securities of the Company, its successor, or, in the case of (iii) below, the corporation or corporations to which the assets were transferred: (i) a sale or exchange by the stockholders in a single or series of related transactions of more than 50% of the Company’s voting stock; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. If a Change in Control occurs, the surviving, continuing successor or purchasing corporation or parent corporation thereof may either assume outstanding options or stock appreciation rights or substitute new awards having an equivalent value.

In the event of a Change in Control, in which the outstanding stock options and stock appreciation rights are not assumed or replaced, then all unexercisable, unvested or unpaid portions of such outstanding awards will become exercisable, vested and payable in full prior to the date of the Change in Control. Since 2014, however, all grants of stock options that continue after a Change in Control are “double trigger,” requiring both a Change in Control and a qualifying termination of service for vesting to accelerate.

In the event of a Change in Control, the lapsing of all vesting conditions and restrictions on any shares subject to any restricted stock award, restricted stock unit award or performance award held by a participant whose service with

the Company has not terminated prior to the Change in Control may be accelerated effective as of the date of the Change in Control, subject to the terms of the applicable grant agreement. Since 2014, all grants of restricted stock that continue after a Change in Control are “double trigger,” requiring both a Change in Control and a qualifying termination of service for stock vesting to accelerate. Since 2014, all performance award grant agreements provide that the value of outstanding performance awards will be determined and paid at (i) the degree of attainment of the applicable performance goals for the completed performance periods prior to the date of the Change in Control and (ii) 100% of the pre-established performance goal target for incomplete periods.

Any option or stock appreciation right not assumed, replaced, or exercised as of the date of the Change in Control will terminate. The Amended 2004 Plan authorizes the Committee, in its discretion, to provide for different treatment of any award, as may be specified in such award’s written agreement, which may provide for acceleration of the vesting or settlement of any award, or provide for longer periods of exercisability, upon a Change in Control.

Termination or Amendment. The Amended 2004 Plan will continue in effect until the first to occur of (i) its termination by the Committee or (ii) the date on which all shares available for issuance under the Amended 2004 Plan have been issued and all restrictions on such shares under the terms of the Amended 2004 Plan and the agreements evidencing awards granted under the Amended 2004 Plan have lapsed. Unless extended by a vote of our stockholders, no awards may be granted under the Amended 2004 Plan after November 16, 2021. The Committee may terminate or amend the Amended 2004 Plan at any time, provided that no amendment may be made without stockholder approval if the Committee deems such approval necessary for compliance with any applicable tax or securities law or other regulatory requirements, including the requirements of any stock exchange or market system on which the Common Stock of the Company is then listed. No termination or amendment may affect any outstanding award unless expressly provided by the Committee, and, in any event, may not adversely affect an outstanding award without the consent of the participant unless required to enable an option designated as an incentive stock option to qualify as such or necessary to comply with any applicable law, regulation or rule.

 

 

Summary of U.S. Federal Income Tax Consequences

 

The following is a general summary of the federal income tax treatment of stock options, which are authorized for grant under the Amended 2004 Plan, based upon the provisions of the Code as of the date of this proxy statement. This summary is not intended to be exhaustive and the exact tax consequences to any award holder depend upon his or her

particular circumstances and other facts. Plan participants should consult their tax advisor with respect to any state, local and non-U.S. tax considerations or relevant federal tax implications of options granted under the Amended 2004 Plan.

 

 

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Incentive Stock Options. An option holder recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option that qualifies under Section 422 of the Code. Option holders who neither dispose of their shares within two years of the date that the option was granted or within one year following the exercise of the option, normally recognize a capital gain or loss on the sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If an option holder satisfies these holding periods, on the sale of the shares, we are not entitled to any deduction for federal income tax purposes. Where an option holder disposes of shares within two years after the date of grant of those options or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the exercise date and the option exercise price (which is not to exceed the gain realized on the sale, if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) is taxed as ordinary income at the time of disposition. Any gain in excess of that amount is a capital gain. If a loss is recognized, there is no ordinary income, and such loss is a capital loss. Any ordinary income recognized by the option holder on the disqualifying disposition of the shares generally results in a deduction by the Company for federal income tax purposes.

Nonqualified Stock Options. Options not designated or qualifying as incentive stock options are nonqualified stock options having no special tax status. An option holder generally recognizes no taxable income as a result of the grant of the option. On the exercise of a nonqualified stock option, the option holder normally recognizes ordinary income

in the amount of the difference between the option exercise price and the fair market value of the shares on the exercise date. Where the option holder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. On the sale of shares acquired by the exercise of a nonqualified stock option, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date), is taxed as a capital gain or loss. No tax deduction is available to the Company with respect to the grant of a nonqualified stock option or the sale of the stock acquired pursuant to such grant. The Company should generally be entitled to a deduction equal to the amount of ordinary income recognized by the option holder as a result of the exercise of a nonqualified stock option.

Deductibility of Compensation. The Code allows publicly held corporations to deduct compensation that is in excess of $1,000,000 paid to the corporation’s chief executive officer and any of its three most highly compensated executive officers (other than the chief executive officer and the chief financial officer) if the compensation is payable solely based on the attainment of one or more performance goals and where certain statutory requirements are satisfied. It is intended that compensation arising from awards granted under the Amended 2004 Plan that are based on performance goals, and stock options and stock appreciation rights, are to be deductible by us as qualified performance-based compensation not subject to the $1,000,000 limitation on deductibility under the Code. Despite this, we reserve the right to grant awards under the Amended 2004 Plan that do not result in qualified performance-based compensation and, as such, may not entitle us to a tax deduction.

 

 

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Plan Benefits

The following table shows, for each of the individuals and groups indicated, the total number of shares of our common stock subject to all stock awards, including options, that have been granted (even if not currently outstanding) under the Plan since inception through the record date, December 30, 2016.

 

Name and position    Number of shares subject
to stock awards
 

Leonard A. Comma, Chairman of the Board and Chief Executive Officer

     710,550   

Jerry P. Rebel, Executive Vice President and Chief Financial Officer

     815,854   

Frances L. Allen, Jack in the Box Brand President

     50,105   

Mark H. Blankenship, Chief People, Culture, and Corporate Strategy Officer

     226,419   

Phillip H. Rudolph, Chief Legal and Risk Officer and Corporate Secretary

     379,667   

All current executive officers as a group

     2,597,159   

All current directors who are not executive officers as a group

     282,839   

Each nominee for election as a director:

  

Leonard A. Comma

     710,550   

David L. Goebel

     47,451   

Sharon P. John

     2,333   

Madeleine A. Kleiner

     14,640   

Michael W. Murphy

     83,851   

James M. Myers

     22,262   

David M. Tehle

     83,851   

John T. Wyatt

     28,451   

Each associate of any such directors, executive officers or nominees

     0   

Each other person who received or is to receive 5% of such options, warrants or rights

     0   

All employees, including all current officers who are not executive officers, as a group

     552,570   

New Plan Benefits

The following table shows the total number of shares of our common stock subject to awards that will be received by or allocated to each of the individuals and groups indicated below under the Amended 2004 Plan, if such number is determinable:

 

Name and position    Dollar value     Number of shares  

Leonard A. Comma, Chairman of the Board and Chief Executive Officer

     (1     (1

Jerry P. Rebel, Executive Vice President and Chief Financial Officer

     (1     (1

Frances L. Allen, Jack in the Box Brand President

     (1     (1

Mark H. Blankenship, Chief People, Culture, and Corporate Strategy Officer

     (1     (1

Phillip H. Rudolph, Chief Legal and Risk Officer and Corporate Secretary

     (1     (1

All current executive officers as a group

     (1 )     (1

All current directors who are not executive officers as a group

   $ 90,000 per fiscal year        (2

All employees, including all current officers who are not executive officers, as a group

     (1     (1
(1)  Awards granted under the Amended 2004 Plan to our executive officers and other employees are discretionary and are not subject to set benefits or amounts under the terms of the Amended 2004 Plan, and our Board and our Compensation Committee have not granted any awards under the Amended 2004 Plan subject to stockholder approval of this Proposal 4. Accordingly, the benefits or amounts that will be received or allocated to our executive officers and other employees under the Amended 2004 Plan are not determinable.
(2)  Awards granted under the Amended 2004 Plan to our non-employee directors are discretionary and are not subject to set benefits or amounts under the terms of the Amended 2004 Plan. However, pursuant to our non-employee director compensation policy, each of our current non-employee directors is eligible to receive an annual grant of RSUs. The number of shares subject to each such awards is determined by dividing the annual equity award value of $90,000 by the closing price of Common Stock on the date of the annual grant, which is the second business day of the next “window period” opened in accordance with the Company’s Employee/Insider Trading Policy and, therefore, is not determinable at this time. For additional information regarding our compensation policy for non-employee directors, see the “Director Compensation and Stock Ownership Guidelines” section in this Proxy Statement.

 

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes the equity compensation plans under which Company common stock may be issued as of October 2, 2016. Stockholders of the Company approved all plans.

 

      (a) Number of securities to be
issued upon exercise of
outstanding
options, warrants
and rights (1)
     (b) Weighted-average
exercise price of
outstanding options (1)
     (c) Number of securities remaining
for future issuance under equity
compensation plans (excluding
securities reflected in column (a))
 

Equity compensation plans approved by security holders (2)

     965,160       $ 61.73         2,465,612   
(1)  Includes shares issuable in connection with our outstanding stock options, performance-vested stock awards, nonvested stock awards and units, and non-management director deferred stock equivalents. The weighted-average exercise price in column (b) includes the weighted-average exercise price of stock options.
(2)  The Company has shares authorized for issuance to employees, consultants, and directors under the Amended 2004 Plan, and the Amended and Restated Deferred Compensation Plan for Non-Management Directors. For additional description of our equity compensation plans, see Note 12, Share-Based Employee Compensation, of the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2016.

Required Vote and Board of Directors Recommendation

The affirmative vote of a majority of the votes cast at the meeting at which a quorum is present, either in person or by proxy, is required to re-approve certain terms and conditions set forth in our Amended 2004 Plan that will permit us to grant awards under our Amended 2004 Plan that may qualify as “performance-based compensation” within the meaning of Section 162(m). If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the effect of a vote “AGAINST” the proposal. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.

The Board believes that the proposed re-approval of these terms and conditions under the Amended 2004 Plan is in the best interests of the Company and its stockholders for the reasons stated above.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” RE-APPROVAL OF CERTAIN TERMS AND CONDITIONS SET FORTH IN OUR AMENDED 2004 PLAN THAT WILL PERMIT US TO GRANT AWARDS UNDER OUR 2004 PLAN THAT MAY QUALIFY AS “PERFORMANCE-BASED COMPENSATION” WITHIN THE MEANING OF SECTION 162(m).

 

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            PROPOSAL FIVE – ADVISORY VOTE ON THE FREQUENCY OF VOTE ON EXECUTIVE COMPENSATION   

 

PROPOSAL FIVE – ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION

Pursuant to Section 14A of the Securities Exchange Act of 1934, we are required to provide stockholders with the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently to vote on future advisory votes on the compensation of our named executive officers as disclosed in accordance with the compensation disclosure rules of the Securities and Exchange Commission.

Stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation every one, two, or three years. Stockholders also may abstain from casting a vote on this proposal.

The Board has determined that an annual advisory vote on executive compensation will permit our stockholders to provide direct input on the Company’s executive compensation philosophy, policies and practices as disclosed in the proxy statement each year, which is consistent with our efforts to engage in an ongoing dialogue with our stockholders on executive compensation and corporate governance matters.

This vote is advisory, which means that the vote on executive compensation is not binding on the Company, our Board, or the Compensation Committee. However, our Board values the opinions that our stockholders express in their votes and will take into account the outcome of the vote when considering how frequently we should conduct an advisory Say on Pay vote on the compensation of our named executive officers.

Stockholders may cast a vote on the preferred voting frequency by selecting the option of one year, two years, or three years (or may abstain) when voting in response to the resolution set forth below.

“RESOLVED, that the stockholders determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation of the Company’s named executive officers as set forth in the Company’s proxy statement should be (i) every one year, (ii) every two years, or (iii) every three years.”

Required Vote and Board of Directors’ Recommendation

The choice of frequency that receives the highest number of “FOR” votes will be considered the advisory vote of the stockholders. Brokers will not be able to cast votes if clients do not provide voting instructions on this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE OPTION “ONE YEAR” VOTES AS THE PREFERRED FREQUENCY FOR ADVISORY VOTES ON COMPENSATION.

 

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    CD&A — I. EXECUTIVE SUMMARY          

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) explains the key elements of our executive compensation program and compensation decisions for our named executive officers (“NEOs”) in fiscal 2016. The Compensation Committee of our Board of Directors (the “Committee”), with input from its independent compensation consultant, oversees these programs and determines compensation for our NEOs.

Our fiscal year 2016 NEOs are:

 

   Leonard A. Comma    Chairman and Chief Executive Officer (“CEO”), our principal executive officer
   Jerry P. Rebel    Executive Vice President, Chief Financial Officer (“CFO”), our principal financial officer
   Frances L. Allen    Jack in the Box Brand President (“JIB President”)
   Mark H. Blankenship    Executive Vice President, Chief People, Culture and Corporate Strategy Officer (“CPO”)
   Phillip H. Rudolph    Executive Vice President, Chief Legal and Risk Officer (“CLO”) and Corporate Secretary

Quick Reference Guide

 

Executive Summary

     Section I   

Compensation Principles and Objectives

     Section II   

Compensation Competitive Analysis

     Section III   

Elements of Compensation

     Section IV   

Compensation Decision-Making Process

     Section V   

Fiscal 2016 Compensation

     Section VI   

Additional Compensation Information

     Section VII   

I. EXECUTIVE SUMMARY

 

Jack in the Box is committed to responsibly building long-term stockholder value. Our executive compensation program is designed to deliver on this commitment by using a balanced performance measurement framework that is aligned with the key drivers of Company performance and stockholder value creation. This executive summary provides an overview of our fiscal 2016 performance, compensation framework and pay actions, targeted total direct compensation, and CEO pay for performance alignment.

a. Fiscal 2016 Financial Highlights

Returns to Stockholders

 

  The Company’s stock price increased 20.4% to $95.94 per share at fiscal year-end (“FYE”) 2016, versus $79.71 at FYE 2015.
  Cumulative total shareholder return increased significantly year over year, and for the fifth consecutive year, as shown on the TSR-CEO pay-for-performance alignment graph in Section I.d. below.
 

Financial and Operational Achievements

 

  Operating Earnings Per Share (“Operating EPS”)1 increased 28.7% to $3.86 per share for fiscal 2016 (versus $3.00 for fiscal 2015), representing an increase of more than 25%, excluding the $0.09 benefit from the 53rd week in fiscal 2016. This was the Company’s fifth consecutive year of growth in excess of 20%.

 

  Systemwide same-store sales grew 1.4% at Qdoba (on top of a 9.3% increase the prior year) and 1.2% at Jack in the Box (“JIB”) (on top of a 6.5% increase in fiscal 2015).
  Consolidated restaurant operating margin (“ROM”) was 20.2% of sales, with margins at JIB increasing by 50 basis points to 21.2%.

 

  During fiscal 2016, the Company made progress on key strategic initiatives, including reducing our G&A, increasing our borrowing capacity and beginning to implement plans to bring the JIB franchise mix to over 90% of the system.

 

  Consolidated franchise margin, as a percentage of franchise revenues, improved 140 basis points to 52.9%.
 

 

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b. Fiscal 2016 Compensation Framework and Key Pay Actions

Our executive compensation program is designed to motivate, engage, and retain a talented executive leadership team and to appropriately reward them for their contributions to our business. Our performance measurement framework consists of a combination of financial and operational performance metrics, varying time horizons, and multiple equity vehicles. The largest portion of our executives’ compensation is variable and is directly tied to the achievement of annual and longer-term financial and operating goals. In combination, these metrics and variables provide a balanced and comprehensive view of performance, and drive the Committee’s executive compensation decisions.

Consistent with the fundamental principle that compensation programs should align pay with performance, the Company’s fiscal 2016 performance directly impacted compensation decisions and pay outcomes, as shown in the chart below that summarizes the compensation framework, key fiscal 2016 performance measures and 2016 pay actions. In addition to the long-term incentive awards outlined below, the Committee awarded the CEO a special retention stock award in 2016 described in Section I.c.

LOGO

 

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c. Fiscal 2016 Targeted Total Direct Compensation Mix

The chart below shows the percentage breakdown of targeted total direct compensation (“TDC”) (consisting of base salary, target annual incentive, and target long-term incentive) for each NEO in fiscal 2016, excluding Mr. Comma’s special one-time retention award. Target TDC is set within a competitive range of the median of “Market compensation” based on market data and advice provided by the Committee’s independent consultant (as described in Section III.a “Compensation Competitive Analysis”). Consistent with our objective of pay for performance alignment (described in Section II “Compensation Principles and Objectives”), the largest portion of compensation is variable, at-risk pay in the form of annual and long-term incentives, including annual incentive, stock options and PSUs. In fiscal 2016, 61% of our CEO’s pay was at risk, and 54%-55% of pay for our other NEOs was at risk.

 

 

LOGO

CEO - 2016 TDC

 

Using the methodology described above, the Committee determined that the target TDC for our CEO in fiscal 2016 was $5.3 million (consisting of base salary of $900,000, target annual incentive of $900,000, and target long-term incentive of $3.5 million), which was approximately 13% below the TDC Market median.

When reviewing fiscal 2016 pay, the Committee was mindful of the Company’s strong performance under Mr. Comma’s leadership, the criticality of his role in value creation for our stockholders, and his being recognized within the institutional investment community as one of the top performing restaurant industry CEOs. For these reasons, the Committee wanted to reward Mr. Comma and above all incentivize him to remain with the Company, while providing measured increases to ongoing, target total direct compensation. Accordingly, the Committee awarded him a special one-time retention stock award in addition to his annual LTI award.

This special retention award consists of restricted stock units (RSUs) with a target value of $4 million, which vest only if Mr. Comma remains employed with the Company for at least four years from the grant date, at which time 50% of the award vests, with the remaining 50% vesting five years after grant. The Committee, with the advice of its independent consultant, designed the award to have a long vesting “tail” and be back-loaded to align the award’s ultimate worth with continued value creation for stockholders. Including this

special non-recurring retention stock award, Mr. Comma’s Target TDC in fiscal 2016 was $9.3 million, as shown in the table below.

 

      Target      SCT(1)  

Salary

   $ 900,000       $ 909,615   

Annual Incentive

   $ 900,000       $ 1,506,240   

Long-Term Incentive (LTI)

   $ 3,500,000       $ 3,167,729   

FY 2016 Annual Target TDC

   $ 5,300,000       $ 5,583,584   

Special Retention Stock Award (vesting 50% after year 4 and 50% after year 5)

   $ 4,000,000       $ 3,499,432   

Total, including Special Award

   $ 9,300,000       $ 9,083,016   
(1) This column shows the CEO’s actual TDC-- as reflected in the “Summary Compensation” and “Grants of Plan-Based Awards” tables. The difference between Target and SCT compensation is due to: (a) the 53rd week of salary in FY 2016; and (b) Mr. Comma’s fiscal 2016 annual incentive payout of 167% of target (resulting from the Company exceeding target performance on its goals), which are offset by: (c) the difference in stock price between the price on the actual grant date of the long-term incentive awards and the earlier 60-day average price used by the Committee to establish the number of options, RSUs and PSUs to be granted; and (d) the SCT use of the grant date fair value for RSU and PSU awards, as described in the footnotes to those tables.

The LTI components are described in detail in Section VI.c. — Fiscal 2016 Compensation — Long-Term Incentive Compensation.

 

 

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            CD&A — I. EXECUTIVE SUMMARY  

 

d. CEO Compensation and Pay for Performance Alignment

Each year, the Committee assesses our CEO’s actual compensation relative to the Company’s performance. The following graph shows the relationship of our CEO’s actual TDC compared to our cumulative total shareholder return (TSR) performance in each of the last five fiscal years. Actual TDC in this chart includes base salary, actual annual incentive earned for the year, and the long-term incentive value based on the stock price at the time of grant, as detailed in the section immediately above. Pay for performance alignment is shown relative to the TDC of our current CEO, Mr. Comma, for fiscal 2014-2016, and relative to our former CEO, Ms. Lang, for fiscal 2012-2013. As illustrated, CEO compensation was generally aligned with Company performance (except in fiscal 2014 when the CEO’s pay declined during the transition from the former CEO to the new CEO, although TSR improved significantly). The FY 2016 bar reflects Mr. Comma’s annual LTI incentive and the special retention stock award. No part of the special award vests for at least four years from the grant date, as described in section I.c.

 

 

LOGO

 

  (1)  The graph above shows the cumulative return to holders of the Company’s Common Stock at September 30th of each year assuming $100 was invested on September 30, 2011, and assumes reinvestment of dividends. The Company began paying dividends in fiscal 2014.  

e. Say-on-Pay Feedback from Stockholders

In 2016, we sought an advisory vote from our stockholders regarding our executive compensation program and received a 98.6% favorable vote supporting the program. Each year, the Committee considers the results of the advisory vote as it completes its annual review of each pay element and the compensation provided to our NEOs and other executives. Given the significant level of stockholder support and our stockholder outreach throughout the year, the Committee concluded that our executive compensation program continues to align executive pay with stockholder interests and provides competitive pay that encourages retention and effectively incentivizes performance of talented NEOs and executives. Accordingly, the Committee determined not to make any significant changes to our programs as a result of the vote. The Committee will continue to consider the outcome of our say-on-pay votes and our stockholders’ views when making future compensation decisions for the NEOs and executives.

 

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    CD&A — II. COMPENSATION PRINCIPLES AND OBJECTIVES          

 

II. COMPENSATION PRINCIPLES AND OBJECTIVES

 

The Committee focuses on the following principles and objectives in determining and measuring the various components of our executive compensation programs:

 

  Competitive target pay structure, including base salary, annual incentive, and long-term incentives that enable us to attract and retain talented, experienced executives who can drive long-term stockholder value.

 

  Pay for performance alignment, with a higher percentage of executive pay in the form of annual and long-term incentives that directly tie payouts to the achievement of incentive goals.

 

  Comprehensive goal setting, with financial, operational, and/or strategic performance metrics that drive long-term stockholder value.

 

  Incentivizing balanced short-term and long-term executive decision making, through variable compensation components (cash and stock) using varying timeframes.

 

  Executive alignment with stockholder interests, through stock ownership and holding requirements.

 

  Sound governance practices and principles in plan design and pay decisions, with the Committee considering both what and how performance is achieved.

 

  Management of compensation risk, by establishing incentive goals that avoid placing too much emphasis on any one metric or performance time horizon, thereby discouraging excessive or unwise risk-taking.

Internal Pay Equity

Our compensation programs are designed so that potential compensation opportunities are appropriate relative to each executive’s level of responsibility and impact. While program design is similar for executives at the same level, actual pay may vary based on job scope and individual performance over time. In fiscal 2016, our CEO’s targeted TDC was approximately 2.9 times higher than the next highest paid executive when excluding the special retention stock award, described in Section I.c.

 

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            CD&A — III. COMPENSATION COMPETITIVE ANALYSIS  

 

III. COMPENSATION COMPETITIVE ANALYSIS

 

a. Competitive Analysis

 

Each year the Committee relies on multiple data points to assess the competitiveness of our executive compensation program and the individual compensation of our executives. Information the Committee uses to perform this analysis includes:

 

  The Company’s performance against its financial and operational goals;

 

  The mix of short-term and long-term compensation in the form of cash and equity-based compensation; and
  A review of “Market” compensation by the Committee’s independent consultant, which includes data from (a) proxy statement disclosures of our Peer Group (defined below), (b) a restaurant industry compensation survey, (c) general industry data from national compensation surveys; and (d) the Company’s financial performance relative to our Peer Group.
 

 

b. Fiscal 2016 Peer Group

 

We use a Peer Group to assess the competitive pay levels of our NEOs and other executives, and to evaluate program design elements. The Committee believes the Peer Group should consist of a combination of restaurant and retail companies because these are the primary companies with which we compete for executive talent.

Our practice in selecting Peer Group companies is to look for companies in the restaurant industry that are comparable in size (GAAP revenue, market capitalization and systemwide sales) generally between 0.5x and 2.0x Jack in the Box Inc. The Committee also considers number of locations, business models and consumer focus. In reviewing systemwide sales comparisons, the Committee focuses on the eleven restaurant companies in the Peer Group (for which comparative data is applicable). Given the small number of public restaurant companies that meet the above criteria, our peer group also includes retail companies, using the same criteria described above.

For 2016, the Committee’s independent consultant recommended, and the Committee approved, the following changes to the Peer Group:

 

  Removing Aeropostale Inc. and Ruby Tuesday, Inc. due to their relatively small size and weak performance, and

 

  Replacing the previous two companies with Papa John’s International Inc. and Express, Inc. because they more closely meet the established Peer Group criteria described above.

The Committee approved the revised fiscal 2016 Peer Group in July 2015. At such time, the new Peer Group members’ median trailing four-quarter revenue was $2.1 billion and the median market capitalization (as most recently reported) was $3.0 billion, compared with projected Jack in the Box Inc. trailing four-quarter revenue of $1.5 billion and market cap of $3.5 billion. For the peer group restaurant companies, median systemwide sales (as of their most recently completed fiscal year) was $4.0 billion, compared to $4.2 billion projected for Jack in the Box.

 

 

2016 Peer Group
Restaurant   Retail
Brinker International, Inc.   Chico’s FAS Inc.
Buffalo Wild Wings, Inc.   Children’s Place Retail Stores Inc.
The Cheesecake Factory Incorporated   DSW Inc.
Chipotle Mexican Grill, Inc.   Express, Inc.
Cracker Barrel Old Country Store, Inc.   Finish Line, Inc.
DineEquity, Inc   Genesco Inc.
Domino’s Pizza, Inc.   Urban Outfitters, Inc.
Panera Bread Company  
Papa John’s International Inc.  
Sonic Corporation  
The Wendy’s Company    

 

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Table of Contents
    CD&A — IV. ELEMENTS OF COMPENSATION          

 

IV. ELEMENTS OF COMPENSATION

 

Our executive compensation programs consist of the elements summarized below, and are designed to (a) achieve our compensation objectives, (b) enable the Company to attract, retain, motivate, engage, and reward our NEOs and other executives, and (c) encourage an appropriate level of risk taking, as discussed later in this CD&A.

 

Element /

Type of Plan

   Link to Compensation Objectives    Key Features

Current Year Performance

  

Base Salary

 

(Cash)

   Fixed amount of compensation for performing day-to-day responsibilities. Provides financial stability and security, and represents the smallest portion of TDC.    Competitive pay that is targeted to approximate a reasonable range of the median of the Market, taking into account job scope and complexity, criticality of position, knowledge, skills and experience. Generally, executives are eligible for an annual salary increase, depending on individual performance, market pay changes, and internal equity.

Annual

Incentive

 

(Cash)

   Variable compensation component. Motivates and rewards for achievement of annual financial and operational goals, and in some years, other annual strategic objectives.    Incentives are targeted to approximate a reasonable range of the Market median. Total potential payouts range from 0% - 200% of target payout. Goals and weighting are set annually to align with specific financial, operational, and/or strategic performance objectives and the Company’s operational plan and budget. Fiscal 2016 goals are described in Section VI.b.

Multi-Year Performance

  

Long-Term

Incentive (LTI)

 

(Equity)

  

Variable compensation component. Motivates and rewards for sustained long-term financial and operational performance designed to increase long-term stockholder value.

 

Encourages continued employment through required vesting periods in order to obtain shares.

 

Stock ownership and holding requirements align the financial interests of our executives with the financial interests of our stockholders.

  

LTI guidelines are reviewed annually and set to result in total pay that is within a reasonable range of the Market median. Actual grants may vary from the LTI guideline based on individual performance. No dividends are paid on unvested RSUs or PSUs.

 

Stock Options: In fiscal 2016, option awards represented 34% of each executive’s LTI guideline; they vest 33% per year over three years and expire seven years from the grant date. The exercise price is equal to the closing price of Jack in the Box Common Stock on the date of grant.

 

Performance Shares (PSUs): In fiscal 2016, PSUs represented 33% of the LTI guideline; they vest at the end of three years, and are payable in stock, with the amount vesting based upon achievement of pre-established performance goals (ranging from zero to 150% of the target number of shares granted). Beginning in fiscal 2016, PSUs are subject to a holding requirement (executives must hold 50% of after-tax net shares resulting from the vesting of PSUs until termination of service). The goals for the FY 2016-2018 grant are described in Section VI.c.

 

Restricted Stock Units (RSUs): In fiscal 2016, RSUs represented 33% of the LTI guideline, vest 25% per year over four years, and are payable in stock. RSUs are subject to a holding requirement (executives must hold 50% of after-tax net shares resulting from the vesting of RSUs until termination of service). Prior to FY 2016, RSU awards were generally subject to a 50-100% holding requirement depending on whether the recipient had met their stock ownership guideline at the time of grant.

Attraction & Retention

  

Perquisites

 

(Cash)

   Provides a limited cash value for certain other benefits that are typically offered to executives in the Market.    A taxable benefit provided to executives and paid bi-weekly. This benefit is intended to assist with each executive’s expenses for financial planning and use of their personal automobile and cell phone for business purposes.

Retirement

Benefits

 

(Pension, SERP, 401(k), Deferred Compensation)

   Provides for retirement income to reward service and commitment to the Company and to encourage retention.   

Pension — The Company sponsors an employee pension plan that provides benefits based on years of service and earnings up to IRC limitations. The plan was closed to employees hired on or after January 1, 2011, and was “sunset” on December 31, 2015, after which time participants no longer accrue added benefits based on additional pay or service. Four NEOs are participants in the plan.

Supplemental Executive Retirement Plan (“SERP”) — The SERP was closed to new participants in 2007. Two NEOs, who were hired or promoted into Officer positions prior to 2007, are participants in the plan. The plan provides retirement income on a non-qualified basis, without regard to IRC limitations.

401(k) Plan — The 401(k) plan is a qualified deferred compensation plan that is available to all employees who are at least age 21. The 401(k) plan includes a Company matching contribution of up to 4% of compensation deferred by employees, subject to annual IRC limits.

Executive Deferred Compensation Plan (“EDCP”) — The EDCP is a non-qualified deferred compensation plan that is offered to highly-compensated employees. Prior to January 1, 2016, the EDCP included a Company matching contribution of up to 3% of compensation deferred, and beginning January 1, 2016, was replaced with an annual restoration matching contribution for participants whose deferrals to the 401(k) plan (and related Company matching contributions) are limited due to tax code limits applicable to the 401(k) plan. A participant must be employed on the last day of the calendar year to receive the restoration matching contribution. Executives hired or promoted to an Officer position after 2007, and not eligible for the SERP (including three NEOs), also receive a Company contribution to the EDCP for ten years from their hire date dates, equal to 4% of their base salary and annual incentive.

 

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            CD&A — V. COMPENSATION DECISION-MAKING PROCESS  

 

V. COMPENSATION DECISION-MAKING PROCESS

 

 

a. Role of the Compensation Committee

The Committee works closely with its independent consultant and meets regularly, including in executive session without members of Management present, to make decisions on our executive compensation program and on the compensation of our CEO and other executives. The Committee reviews a variety of market data and information, including Company, Peer Group, restaurant/retail industry, and general industry compensation information, and considers the recommendations of its independent consultant when making compensation decisions. The Committee Chair reports the actions of the Committee to the Board at each regular meeting. The Committee’s responsibilities include reviewing and approving:

 

  The Peer Group;

 

  Our compensation principles and objectives;

 

  The amount and form of executive compensation (pay increases, equity grants);

 

  CEO performance and compensation, and executive officer compensation;

 

  Annual and long-term incentive plans and benefit plans;

 

  Performance metrics and goals, and the achievement of annual and long-term incentive plan goals;

 

  Board compensation; and

 

  Annual proxy statement/CD&A disclosure.

b. Role of the Independent Compensation Consultant

The Committee has retained Semler Brossy Consulting Group, LLC (“Semler Brossy” or the “Consultant”) as its independent compensation consultant since January 2010. The Consultant reports directly to the Committee and performs no other work for the Company. The Committee has analyzed whether the work of Semler Brossy as a compensation consultant raises any conflict of interest, taking into consideration the following factors: (i) whether Semler Brossy provides any other services to the Company; (ii) the amount of fees paid by the Company to Semler Brossy as a percentage of Semler Brossy’s total revenue; (iii) Semler Brossy’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Semler Brossy or the individual compensation advisors employed by the firm with any executive officers of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Committee; and (vi) any stock of the Company owned by Semler Brossy or the individual compensation advisors whom it employs. The Committee has determined, based on its analysis of the above factors, that the work of Semler Brossy and the individual compensation advisors employed by

Semler Brossy as compensation consultants to the Committee has not created any conflict of interest.

The Consultant does the following for the Committee:

 

  Attends Committee meetings;

 

  Provides independent advice to the Committee on current trends and best practices in compensation design and program alternatives, and advises on plans or practices that may improve effectiveness of our compensation program;

 

  Provides and discusses peer group and survey data for competitive comparisons and, based on this information, offers independent recommendations on CEO and NEO compensation;

 

  Reviews the CD&A and other compensation-related disclosures in our proxy statements;

 

  Offers recommendations, insights and perspectives on compensation related matters;

 

  Evaluates and advises the Committee regarding enterprise and related risks associated with executive compensation components, plans and structures; and

 

  Assists the Committee in designing executive compensation programs that are competitive and align the interests of our executives with those of our stockholders.

In fiscal 2016, Semler Brossy attended all Committee meetings in person or by telephone, including executive sessions as requested, and consulted frequently with the Committee Chair between meetings. Semler Brossy reviewed this CD&A.

c. Role of the CEO in Compensation Decisions

When making decisions on executive compensation, the Committee considers input from the Company’s CEO, who reviews the performance of the other NEOs and executives and provides his recommendations to the Committee on NEOs’ and other executives’ compensation. The Company’s Chief People, Culture and Corporate Strategy Officer (“CPO”), compensation and benefits department, and the CFO and finance department also provide information and answer the Committee’s questions regarding Company financial targets and projections. The CEO meets privately with the Committee and its Consultant to discuss his executive pay recommendations, and provides his insight and perspectives to the Committee on the reports and recommendations of the Committee’s Consultant relating to plan design and strategies, goal setting, payout structure, stock grants and holding requirements, and related topics.

The Committee reviews and discusses pay decisions related to the CEO in executive session without the CEO or any other members of Management present.

 

 

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    CD&A — VI. FISCAL 2016 COMPENSATION          

 

VI. FISCAL 2016 COMPENSATION

 

a. Base Salary

In fiscal 2016, the Committee approved the following NEO salary increases, effective November 2015, to maintain Market competitiveness, and to recognize individual performance, skills, experience, and criticality of position. The Committee gave Mr. Comma a higher percentage salary increase than the other NEOs to achieve its objective of bringing his pay closer to the Market median over time.

 

2016 Base Salary Increases  
Name    Fiscal 2015 Salary      Fiscal 2016 Salary      % Increase  

Mr. Comma (CEO)

   $ 850,000       $ 900,000         5.9%   

Mr. Rebel (CFO)

   $ 556,000       $ 564,000         1.4%   

Ms. Allen (JIB President)

   $ 500,000       $ 515,000         3.0%   

Dr. Blankenship (CPO)

   $ 362,000       $ 369,000         1.9%   

Mr. Rudolph (CLO)

   $ 502,000       $ 512,000         2.0%   

b. Performance-Based Annual Incentive Compensation (Cash)

 

In November 2015, the Committee approved the annual incentive goals for fiscal 2016 consistent with the Company’s fiscal 2016 operational plan and budget approved by the Board. For Brand Services executives (Mr. Comma, Mr. Rebel, Dr. Blankenship and Mr. Rudolph), the annual goals included: (1) Operating EPS, using the same calculation that Management and the investment community commonly use to assess the Company’s performance; and (2) Consolidated Restaurant Operating Margin (ROM), as described below. For Ms. Allen, the JIB President (an NEO), and the Qdoba President (who is not an NEO for fiscal 2016), the goals included a combination of the corporate Operating EPS goal, and specific goals for each of their respective brands.

When setting fiscal 2016 annual incentive goals, the Committee and our CEO considered: (1) the Company’s fiscal 2016 operational plan and budget, that included then-current

economic conditions, and potential events that could impact future sales and earnings levels; (2) a sensitivity analysis of Company and brand performance results relative to the incentive targets; and (3) the advice of the Committee’s Consultant. Based on this review, the Committee set goals based on key financial metrics that it believed would increase stockholder value if achieved, with target and higher goals set at challenging, yet reasonable levels. The plan structure and relative weights of each goal are shown in the table below.

 

Brand Services Executives   JIB/Qdoba Brand Executives

70%

  Jack in the Box Inc. Operating EPS   30%   Jack in the Box Inc. Operating EPS

30%

  Consolidated ROM   40%   JIB/Qdoba Brand Earnings from Operations
        30%   JIB/Qdoba ROM
 

 

2016 Performance Metrics    Why Goal Is Used

Operating EPS (diluted) (1)

   This is a primary measure of how well the Company is performing overall, and is a key driver of stockholder return over the long term. This metric excludes restructuring charges and gains and losses from refranchising.

Consolidated Restaurant Operating Margin (ROM)

   Consolidated ROM measures how effectively the Company manages its business operations and costs, and is a key performance metric for alignment with our franchise operators, our franchising strategy, and our stockholders and potential investors.

JIB/Qdoba Brand Earnings From Operations

   Brand Earnings from Operations is a key performance metric for measuring operational performance relative to profitability, and is reported in the footnotes to our financial statements as Earnings from Operations by Segment. It includes all earnings for the specified brand — all revenue less costs — before interest and taxes, where such costs include regional administrative costs, but excludes restructuring costs and unallocated costs related to shared service functions (such as accounting/finance, IT, human resources, audit services, legal, tax and treasury) as well as unallocated costs such as pension expense and share-based compensation.

JIB/Qdoba Restaurant Operating Margin (ROM)

   Brand ROM measures how effectively JIB and Qdoba manage their respective business operations and costs, and is a key performance metric that aligns with the interests of each brand’s franchise operators, as well as with our stockholders and potential investors.

 

(1)  Operating EPS refers to diluted EPS from continuing operations on a GAAP basis excluding restructuring charges and gains/losses from refranchising. For a reconciliation, please see the Company’s current report on Form 8-K and accompanying press release filed November 21, 2016.

 

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            CD&A — VI. FISCAL 2016 COMPENSATION  

 

Fiscal 2016 Performance Results

 

The Company and Committee use a rigorous process to set challenging, yet reasonably attainable goals. This process includes (a) aligning annual goals with the fiscal year budget approved by the Board, (b) considering current and projected performance of the restaurant industry in general and companies within our peer group, (c) considering internal and external situations that could impact performance, and (d) ensuring appropriate and competitive levels of payout relative to performance achievement.

Jack in the Box Inc. performance: The Company performed near the maximum performance goal set for fiscal 2016 Operating EPS, and achieved the target goal for Consolidated ROM (the Brand Services goals).

JIB performance: The JIB brand performed just above the target goal set for JIB Earnings from Operations, and exceeded the maximum performance goal for JIB ROM.

Qdoba performance: The Qdoba brand did not achieve the minimum threshold goals set for Earnings from Operations or brand ROM.

 

LOGO

The charts below show actual financial performance relative to target performance for the two corporate goals and the two JIB and Qdoba brand-specific goals, respectively.

 

LOGO

 

LOGO

 

 

Fiscal 2016 Payouts

The 2016 target and maximum annual incentive payout percentages for the NEOs, expressed as a percentage of annual base salary, are shown in the table below. The payout percentages are set by position level, taking into account the compensation competitive analysis described in Section III.a. and each executive’s role in the Company. There is no minimum amount of incentive payout guaranteed for the NEOs, but the maximum amount is capped at 2x target payout (which is 200% of salary for the CEO, and 150% of salary for the other NEOs). The payouts as a percent of target incentive and as a percent of annual salary are shown below.

 

     Potential Payout
(As Percent of Annual Salary)
    

Target

Incentive

    

Actual Payout

(As Percent of

Target Payout)

   

Actual Payout

(As Percent of

Annual Salary)

   

Actual Incentive

Payout

 
     Target             Max                

Mr. Comma (CEO)

   100%    200%      $ 900,000         167.4     167.4   $ 1,506,240   

Mr. Rebel (CFO)

     75%    150%      $ 423,000         167.4     125.6   $ 708,243   

Ms. Allen (JIB President)

     75%    150%      $ 386,250         166.9     125.2   $ 644,651   

Dr. Blankenship (CPO) 

     75%    150%      $ 276,750         167.4     125.6   $ 463,372   

Mr. Rudolph (CLO)

     75%    150%      $ 384,000         167.4     125.6   $ 642,944   

 

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    CD&A — VI. FISCAL 2016 COMPENSATION          

 

c. Long-Term Incentive Compensation

 

In fiscal 2016, the LTI program for all our Company NEOs was comprised of 34% stock options, 33% performance shares (PSUs), and 33% restricted stock units (RSUs). The Committee chose these forms of equity awards and weightings to (a) provide options which align executive pay with the creation of value for our stockholders through stock price appreciation, (b) provide PSUs that directly link executive pay to achievement of longer-term Company financial and operational goals, and (c) provide time-vested RSUs to facilitate stock ownership and retention. All executives (Brand Services, JIB Brand, and Qdoba Brand) share the same PSU goals.

Each year, the Committee’s Consultant advises the Committee on the LTI grant guidelines that reflect approximately the median of Market TDC when combined with base salary and the target annual incentive. For the fiscal 2016 grant, the Committee considered the equity grant guidelines, the Company’s overall performance, each brand’s performance for the prior fiscal year, recommendations from the CEO (except with regard to his own compensation), and input from the Consultant to determine the actual grant value for each NEO. The chart below illustrates our LTI structure and the key elements of each type of award for our NEOs and other executives for fiscal 2016.

 

 

 

LOGO

 

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            CD&A — VI. FISCAL 2016 COMPENSATION  

 

Performance Shares

PSUs are granted annually and vest after three years based on achievement of performance metrics that are established for the three-fiscal year performance period (“Performance Period”). The Committee sets specific performance goals (including minimum, target, and maximum) either (a) at the beginning of the Performance Period, or (b) annually at the beginning of each fiscal year of the Performance Period, depending on the goal; in the latter case, the threshold performance goals set for the second and third years of the Performance Period may not be lower than the threshold set for the first year. The Committee believes that for some metrics, setting annual performance goals improves its visibility into the relative attainability and difficulty of the goals and, as a result, better aligns performance and payouts. Vesting ranges from 0% to 150% of the target number of shares granted; the threshold payout (50% of target) requires achieving an established minimum performance requirement (there is no payout if performance doesn’t meet the minimum requirement).

PSUs Granted in Fiscal 2016: In November 2015, the Committee granted PSU awards to our NEOs and executives for the fiscal 2016-2018 Performance Period, based on two equally-weighted metrics: (a) adjusted ROIC from Operations and (b) Consolidated Systemwide Sales Growth. The ROIC performance goals were established for the full Performance

Period and will be measured at the end of the third fiscal year (fiscal 2018), while the sales goals were set only for the first year (fiscal 2016) of the Performance Period. Goals for fiscal 2017 and 2018 will be set at the beginning of each respective year. These metrics support the critical drivers of our success: growing top-line sales profitably at both brands, and encouraging prudent deployment of capital to drive the business. For each metric, the Committee believes the goals set are appropriately challenging, yet reasonably attainable.

PSUs Vested in 2016: PSUs granted in November 2013 (based on the fiscal 2014-2016 Performance Period) vested and were payable in November 2016. Consistent with our pay for performance philosophy, the payout level was determined based on the average of the performance level attained in each fiscal year of the performance period for the three goals, based upon (a) an ROIC from Operations measure (weighted 50%), (b) JIB Systemwide Average Unit Sales Growth (“JIB-AUV”) (weighted 25%), and (c) Qdoba Systemwide Average Unit Sales Growth (“Qdoba AUV”) (weighted 25%). The average achievement level of payout on the ROIC from Operations goal was above target at 148.1%. Achievement on the JIB-AUV goal was just above target at 104.3%. And achievement on the Qdoba-AUV goal was below target at 88.8%. Together, this resulted in a weighted payout of 122.4% of the target number of PSUs granted to each of the NEOs except Ms. Allen (who was hired in fiscal 2015).

 

 

The “Grants of Plan-Based Awards” table shows the LTI awards to each of our NEOs in fiscal 2016.

d. Cash Perquisite Allowance

 

Executives receive an annual cash perquisite allowance, intended to contribute to the executive’s expenses for financial planning, and the executive’s use of their personal automobile and cell phone for business purposes. The allowance is taxable to each executive, and the Company does not provide a related tax gross-up.

Name    Allowance  

Mr. Comma (CEO)

   $ 66,500   

Mr. Rebel (CFO)

   $ 52,000   

Ms. Allen (JIB President)

   $ 52,000   

Dr. Blankenship (CPO)

   $ 52,000   

Mr. Rudolph (CLO)

   $ 52,000   
 

 

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    CD&A — VII. ADDITIONAL COMPENSATION INFORMATION          

 

VII. ADDITIONAL COMPENSATION INFORMATION

 

a. Executive Stock Ownership Requirements

 

Our senior vice presidents and higher, including our NEOs, are subject to stock ownership guidelines. The guidelines are intended to assure that these executives maintain a meaningful financial stake in the Company in order to promote a long-term perspective in managing the business, and to align their long-term financial interests with those of our stockholders. Our stock ownership guidelines consist of (1) an ownership requirement set as a multiple of salary and (2) a holding requirement.

1. Stock Ownership Guideline

 

Position    Minimum Ownership
(multiple of base salary)
 

Chairman and CEO

     5.0x   

Executive Vice President

     3.0x   

JIB and Qdoba Brand Presidents

     3.0x   

Senior Vice President

     1.5x   

2. Holding Requirements

Beginning in fiscal 2014 for annual RSU grants and in fiscal 2016 for PSUs, executives are required to hold until termination of service, a minimum of 50% of after-tax net shares resulting from the vesting of RSUs and PSUs. (For annual RSU grants prior to fiscal 2014, executives who had not yet met their ownership guideline were required to hold 100% of net shares.)

Prior to 2011, the executive stock ownership program consisted of one-time grants of restricted stock units that had to be held until the executive’s termination of service with the Company.

 

 

NEO Stock Ownership

Each year, the Committee reviews our NEOs’ stock ownership relative to their respective requirement, with new executives expected to meet their ownership requirement within five years from the date they became subject to the requirement. As of the end of fiscal 2016, all of our NEOs met their stock ownership requirement except Ms. Allen, who was hired in October 2014 and is still within her transition period for compliance.

 

Name    Shares
Directly
Held
     Restricted
Stock/
Unvested
Shares  (1)
     Total
Shares
     Value at 9/30/16
@ $95.94
    

Stock
Ownership

Requirement
(000s)

     Meets
Requirement
 

Mr. Comma (CEO)

     30,202         126,251         156,453       $ 15,010,101       $ 4,500,000         Yes   

Mr. Rebel (CFO)

     28,957         76,516         105,473       $ 10,119,080       $ 1,692,000         Yes   

Ms. Allen (JIB President)

     1,189         8,537         9,726       $ 933,112       $ 1,545,000         No   

Dr. Blankenship (CPO)

     12,890         6,849         19,739       $ 1,893,760       $ 1,107,000         Yes   

Mr. Rudolph (CLO)

     18,121         70,069         88,190       $ 8,460,949       $ 1,536,000         Yes   
(1)  This column includes restricted shares and unvested RSUs; and for Mr. Comma, also includes deferred performance vested restricted stock. Unvested PSUs and unvested or unexercised options do not count toward meeting ownership guidelines.

b. Executive Benefits

 

Our NEOs and other executives receive the same benefits as those generally available to other employees in the Company. Both Company-subsidized and voluntary benefit programs are provided and include medical, dental, vision, life insurance,

and disability coverage. Additionally, the Company provides each NEO with an enhanced level of employer-paid term life insurance with a value for each NEO of $770,000.

 

 

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c. Retirement Plans

 

The Company’s retirement plans are designed to provide our employees, including our NEOs and other executives, with some retirement income security. These plans reward for service and provide an additional incentive for our employees to build long-term careers at Jack in the Box.

 

  Defined Benefit Pension Plan (“Retirement Plan”). Four NEOs and all other employees hired before 2011 are participants in a tax-qualified defined benefit pension plan. This plan was closed to new employees hired on or after January 1, 2011, and “sunset” on December 31, 2015. This means that participants no longer accrue additional benefits based on additional pay and service as of that date. Participants may begin receiving their accrued benefit on or after retirement.

 

  Supplemental Executive Retirement Plan (“SERP”). Two of our NEOs and one other Company executive are participants in the SERP. Effective January 1, 2007, the SERP was closed to new participants. The SERP is unfunded and not qualified for tax purposes. The SERP was established in 1990 to address Internal Revenue Code (“IRC”) limitations on pension benefits that could be accrued under our tax-qualified pension plan.

 

  Qualified 401(k) Plan (“401(k) Plan”). Effective January 1, 2016, our NEOs became eligible to defer base salary and annual incentive compensation through the Company’s qualified defined contribution plan, the 401(k) Plan. (Prior to that time, our NEOs and other highly compensated employees were excluded from participating.) The 401(k) Plan is available to all Company employees and provides to all employees who participate in the plan by deferring eligible compensation a Company matching contribution equal to 100% of the first four percent of compensation deferred, with immediate vesting.
  Non-Qualified Deferred Compensation Plan (“EDCP”). In light of IRC limits imposed on the 401(k) Plan, we sponsor the EDCP Plan into which our NEOs and other highly compensated employees may also defer up to 50% of their base salary and up to 85% of their annual incentive compensation. In coordination with the 401(k) Plan changes that took effect January 1, 2016, the EDCP Company matching contribution (previously 100% of the first three percent of compensation deferred) was replaced with a “restoration matching contribution.” This means the Company will match up to the full four percent potential matching contribution for participants whose compensation or deferrals to the 401(k) Plan (and related Company matching contributions) are limited due to the IRC limits applicable to the 401(k) Plan. A participant must be employed on the last day of the calendar year to receive the restoration matching contribution, which is then 100% vested. Company matching contributions made prior to January 1, 2016 vested at a rate of 25% per year (such that the match fully vests after completion of four full years of service with the Company). Participants choose from an array of investment options, and their accounts are credited based upon the performance of the investment options. These obligations under the EDCP represent an unsecured claim against the Company.

 

  Enhanced EDCP. Due to the closure of the SERP in 2007, employees hired or promoted into a Corporate Vice President position between January 1, 2007 and May 7, 2015 receive a supplemental contribution to their EDCP account of four percent of base salary and annual incentive each year for up to ten years. Three of our NEOs receive the enhanced EDCP.
 

 

d. Prohibition of Pledging and Hedging Transactions

 

The Company prohibits directors and Section 16 officers from engaging in certain derivative transactions in Company stock, including:

 

  Trading in “puts”, “calls”, or other derivative vehicles involving the Company’s securities (often referred to as hedging transactions);
  Engaging in zero-cost collars, forward sales contracts or other hedging transactions in Company securities;

 

  Holding Company securities in margin accounts; or

 

  Pledging Company securities.
 

 

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    CD&A — VII. ADDITIONAL COMPENSATION INFORMATION          

 

e. Executive Compensation Recovery (“Clawback”) Policy

 

The Company’s compensation recovery policy provides that in the event Jack in the Box Inc. materially restates all or a portion of its financial statements due to fraud or intentional misconduct, either committed by a Corporate Officer or knowingly permitted by a Corporate Officer, the Committee may take action to recover incentive cash compensation and performance-based equity awards that were based on the achievement of financial results that were subsequently restated. For purposes of this policy, a Corporate Officer is defined as an employee with the title of Corporate Vice President or above, and includes the JIB President and Qdoba President, as well as former Corporate Officers who were employed by the Company at the time of any fraud or intentional misconduct.

Executive compensation subject to recovery and/or cancellation may include:

 

i) Annual incentive or incentive cash compensation paid to the Corporate Officer, plus a reasonable rate of interest,

 

ii) Economic gains realized from the sale of shares awarded under a performance-based equity plan, and
iii) Restricted stock or units, deferred stock awards or units, and outstanding stock options to the extent vesting of such awards is performance-based.

The Committee has the sole discretion to determine what action to take in the event of a restatement, including soliciting recommendations from the Audit Committee and the full Board and retaining outside advisors to assist in making its determinations. Any actions taken by the Committee would be independent of consequences imposed by law enforcement agencies, regulators or other authorities.

Since November 2015, all PSU grant agreements contain specific terms providing that the award is subject to recoupment in accordance with any clawback policy that the Company adopts pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Act or other applicable law. The Committee will continue to review potential changes to its policies in light of the Dodd-Frank Act final regulations.

 

 

f. Termination of Service

 

None of the 2016 NEOs have employment agreements that provide for benefits upon termination of service, except (a) in the event of a change in control (“CIC”) as described in the “Compensation and Benefits Assurance Agreements discussion in the next section, and (b) in the case of Ms. Allen, whose employment offer letter provides for payment to her of one year base salary in the event she is terminated without cause.

When an NEO terminates employment with the Company, the NEO will receive amounts according to the specific terms and provisions of each compensation plan or benefit plan in which he or she participates. Such amounts may include:

 

  Amounts contributed to and distributed under the Company’s qualified and non-qualified deferred compensation plans (subject to the specific terms and requirements of IRC Section 409A).

 

  Under the Company’s equity incentive plan and standard equity agreements, upon a CIC: (a) vesting of PSUs based on actual levels achieved for completed performance periods and target level for incomplete periods, and (b) accelerated vesting of RSUs and options only upon both a qualified CIC and qualifying termination, as described in the “Compensation & Benefits Assurance Agreements” section below.

 

  Amounts accrued and vested in the Company’s pension plans (Retirement Plan for four NEOs; plus the SERP for Mr. Rebel and Dr. Blankenship only).
  If termination is after the end of the fiscal year but before payment, the annual cash incentive award, subject to the Company’s achievement of performance goals.

If eligible to retire under a Company-sponsored retirement plan, in addition to the above, and consistent with the terms of our standard equity agreement, a corporate officer (including all NEOs) is entitled to the following:

 

  Accelerated vesting of options equal to 5% additional vesting for each full year of service with the Company.

 

  Prorated vesting of PSUs and full vesting of time-vested RSUs in accordance with the vesting schedule of each award.

 

  A prorated annual cash incentive award based on the number of full reporting periods worked in the fiscal year before retirement, subject to the Company’s eligibility requirements and achievement of performance goals.

If an NEO dies while employed by the Company, under the terms of the respective stock award agreements, all outstanding options and stock awards will become 100% vested on the date of his or her death (in the case of PSUs, subject to the number of periods completed during the performance period and actual performance achieved).

The values of additional potential payments to the NEOs are provided in the section entitled “Potential Payments On Termination of Employment or Change in Control” of this Proxy Statement.

 

 

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g. Compensation & Benefits Assurance (Change in Control) Agreements

 

The Committee believes that Compensation & Benefits Assurance Agreements (otherwise known as a Change in Control or “CIC” Agreements) benefit stockholders by providing an important incentive to senior executives to remain focused on running the business in the case of a pending or actual CIC event. Accordingly, each of the NEOs and two other officers have a CIC Agreement providing for compensation in the form of a lump sum payment and other benefits in the event of a qualifying termination within 24 months of the effective date of the CIC of the Company (a “double-trigger” agreement).

In 2009, in line with market practices, the Committee determined not to enter into any future compensatory agreements with executives that obligate the Company to provide tax gross-up payments intended to offset the cost of excise taxes imposed on “excess parachute payments.” Accordingly, no CIC Agreements entered into since 2009

include gross-up provisions. One grandfathered CIC Agreement, entered into with our CFO prior to 2009, was still in effect at fiscal year-end, and includes a gross-up provision.

The Company’s current form CIC agreement includes a “best after-tax” provision where benefits would be reduced only if doing so would result in a better after-tax economic position for the affected executive. Under this provision, there are no gross-ups payable; the executive is solely responsible for payment of excise taxes and other applicable federal, state, and local income and employment taxes. The Committee plans to continue to monitor the costs and appropriate terms and conditions of CIC Agreements in the future.

A detailed discussion of the provisions of the CIC Agreements and associated monetary values is provided in the sub-section following the compensation tables entitled Compensation & Benefits Assurance Agreements.

 

 

h. Tax and Accounting Information

 

Internal Revenue Code Section 162(m)

The Committee and its Consultant consider the IRC Section 162(m) implications of all compensation decisions for our NEOs and other executives. Section 162(m) places a one million dollar limit on the amount of compensation that the Company can deduct in any one year for certain NEOs. Certain performance-based pay is excluded from this limit. For the reasons discussed earlier, our compensation programs are designed to provide the largest portion of an executive’s compensation through programs intended to qualify as performance-based compensation under Section 162(m), including our annual performance incentive plan and long-term incentive plan in the form of stock options and performance shares. However, corporate objectives may not necessarily align with the requirements of Section 162(m). Accordingly, the Committee may grant awards or enter into compensation arrangements under which payments are not deductible under Section 162(m). For example, restricted stock awards are not considered performance-based under Section 162(m) and, accordingly, are subject to the one million dollar deductibility limit.

Internal Revenue Code Section 409A

Under IRC Section 409A, amounts deferred by an employee under a non-qualified deferred compensation plan (such as the SERP and EDCP) may be included in gross income when deferred and be subject to a 20% additional federal tax, unless the plan complies with certain requirements related to the timing of deferral election and distribution decisions.

The Company administers the SERP and EDCP intending to comply with Section 409A. The Company intends that its stock options are exempt from Section 409A.

Expensing of Stock and Option Awards

The Company accounts for compensation expense associated with stock and option awards in accordance with the Financial Accounting Standards Board (“FASB”) authoritative guidance on stock compensation, and it uses a Black Scholes valuation model to determine the “fair value” of our stock options at grant. For further details regarding the accounting for the compensation expense associated with stock and option awards, refer to Note 12, Share-Based Employee Compensation in the Company’s 2016 Annual Report on Form 10-K.

 

 

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    COMPENSATION COMMITTEE REPORT          

 

COMPENSATION COMMITTEE REPORT

The Jack in the Box Compensation Committee is comprised solely of independent members of the Company’s Board of Directors. The Committee assists the Board in fulfilling its responsibilities regarding compensation matters, and is responsible under its charter for determining the compensation of the Executive Officers. This includes reviewing all components of pay for our CEO and the other NEOs. The Committee reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with its Consultant, with Management and with the Board. Based on this review and discussion, the Committee, on behalf of the Board, has authorized that this Compensation Discussion and Analysis be included in this Proxy Statement for fiscal 2016, ended October 2, 2016.

THE COMPENSATION COMMITTEE

John T. Wyatt, Chair

David L. Goebel

Sharon P. John

Madeleine A. Kleiner

 

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            COMPENSATION RISK ANALYSIS  

 

COMPENSATION RISK ANALYSIS

The Committee has engaged in a thorough risk analysis of our compensation plans, programs, policies, and practices for all employees. This includes advice from the Committee’s independent Consultant regarding executive programs, and a detailed report, prepared by a Company Internal Compensation Risk Committee, describing the risk mitigation characteristics of the Company’s annual and long-term incentive programs. For the following reasons, the Committee believes that the design of our compensation programs, the governance of our programs, and our risk oversight process guard against imprudent risk taking that could have a material adverse effect on the Company.

Compensation Program Design Protections

 

 

  Our base pay programs consist of competitive salaries that provide a fixed level of income on a regular basis. This mitigates incentives on the part of our executives and employees to take unnecessary or imprudent risks.

 

  The Board approves the Company’s strategic plan, capital budget, and long-term financial and operational plans that serve as the basis for setting short and long-term incentive goals. Goals are intended to drive stockholder value and are set relative to the approved budget, historical and future expected performance, and a reasonable amount of stretch so that they do not encourage imprudent risk taking.

 

  Our annual incentive programs provide variable pay opportunities for certain position levels based on achievement of multiple annual performance goals including both financial, operational, and, for some years, strategic goals. Goals are set at reasonable levels and payouts are managed as a percentage of pay, with maximum caps.
  The largest amount of executive incentive compensation opportunity is tied to long-term incentive compensation that emphasizes sustained Company performance over time. This reduces incentive for executives and other employees to take risks that might increase short-term compensation at the expense of longer term Company results.

 

  Equity awards have multi-year vesting, and RSU and PSU awards for executives have holding requirements until termination of service. This aligns the long-term interests of our NEOs and executives with those of our stockholders, and discourages taking short-term risks at the expense of longer-term performance.

 

  The maximum awards that may be paid out under the annual and long-term incentive programs are capped at appropriate competitive levels, and the Committee retains the discretion to reduce payouts under the plans.
 

 

Structural Governance Protections

 

 

  The Committee has adopted a clawback/compensation recovery policy that allows the Committee to take action to recover both cash compensation and performance-based equity awards for all NEOs and executives in the event of a material restatement based on fraud or intentional misconduct.

 

  The Company has strong internal controls over the measurement and calculation of performance goals designed to keep them from being susceptible to manipulation.

 

  Company policy also:

 

    Prohibits directors and executive officers from engaging in hedging transactions involving our stock, which prevents executives from insulating themselves from poor stock performance by betting against our success;
    Prohibits directors and officers from pledging Company stock or holding Company stock in margin accounts. This reduces the risk that executives might create incentives to focus on short-term performance at the expense of long-term performance; and

 

    Has a formal ethics code of conduct and an ethics helpline, and provides ethics training and communications to employees. The ethics program is intended to reinforce a culture of integrity.

 

  The Company also has a Compensation Risk Committee that includes functional experts tasked specifically with evaluating potential unintended or unforeseen consequences of our compensation programs and their component parts.
 

 

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    EXECUTIVE COMPENSATION          

 

EXECUTIVE COMPENSATION

The Summary Compensation Table (“SCT”) summarizes the total compensation of our NEOs for the fiscal year ended October 2, 2016, and the prior two fiscal years to the extent required under the Securities and Exchange Commission rules.

Summary Compensation Table

 

 

Name &

Principal Position

  Fiscal
Year
    Salary (1)     Bonus     Stock
Awards (3)
    Option
Awards (4)
    Non-Equity
Incentive Plan
Compensation (5)
    Change in
Pension
Value &
NQDC
Earnings (6)
   

All

Other
Comp (7)

    Total  

Mr. Comma

    2016      $ 909,615      $ 0      $ 5,963,780      $ 703,380      $ 1,506,240      $ 97,294      $ 260,745      $ 9,441,054   

Chairman and CEO

    2015      $ 842,308      $ 0      $ 2,631,761      $ 1,013,216      $ 1,632,000      $ 36,357      $ 239,702      $ 6,395,344   
      2014      $ 765,846      $ 0      $ 1,298,804      $ 1,534,018      $ 1,600,000      $ 72,276      $ 229,922      $ 5,500,866   

Mr. Rebel

    2016      $ 573,615      $ 0      $ 648,609      $ 170,813      $ 708,243      $ 1,620,465      $ 179,577      $ 3,901,322   

Executive Vice President,

    2015      $ 553,539      $ 0      $ 925,277      $ 283,110      $ 801,335      $ 1,256,873      $ 155,541      $ 3,975,675   

Chief Financial Officer

    2014      $ 537,539      $ 0      $ 679,038      $ 506,018      $ 810,000      $ 1,074,699      $ 117,801      $ 3,725,095   

Ms. Allen

    2016      $ 522,596      $ 0      $ 489,171      $ 180,869      $ 644,651      $ 0      $ 146,770      $ 1,984,057   

JIB President

    2015      $ 461,538      $ 200,000  (2)    $ 614,752      $ 171,581      $ 683,654      $ 0      $ 291,636      $ 2,423,161   

Dr. Blankenship

    2016      $ 375,019      $ 0      $ 367,134      $ 100,483      $ 463,372      $ 1,273,533      $ 87,146      $ 2,666,687   

Executive Vice President,

    2015      $ 360,154      $ 0      $ 454,366      $ 154,407      $ 521,733      $ 1,102,031      $ 79,067      $ 2,671,758   
Chief People, Culture, & Corp Strategy Officer     2014      $ 347,385      $ 0      $ 292,553      $ 260,250      $ 525,000      $ 915,022      $ 77,832      $ 2,418,042   

Mr. Rudolph

    2016      $ 520,308      $ 0      $ 612,256      $ 170,813      $ 642,944      $ 64,290      $ 186,302      $ 2,196,913   

Executive Vice President,

    2015      $ 499,385      $ 0      $ 731,084      $ 246,271      $ 723,508      $ 48,499      $ 171,248      $ 2,419,995   
Chief Legal and Risk Officer & Secretary     2014      $ 482,846      $ 0      $ 476,164      $ 415,062      $ 727,500      $ 63,438      $ 150,448      $ 2,315,458   
(1)  This column shows the base salary earned during the fiscal year, including any amounts deferred by the NEOs in the Executive Deferred Compensation Plan (EDCP). The amounts for 2016 reflect one additional week of compensation due to the Company’s 53-week fiscal year.
(2)  Ms. Allen joined the Company during fiscal 2015 and this amount represents the new hire cash bonus she received.
(3)  This column shows the aggregate grant date fair value of the PSUs and RSUs granted during the applicable fiscal year, in accordance with FASB ASC Topic 718 (“ASC 718”) based on the assumptions and methodologies set forth in the Company’s 2016 Annual Report on Form 10-K (Note 12, Share-Based Employee Compensation). The 2016 amount for Mr. Comma also includes his special one-time retention RSU award which vests 50% four years after the date of grant, and the remaining 50% five years after grant. The 2015 amount for Ms. Allen also includes her new-hire grant of 4,207 RSUs, which vest 33% per year over three years on each anniversary of the grant.
   PSU awards, which cliff vest after three years, are made annually in November and vest based on our performance during the succeeding three-fiscal year period. The performance metrics are established at the beginning of the three-year period when the grant is made; the specific performance goals for all or a portion of the award are reviewed and set by the Committee (a) for the full three-year performance period at the time of grant for some performance metrics, or (b) for a one-year period at the beginning of each fiscal year for other performance metrics. The amounts for each year include the sum of the grant date fair values under ASC 718 for current and past year PSU grants, for which performance metrics were set in that year, at target values. Assuming the maximum level of performance achievement (150% of target), the PSU total values for each NEO in 2016 are, respectively: Mr. Comma, $2,107,040; Mr. Rebel, $586,928; Ms. Allen, $325,112; Dr. Blankenship, $323,664 and Mr. Rudolph, $532,398.
(4)  This column shows the grant date fair values of stock options granted during the applicable fiscal year in accordance with ASC 718. The grant date fair values have been determined based on the assumptions and methodologies set forth in the Company’s 2016 Annual Report on Form 10-K (Note 12, Share-Based Employee Compensation).
(5)  This column shows the annual incentive awards earned under the annual incentive plan for executives. Performance achievement is approved by the Committee at the November meeting following the end of the fiscal year. Annual incentive payments are made in December following Committee approval and reported in the SCT in the fiscal year for which the incentive is earned.
(6)  This column shows the change in the estimated present value of each NEO’s accumulated benefit under (a) the qualified pension plan (the “Retirement Plan”) for Messrs. Comma, Rebel, Rudolph and Dr. Blankenship, and (b) the Supplemental Executive Retirement Plan (“SERP”) for Mr. Rebel and Dr. Blankenship only. The estimates are determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements for fiscal years ending October 2, 2016, September 27, 2015, and September 28, 2014. The RP-2014 Mortality Table is used for the Retirement Plan and SERP estimates (the SERP uses a white collar adjustment). Both Plans used the MP-2015 generational scale projected from 2006, modified to use 15 year convergence to an ultimate rate of .75%. The amounts reported in this column may fluctuate significantly in a given year based on a number of factors that affect the formula to determine pension benefits, including changes in: (i) salary and annual incentive; (ii) years of service; and, predominantly (iii) the discount rates used in estimating present values, which were 3.60% for the SERP and 3.85% for the Retirement Plan for 2016, 4.45% for the SERP and 4.79% for the Retirement Plan for 2015, and 4.36% for the SERP and 4.60% for the Retirement Plan for 2014. Participating NEOs become vested in the Retirement Plan after five years, and in the SERP after attaining age 55 and completing ten years of service. Both plans have been closed to new participants, and the Retirement Plan was sunset on December 31, 2015. For a detailed discussion of the Company’s pension benefits, see the sections of this Proxy Statement titled “Retirement Plan,” “Supplemental Executive Retirement Plan” and “Pension Benefits Table” and accompanying footnotes. The Company does not provide above-market or preferential earnings on non-qualified deferred compensation.

 

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            EXECUTIVE COMPENSATION  

 

(7)  Amounts in this column for fiscal 2016 are detailed in the table below:

 

All Other Compensation Table  
     

Perquisite

Allowance (a)

     Deferred
Compensation
Matching
Contribution (a)(b)
     Company-
Paid Life
Insurance
Premiums (a)
     Other    

Total

All Other
Compensation (a)

 

Mr. Comma (CEO)

   $ 67,779       $ 192,966       $ 0       $ 0     $ 260,745   

Mr. Rebel (CFO)

   $ 53,000       $ 51,177       $ 314       $ 75,086 (c)    $ 179,577   

Ms. Allen (JIB President)

   $ 53,000       $ 93,380       $ 390       $ 0      $ 146,770   

Dr. Blankenship (CPO)

   $ 53,000       $ 33,536       $ 610       $ 0      $ 87,146   

Mr. Rudolph (CLO)

   $ 53,000       $ 93,016       $ 394       $  39,892 (c)    $ 186,302   
  (a)  The amounts in these columns include one additional week of compensation due to the Company’s 53-week fiscal year in 2016.  
  (b)  The amounts in this column reflect matching contributions under the 401(k) plan and the restoration matching contribution in the EDCP related to fiscal 2016 compensation. For Messrs. Comma, Rudolph and Ms. Allen, these amounts include the enhanced EDCP Company contribution they receive in place of the SERP, as discussed in the “Non-qualified Deferred Compensation” section below.  
  (c)  These amounts represent cash dividends paid on December 22, 2015; March 14, 2016; June 7, 2016 and August 29, 2016 for Mr. Rebel and Mr. Rudolph’s restricted stock shares being held in an escrow account until each executive’s termination or retirement.  

 

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    EXECUTIVE COMPENSATION          

 

Grants of Plan-Based Awards

 

The following table provides information on fiscal 2016 cash and equity incentive awards granted to our NEOs. Cash incentive awards are based on fiscal year performance under our annual incentive plan (“AIP”). Long-term equity incentive compensation includes stock options, time-based restricted stock units, and performance share awards that vest, if at all, upon achievement of performance goals over a three fiscal year period. The 2016 incentive award terms are further described in CD&A Sections IV (“Elements of Compensation”) and VI (“Fiscal 2016 Compensation”).

 

   

Grant

Date (1)

   

Approval

Date

   

Award

Type (2)

    Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (3)  
    Estimated Future Payouts Under
Equity Incentive Plan Awards (4)
   

All Other
Stock
Awards:
Number of
Shares of

Stock or

Units # (5)

   

All Other
Option
Awards:
Number of

Securities

Underlying

Options # (6)

   

Exercise

or Base
Price of
Option

Awards

($/Share)

   

Grant

Date Fair
Value of
Stock and

Option

Awards

($) (7)

 
Name        

Threshold

($)

   

Target

($)

   

Maximum

($)

    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Mr. Comma

(CEO)

    11/24/2015        11/12/2015        PSU 14-16                                3,301        6,602        9,903                              $ 496,709   
    11/24/2015        11/12/2015        PSU 15-17              1,264        2,528        3,792            $ 190,194   
    11/24/2015        11/12/2015        PSU 16-18              4,770        9,540        14,310            $ 717,790   
    11/24/2015        11/12/2015        RSU                    14,310          $ 1,059,656   
    11/24/2015        11/12/2015        RSU (8)                  49,560          $ 3,499,432   
    11/24/2015        11/12/2015        Option                      43,365      $ 75.24      $ 703,380   
              11/12/2015        AIP        $ —      $ 900,000      $ 1,800,000                                                           

Mr. Rebel

(CFO)

    11/24/2015        11/12/2015        PSU 14-16              1,089        2,178        3,267            $ 163,848   
    11/24/2015        11/12/2015        PSU 15-17              353        706        1,059            $ 53,132   
    11/24/2015        11/12/2015        PSU 16-18              1,158        2,317        3,475            $ 174,306   
    11/24/2015        11/12/2015        RSU                    3,475          $ 257,324   
    11/24/2015        11/12/2015        Option                      10,531      $ 75.24      $ 170,813   
              11/12/2015        AIP        $ —      $ 423,000      $ 846,000                                                           

Ms. Allen (JIB President)

    11/24/2015        11/12/2015        PSU 15-17              214        428        642            $ 32,203   
    11/24/2015        11/12/2015        PSU 16-18              1,226        2,453        3,679            $ 184,539   
    11/24/2015        11/12/2015        RSU                    3,679          $ 272,430   
    11/24/2015        11/12/2015        Option                      11,151      $ 75.24      $ 180,869   
              11/12/2015        AIP        $ —      $ 386,250      $ 772,500                                                           

Dr. Blankenship

(CPO)

    11/24/2015        11/12/2015        PSU 14-16              560        1,120        1,680            $ 84,269   
    11/24/2015        11/12/2015        PSU 15-17              193        385        578            $ 28,980   
    11/24/2015        11/12/2015        PSU 16-18              681       1,363        2,044            $ 102,527   
    11/24/2015        11/12/2015        RSU                    2,044          $ 151,358   
    11/24/2015        11/12/2015        Option                      6,195      $ 75.24      $ 100,483   
              11/12/2015        AIP        $ —      $ 276,750      $ 553,500                                                           

Mr. Rudolph

(CLO)

    11/24/2015        11/12/2015        PSU 14-16              893        1,786        2,680            $ 134,404   
    11/24/2015        11/12/2015        PSU 15-17              307        614        922            $ 46,222   
    11/24/2015        11/12/2015        PSU 16-18              1,158        2,317        3,475            $ 174,306   
    11/24/2015        11/12/2015        RSU                    3,475          $ 257,324   
    11/24/2015        11/12/2015        Option                      10,531      $ 75.24      $ 170,813   
              11/12/2015        AIP        $ —      $ 384,000      $ 768,000                                                           
(1)  All grants were approved at the November 2015 Committee meeting, with a grant date of November 24, 2015, the second business day of the Company’s next open trading window, as is the Company’s standard practice. In accordance with ASC 718, the “grant date” is shown for the portion of the PSUs awarded in fiscal 2016 that relate to the fiscal 2016 performance period, and the portion of the PSUs awarded in fiscal 2014 and 2015 related to the fiscal 2016 performance period, as further described in Footnote 7 to this table.
(2)  For PSU awards, this column shows the three fiscal years of the PSU performance period.
(3)  This column shows the potential payouts under the fiscal 2016 annual incentive plan, which could be earned based on performance in fiscal 2016. The threshold payout is zero, target payout represents the amount payable for achieving the target level of performance, and maximum payout is capped at two times target payout. Incentive payouts are prorated between performance levels, and the payout values are calculated using the executive’s annual salary rate as specified at the time performance goals are approved by the Committee (no later than 90 days from the start of the fiscal year). The Summary Compensation Table for fiscal 2016 shows the actual incentive compensation earned by our NEOs for fiscal 2016 performance.
(4)  This column shows the threshold, target, and maximum potential share payout levels for the PSUs under the Company’s long-term incentive plan for the fiscal 2016-2018 PSU award and for the fiscal 2016 performance period of the 2014-16 and 2015-17 PSU awards. The amount for the 2016-18 PSU award represents (a) the entire three-fiscal year period for one of the two performance metrics (ROIC from Operations), and (b) the fiscal 2016 performance period only for the second metric (consolidated systemwide sales growth) for the reasons explained in Footnote 7. Threshold payout for all of the PSUs reflected above is 50% of target and requires achieving an established minimum performance requirement (there is no payout if performance doesn’t meet the minimum requirement). Maximum payout is 150% of target.
(5)  This column shows the number of RSUs granted on November 24, 2015 that vest 25% per year over four years on each anniversary of the grant date; and, on the second row for Mr. Comma, a special retention stock award which vests 50% four years after the date of the grant and the remaining 50% five years after grant.
(6)  This column shows the number of stock options granted in November 2015 that vest 33% per year over three years on the anniversary of the grant date. The options expire seven years from grant date. The exercise price is the closing price of Common Stock on the grant date of November 24, 2015 ($75.24).
(7) 

For stock options, the value represents the grant date fair value computed in accordance with ASC 718, which is a theoretical value at grant using a valuation model that requires the input of assumptions, including the expected volatility of our stock price. As such, the values may not reflect the actual amounts that our NEOs will realize; rather the actual amount realized will depend on the Company’s stock price relative to the exercise price. The values of PSUs and RSUs also represent the grant date fair values, as computed in accordance with ASC 718, based on the closing price of the Company’s Common Stock on the grant date discounted by the present value of the expected dividend stream over the vesting period, as applicable, which was $75.24 for PSUs, $70.61 for Mr. Comma’s special retention award RSUs and $74.05 for all other RSUs. The grant date fair values of all awards were determined based on the assumptions and methodologies set forth in the Company’s 2016 Annual Report on Form 10-K (Note 12, Share-Based Employee Compensation). PSU awards, which cliff vest after three years, are made annually in November and vest based on the Company’s performance during the succeeding three-fiscal year period. The performance metrics are established at the beginning of the three-

 

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  fiscal year period when the grant is made; while the specific performance goals are either set by the Committee (a) at that time also for the full three-fiscal year performance period or (b) at the beginning of each fiscal year for that portion of the performance period; in accordance with SEC rules and ASC 718, the values shown on each of the three rows for the PSUs reflect the grant date fair value of the fiscal 2016 performance period (total or portion, as applicable) of the award based on probable outcome (target level performance) of each of the PSU awards.
(8)  Represents a special retention stock award approved by the Committee to reward Mr. Comma for his strong leadership and Company performance, and to incentivize him to remain with the Company over the longer term. The award vests 50% four years after the date of grant, and the remaining 50% five years after grant.

Outstanding Equity Awards at Fiscal Year End 2016

 

The following table provides information on all outstanding option awards and unvested stock awards held by each of the NEOs at the end of fiscal 2016. Each option grant is shown separately and the vesting schedule is shown as Footnote 1 to the table. The market value of the stock awards is based on the closing price of Jack in the Box Inc. Common Stock as of the last trading day of the fiscal year, September 30, 2016, which was $95.94.

 

    Option Awards (1)     Stock Awards  
Name  

Option

Grant Date

   

Number of

Securities

Underlying

Unexercised

Options

Exercisable
(#)

   

Number of

Securities

Underlying

Unexercised

Options

Unexercisable
(#)

   

Option

Exercise

Price

   

Option

Expiration

Date

   

Number

Of Shares
or Units

of Stock
That

Have Not

Vested
(#) (2)

   

Market
Value of
Shares or
Units of

Stock That

Have Not

Vested

   

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares,
Units or
Other Rights
That Have
Not Vested
(#)(3) 

   

Equity

Incentive

Plan Awards:

Market or

Payout Value
of Unearned

Shares,

Units or

Other Rights

That Have
Not Vested

 

Mr. Comma (CEO)

    11/26/2013               25,529      $ 47.29        11/26/2020        155,001      $ 14,870,796        21,828      $ 2,094,178   
    11/25/2014        15,320        30,640      $ 73.53        11/25/2021           
      11/24/2015               43,365      $ 75.24        11/24/2022                                   

Mr. Rebel (CFO)

    11/26/2013        16,842        8,421      $ 47.29        11/26/2020        86,527      $ 8,301,400        5,683      $ 545,227   
    11/25/2014        4,280        8,562      $ 73.53        11/25/2021           
      11/24/2015               10,531      $ 75.24        11/24/2022                                   

Ms. Allen

    11/25/2014        2,594        5,189      $ 73.53        11/25/2021        10,008      $ 960,188        4,692      $ 450,150   

(JIB President)

    11/24/2015               11,151      $ 75.24        11/24/2022                                   

Dr. Blankenship (CPO)

    11/26/2012        15,297             $ 27.49        11/26/2019        12,084      $ 1,159,339        3,218      $ 308,735   
    11/26/2013        8,662        4,331      $ 47.29        11/26/2020           
    11/25/2014        2,334        4,670      $ 73.53        11/25/2021           
      11/24/2015               6,195      $ 75.24        11/24/2022                                   

Mr. Rudolph (CLO)

    11/26/2013        13,814        6,908      $ 47.29        11/26/2020        78,453      $ 7,526,781        5,303      $ 508,770   
    11/25/2014        3,723        7,448      $ 73.53        11/25/2021           
      11/24/2015               10,531      $ 75.24        11/24/2022                                   
(1)  All option awards vest 33% each year for three years from date of grant.
(2)  The amounts in this column are:
   (a) unvested restricted stock awards or RSUs granted under the stock ownership program with vesting subject to the executive’s continued employment with the Company, and full vesting ten years from the grant date and issued only upon termination (Mr. Comma, 34,700; Mr. Rebel, 62,572; and Mr. Rudolph, 58,815);
   (b) unvested RSUs that vest (i) for each executive: (A) 20% each year for five years for grants prior to November 2015, and (B) 25% each year for the regular November 2015 grant (Mr. Comma, 38,991; Mr. Rebel, 13,944; Ms. Allen, 5,733; Dr. Blankenship, 6,849; and Mr. Rudolph, 11,254); and (ii) for Mr. Comma’s special retention stock award: 49,560 RSUs that vest 50% four years after the date of grant and the remaining 50% five years after grant.
   (c) for Ms. Allen only, 2,804 unvested RSUs that vest 33% per year over three years; and
   (d) unvested PSUs for which the performance goals have been met for a completed performance period and that vest upon the third anniversary of the November 2013, November 2014 and November 2015 grant dates, subject to the executive’s continued employment with the Company (Mr. Comma, 31,750; Mr. Rebel, 10,011; Ms. Allen, 1,471; Dr. Blankenship, 5,235; and Mr. Rudolph, 8,384).
(3)  This column shows unvested PSUs granted in November 2013, November 2014 and November 2015 for which the performance achievement was not yet known at fiscal year-end (“FYE”), and that vest upon the third anniversary of each grant date. The share amount is reported at target payout level.

 

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    EXECUTIVE COMPENSATION          

 

Option Exercises and Stock Vested in Fiscal 2016

 

The following table provides information on stock option exercises and shares acquired on the vesting of stock awards by the NEOs during fiscal 2016. Option award value realized is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate fair market value of the shares of Jack in the Box Inc. stock acquired on the date of exercise. Stock award value realized is calculated by multiplying the number of shares shown in the table by the closing price of our stock on the date the stock awards vested.

 

     Option Awards      Stock Awards (1)  
      Number of Shares
Acquired on
Exercise (#)
     Value Realized on
Exercise
     Number of Shares
Acquired on
Vesting (#)
     Value Realized on
Vesting
 

Mr. Comma (CEO)

     67,572       $ 3,664,111         23,892       $ 1,788,789   

Mr. Rebel (CFO)

     42,362       $ 3,029,174         18,139       $ 1,355,204   

Ms. Allen (JIB President)

     0       $ 0         1,917       $ 146,708   

Dr. Blankenship (CPO)

     0       $ 0         7,027       $ 525,675   

Mr. Rudolph (CLO)

     8,505       $ 599,739         11,419       $ 853,844   
(1)  The reported number of shares and value realized on vesting includes time-vested RSUs granted in prior years, and the PSUs granted in November 2012 for the performance period fiscal 2013-2015, which vested in November 2015 and resulted in a payout of 117.3% of the target PSU award.

Retirement Plan Benefits

 

The following table provides information on the pension benefits for the NEOs under each of the following pension plans:

 

Retirement Plan

The Retirement Plan is a Company-funded and tax-qualified retirement plan that was offered to eligible employees hired prior to January 1, 2011 that had reached age 21 and completed one year of service (at least 1,000 hours/year). Four NEOs who were hired prior to 2011 participate in the plan. Participants are 100% vested after completing five years (1,000 hours per year) of service. As of December 31, 2015 the Retirement Plan was “sunset” and employees no longer accrue additional benefits based on additional pay and service. The plan provides that a participant retiring at the normal retirement age of 65 will receive benefits based primarily on the formula described below:

 

  (1) 1% of the average of the five highest consecutive calendar years of pay (“Final Average Pay”, includes base salary and annual incentive) out of the last ten years of eligible service, multiplied by the number of full calendar years and months while an eligible employee.

PLUS

 

  (2) 0.4% of Final Average Pay in excess of Covered Compensation (average of the Social Security taxable wage bases) multiplied by the number of full calendar years and months while an eligible employee (up to a maximum of 35 years).

A participant in the Retirement Plan who has at least ten years of vesting service may elect to begin receiving reduced payments as early as age 55. Note: Prior to 1989, benefits are subject to grandfathered minimum benefit accruals under the previous plan. Retirement plan benefits are (i) not

permitted to be paid to participants while actively employed with Jack in the Box Inc. and (ii) typically paid in the form of a monthly annuity unless the present value of the accrued benefit is equal to or less than $20,000 (previously $15,000) at termination and in such event, may be paid in the form of a lump sum payment.

Supplemental Executive Retirement Plan (SERP)

Effective January 1, 2007, the SERP was closed to new participants. Executives and certain “highly compensated employees” who were hired or promoted into such position prior to January 1, 2007 (including two NEOs) are eligible to participate in the SERP. The SERP, established in 1990, provides for retirement benefits above amounts available under the Company’s Retirement Plan due to IRC limits that restrict benefits available under the Company’s tax-qualified plan. The SERP is unfunded and not qualified for tax purposes.

The SERP provides that a participant retiring at the normal retirement age of 62 will receive a benefit equal to a target replacement income, based on final average pay and service. When combined with other amounts payable under the Company’s tax-qualified pension benefit, and other qualified

and non-qualified deferred compensation programs, the target replacement income is up to 60% of Final Average Pay and subject to the following conditions:

 

  Final Average Pay is defined as the average of the five highest calendar years of pay (base salary and annual incentive) out of the last ten years of employment with the Company.
 

 

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  Service is defined as the entire period of employment in calendar years and months while an eligible employee.

 

  There is no reduction in the target replacement income (60%) if a participant has 20 or more years of service. For participants with less than 20 years of service, the target replacement income percentage is determined by multiplying the number of years of service times 3%, up to a maximum of 20 years.

 

  To receive a retirement benefit under the SERP, a participant must attain the earlier of (i) age 62 or (ii) age 55 with ten years of service while employed at Jack in the Box or while disabled. A participant may begin receiving payments as early as age 55 subject to a reduction in benefits (equal to 5/12 of 1% for each month by which commencement of benefit payments precedes the participant’s attainment of age 62).

 

  Benefits under the SERP are only available to retirees as monthly payments and cannot be received in a lump sum.

 

  Death benefits are payable if a participant dies while employed.

 

  The SERP provides for spousal joint and survivor annuities.

The following table provides information on the actuarial present value of the NEOs’ accumulated pension and SERP benefits as of the end of fiscal 2016 (October 2, 2016), using fiscal 2016 earnings (base salary and annual incentive). The maximum amounts used for the Retirement Plan do not exceed the IRS-prescribed limit applicable to tax-qualified plans ($265,000 for 2016). Present values were calculated using the interest rate and mortality assumptions used in the Company’s financial statements for fiscal year 2016.

 

 

Pension Benefits Table  
      Plan Name (1)    Number of Years
Credited Service
(#)
     Present Value of
Accumulated
Benefit at Normal
Retirement Age  (2)
     Payments During
Last Year ($)
 

Mr. Comma (CEO)

   Retirement Plan      14       $ 384,221       $ 0   

Mr. Rebel (CFO)

   Retirement Plan      12       $ 521,184       $ 0   
     SERP      13       $ 5,993,380       $ 0   

Ms. Allen (JIB President)

   None      N/A         N/A         N/A   

Dr. Blankenship (CPO)

   Retirement Plan      18       $ 680,403       $ 0   
     SERP      19       $ 4,281,792       $ 0   

Mr. Rudolph (CLO)

   Retirement Plan      8       $ 333,357       $ 0   
(1)  Messrs. Comma, Rebel, Rudolph and Dr. Blankenship participate in the Retirement Plan; Mr. Rebel and Dr. Blankenship are the only NEOs who participate in the SERP.
(2)  As of the end of fiscal 2016, all four Retirement Plan participants are vested in the Plan, and Mr. Rebel and Dr. Blankenship have met the service and minimum age requirements for vesting in the SERP. The actuarial present value of accumulated benefits under the Retirement Plan and the SERP is based on discount rates of 3.85% and 3.60% respectively, as of October 2, 2016. The RP-2014 Mortality Table is used for both the Retirement Plan and the SERP calculations (the SERP uses a white collar adjustment). Both Plans use the MP-2015 generational scale projected from 2006, modified to use 15 year convergence to an ultimate rate of .75%. Participants are assumed to retire at the latest of current age and the plan’s earliest retirement date with unreduced benefits. No pre-retirement mortality, retirement, or termination has been assumed for the present value factors.

Non-Qualified Deferred Compensation

 

Executive Deferred Compensation Plan (EDCP)

In addition to eligibility to participate in the 401(k) Plan, the NEOs and other highly compensated employees are eligible to defer up to 50% of base salary and up to 85% of annual incentive pay to the EDCP, an unfunded, non-qualified deferred compensation plan, with benefits paid by the Company out of its general assets. The plan is subject to IRC Section 409A for all deferred compensation earned on or after January 1, 2005; deferred compensation earned prior to 2005 is not subject to Section 409A requirements and continues to be governed under the terms of the plan and tax laws in effect on or before December 31, 2004, as applicable. In conjunction with the 401(k) Plan changes that took effect January 1, 2016, the EDCP Company matching contribution (previously 100% of the first three percent of compensation deferred) was replaced with a “restoration matching contribution.” This means the Company will match up to the full four percent potential matching contribution for participants whose deferrals to the 401(k) Plan (and related Company

matching contributions) were limited due to the IRC limits applicable to the 401(k) Plan. A participant must be employed on the last day of the calendar year to receive the restoration matching contribution, which is then 100% vested. Company matching contributions made prior to January 1, 2016 vest at a rate of 25% per year (such that the match fully vests after completion of four full years of service with the Company). Participants choose from an array of investment options.

Enhanced EDCP — Beginning January 1, 2007, new Corporate Vice Presidents and above who otherwise would have been eligible for the SERP receive an additional annual Company contribution of 4% of base salary and annual incentive to their EDCP account for up to ten years. Participants become vested in the supplemental contribution at the rate of 25% per year (such that they are fully vested after completing four full years of service with the Company). The Enhanced EDCP was closed to new participants as of May 7, 2015.

 

 

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    EXECUTIVE COMPENSATION          

 

 

The following table provides information on the contributions, earnings, withdrawals and distributions in the Executive Deferred Compensation Plan during fiscal 2016 and the

account balances as of the end of fiscal 2016. As of October 2, 2016, all NEOs, except Ms. Allen are 100% vested in Company contributions.

 

 

Non-Qualified Deferred Compensation Plan Table  
      Executive
Contributions in
Fiscal 2016 (1)
     Registrant
Contributions In
Fiscal 2016 (2)
     Aggregate
Earnings in
Fiscal 2016
     Aggregate
Withdrawals/
Distributions
     Aggregate
Balance at
FYE16 (3)
 

Mr. Comma (CEO)

   $ 378,028       $ 182,669       $ 255,647       $       $ 2,979,827   

Mr. Rebel (CFO)

   $ 58,357       $ 40,674       $ 120,204       $       $ 1,136,149   

Ms. Allen (JIB President)

   $ 110,370       $ 82,780       $ 23,832       $       $ 293,688   

Dr. Blankenship (CPO)

   $ 38,538       $ 22,936       $ 219,195       $       $ 2,022,358   

Mr. Rudolph (CLO)

   $ 116,325       $ 82,460       $ 108,882       $       $ 1,174,745   
(1)  These amounts are also included in the salary and non-equity incentive plan compensation columns in the 2016 row of the SCT.
(2)  These amounts are reported as “All Other Compensation” in the SCT.
(3)  Amounts reported in this column are included in the “Salary” column in the SCT in prior years if the named executive officer was an NEO in previous years. The balance at FYE 2016 reflects the cumulative value of each NEO’s deferrals, match, and investment gains or losses. These FYE amounts do not include contributions or earnings related to the fiscal 2016 annual incentive payment which was paid after the end of fiscal 2016 (but which amounts are included in the executive and registrant contributions columns of this table).

Potential Payments on Termination of Employment or Change in Control

 

 

Compensation & Benefits Assurance Agreements. The Company provides CIC Agreements because it considers it in the best interest of its stockholders to encourage continued employment of key management in the event of a CIC transaction. These agreements help facilitate successful performance by key executives during an impending CIC, by protecting them against the loss of their positions following a change in the ownership or control of the Company, and ensuring that his or her expectations for long-term incentive compensation arrangements will be fulfilled. Generally, under the agreements, a CIC is defined to include:

 

(i) the acquisition by any person or group of 50% or more of the outstanding stock or combined voting power of the Company (excluding acquisitions by the fiduciary of the Company benefit plans or certain affiliates);

 

(ii) circumstances in which individuals constituting our board of directors generally cease to constitute a majority of the board; and

 

(iii) certain stockholder-approved mergers, consolidations, sales of assets or liquidation of the Company.

These CIC Agreements provide certain specified benefits to the executive if, within twenty-four (24) full calendar months following the effective date of a CIC, his or her employment is terminated (“Qualifying Termination”):

 

(i) involuntarily other than for cause, death, or disability, or

 

(ii) voluntarily for good reason. Voluntary termination for good reason is generally defined as the executive’s resignation due to:

 

  (a) the assignment of the executive to duties or responsibilities inconsistent with his or her status, or a
  reduction or alteration in the nature or status of his or her duties or responsibilities in effect as of ninety (90) days prior to the CIC event;

 

  (b) the acquiring company’s requirement that the executive be based at a location in excess of fifty (50) miles from his or her location immediately prior to a CIC;

 

  (c) a material reduction in base salary;

 

  (d) a material reduction in the Company’s compensation, health and welfare, retirement benefit plans, or any perquisites, unless an alternative plan is provided of a comparable value; or

 

  (e) the Company’s failure to require any successor to assume the CIC agreement benefits.

CIC benefits under the CIC Agreements are not provided in the event of terminations by reason of death, disability, voluntary termination without good reason, or the Company’s involuntary termination of the executive’s employment for cause. CIC benefits under the CIC Agreements are also not provided in the event of a CIC when there is not a corresponding Qualifying Termination. In the event of a CIC of the Company and Qualifying Termination of an executive covered under a CIC Agreement as described above, the executive is entitled to the following severance benefits:

 

1. A lump sum cash payment equal to his or her accrued but unpaid annual salary and unreimbursed business expenses.
 

 

68    JACK IN THE BOX INC.  ï   2017 PROXY STATEMENT


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            EXECUTIVE COMPENSATION  

 

2. A lump sum cash amount equal to a multiple of the executive’s then-current annual salary, based on their position, as follows:

 

      Multiple of Salary  

Mr. Comma

     3.0x   

Mr. Rebel

     2.5x   

Ms. Allen

     2.5x   

Dr. Blankenship

     2.5x   

Mr. Rudolph

     2.5x   

 

3. A lump sum cash incentive award equal to the multiple above times the greater of: (a) the average annual incentive percentage for the last three fiscal years prior to the CIC times annual salary; or (b) the average dollar amount of the annual incentive paid for the last three fiscal years prior to the CIC. If an executive does not have three full years of incentive awards, the Company will apply the target incentive award percentage for each missed year.

 

4. Continuation of health insurance coverage at Company expense at the same cost and same coverage level as in effect as of the executive’s Qualifying Termination date (subject to changes in coverage levels applicable to all employees generally) for a specified coverage period as provided below, to run concurrently with any coverage provided under COBRA. If an executive receives health insurance coverage with a subsequent employer prior to the end of 18 months, the continuation of health insurance coverage under the agreement is discontinued.

 

      Coverage Period  

Mr. Comma

     36 months   

Mr. Rebel

     30 months   

Ms. Allen