UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number
Ruth’s Hospitality Group, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip code) |
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Registrant’s telephone number, including area code
None
Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | ☒ | Accelerated Filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares outstanding of the registrant’s common stock as of July 29, 2022 was
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| Condensed Consolidated Balance Sheets as of June 26, 2022 and December 26, 2021 |
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| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 1A |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets—Unaudited
(Amounts in thousands, except share and per share data)
| June 26, | December 26, | |||||||
| 2022 | 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for doubtful accounts 2022 - $; 2021 - $ | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| Property and equipment, net of accumulated depreciation 2022 - $; 2021 - $ | ||||||||
| Operating lease right of use assets | ||||||||
| Goodwill | ||||||||
| Franchise rights, net of accumulated amortization 2022 - $; 2021 - $ | ||||||||
| Other intangibles, net of accumulated amortization 2022 - $; 2021 - $ | ||||||||
| Deferred income taxes | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll | ||||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Current operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt | ||||||||
| Operating lease liabilities | ||||||||
| Unearned franchise fees | ||||||||
| Deferred income taxes | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Shareholders' equity: | ||||||||
| Common stock, par value $ per share; shares authorized, shares issued and outstanding at June 26, 2022, shares issued and outstanding at December 26, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Treasury stock, at cost; shares at June 26, 2022 and December 26, 2021 | ||||||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Income Statement—Unaudited
(Amounts in thousands, except share and per share data)
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 26, | June 27, | June 26, | June 27, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| Restaurant sales | $ | $ | $ | $ | ||||||||||||
| Franchise income | ||||||||||||||||
| Other operating income | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Costs and expenses: | ||||||||||||||||
| Food and beverage costs | ||||||||||||||||
| Restaurant operating expenses | ||||||||||||||||
| Marketing and advertising | ||||||||||||||||
| General and administrative costs | ||||||||||||||||
| Depreciation and amortization expenses | ||||||||||||||||
| Pre-opening costs | ||||||||||||||||
| Loss on legal settlement | ||||||||||||||||
| Loss on impairment | ||||||||||||||||
| Total costs and expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other | ||||||||||||||||
| Income before income taxes | ||||||||||||||||
| Income tax expense | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | ||||||||||||
| Shares used in computing earnings per common share: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Cash dividends declared per common share | $ | $ | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity—Unaudited
(Amounts in thousands, except per share data)
| Additional | ||||||||||||||||||||||||||||
| Common Stock | Paid-in | Retained | Treasury Stock | Shareholders' | ||||||||||||||||||||||||
| Shares | Value | Capital | Earnings | Shares | Value | Equity | ||||||||||||||||||||||
| Balance at December 26, 2021 | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||
| Cash dividends, $ per common share | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Shares issued under stock compensation plan net of shares withheld for tax effects | ( | ) | — | — | — | ( | ) | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||||
| Balance at March 27, 2022 | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Cash dividends, $ per common share | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||
| Shares issued under stock compensation plan net of shares withheld for tax effects | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||
| Balance at June 26, 2022 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Common Stock | Paid-in | Retained | Treasury Stock | Shareholders' | ||||||||||||||||||||||||
| Shares | Value | Capital | Earnings | Shares | Value | Equity | ||||||||||||||||||||||
| Balance at December 27, 2020 | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Shares issued under stock compensation plan net of shares withheld for tax effects | ( | ) | — | — | — | ( | ) | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||||
| Balance at March 28, 2021 | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||
| Net loss | — | |||||||||||||||||||||||||||
| Shares issued under stock compensation plan net of shares withheld for tax effects | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||
| Balance at June 27, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows—Unaudited
(Amounts in thousands)
| 26 Weeks Ended | ||||||||
| June 26, | June 27, | |||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income taxes | ( | ) | ||||||
| Non-cash interest expense | ||||||||
| Loss on impairment | ||||||||
| Stock-based compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Operating lease liabilities and assets | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Principal borrowings on long-term debt | ||||||||
| Principal repayments on long-term debt | ( | ) | ( | ) | ||||
| Repurchase of common stock | ( | ) | ||||||
| Cash dividend payments | ( | ) | ||||||
| Tax payments from the vesting of restricted stock | ( | ) | ( | ) | ||||
| Deferred financing costs | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest, net of capitalized interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Noncash investing and financing activities: | ||||||||
| Accrued acquisition of property and equipment | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
RUTH’S HOSPITALITY GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements—Unaudited
(1) The Company and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Ruth’s Hospitality Group, Inc. and its subsidiaries (collectively, the "Company") as of June 26, 2022 and December 26, 2021 and for the thirteen and twenty-six week periods ended June 26, 2022 and June 27, 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated financial statements include the financial statements of Ruth’s Hospitality Group, Inc. and its wholly owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.
Ruth’s Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment. Ruth’s Hospitality Group, Inc. operates Company-owned Ruth’s Chris Steak House restaurants and sells franchise rights to Ruth’s Chris Steak House franchisees giving the franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise agreement. As of June 26, 2022, there were
The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. The interim results of operations for the periods ended June 26, 2022 and June 27, 2021 are not necessarily indicative of the results that may be achieved for the full fiscal year. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021.
The Company operates on a 52- or 53-week fiscal year ending on the last Sunday in December. The fiscal quarters ended June 26, 2022 and June 27, 2021 each contained thirteen weeks and are referred to herein as the second quarter of fiscal year 2022 and the second quarter of fiscal year 2021, respectively. Fiscal years 2022 and 2021 are both 52-week years.
COVID-19 Impact
In March 2020 the World Health Organization declared the novel coronavirus 2019 (COVID-19) a pandemic and the United States declared it a National Public Health Emergency, which has resulted in a significant reduction in revenue at the Company’s restaurants due to mandatory restaurant closures, capacity limitations, social distancing guidelines or other restrictions mandated by governments across the world, including federal, state and local governments in the United States. As a result of these developments, the Company has experienced a significant negative impact on its revenues, results of operations and cash flows compared to periods prior to the onset of the pandemic. As of June 26, 2022, all of the Company-owned and -managed restaurants were open. This continues to be an unprecedented event in the Company’s history, and as the COVID-19 pandemic continues to evolve, it remains uncertain how the conditions surrounding COVID-19 will continue to change. The Company has and could continue to experience macroeconomic impacts arising from the long duration of the COVID-19 pandemic, including operating restrictions, labor shortages and supply chain disruptions. The extent to which COVID-19 will continue to impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the unknown duration and severity of the COVID-19 pandemic, which may be impacted by new and evolving variants of the COVID-19 virus, the adoption rate of the COVID-19 vaccines in the jurisdictions in which the Company operates, the actions taken to contain the impact of COVID-19, and further actions that may be taken to limit the resulting public health and economic impact.
Following increases in the number of cases of COVID-19 throughout the United States and a spike in COVID-19 cases as a result of the Omicron and subsequent variants, some of our restaurants may become subject to COVID-19-related restrictions such as mask requirements for team members, guests or both. We continue to monitor state, local, and federal government regulatory and public health responses to the COVID-19 pandemic.
Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reporting of revenue and expenses during the periods presented to prepare these condensed consolidated financial statements in conformity with GAAP. Significant items subject to such estimates and assumptions include the carrying amounts of property and equipment, goodwill, franchise rights, operating lease right of use assets and obligations related to gift cards, income taxes, operating lease liabilities, incentive compensation, workers’ compensation and medical insurance. Actual results could differ from those estimates.
(2) Fair Value Measurements
The carrying amounts of cash and cash equivalents, receivables, prepaid expenses, accounts payable and accrued expenses and other current liabilities are reasonable estimates of their fair values due to their short duration. Borrowings classified as long-term debt as of June 26, 2022 and December 26, 2021 have variable interest rates that reflect currently available terms and conditions for similar debt. The carrying value, plus unpaid interest and deferred financing costs of $
The Company did not have any non-financial assets measured at fair value on a non-recurring basis as of June 26, 2022.
The Company’s non-financial assets measured at fair value on a non-recurring basis as of December 26, 2021 were as follows (in thousands):
| Fair Value as of December 26, 2021 | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Losses on Impairment | |||||||||||||
| Long-lived assets | $ | $ | $ | $ | ||||||||||||
(3) Leases
The Company leases restaurant facilities and equipment. The Company determines whether an arrangement is or contains a lease at contract inception. The Company’s leases are all classified as operating leases, which are included as operating lease right of use assets (“ROU assets”) and operating lease liabilities in the Company’s condensed consolidated balance sheet. Operating lease liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. ROU assets are measured based on the operating lease liabilities adjusted for lease incentives, initial indirect costs and impairments of operating lease assets. Minimum lease payments include only the fixed lease components of the agreements, as well as any variable rate payments that depend on an index, which are measured initially using the index at the lease commencement dates. To determine the present value of future minimum lease payments, the Company estimates incremental borrowing rates based on the information available at the lease commencement dates, or amendment date for contract modifications. The Company estimates its incremental borrowing rates by determining the synthetic credit rating of the Company using quantitative and qualitative analysis and then adjusting the synthetic credit rating to a collateralized credit rating. A spread curve is then developed using the U.S. corporate bond yield curve of the same credit rating and the U.S. Treasury curve to determine the rate for different terms. The expected lease terms include options to extend when it is reasonably certain the Company will exercise the options up to a total term of
On April 10, 2020, the FASB issued a staff Q&A (the “Staff Q&A”) to provide guidance on its remarks at the April 8, 2020 Board meeting about accounting for rent concessions resulting from the COVID-19 pandemic. The Staff Q&A affirmed the discussion at the April 8, 2020 meeting by allowing entities to forgo performing the lease-by-lease legal analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions as long as the concessions are related to COVID-19 and the changes to the lease do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. In addition, the Staff Q&A affirmed that entities may make an election to account for eligible concessions, regardless of their form, either by (1) applying the modification framework for these concessions in accordance with Topic 842 or (2) accounting for the concessions as if they were made under the enforceable rights included in the original agreement.
Due to the impacts of the COVID-19 pandemic, the Company initiated negotiations with its landlords to modify its restaurant lease agreements. Where applicable, the Company has elected to account for eligible lease concessions as if they were made under the enforceable rights included in the original agreement pursuant to the Staff Q&A.
As of June 26, 2022, all of the Company-owned Ruth’s Chris Steak House restaurants operated in leased premises, with the exception of the restaurant in Ft. Lauderdale, FL, which is an owned property, and the restaurants in Anaheim, CA, Lake Mary, FL, Princeton, NJ and South Barrington, IL, which operate on leased land. The leases generally provide for minimum annual rental payments with scheduled minimum rent payment increases during the terms of the leases. Certain leases also provide for rent deferral during the initial term, lease incentives in the form of tenant allowances to fund leasehold improvements, and/or contingent rent provisions based on the sales at the underlying restaurants. Most of the Company’s restaurant leases have remaining lease terms of year to
The components of lease expense are as follows (in thousands):
| 13 Weeks Ended | 13 Weeks Ended | 26 Weeks Ended | 26 Weeks Ended | ||||||||||||||
| Classification | June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | |||||||||||||
| Operating lease cost | Restaurant operating expenses and general and administrative costs | $ | $ | $ | $ | ||||||||||||
| Variable lease cost | Restaurant operating expenses and general and administrative costs | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | |||||||||||||
As of June 26, 2022, maturities of lease liabilities are summarized as follows (in thousands):
| Operating Leases | ||||
| 2022, excluding the first twenty-six weeks ended June 26, 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total future minimum rental commitments | ||||
| Imputed interest | ( | ) | ||
| $ | ||||
Supplemental cash flow information related to operating leases was as follows (in thousands):
| 26 Weeks Ended | 26 Weeks Ended | |||||||
| June 26, 2022 | June 27, 2021 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations | $ | $ | ||||||
| Reduction of right-of-use assets and lease obligations from lease modifications and terminations | $ | $ | ( | ) | ||||
Additionally, as of June 26, 2022, the Company has executed
(4) Revenue
In the following tables, the Company’s revenue is disaggregated by major component for each category on the consolidated statements of operations (in thousands).
| Thirteen Weeks Ended June 26, 2022: | Domestic | International | Total Revenue | |||||||||
| Restaurant sales | $ | $ | $ | |||||||||
| Franchise income | ||||||||||||
| Other operating income | ||||||||||||
| Total revenue | $ | $ | $ | |||||||||
| Thirteen Weeks Ended June 27, 2021: | Domestic | International | Total Revenue | |||||||||
| Restaurant sales | $ | $ | $ | |||||||||
| Franchise income | ||||||||||||
| Other operating income | ||||||||||||
| Total revenue | $ | $ | $ | |||||||||
| Twenty-Six Weeks Ended June 26, 2022: | Domestic | International | Total Revenue | |||||||||
| Restaurant sales | $ | $ | $ | |||||||||
| Franchise income | ||||||||||||
| Other operating income | ||||||||||||
| Total revenue | $ | $ | $ | |||||||||
| Twenty-Six Weeks Ended June 27, 2021: | Domestic | International | Total Revenue | |||||||||
| Restaurant sales | $ | $ | $ | |||||||||
| Franchise income | ||||||||||||
| Other operating income | ||||||||||||
| Total revenue | $ | $ | $ | |||||||||
The following table provides information about receivables and deferred revenue liabilities from contracts with customers (in thousands).
| June 26, | December 26, | |||||||
| 2022 | 2021 | |||||||
| Accounts receivable, less allowance for doubtful accounts 2022 - $; 2021 - $ | $ | $ | ||||||
| Deferred revenue | $ | $ | ||||||
| Unearned franchise fees | $ | $ | ||||||
Significant changes in the deferred revenue balance and the unearned franchise fees balance during the first twenty-six weeks of fiscal year 2022 are presented in the following table (in thousands).
| Deferred | Unearned | |||||||
| Revenue | Franchise Fees | |||||||
| Balance at December 26, 2021 | $ | $ | ||||||
| Decreases in the beginning balance from gift card redemptions | ( | ) | — | |||||
| Increases due to proceeds received, excluding amounts recognized during the period | — | |||||||
| Decreases due to recognition of franchise development and opening fees | — | ( | ) | |||||
| Increases due to proceeds received for franchise development and opening fees | — | |||||||
| Other | ( | ) | — | |||||
| Balance at June 26, 2022 | $ | $ | ||||||
Significant changes in the deferred revenue balance and the unearned franchise fees balance during the first twenty-six weeks of fiscal year 2021 are presented in the following table (in thousands).
| Deferred | Unearned | |||||||
| Revenue | Franchise Fees | |||||||
| Balance at December 27, 2020 | $ | $ | ||||||
| Decreases in the beginning balance from gift card redemptions | ( | ) | — | |||||
| Increases due to proceeds received, excluding amounts recognized during the period | — | |||||||
| Decreases due to recognition of franchise development and opening fees | — | ( | ) | |||||
| Increases due to proceeds received for franchise development and opening fees | — | — | ||||||
| Other | — | |||||||
| Balance at June 27, 2021 | $ | $ | ||||||
(5) Long-term Debt
Long-term debt consists of the following (in thousands):
| June 26, | December 26, | |||||||
| 2022 | 2021 | |||||||
| Senior Credit Facility: | ||||||||
| Revolving credit facility | $ | $ | ||||||
| Less current maturities | — | — | ||||||
| $ | $ | |||||||
As of June 26, 2022, the Company had $
The amended and restated credit agreement the Company entered into on October 18, 2021 with Wells Fargo Bank, National Association as administrative agent, and certain other lenders (as amended, "Credit Agreement") provides for a revolving credit facility of $
The Credit Agreement contains customary representations and affirmative and negative covenants (including limitations on indebtedness and liens) as well as financial covenants, as described below, requiring a minimum fixed coverage charge ratio as defined in the Credit Agreement (“Fixed Charge Coverage Ratio”) limiting the Company’s actual leverage ratio as defined in the Credit Agreement (“Maximum Consolidated Leverage Ratio”). The October 2021 amendment and restatement of the Credit Agreement restored the Fixed Charge Coverage Ratio and Maximum Consolidated Leverage Ratio to a Fixed Charge Coverage Ratio equal to or greater than and Maximum Consolidated Leverage Ratio no greater than Effective with the October 2021 amendment and restatement of the Credit Agreement, dividends and share repurchases are not limited if the Company's Consolidated Leverage Ratio is less than and holds a minimum liquidity of $
Interest rate margins and the fee for the unused commitment are calculated based on the Maximum Consolidated Leverage Ratio, and at the Company’s option, revolving loans may bear interest at either:
| (i) | LIBOR, plus an applicable margin, or |
| (ii) | the highest of (a) the rate publicly announced by Wells Fargo as its prime rate, (b) the average published federal funds rate in effect on such day plus |
The applicable margin is based on the Company’s Maximum Consolidated Leverage Ratio, ranging from (a)
As of June 26, 2022, we were in compliance with all covenants pertaining to the Credit Agreement.
(6) Shareholders’ Equity
In October 2019, the Company’s Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $
As a result of the impacts to our business arising from the COVID-19 pandemic, the Company previously suspended its dividend payments. During the first quarter of fiscal year 2022, the Company resumed its dividend. The Company’s Board of Directors declared the following dividends during the periods presented (amounts in thousands, except per share amounts):
| Declaration Date | Dividend per Share | Record Date | Total Amount | Payment Date | ||||||
| Fiscal Year 2022 | ||||||||||
| January 6, 2022 | $ | | $ | | ||||||
| May 6, 2022 | $ | | $ | | ||||||
Subsequent to the end of the second quarter of fiscal year 2022, the Company's Board of Directors declared a regular quarterly cash dividend of $
Outstanding unvested restricted stock is not included in common stock outstanding amounts. Restricted stock awards outstanding as of June 26, 2022 totaled
(7) Segment Information
The Company has reportable segments – the Company-owned steakhouse segment and the franchise operations segment. The Company does not rely on any major customers as a source of revenue. The Company-owned Ruth’s Chris Steak House restaurants, all of which are located in North America, operate within the full-service dining industry, providing similar products to similar customers. Revenues are derived principally from food and beverage sales. As of June 26, 2022, (i) the Company-owned steakhouse restaurant segment included
Segment information related to the Company’s two reportable business segments follows (in thousands):
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 26, | June 27, | June 26, | June 27, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| Company-owned steakhouse restaurants | $ | $ | $ | $ | ||||||||||||
| Franchise operations | ||||||||||||||||
| Unallocated other revenue and revenue discounts | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
| Segment profits: | ||||||||||||||||
| Company-owned steakhouse restaurants | $ | $ | $ | $ | ||||||||||||
| Franchise operations | ||||||||||||||||
| Total segment profit | ||||||||||||||||
| Unallocated operating income | ||||||||||||||||
| Marketing and advertising expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Pre-opening costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on settlement | ( | ) | ( | ) | ||||||||||||
| Loss on impairment | ( | ) | ( | ) | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Income before income tax expense | $ | $ | $ | $ | ||||||||||||
| Capital expenditures: | ||||||||||||||||
| Company-owned steakhouse restaurants | $ | $ | $ | $ | ||||||||||||
| Corporate assets | ||||||||||||||||
| Total capital expenditures | $ | $ | $ | $ | ||||||||||||
| June 26, | December 26, | |||||||
| 2022 | 2021 | |||||||
| Total assets: | ||||||||
| Company-owned steakhouse restaurants | $ | $ | ||||||
| Franchise operations | ||||||||
| Corporate assets - unallocated | ||||||||
| Total assets | $ | $ | ||||||
(8) Stock-Based Employee Compensation
On May 15, 2018, the Company’s stockholders approved a new 2018 Omnibus Incentive Plan (the "2018 Plan") which replaced the Amended and Restated 2005 Equity Incentive Plan (the "2005 Plan"), which expired on . The 2018 Plan authorizes
(9) Income Taxes
Income tax expense differs from amounts computed by applying the federal statutory income tax rate to income from continuing operations before income taxes as follows:
| 26 Weeks Ended | ||||||||
| June 26, | June 27, | |||||||
| 2022 | 2021 | |||||||
| Income tax expense at statutory rates | % | % | ||||||
| Increase (decrease) in income taxes resulting from: | ||||||||
| State income taxes, net of federal benefit | % | % | ||||||
| Federal employment tax credits | ( | %) | ( | %) | ||||
| Non-deductible executive compensation | % | % | ||||||
| Stock-based compensation | ( | %) | ( | %) | ||||
| Other | ( | %) | ( | %) | ||||
| Effective tax rate | % | % | ||||||
The employment-related tax credits line in the effective tax rate schedule above is comprised mainly of federal FICA tip credits which the Company utilizes to reduce its periodic federal income tax expense. A restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain wages (the FICA tip credit). The credit against income tax liability is for the full amount of eligible FICA taxes. Employers cannot deduct from taxable income the amount of FICA taxes taken into account in determining the credit.
The Company files consolidated and separate income tax returns in the United States federal jurisdiction and many state jurisdictions, respectively. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations for the years before 2017.
(10) Earnings Per Share
The following table sets forth the computation of earnings per share (amounts in thousands, except share and per share amounts):
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||
| June 26, | June 27, | June 26, | June 27, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Shares: | ||||||||||||||||
| Weighted average number of common shares outstanding - basic | ||||||||||||||||
| Weighted average number of common shares outstanding - diluted | ||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | ||||||||||||
Diluted earnings per share for the second quarter of fiscal year 2022 excludes restricted shares of
(11) Commitments and Contingencies
The Company is subject to various claims, possible legal actions and other matters arising in the normal course of business. Management does not expect disposition of these other matters to have a material adverse effect on the financial position, results of operations or liquidity of the Company. The Company expenses legal fees as incurred.
The legislation and regulations related to tax and unclaimed property matters are complex and subject to varying interpretations by both government authorities and taxpayers. The Company remits a variety of taxes and fees to various governmental authorities, including excise taxes, property taxes, sales and use taxes, and payroll taxes. The taxes and fees remitted by the Company are subject to review and audit by the applicable governmental authorities which could assert claims for additional assessments. Although management believes that its tax positions are reasonable, various taxing authorities may challenge certain of the positions taken by the Company which may result in additional liability for taxes and interest. These tax positions are reviewed periodically based on the availability of new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits, the identification of new tax contingencies, or the rendering of relevant court decisions. An unfavorable resolution of assessments by a governmental authority could negatively impact the Company’s results of operations and cash flows in future periods.
The Company is subject to unclaimed or abandoned property (escheat) laws which require the Company to turn over to certain state governmental authorities the property of others held by the Company that has been unclaimed for specified periods of time. The Company is subject to audit of its escheatment practices by individual U.S. states.
On February 26, 2018, a former restaurant hourly employee filed a class action lawsuit in the Superior Court of the State of California for the County of Riverside, alleging that the Company violated the California Labor Code and California Business and Professions Code, by failing to pay minimum wages, permit required meal and rest breaks and provide accurate wage statements, among other claims. On September 2, 2020, the class action lawsuit was amended to include two additional proposed class representatives. This lawsuit seeks unspecified penalties under California's Private Attorney's General Act in addition to other monetary payments (Quiroz Guerrero, et al. v. Ruth's Hospitality Group, Inc, et al.; Case No RIC1804127) (the "Quiroz Guerroro Action"). Additionally, on July 29, 2021, September 17, 2021, and October 19, 2021, other former restaurant hourly employees filed complaints in the Superior Court of the State of California for the County of San Francisco, the County of Los Angeles, and the County of Contra Costa alleging causes of action substantially similar to the allegations made in the Quiroz Guerrero Action (collectively, with the Quiroz Guerroro Action, the "Class Action Litigations"), which cases may be consolidated with the Quiroz Guerrero Action. On May 11, 2022 a Memorandum of Understanding was signed with the plaintiffs in the Class Action Litigations agreeing to a $
The Company currently buys a majority of its beef from
Our restaurant operations could be further disrupted if large numbers of our employees are diagnosed with COVID-19. If a significant portion of our workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition, or results of operations.
Our suppliers could be adversely impacted by the COVID-19 pandemic. If our suppliers' employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, we could face shortages of food items or other supplies at our restaurants, and our operations and sales could be adversely impacted by such supply interruptions.
Additional government regulations or legislation as a result of COVID-19 in addition to decisions we have made and may make in the future relating to the compensation of and benefit offerings for our restaurant Team Members could also have an adverse effect on our business. We cannot predict the types of additional government regulations or legislation that may be passed relating to employee compensation or benefits as a result of the COVID-19 pandemic.
The Company could experience other potential impacts as a result of the COVID-19 pandemic that are not completely known at this time, including, but not limited to, charges from potential adjustments to the carrying amount of goodwill, indefinite-lived intangibles and long-lived impairment charges. Our actual results may differ materially from the Company's current estimates as the scope of the COVID-19 pandemic evolves, depending largely though not exclusively on the duration of the disruption to our business.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “likely result,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek”, “should,” “target,” “will be,” “will continue,” “will likely result,” “would” and other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals, including with respect to restaurant openings/re-openings and acquisitions or closures, capital expenditures, strategy, financial outlook, liquidity outlook, our effective tax rate, and the impact of inflation and recent accounting pronouncements, also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: the negative impact the COVID-19 pandemic has had and will continue to have on our business, financial condition, results of operations and cash flows; reductions in the availability of, or increases in the cost of, USDA Prime grade beef, fish and other food items; impacts from the conflict in Ukraine, including potential supply disruptions, and changes in economic conditions and general trends; the loss of key management personnel; the effect of market volatility on the Company’s stock price; health concerns about beef or other food products; the effect of competition in the restaurant industry; changes in consumer preferences; the ability to respond to anticipated inflationary pressures, including reductions in consumer discretionary income and our ability to pass along rising costs through increased selling prices, and unfavorable global or regional economic conditions, including economic slowdown or recession; labor shortages or increases in labor costs; the impact of federal, state or local government regulations relating to income taxes, unclaimed property, Company employees, the sale or preparation of food, the sale of alcoholic beverages and the opening of new restaurants; political conditions, civil unrest or other developments and risks in the markets where the Company’s restaurants are located; harmful actions taken by the Company’s franchisees; the inability to successfully integrate franchisee acquisitions into the Company’s business operations; economic, regulatory and other limitations on the Company’s ability to pursue new restaurant openings and other organic growth opportunities; a material failure, interruption or security breach of the Company’s information technology network; the Company’s indemnification obligations in connection with its sale of the Mitchell’s Restaurants; the Company’s ability to protect its name and logo and other proprietary information; an impairment in the financial statement carrying value of our goodwill, other intangible assets or property; gains or losses on lease modifications; the impact of litigation; the restrictions imposed by the Company’s credit agreement; changes in, or the suspension or discontinuation of the Company’s quarterly cash dividend payments or share repurchase program; and the inability to secure additional financing on terms acceptable to the Company. For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in Part II Item 1A of this Form 10-Q and the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof. You should not assume that material events subsequent to the date of this Quarterly Report on Form 10-Q have not occurred.
Overview
Ruth’s Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment. Ruth’s Hospitality Group, Inc. operates Company-owned Ruth’s Chris Steak House restaurants and sells franchise rights to Ruth’s Chris Steak House franchisees giving the franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise agreement. As of June 26, 2022, there were 151 Ruth’s Chris Steak House restaurants, including 74 Company-owned restaurants, three restaurants operating under contractual agreements and 74 franchisee-owned restaurants. Subsequent to the end of the quarter two new Company-owned Ruth's Chris Steak House restaurants were opened in Worcester, MA and Long Beach, CA.
The Ruth’s Chris menu features a broad selection of USDA Prime and other high-quality steaks and other premium offerings served in Ruth’s Chris’ signature fashion – “sizzling” and topped with butter – complemented by other traditional menu items inspired by our New Orleans heritage. The Ruth’s Chris restaurants reflect over 55 years of commitment to the core values instilled by our founder, Ruth Fertel, of caring for our guests by delivering the highest quality food, beverages and service in a warm and inviting atmosphere.
All Company-owned Ruth’s Chris Steak House restaurants are located in the United States. The franchisee-owned Ruth’s Chris Steak House restaurants include 23 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Philippines, Singapore and Taiwan.
In March 2020 the World Health Organization declared the novel coronavirus 2019 (COVID-19) a pandemic and the United States declared it a National Public Health Emergency, which has resulted in a significant reduction in revenue at the Company’s restaurants due to mandatory restaurant closures, capacity limitations, social distancing guidelines or other restrictions mandated by governments across the world, including federal, state, and local governments in the United States. As a result of these developments, the Company has experienced a significant negative impact on its revenues, results of operations and cash flows compared to periods prior to the onset of the pandemic. As of June 26, 2022, all of the Company-owned and -managed restaurants were open. This continues to be an unprecedented event in the Company’s history, and as the COVID-19 pandemic continues to evolve, it remains uncertain how the conditions surrounding COVID-19 will continue to change. The Company has had and could continue to experience macroeconomic impacts arising from the long duration of the COVID-19 pandemic, including labor shortages and supply chain disruptions. The extent to which COVID-19 will continue to impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the unknown duration and severity of the COVID-19 pandemic, which may be impacted by new and evolving variants of the COVID-19 virus, the adoption rate of the COVID-19 vaccines and boosters in the jurisdictions in which the Company operates, actions taken to contain the impact of COVID-19, and further actions that may be taken to limit the resulting public health and economic impact.
Following increases in the number of cases of COVID-19 throughout the United States and a spike in COVID-19 cases as a result of the Omicron and subsequent variants, some of our restaurants are subject to COVID-19-related restrictions such as mask requirements for team members, guests or both. We continue to monitor state, local, and federal government regulatory and public health responses to the COVID-19 pandemic.
Our business is subject to seasonal fluctuations. Historically, our first and fourth quarters have tended to be the strongest revenue quarters due largely to the year-end holiday season and the popularity of dining out during the fall and winter months. Due to the impacts of COVID-19, it is uncertain whether future quarters will be stronger or weaker than the second fiscal quarter fiscal year 2022 or the first twenty-six weeks of fiscal year 2022. Consequently, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year, and comparable restaurant sales for any period may decrease.
Our Annual Report on Form 10-K for the fiscal year ended December 26, 2021 provides additional information about our business, operations and financial condition.
Results of Operations
The table below sets forth certain operating data expressed as a percentage of total revenues for the periods indicated, except as otherwise noted. Our historical results are not necessarily indicative of the operating results that may be expected in the future.
| 13 Weeks Ended |
26 Weeks Ended |
|||||||||||||||
| June 26, |
June 27, |
June 26, |
June 27, |
|||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Restaurant sales |
93.9 | % | 93.9 | % | 94.0 | % | 93.7 | % | ||||||||
| Franchise income |
4.0 | % | 4.1 | % | 3.9 | % | 4.2 | % | ||||||||
| Other operating income |
2.1 | % | 2.0 | % | 2.1 | % | 2.1 | % | ||||||||
| Total revenues |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Costs and expenses: |
||||||||||||||||
| Food and beverage costs (percentage of restaurant sales) |
29.8 | % | 30.3 | % | 31.1 | % | 29.3 | % | ||||||||
| Restaurant operating expenses (percentage of restaurant sales) |
44.9 | % | 43.6 | % | 45.5 | % | 44.7 | % | ||||||||
| Marketing and advertising |
3.7 | % | 2.9 | % | 3.8 | % | 2.6 | % | ||||||||
| General and administrative costs |
7.3 | % | 7.9 | % | 7.3 | % | 8.1 | % | ||||||||
| Depreciation and amortization expenses |
4.0 | % | 4.6 | % | 3.9 | % | 5.1 | % | ||||||||
| Pre-opening costs |
0.6 | % | 0.1 | % | 0.6 | % | 0.3 | % | ||||||||
| Loss on legal settlement |
4.7 | % | — | 2.4 | % | — | ||||||||||
| Loss on impairment |
— | 0.4 | % | — | 0.2 | % | ||||||||||
| Total costs and expenses |
90.3 | % | 85.3 | % | 90.0 | % | 85.7 | % | ||||||||
| Operating income |
9.7 | % | 14.7 | % | 10.0 | % | 14.3 | % | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense, net |
(0.2 | %) | (1.0 | %) | (0.2 | %) | (1.2 | %) | ||||||||
| Other |
0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
| Income before income taxes |
9.5 | % | 13.7 | % | 9.8 | % | 13.1 | % | ||||||||
| Income tax expense |
1.5 | % | 2.5 | % | 1.7 | % | 2.2 | % | ||||||||
| Net income |
8.0 | % | 11.2 | % | 8.1 | % | 10.9 | % | ||||||||
Second Quarter Ended June 26, 2022 (13 Weeks) Compared to Second Quarter Ended June 27, 2021 (13 Weeks)
Overview. Operating income decreased by $3.8 million to $12.5 million for the second quarter of fiscal year 2022 from the operating income reported for the second quarter of fiscal year 2021. Operating income for the second quarter of fiscal year 2022 was favorably impacted by a $16.6 million increase in restaurant sales, a $601 thousand increase in franchise income and a $543 thousand increase in other operating income, offset by an $8.8 million increase in restaurant operating expenses, a $6.0 million increase in settlement losses, a $4.4 million increase in food and beverage costs, a $1.5 million increase in marketing and advertising costs, a $584 thousand increase in pre-opening costs and a $553 thousand increase in general and administrative costs. Net income decreased from the second quarter of fiscal year 2021 by $2.1 million to $10.3 million.
Segment Profits. Segment profitability information is presented in Note 7 in the notes to the condensed consolidated financial statements included in Item 1. “Financial Statements”. Segment profit for the second quarter of fiscal year 2022 for the Company-owned steakhouse restaurant segment increased by $3.7 million to a $32.2 million profit compared to the second quarter of fiscal year 2021. The increase was driven primarily by a $16.9 million increase in restaurant sales offset by an $8.8 million increase in restaurant operating expenses and a $4.4 million increase in food and beverage costs. Franchise income increased $601 thousand in the second quarter of fiscal year 2022 compared to the second quarter of fiscal year 2021.
Restaurant Sales. Restaurant sales increased by $16.6 million, or 15.9%, to $120.8 million in the second quarter of fiscal year 2022 from the second quarter of fiscal year 2021. Company-owned comparable restaurant sales in the second quarter of fiscal year 2022 were $116.5 million, which represented an increase of $13.0 million, or 12.6%, compared to the second quarter of fiscal year 2021.
Franchise Income. Franchise income in the second quarter of fiscal year 2022 increased by $601 thousand, or 13.3%, to $5.1 million compared to the second quarter of fiscal year 2021. The increase in franchise income compared to the second quarter of fiscal year 2021 was due to an increase in franchisee-owned restaurant sales.
Other Operating Income. Other operating income increased by $543 thousand in the second quarter of fiscal year 2022 compared to the second quarter of fiscal year 2021. The increase was primarily due to an increase in breakage income of $192 thousand resulting from an increase in gift card redemptions and a $395 thousand increase in income from miscellaneous charges generated in the restaurants. The increase in these items was primarily due to increases in restaurant sales and gift card redemptions.
Food and Beverage Costs. Food and beverage costs increased by $4.4 million, or 13.8%, to $36.0 million in the second quarter of fiscal year 2022 compared to the second quarter of fiscal year 2021 primarily due to increased restaurant sales. As a percentage of restaurant sales, food and beverage costs decreased to 29.8% in the second quarter of fiscal year 2022 from 30.3% in the second quarter of fiscal year 2021, primarily driven by a 6.5% decrease in beef costs.
Restaurant Operating Expenses. Restaurant operating expenses increased by $8.8 million, or 19.5%, to $54.2 million in the second quarter of fiscal year 2022 from the second quarter of fiscal year 2021. Restaurant operating expenses, as a percentage of restaurant sales, were 44.9% in the second quarter of fiscal year 2022 compared to 43.6% in the second quarter of fiscal year 2021 primarily driven by higher labor costs from adding staff to our restaurants.
Marketing and Advertising. Marketing and advertising expenses increased by $1.5 million, or 46.9%, to $4.7 million in the second quarter of fiscal year 2022 from the second quarter of fiscal year 2021. The increase in marketing and advertising expenses in the second quarter of fiscal year 2022 was primarily attributable to a $1.0 million increase in digital and data transformation expenses.
General and Administrative Costs. General and administrative costs increased by $553 thousand, or 6.3%, to $9.3 million in the second quarter of fiscal year 2022 from the second quarter of fiscal year 2021. As a percentage of revenue, general and administrative costs decreased from 7.9% in the second quarter of fiscal year 2021 to 7.3% in the second quarter of fiscal year 2022 primarily due to increased sales.
Depreciation and Amortization Expenses. Depreciation and amortization expense increased by $51 thousand to $5.1 million in the second quarter of fiscal year 2022 from the second quarter of fiscal year 2021.
Pre-opening Costs. Pre-opening costs were $743 thousand in the second quarter of fiscal year 2022. These expenses are primarily due to the anticipated openings of three Ruth’s Chris Steak House restaurants in the third quarter of fiscal year 2022 and recognition of rent expense at unopened Ruth’s Chris Steak House restaurants where the Company has taken possession of the property. Pre-opening costs were $159 thousand in the second quarter of fiscal year 2021 primarily due to the recognition of rent expense at unopened Ruth’s Chris Steak House restaurants where the Company had taken possession of the properties.
Loss on Settlement. During the second quarter of fiscal year 2022, the Company recorded a $6.0 million loss on settlement. This expense relates to the signing of a Memorandum of Understanding to settle certain class action litigations. Further information can be found in Note 11 in the condensed consolidated financial statements included in Item 1. "Financial Statements".
Loss on Impairment. During the second quarter of fiscal year 2021, the Company recorded a $394 thousand loss on impairment of which $306 thousand related to long-lived assets as described in Note 2 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements". No loss on impairment was reported for the second quarter of fiscal year 2022.
Interest Expense. Interest expense decreased $889 thousand to $239 thousand in the second quarter of fiscal year 2022 compared to $1.1 million in the second quarter of fiscal year 2021. The decrease is primarily due to a lower average debt balance in the second quarter of fiscal year 2022, partially offset by a higher interest rate.
Other Income and Expense. During the second quarter of fiscal year 2021, we recognized other income of $34 thousand. During the second quarter of fiscal year 2021, we recognized other income of $36 thousand.
Income Tax Expense. During the second quarter of fiscal year 2022, we recognized income tax expense of $2.0 million compared to $2.8 million during the second quarter of fiscal year 2021. The effective tax rate, including the impact of discrete items, decreased to 15.9% for the second quarter of fiscal year 2022 compared to 18.2% for the second quarter of fiscal year 2021. Fiscal year 2022 discrete items and other unexpected changes impacting the annual tax expense may cause the effective tax rate for fiscal year 2022 to differ from the effective tax rate for the second quarter of fiscal year 2022.
Net Income. Net income was $10.3 million in the second quarter of fiscal year 2022, which reflected a decrease of $2.1 million compared to $12.4 million in the second quarter of fiscal year 2021. The decrease was attributable to the factors noted above.
Twenty-Six Weeks Ended June 26, 2022 (26 Weeks) Compared to Twenty-Six Weeks Ended June 27, 2021 (26 Weeks)
Overview. Operating income decreased by $2.8 million to $25.5 million for the first twenty-six weeks of fiscal year 2022 from the income reported for the first twenty-six weeks of fiscal year 2021. Operating income for the first twenty-six weeks of fiscal year 2022 was favorably impacted by a $53.7 million increase in restaurant sales, a $1.5 million increase in franchise income and a $1.4 million increase in other operating income, offset by a $25.9 million increase in restaurant operating expenses, a $20.0 million increase in food and beverage costs, a $6.0 million increase in settlement losses, a $4.4 million increase in marketing and advertising costs, a $2.6 million increase in general and administrative costs and a $1.0 million increase in pre-opening costs. Net income decreased from the first twenty-six weeks of fiscal year 2021 by $788 thousand to $20.7 million.
Segment Profits. Segment profitability information is presented in Note 7 in the notes to the condensed consolidated financial statements included in Item 1. “Financial Statements”. Segment profit for the first twenty-six weeks of fiscal year 2022 for the Company-owned steakhouse restaurant segment increased by $8.3 million to a $59.0 million profit compared to the first twenty-six weeks of fiscal year 2021. The increase was driven primarily by a $54.2 million increase in restaurant sales offset by a $25.9 million increase in restaurant operating expenses and a $20.0 million increase in food and beverage costs. Franchise income increased $1.5 million in the first twenty-six weeks of fiscal year 2022 compared to the first twenty-six weeks of fiscal year 2021.
Restaurant Sales. Restaurant sales increased by $53.7 million, or 28.9%, to $239.5 million in the first twenty-six weeks of fiscal year 2022 from the first twenty-six weeks of fiscal year 2021. Company-owned comparable restaurant sales in the first twenty-six weeks of fiscal year 2022 were $231.6 million, which represented an increase of $46.8 million, or 25.3%, compared to the first twenty-six weeks of fiscal year 2021.
Franchise Income. Franchise income in the first twenty-six weeks of fiscal year 2022 increased by $1.5 million, or 18.5%, to $9.9 million compared to the first twenty-six weeks of fiscal year 2021. The increase in franchise income compared to the first twenty-six weeks of fiscal year 2021 was due to an increase in franchisee-owned restaurant sales.
Other Operating Income. Other operating income increased by $1.4 million in the first twenty-six weeks of fiscal year 2022 compared to the first twenty-six weeks of fiscal year 2021. The increase was primarily due to an increase in breakage income of $804 thousand resulting from an increase in gift card redemptions and a $622 thousand increase in income from miscellaneous charges generated in the restaurants. The increase in these items was primarily due to increases in restaurant sales and gift card redemptions.
Food and Beverage Costs. Food and beverage costs increased by $20.0 million, or 36.8%, to $74.6 million in the first twenty-six weeks of fiscal year 2022 compared to the first twenty-six weeks of fiscal year 2021 primarily due to increased restaurant sales. As a percentage of restaurant sales, food and beverage costs increased to 31.1% in the first twenty-six weeks of fiscal year 2022 from 29.3% in the first twenty-six weeks of fiscal year 2021, primarily driven by a 10.3% increase in beef costs.
Restaurant Operating Expenses. Restaurant operating expenses increased by $25.9 million, or 31.2%, to $108.9 million in the first twenty-six weeks of fiscal year 2022 from the first twenty-six weeks of fiscal year 2021. Restaurant operating expenses, as a percentage of restaurant sales, were 45.5% in the first twenty-six weeks of fiscal year 2022 compared to 44.7% in the first twenty-six weeks of fiscal year 2021 primarily driven by higher labor costs from adding staff to our restaurants.
Marketing and Advertising. Marketing and advertising expenses increased by $4.4 million, or 84.9%, to $9.7 million in the first twenty-six weeks of fiscal year 2022 from the first twenty-six weeks of fiscal year 2021. The increase in marketing and advertising expenses in the first twenty-six weeks of fiscal year 2022 was attributable to a $2.5 million increase in digital and data transformation expenses and increasing expenses as the Company resumes its marketing programs that were suspended as a result of its response to the COVID-19 pandemic.
General and Administrative Costs. General and administrative costs increased by $2.6 million, or 16.3%, to $18.6 million in the first twenty-six weeks of fiscal year 2022 from the first twenty-six weeks of fiscal year 2021. The increase in general and administrative costs in the first twenty-six weeks of fiscal year 2022 was primarily attributable to a $1.6 million in compensation related expenses, a $684 thousand increase in professional fees and a $308 thousand increase in travel related expenses over the first twenty-six weeks of 2021. As a percentage of revenue, general and administrative costs decreased from 8.1% in the first twenty-six weeks of fiscal year 2021 to 7.3% in the first twenty-six weeks of fiscal year 2022 primarily due to increased sales.
Depreciation and Amortization Expenses. Depreciation and amortization expense decreased by $219 thousand to $9.9 million in the first twenty-six weeks of fiscal year 2022 from the first twenty-six weeks of fiscal year 2021.
Pre-opening Costs. Pre-opening costs were $1.6 million in the first twenty-six weeks of fiscal year 2022. These expenses are primarily due to the to the anticipated openings of three Ruth’s Chris Steak House restaurants in the third quarter of fiscal year 2022, the opening of the Ruth’s Chris Steak House restaurant in Aventura, Florida in March 2022 and recognition of rent expense at unopened Ruth’s Chris Steak House restaurants where the Company has taken possession of the property. Pre-opening costs were $604 thousand in the first twenty-six weeks of fiscal year 2021 primarily due to the recognition of rent expense at four unopened Ruth’s Chris Steak House restaurants where the Company had taken possession of the properties.
Loss on Settlement. During the first twenty-six weeks of fiscal year 2022, the Company recorded a $6.0 million loss on settlement. This expense relates to the signing of a Memorandum of Understanding to settle certain class action litigations. Further information can be found in Note 11 in the condensed consolidated financial statements included in Item 1. "Financial Statements".
Loss on Impairment. During the first twenty-six weeks of fiscal year 2021, the Company recorded a $394 thousand loss on impairment of which $306 thousand related to long-lived assets as described in Note 2 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements". No loss on impairment was reported for the first twenty-six weeks of fiscal year 2022.
Interest Expense. Interest expense decreased $1.9 million to $563 thousand in the first twenty-six weeks of fiscal year 2022 compared to $2.4 million in the first twenty-six weeks of fiscal year 2021. The decrease is primarily due to a lower average debt balance in the first twenty-six weeks of fiscal year 2022.
Other Income and Expense. During the first twenty-six weeks of fiscal year 2021, we recognized other income of $62 thousand. During the first twenty-six weeks of fiscal year 2021, we recognized other income of $80 thousand.
Income Tax Expense. During the first twenty-six weeks of fiscal year 2022, we recognized income tax expense of $4.3 million compared to $4.5 million during the first twenty-six weeks of fiscal year 2021. The effective tax rate, including the impact of discrete items, increased to 17.2% for the first twenty-six weeks of fiscal year 2022 compared to 17.1% for the first twenty-six weeks of fiscal year 2021. Fiscal year 2022 discrete items and other unexpected changes impacting the annual tax expense may cause the effective tax rate for fiscal year 2022 to differ from the effective tax rate for the first twenty-six weeks of fiscal year 2022.
Net Income. Net income was $20.7 million in the first twenty-six weeks of fiscal year 2022, which reflected a decrease of $788 thousand compared to $21.5 million in the first twenty-six weeks of fiscal year 2021. The decrease was attributable to the factors noted above.
Liquidity and Capital Resources
Overview
Our principal sources of cash have been historically provided by our operating activities as well as periodic borrowings from our senior credit facility. During the first twenty-six weeks of fiscal year 2022 our principal uses of cash flow were debt repayments, capital expenditures, repurchase of common stock and dividend payments.
During the fourth quarter of fiscal year 2019, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $60 million of outstanding common stock from time to time. As a result of the impacts to our business arising from the COVID-19 pandemic, the Company suspended its share repurchase program. During the third quarter of fiscal year 2021, the Company resumed its share repurchase program and repurchased 887,515 shares at an aggregate cost of $16.6 million or an average cost of $18.69 per share through December 27, 2021. All repurchased shares were retired and cancelled. During the first twenty-six weeks of fiscal year 2022 the Company repurchased 529,734 shares at an aggregate cost of $9.5 million or an average cost of $18.01 per share.
The Company also resumed payments of dividends in the first quarter of fiscal year 2022 with a $0.12 per share dividend paid on February 17, 2022, and a $0.14 per share dividend paid on June 2, 2022. Subsequent to the end of the second quarter of fiscal year 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.14 per share payable on September 2, 2022, to shareholders of record as of the close of business on August 19, 2022.
We believe that our current cash position, coupled with our anticipated cash flow from operations, should provide us with adequate liquidity for the next twelve months and, when combined with our access to additional capital, should provide us with adequate liquidity for the foreseeable future. As of June 26, 2022, we were in compliance with all covenants pertaining to the Credit Agreement.
Senior Credit Facility
As of June 26, 2022, we had $40.0 million of outstanding indebtedness under our senior credit facility and approximately $4.7 million of outstanding letters of credit, pursuant to a credit agreement entered into with Wells Fargo Bank, National Association as administrative agent, and certain other lenders (as amended, the “Credit Agreement”). As of June 26, 2022, the weighted average interest rate on our outstanding debt was 3.7% and the weighted average interest rate on our outstanding letters of credit was 1.9%. In addition, the fee on the unused portion of our senior credit facility was 0.3%.
The Credit Agreement provides for a revolving credit facility of $140.0 million with a $10.0 million sub-facility of letters of credit and a $5.0 million sub-facility for swingline loans. Subject to the satisfaction of certain conditions and lender consent, the revolving credit facility may be increased up to a maximum of $200.0 million. The Credit Agreement has a maturity date of October 18, 2026. For more information about our long-term debt, see Note 5 in the notes to the condensed consolidated financial statements included in Item 1. “Financial Statements”.
Sources and Uses of Cash
The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities (in thousands):
| 26 Weeks Ended |
||||||
| June 26, |
June 27, |
|||||
| 2022 |
2021 |
|||||
| Net cash provided by (used in): |
||||||
| Operating activities |
$ | 25,006 | $ | 42,004 | ||
| Investing activities |
(23,093 | ) | (2,504 | ) | ||
| Financing activities |
(49,180 | ) | (47,563 | ) | ||
| Net decrease in cash and cash equivalents |
$ | (47,267 | ) | $ | (8,063 | ) |
Operating Activities. Operating activities provided cash of $25.0 million during the first twenty-six weeks of fiscal year 2022 and $42.0 million during the first twenty-six weeks of fiscal year 2021. Operating cash outflows pertain primarily to expenditures for food and beverages, restaurant operating expenses, marketing and advertising, general and administrative costs, and income taxes. Operating activities provided cash flows primarily because operating revenues have exceeded cash-based expenses.
Investing Activities. Cash used in investing activities totaled $23.1 million in the first twenty-six weeks of fiscal year 2022 compared with $2.5 million used in the first twenty-six weeks of fiscal year 2021. Cash used in investing projects during the first twenty-six weeks of fiscal year 2022 primarily pertained to $14.0 million for new restaurants, $6.6 million for technology investments and upgrades, and $2.3 million for restaurant remodel and capital replacement projects. Cash used in investing activities during the first twenty-six weeks of fiscal year 2021 primarily pertained to $1.4 million for new restaurants and $981 thousand for capital replacement projects.
Financing Activities. Financing activities used cash during the first twenty-six weeks of fiscal year 2022 and the first twenty-six weeks of fiscal year 2021. During the first twenty-six weeks of fiscal year 2022, we repaid debt in the amount of $45.0 million, paid $9.5 million for the repurchase of common stock, paid $8.8 million in dividends and paid $849 thousand in employee withholding taxes in connection with the vesting of restricted stock. We paid the $849 thousand in taxes in connection with the vesting of restricted stock for recipients who elected to satisfy their individual tax withholding obligations by having us withhold a number of vested shares of restricted stock. These cash payments were partially offset by $15.0 million in proceeds from long-term debt. During the first twenty-six weeks of fiscal year 2021, we reduced debt by $45 million, paid $2.4 million in employee withholding taxes in connection the with vesting of restricted stock and paid $145 thousand in deferred financing costs.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the periods presented. Our Annual Report on Form 10-K for the fiscal year ended December 26, 2021 includes a summary of the critical accounting policies and estimates that we believe are the most important to aid in the understanding our financial results. There have been no material changes to these critical accounting policies and estimates that impacted our reported amounts of assets, liabilities, revenues or expenses during the first twenty-six weeks of fiscal year 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The Company is exposed to market risk from fluctuations in interest rates. For fixed rate debt, interest rate changes affect the fair market value of such debt but do not impact earnings or cash flows. Conversely, for variable rate debt, including borrowings under the Company’s senior credit facility, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant. At June 26, 2022, the Company had $40.0 million in variable rate debt outstanding. The Company currently does not use financial instruments to hedge its risk to market fluctuations in interest rates. Holding other variables constant (such as debt levels), a hypothetical immediate one percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash flows for fiscal year 2022 of approximately $400 thousand.
Effect of Healthcare Inflation
The Company is exposed to market price fluctuations related to the cost of providing healthcare to its employees. Claim trends are predicted to outpace inflation throughout the upcoming year. Pharmacy costs are also rising in excess of general and medical cost inflation. If prices increase, or the Company experiences significantly more claims, operating margins could be materially adversely affected. Holding other variables constant, a hypothetical 10% fluctuation in healthcare costs would have an approximate impact on pre-tax earnings of approximately $1.0 million for the 2022 fiscal year.
Foreign Currency Risk
The Company believes that fluctuations in foreign exchange rates do not present a material risk to its operations due to the relatively small amount of franchise income it receives from outside the U.S. During the first twenty-six weeks of fiscal years 2022 and 2021, franchise income attributable to international locations was approximately $1.3 million and $886 thousand, respectively, which is less than 1% of total annual revenue.
Commodity Price Risk
The Company is exposed to market price fluctuations in beef and other food product prices. Given the historical volatility of beef and other food prices, this exposure can impact the Company's food and beverage costs. As the Company typically sets its menu prices in advance of its beef and other food product purchases, the Company cannot quickly react to changing costs of beef and other food items. To the extent that the Company is unable to pass the increased costs on to its guests through price increases, the Company’s results of operations would be adversely affected. The Company has experienced 10.3% inflation in beef pricing during the first twenty-six weeks of fiscal year 2022 compared to the first twenty-six weeks of fiscal year 2021. The Company has seen a reduction in beef prices during the second quarter of fiscal year 2022 of 6.5% compared to the second quarter of fiscal year 2021. During the third quarter of fiscal year 2021, we negotiated set pricing on approximately 10% of our beef supply from mid-September 2021 into mid-March 2022. During the first quarter of fiscal year 2022, we negotiated set pricing on approximately 20% of our beef supply from mid-March 2022 through mid-August 2022. This pricing agreement was extended from mid-August 2022 through mid-November 2022. The market for USDA Prime grade beef is particularly volatile. If prices increase, or the supply of beef is reduced, operating margin could be materially adversely affected. Holding other variables constant, a hypothetical 10% fluctuation in beef prices would have an approximate impact on pre-tax earnings ranging from $6.0 million to $7.0 million for fiscal year 2022.
Effects of Inflation
Components of the Company's operations subject to inflation include food, beverage, lease and labor costs. The Company's leases require it to pay taxes, maintenance, repairs, insurance and utilities, all of which are subject to inflationary increases. The Company believes that general inflation, excluding increases in food, employee wages and employee health plan costs, has not had a material impact on its results of operations in recent years. Routinely, governmental entities acted to increase minimum wage rates in jurisdictions where Company-owned restaurants are located, which increases our operating costs. Also, the U.S. government may act to further increase the federal minimum wage rate and/or decrease or eliminate the tip credit which could further increase employee compensation costs and related taxes in 2022 if adopted. The increased minimum wage rates are not expected to materially increase employee compensation and related taxes in fiscal year 2022 compared to fiscal year 2021. If prices increase, operating margins could be materially adversely affected. Holding other variables constant, a hypothetical 10% increase in other operating costs would have an approximate impact on pre-tax earnings ranging from $5.0 million to $6.0 million for fiscal year 2022.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 26, 2022. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 26, 2022 to ensure that information required to be disclosed in reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information required to be disclosed by the Company is accumulated and communicated to the Company’s management to allow timely decisions regarding the required disclosure.
Changes in internal control over financial reporting
During the fiscal quarter ended June 26, 2022, there was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that in the Company’s judgment has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
None.
See Note 11 in the notes to the condensed consolidated financial statements included in Item 1. “Financial Statements” for a summary of legal proceedings.
See our risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021. Circumstances and events described in such risk factors could result in significant adverse effects on our financial position, results of operations and cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Stock repurchase activity during the second quarter ended June 26, 2022 was as follows:
| Period |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program |
Maximum Approximate Dollar Value that May Yet be Purchased under the Program – Amounts in thousands |
||||||||||||
| March 28, 2022 to May 1, 2022 |
— | — | — | $ | 24,966 | |||||||||||
| May 2, 2022 to May 29, 2022 |
238,715 | $ | 18.75 | 238,715 | $ | 20,489 | ||||||||||
| May 30, 2022 to June 26, 2022 |
291,019 | 17.41 | 291,019 | $ | 15,423 | |||||||||||
| Totals for the fiscal quarter |
529,734 | $ | 18.01 | 529,734 | $ | 15,423 | ||||||||||
Subsequent to the end of the second quarter, the Company's Board of Directors approved a new share repurchase program under which the Company is authorized to repurchase up to $60.0 million of outstanding common stock from time to time in the open market, through negotiated transactions or otherwise (including, without limitation, the use of Rule 10b5-1 plans), depending on share price, market conditions and other factors. The new share repurchase program replaces, as of August 9, 2022, the Company's previous share repurchase program announced in October 2019. The previous share repurchase program had permitted the repurchase of up to $60 million of outstanding common stock, of which approximately $15.4 million remains unused. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of its shares, and the program has no termination date. The Company intends to conduct any open market share repurchase activities in compliance with the safe harbor provisions of Rule 10b-18 of the Exchange Act. The Company's Credit Agreement currently does not limit dividends and share repurchases if the Company's Consolidated Leverage Ratio is less than 2.50:1.00 and holds a minimum liquidity of $25.0 million. As of June 26, 2022 our Consolidated Leverage Ratio was less than 2.50:1.00.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
Amendments to Articles of Incorporation or Bylaws.
On August 4, 2022, the Board of Directors (the "Board") of the Company approved amendments to the Company’s bylaws (as amended, the “Amended and Restated Bylaws”), effective as of that date.
The amendments add a new Section 10 of Article VI to specify the forum in which certain state law-based claims may be brought against or on behalf of the Company. With respect to the advance notice provisions concerning stockholder nominations of directors and stockholder proposals (other than pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended) to be brought before a meeting of stockholders, the amendments clarify Sections 11 and 12 of Article II, respectively, with regard to eligibility requirements and expand the information and representations that a stockholder proponent must include in a written notice to the Company for purposes of making such nominations or proposing such matters. In particular, Article II, Sections 11 and 12 of the Amended and Restated Bylaws were revised to require, among others, a signed questionnaire and written representation agreement from each person a stockholder proposes to nominate for election as a director and additional information about a stockholder proponent’s financial interests and intentions.
The foregoing description of the bylaw amendments is only a summary and is qualified in its entirety by reference to the complete text of the Amended and Restated Bylaws, a copy of which is attached hereto as Exhibit 3.1 and is incorporated herein by reference.
Compensatory Arrangements of Certain Officers.
On August 4, 2022, the Board, at the recommendation of the Compensation Committee of the Board (the “Committee”), authorized and approved revised employment agreements by and between the Company and each of Cheryl J. Henry (the “Henry Employment Agreement”), Kristy Chipman (the “Chipman Employment Agreement”), Marcy Lynch (the “Lynch Employment Agreement”), and David Hyatt (the “Hyatt Employment Agreement”). These employment agreements were executed on August 4, 2022 and were effective as of August 1, 2022.
Henry Employment Agreement
The principal changes in the Henry Employment Agreement were to clarify the circumstances under which Ms. Henry may terminate her employment for “Good Reason” and to clarify the Severance Benefits and Change in Control payments to be paid to Ms. Henry in the event of a termination and/or a Change in Control. The Henry Employment Agreement also reflects Ms. Henry’s current salary amount, which was approved by the Board earlier this year.
Chipman, Lynch, and Hyatt Employment Agreements
The principal changes in each of the Chipman Employment Agreement, Lynch Employment Agreement, and Hyatt Employment Agreement were to clarify the circumstances under which Ms. Chipman, Ms. Lynch, and Mr. Hyatt may terminate their respective employment for “Good Reason” and to provide for accelerated vesting of all granted equity incentives in the event their respective employment is terminated by the Company without “Cause” or by the employee for “Good Reason” within 18 months following a Change in Control. In addition to other conforming changes, these agreements also reflect current salary amounts for Ms. Chipman, Ms. Lynch, and Mr. Hyatt, which were approved by the Board earlier this year.
The foregoing descriptions of the Henry Employment Agreement, Chipman Employment Agreement, Lynch Employment Agreement, and Hyatt Employment Agreement are qualified in their entirety by reference to such agreements, which are attached hereto as exhibits 10.1 – 10.4, respectively, and are incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RUTH’S HOSPITALITY GROUP, INC. |
||
| By: |
/s/ CHERYL J. HENRY |
|
| Cheryl J. Henry |
||
| Chairperson of the Board, President and Chief Executive Officer |
||
| (Principal Executive Officer) |
||
| By: |
/s/ KRISTY CHIPMAN |
|
| Kristy Chipman |
||
| Executive Vice President, Chief Financial Officer, and Chief Operating Officer (Principal Financial and Accounting Officer) |
||
Date: August 5, 2022
Exhibit 3.1
AMENDED AND RESTATED BY‑LAWS
OF
RUTH’S HOSPITALITY GROUP, INC.
A Delaware corporation
(Adopted as of August 4, 2022)
ARTICLE I
    OFFICES
Section 1. Registered Office. The registered office of Ruth’s Hospitality Group, Inc. (the “Corporation”) in the State of Delaware shall be located at 251 Little Falls Drive, in the City of Wilmington, County of New Castle, 19808. The name of the Corporation’s registered agent at such address shall be Corporation Service Company. The registered office and/or registered agent of the Corporation may be changed from time to time by action of the Board of Directors of the Corporation (the “Board of Directors”).
Section 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II
    MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting.
Section 2. Annual Meeting. An annual meeting of the stockholders shall be held each year at such time as is specified by the Board of Directors. At the annual meeting, stockholders shall elect directors and transact such other business as properly may be brought before the annual meeting pursuant to Section 12 of ARTICLE II hereof.
Section 3. Special Meetings. Special meetings of stockholders may only be called in the manner provided in the Corporation’s certificate of incorporation as then in effect (the “Certificate of Incorporation”).
Section 4. Notice of Meetings. Whenever stockholders are required or permitted to take action at a meeting, written notice of each annual and special meeting of stockholders stating the date, time and place of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote thereat not less than 10 nor more than 60 days before the date of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Notice shall be given personally or by mail and, if by mail, shall be sent in a postage prepaid envelope, addressed to the stockholder at his, her or its address as the same appears on the records of the Corporation. Notice by mail shall be deemed given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any written waiver of notice.
Section 5. List of Stockholders. The officer having charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by the General Corporation Law of the State of Delaware or by the Certificate of Incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. When a specified item of business requires a vote by a class or series (if the Corporation shall then have outstanding shares of more than one class or series) voting as a class or series, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless by express provisions of an applicable law or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware, the Certificate of Incorporation, the certificate of designation relating to any outstanding class or series of preferred stock or these By‑laws, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular.
Section 11. Advance Notice Provisions for Election of Directors.
(a) Only persons who are nominated in accordance with the procedures set forth in these By‑laws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By‑law, who is entitled to vote generally in the election of directors at the meeting and who shall have complied in all respects with Section 11(b).
(b)
(i) In order for a stockholder to nominate a person for election to the Board of Directors at a meeting of stockholders, such stockholder shall have delivered timely notice of such stockholder’s intent to make such nomination in writing to the secretary of the Corporation. To be timely, a stockholder’s notice to the secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than 90 nor more than 120 days prior to the date of the first anniversary of the previous year’s annual meeting; provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made and (ii) in the case of a special meeting at which directors are to be elected, not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made.
(ii) To be in proper form, a stockholder’s notice shall (A) set forth as to each person whom the stockholder proposes to nominate for election as a director at such meeting (1) the name, age, business address and residence address of the person, (2) the principal occupation or employment of the person, (3) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person, (4) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among (x) the stockholder, the beneficial owner, if any, on whose behalf the nomination is being made and the respective affiliates and associates of, or others acting in concert with, such stockholder and such beneficial owner, on the one hand, and (y) each proposed nominee, on the other hand, including all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made or any affiliate or associate thereof or person acting in concert therewith were the “registrant” for purposes of such Item and the proposed nominee were a director or executive officer of such registrant and (5) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (B) enclose a completed and signed questionnaire and written representation agreement (each as required by Section 11(d) of this ARTICLE II) from each person whom the stockholder proposes to nominate for election as a director at such meeting; and (C) set forth as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is being made (1) the name and record address of such stockholder and of such beneficial owner, (2) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner, (3) a description of all arrangements or understandings between such stockholder and/or such beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (4) a description of any agreement, arrangement or understanding (including any derivative or short positions, swaps, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into by, or on behalf of, such stockholder or such beneficial owner, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner with respect to shares of stock of the Corporation, (5) any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, (6) a representation that such stockholder is a stockholder of record of the Corporation entitled to vote at the applicable meeting, will continue to be a stockholder of record of the Corporation entitled to vote at such meeting through the date of such meeting and intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (7) a representation whether such stockholder and/or such beneficial owner intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock reasonably believed by such stockholder or such beneficial owner to be sufficient to elect the proposed nominee (and such representation shall be included in any such proxy statement and form of proxy) and/or (y) otherwise to solicit proxies or votes from stockholders in support of such nomination (and such representation shall be included in any such solicitation materials). Not later than 10 days after the record date for the meeting, the information required by Items (A)(1)-(5) and (C)(1)-(5) of the prior sentence shall be supplemented by the stockholder giving the notice to provide updated information as of the record date. In addition, the stockholder’s notice must be accompanied by a notarized written consent of each proposed nominee to being named as a nominee (including in the proxy statement relating to such election) and to serve at least one term as a director if elected.
(iii) The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation or whether such nominee would be independent under applicable Securities and Exchange Commission and stock exchange rules and the Corporation’s Corporate Governance Guidelines and Code of Conduct & Business Ethics.
(iv) A stockholder shall not have complied with this Section 11(b) if the stockholder (or beneficial owner, if any, on whose behalf the nomination is made) solicits or does not solicit, as the case may be, proxies or votes in support of such stockholder’s nominee in contravention of the representations with respect thereto required by this section. For purposes of this Section 11(b), “public disclosure” shall mean disclosure in a Current Report on Form 8-K (or any successor form) or in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service.
(v) A stockholder shall not have complied with this Section 11(b) unless, in addition to the foregoing, such stockholder has also at all times complied, and continues to comply, with the Exchange Act and the rules and regulations thereunder, and all other applicable federal, state and other legal requirements, with respect to the matters set forth or referred to in this Section 11(b).
(c) No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this section. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this section, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. A stockholder seeking to nominate a person to serve as a director must also comply with all applicable requirements of the Exchange Act, and the rules and regulations thereunder with respect to the matters set forth in this section.
(d) To be eligible to be a nominee for election or reelection as a director of the Corporation pursuant to this Section 11, a proposed nominee must deliver (in the case of nominee nominated by a stockholder of the Corporation pursuant to this Section 11, in accordance with the time periods and other requirements prescribed for delivery of notice under these By-laws and applicable law) to the Secretary at the principal executive offices of the Corporation (i) a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (in the form to be provided by the Secretary upon written request of any stockholder of record within 10 days of such request) and (ii) a written representation and agreement (in the form to be provided by the Secretary upon written request of any stockholder of record within 10 days of such request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding (whether written or oral) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote in such capacity on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding (whether written or oral) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (C) if elected as director of the Corporation, intends to serve for a full term on the Board of Directors and (D) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable laws and all applicable rules of the exchanges upon which the securities of the Corporation are listed and all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and other guidelines of the Corporation duly adopted by the Board of Directors.
Section 12. Advance Notice Provisions for Other Business to be Conducted at an Annual Meeting.
(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) brought before the meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) otherwise properly brought before the meeting by a stockholder.
(b)
(i) For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder’s notice to the secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 nor more than 120 days prior to the date of the first anniversary of the previous year’s annual meeting; provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the 10th day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever occurs first.
(ii) To be in proper form, a stockholder’s notice to the secretary shall set forth (A) as to each matter the stockholder proposes to bring before the annual meeting, (1) a brief description of the business desired to be brought before the annual meeting, (2) the text of the proposal (including the exact text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the bylaws, the exact text of the proposed amendment), and (3) the reasons for conducting such business at the annual meeting, and (B) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is being made (1) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, and of such beneficial owner, (2) the class and number of shares of the Corporation which are beneficially owned by the stockholder and such beneficial owner, (3) any material interest of the stockholder or such beneficial owner in such business, (4) a description of any agreement, arrangement or understanding between or among such stockholder and/or such beneficial owner and any other person or persons (including their names) in connection with the proposal of such business, (5) a description of any agreement, arrangement or understanding (including any derivative or short positions, swaps, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into by, or on behalf of, such stockholder or such beneficial owner, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner with respect to shares of stock of the Corporation, (6) any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the business proposed pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, (7) a representation that such stockholder is a stockholder of record of the Corporation entitled to vote at the applicable meeting, will continue to be a stockholder of record of the Corporation entitled to vote at such meeting through the date of such meeting and intends to appear in person or by proxy at the annual meeting to bring such business before the meeting and (8) a representation whether such stockholder and/or such beneficial owner intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal (and such representation shall be included in any such proxy statement and form of proxy) and/or (y) otherwise to solicit proxies or votes from stockholders in support of such proposal (and such representation shall be included in any such solicitation materials). Not later than 10 days after the record date for the meeting, the information required by Items (A)(3) and (B)(1)-(6) of the prior sentence shall be supplemented by the stockholder giving the notice to provide updated information as of the record date.
(iii) Notwithstanding anything in these By‑laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this section. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this section; if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. For purposes of this section, “public disclosure” shall mean disclosure in a Current Report on Form 8-K (or any successor form) or in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service. Nothing in this section shall be deemed to affect any rights of (A) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a‑8 under the Exchange Act or (B) the Corporation to omit a proposal from the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.
(iv) A stockholder shall not have complied with this Section 12(b) unless, in addition to the foregoing, such stockholder has also at all times complied, and continues to comply, with the Exchange Act and the rules and regulations thereunder, and all other applicable federal, state and other legal requirements, with respect to the matters set forth or referred to in this Section 12(b).
Section 13. Fixing a Record Date for Stockholder Meetings. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 14. Fixing a Record Date for Other Purposes. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
ARTICLE III
    DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to such powers as are herein and in the Certificate of Incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of the laws of Delaware, the Certificate of Incorporation and these By‑laws.
Section 2. Annual Meetings. The annual meeting of the Board of Directors shall be held without other notice than this By‑law immediately after, and at the same place as, the annual meeting of stockholders.
Section 3. Regular Meetings and Special Meetings. Regular meetings, other than the annual meeting, of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the Board of Directors. Special meetings of the Board of Directors may be called by the chairman of the board, the president (if the president is a director) or, upon the written request of at least a majority of the directors then in office.
Section 4. Notice of Meetings. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by law or these By-laws. Notice of each special meeting of the Board of Directors, and of each regular and annual meeting of the Board of Directors for which notice shall be required, shall be given by the secretary as hereinafter provided in this Section 4, in which notice shall be stated the time and place of the meeting. Except as otherwise required by these By-laws, such notice need not state the purposes of such meeting. Notice of any special meeting, and of any regular or annual meeting for which notice is required, shall be given to each director at least (a) 24 hours before the meeting if by telephone or by being personally delivered or sent by telex, telecopy, email or similar means or (b) 5 days before the meeting if delivered by mail to the director’s residence or usual place of business. Such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage prepaid, or when transmitted if sent by telex, telecopy, email or similar means. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Any director may waive notice of any meeting by a writing signed by the director entitled to the notice and filed with the minutes or corporate records.
Section 5. Waiver of Notice and Presumption of Assent. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.
Section 6. Chairman of the Board, Quorum, Required Vote and Adjournment. The Board of Directors shall elect, by the affirmative vote of a majority of the total number of directors then in office, a chairman of the board, who shall preside at all meetings of the stockholders and Board of Directors at which he or she is present and shall have such powers and perform such duties as the Board of Directors may from time to time prescribe. If the chairman of the board is not present at a meeting of the stockholders or the Board of Directors, the president (if the president is a director and is not also the chairman of the board) shall preside at such meeting, and, if the president is not present at such meeting, a majority of the directors present at such meeting shall elect one of their members to so preside. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business. Unless by express provision of an applicable law, the Certificate of Incorporation or these By‑laws a different vote is required, the vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Committees. The Board of Directors (i) may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, including an executive committee, consisting of one or more of the directors of the Corporation, and (ii) shall during such period of time as any securities of the Corporation are listed on NASDAQ, by resolution passed by a majority of the entire Board of Directors, designate all committees required by the rules and regulations of NASDAQ. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except to the extent restricted by applicable law or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors. Each such committee shall serve at the pleasure of the Board of Directors as may be determined from time to time by resolution adopted by the Board of Directors or as required by the rules and regulations of NASDAQ, if applicable. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors upon request.
Section 8. Committee Rules. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board of Directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. Unless otherwise provided in such a resolution, in the event that a member and that member’s alternate, if alternates are designated by the Board of Directors, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.
Section 9. Communications Equipment. Members of the Board of Directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear and speak with each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting.
Section 10. Action by Written Consent. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of such board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.
Section 11. Compensation. The Board of Directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.
Section 12. Reliance on Books and Records. A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of such person’s duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
ARTICLE IV
    OFFICERS
Section 1. Number. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a chairman of the board, a chief executive officer, a president, one or more vice‑presidents, a secretary, a chief financial officer and such other officers and assistant officers as may be deemed necessary or desirable by the Board of Directors. Any number of offices may be held by the same person, except that neither the chief executive officer nor the president shall also hold the office of secretary. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the Board of Directors may be removed by the Board of Directors at its discretion, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors.
Section 5. Compensation. Compensation of all executive officers shall be approved by the Board of Directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the Corporation; provided however, that compensation of some or all executive officers may be determined by a committee established for that purpose if so authorized by the unanimous vote of the Board of Directors or as required by applicable law or regulation, including any exchange or market upon which the Corporation’s securities are then listed for trading or quotation.
Section 6. Chairman of the Board. The chairman of the board shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and perform such other duties as may be prescribed to him or her by the Board of Directors or provided in these By‑laws.
Section 7. Chief Executive Officer. The chief executive officer shall have the powers and perform the duties incident to that position. Subject to the powers of the Board of Directors and the chairman of the board, the chief executive officer shall be in the general and active charge of the entire business and affairs of the Corporation, and shall be its chief policy making officer. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these By‑laws. The chief executive officer is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chief executive officer shall perform all the duties and responsibilities and exercise all the powers of the president.
Section 8. The President. The president of the Corporation shall, subject to the powers of the Board of Directors, the chairman of the board and the chief executive officer, have general charge of the business, affairs and property of the Corporation, and control over its officers, agents and employees. The president shall see that all orders and resolutions of the Board of Directors are carried into effect. The president is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the chief executive officer, the Board of Directors or as may be provided in these By‑laws.
Section 9. Vice‑Presidents. The vice‑president, or if there shall be more than one, the vice‑presidents in the order determined by the Board of Directors or the chairman of the board, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice‑presidents shall also perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By‑laws may, from time to time, prescribe. The vice‑presidents may also be designated as executive vice‑presidents or senior vice‑presidents, as the Board of Directors may from time to time prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the Board of Directors (other than executive sessions thereof) and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose or shall ensure that his or her designee attends each such meeting to act in such capacity. Under the chairman of the board’s supervision, the secretary shall give, or cause to be given, all notices required to be given by these By‑laws or by law; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By‑laws may, from time to time, prescribe; and shall have custody of the corporate seal of the Corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, any of the assistant secretaries, shall in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president, or secretary may, from time to time, prescribe.
Section 11. The Chief Financial Officer. The chief financial officer shall have the custody of the corporate funds and securities; shall keep full and accurate all books and accounts of the Corporation as shall be necessary or desirable in accordance with applicable law or generally accepted accounting principles; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the chairman of the board or the Board of Directors; shall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the Corporation; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these By‑laws may, from time to time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these By‑laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the Board of Directors.
Section 13. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer’s place during such officer’s absence or disability, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person selected by it.
ARTICLE V
    CERTIFICATES OF STOCK
Section 1. Form. The shares of stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of stock of the Corporation shall be uncertificated shares of stock. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by a certificate and, upon request, every holder of uncertificated shares shall be entitled to have a certificate, signed by, or in the name of the Corporation by the chairman of the board, the chief executive officer or the president and the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such a certificate is countersigned (i) by a transfer agent or an assistant transfer agent other than the Corporation or its employee or (ii) by a registrar, other than the Corporation or its employee, the signature of any such chairman of the board, chief executive officer, president, secretary or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. Shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates and record the transaction on its books. The Board of Directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the Corporation.
Section 2. Lost Certificates. The Corporation may issue or direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 3. Registered Stockholders. Prior to the surrender to the Corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.
ARTICLE VI
    GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, in accordance with applicable law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of applicable law and the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation.
Section 3. Contracts. In addition to the powers otherwise granted to officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
Section 5. Corporate Seal. The Board of Directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Notwithstanding the foregoing, no seal shall be required by virtue of this section.
Section 6. Voting Securities Owned By Corporation. Voting securities in any other Corporation held by the Corporation shall be voted by the chief executive officer, the president or a vice‑president, unless the Board of Directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.
Section 7. Inspection of Books and Records. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.
Section 8. Section Headings. Section headings in these By‑laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.
Section 9. Inconsistent Provisions. In the event that any provision of these By‑laws is or becomes inconsistent with any provision of the Certificate of Incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these By‑laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.
Section 10. Forum for Adjudication of Disputes. Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation or these Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or these Bylaws or (v) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware, or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware (each, a “Covered Action”). Any person purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be (i) deemed to have notice of and consented to the provisions of this Section 10 of ARTICLE VI, and (ii) deemed to have waived any argument relating to the inconvenience of the forums referenced above in connection with any action or proceeding described in this Section 10 of ARTICLE VI. This paragraph does not apply to claims for which the federal courts have exclusive jurisdiction.
If any provision or provisions of this Section 10 of ARTICLE VI shall be held to be invalid, illegal or unenforceable as applied to any person or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provision(s) in any other circumstance and of the remaining provisions of this Section 10 of ARTICLE VI (including, without limitation, each portion of any sentence of this Section 10 of ARTICLE VI containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons and circumstances shall not in any way be affected or impaired thereby.
ARTICLE VII
    AMENDMENTS
These By-laws may be amended, altered, changed or repealed or new By-laws adopted only in accordance with Article Six of the Certificate of Incorporation.
Exhibit 10.1
Employment Agreement
Ruth’s Hospitality Group, Inc. (hereafter referred to as “Employer”) and Cheryl J. Henry (hereinafter referred to as “Employee”) agree upon the following terms of employment of Employee by Employer. This employment agreement (this “Agreement”) shall take effect as of August 1, 2022 (the “Effective Date”).
WHEREAS, Employer and Employee are currently party to that certain Terms of Employment/Letter of Understanding and Salary Continuation Agreement, dated as of June 4, 2018 (the “Prior Agreement”), which, prior to the Effective Date, governs the employment relationship between Employer and Employee; and
WHEREAS, Employer and Employee wish to terminate the Prior Agreement and enter into this Agreement, which, as of the Effective Date, will govern the employment relationship between Employer and Employee.
NOW THEREFORE, in consideration of Employer’s continued employment of Employee and the mutual obligations and rights set forth in this Agreement, the parties hereto agree as follows:
1. Duties. Employee shall be employed during the Employment Term (as defined in Section 3) in the position of President and Chief Executive Officer. Employee will advance the best interests of Employer at all times during their employment and shall at all such times faithfully, industriously and to the best of their ability, perform all duties as may be required of them by virtue of their title and position and in accordance with the job description for his/her title and position as established by Employer’s Board of Directors (the “Board”) and/or its designee from time to time. Employee shall report solely and directly to the Board. Employee shall comply with any and all written personnel policies, corporate policies and employment manuals of Employer in the conduct of their duties. During the Employment Term, Employee will be nominated to the slate of proposed directors put to shareholder vote for possible election as a member of the Board.
2. Extent of Service. Employee shall continue to devote their full time and best efforts to the performance of their duties to Employer, its parent and subsidiary entities, affiliates, successors and assigns (collectively, the “Employer Group”). Employee shall not engage in any business or perform any services in any capacity that would, in the reasonable judgment of the Board, interfere with the full and proper performance by Employee of their duties. The foregoing is not intended to restrict Employee’s ability to: (a) engage in charitable, civic or community activities to the extent that such activities do not materially interfere with their duties hereunder; (b) serve on the board of directors (or similar governing bodies) of another company (provided that, the Board, in its sole discretion, has granted prior written consent, which consent shall not be reasonably withheld); nor (c) to enter into passive investments that do not compete in any way with Employer’s business.
3. Term/Annual Renewals. This Agreement shall expire and terminate and be of no further effect (with the exception of periods herein that, by their terms, survive the termination of this Agreement) on the close of business of the first anniversary of the Effective Date; provided, however, that this Agreement shall automatically renew and extend for additional one-year periods if Employee is not otherwise in default, remains in the employ of Employer, and neither Employer or Employee has given the other party a minimum of 60 days’ notice prior to the expiration of any given one-year period that this Agreement shall terminate upon expiration of the applicable period. The period of Employee’s employment with Employer pursuant to the terms hereof shall be referred to herein as the “Employment Term.”
4. Compensation.
a. Salary. For all duties to be performed by Employee in the capacity referenced hereunder, Employee shall receive an annual base salary of $775,000 (as adjusted, the “Base Salary”), less all applicable taxes and withholdings that cannot be reduced and that shall be paid in accordance with Employer’s normal payroll practice. Employee’s Base Salary will be subject to annual review by the Compensation Committee of the Board of Directors (the “Compensation Committee”).
b. Annual Bonus. Following the end of each fiscal year, Employee will be entitled to a discretionary bonus of up to 130% of their then-current Base Salary (the “Annual Bonus”), based on achievement (as determined by the Compensation Committee) of the budget and performance targets set by the Compensation Committee on an annual basis pursuant to Employer’s annual bonus plan applicable to the Employer’s senior executives (the “Bonus Plan”) and which may be increased or decreased according to the Bonus Plan. The Annual Bonus, if earned, shall be paid to Employee after the issuance of Employer’s audited financial statements relating to the applicable bonus performance year, but in any event by March 15 of the calendar year following the applicable performance year.
c. Automobile Allowance. During the Employment Term, Employee shall receive from Employer a monthly automobile allowance of $1,000, less applicable taxes and withholdings.
5. Benefits.
a. Vacation/Leave. Employee shall be entitled to four weeks of paid vacation per calendar year, with normal sick and holiday leave as defined by Employer’s policies.
b. Benefit Plans. Employee shall be entitled to participate in the health and welfare plans provided by Employer for its executives (including any and all applicable retirement plans) to the extent that Employee is eligible under the plan documents governing those programs. Employer benefits are subject to change at any time in Employer’s sole discretion.
c. Reimbursement of Expenses. Employer agrees to reimburse Employee for reasonable and appropriate Employer-related expenses (as determined by Employer) paid by Employee in furtherance of their duties, including, but not limited to, travel expenses, food, lodging, entertainment expenses and automobile expenses, upon submission of proper accounting records for such expenses.
6. Termination. Notwithstanding any other provision hereof, the Employment Term shall be terminated as set forth in this Section a. The date on which the Employment Term ends pursuant to the terms hereof shall be referred to herein as the “Separation Date.”
a. General. If the Employment Term ends for any reason (whether pursuant to actions taken by Employer, Employee or otherwise), then Employer shall pay or provide to Employee (or Employee’s legal representative or estate, if applicable): (i) any earned but unpaid Base Salary or Annual Bonus through the Separation Date; (ii) any unpaid expense reimbursements in accordance with applicable policy (including any automobile reimbursements, if applicable); (iii) any accrued but unused vacation, which amounts shall be paid to Employee in a lump sum within 30 days following the Separation Date; and (iv) vested employee benefits payable in accordance with the terms of the applicable employee benefit plan (collectively, the “Accrued Obligations”). Except as otherwise specifically provided herein, Employee’s rights in respect of equity-related awards will be determined by the terms of the applicable plan and agreement.
b. Disability or Incapacity. If, for a period of 12 consecutive months during the Employment Term, Employee is disabled or incapacitated for mental, physical or other cause to the extent that she is unable to perform their duties as herein contemplated during such 12-month period, Employer shall immediately thereafter have the right to terminate this Agreement upon providing ten days’ written notice to Employee and shall be obligated to pay Employee compensation up to the date of such termination.
c. Death. Employee’s employment with Employer shall terminate immediately upon Employee’s death. In the event of Employee’s death, Employer shall pay Employee’s Accrued Obligations and any outstanding Severance Benefits to either (i) the beneficiary or beneficiaries designated in writing by Employee to Employer and delivered to Employer prior to Employee’s death or (ii) in the absence of such designation, in accordance with Section 222.15, Florida Statutes, or if there are no such family members, then to Employee’s estate.
d. With or Without Cause. Employer may terminate Employee’s employment for any reason, with or without Cause, at any time. For purposes of this Agreement, “Cause” shall mean any of the following: (i) Employee’s theft or embezzlement, or attempted theft or embezzlement, of money or property of the Employer Group, their perpetuation or attempted perpetuation of fraud, or their participation in a fraud or attempted fraud, in respect of the Employer Group or their unauthorized appropriation of, or their attempt to misappropriate, any tangible or intangible assets or property of the Employer Group; (ii) any material act or acts of disloyalty, misconduct or moral turpitude by Employee injurious to the interest, property, operations, business or reputation of the Employer Group or their commission of a crime that results in injury to any member of the Employer Group; or (iii) Employee’s willful disregard of lawful directive given by a superior or the Board or a violation of an Employer employment policy injurious to the interest of Employer; provided that, in each case, Employee shall have been given written notice from Employer describing in reasonable detail the event or circumstance Employer believes gives rise to a right to terminate Employee for Cause and Employee shall have 15 days to remedy the condition to the satisfaction of Employer. Employee’s failure to cure such condition(s) within such 15-day period shall result in the termination of Employee for Cause.
e. With or Without Good Reason. Employee may terminate their employment with Employer for any reason, with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) a material diminution of, or the assignment by the Board to Employee of any material duties that are clearly inconsistent with, Employee’s status, title and position as President and Chief Executive Officer of Employer (which includes Employee no longer holding their title in the ultimate parent company of Employer following a Change in Control (as defined below) of Employer); (ii) a reduction in Employee’s Base Salary or target bonus opportunity or a failure by Employer to pay Employee any amounts required to be paid under this Agreement, which failure continues uncured for a period of 15 days after written notice thereof is given by Employee to the Board; (iii) the requirement that Employee relocate their principal work location by more than 50 miles from the Company’s headquarters at 1030 West Canton Ave., Winter Park, FL 32789, other than in a direction that reduces Employee’s daily commuting distance; (iv) Employer provides Employee notice as contemplated by Section 3 of its decision not to renew this Agreement on the terms set forth herein; or (v) a material breach of the Agreement by Employer or any material and repeated interference by the Board or any Employer employee or stockholder with Employee’s ability or authority to discharge their duties or responsibilities hereunder that continues after the reasonable notice and opportunity to cure. Notwithstanding the occurrence of any of the foregoing events or circumstances, a resignation shall not be deemed to constitute resignation for Good Reason unless (x) Employee gives Employer written notice of the purported Good Reason not more than 60 days after the initial existence of such event or circumstance, (y) such event or circumstance has not been cured within 30 days following Employer’s receipt of such notice and (z) if Employer does not cure such circumstance, Employee actually terminates their employment not more than 30 days following the end of the applicable cure period.
f. Severance Benefits. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason, then Employee shall be entitled to receive the following benefits (collectively, the “Severance Benefits”): (i) an amount equal to two times Employee’s then-current Base Salary, payable in 24 equal monthly installments following the Separation Date; (ii) an amount equal to Employee’s Annual Bonus for the performance year immediately preceding the year of the Separation Date, payable in 12 equal monthly installments following the Separation Date; (iii) a prorated share (based on the amount of days employed during the applicable performance year) of the Employee’s Annual Bonus for the year of the Separation Date, based on actual performance for the year and payable when such Annual Bonus would have otherwise been payable (but no later than March 15 of the year immediately following the year of the Separation Date); (iv) continued health, welfare and retirement benefits according to the same terms and conditions to which Employee would have been entitled for 24 months following the Separation Date; (v) continued automobile allowances (as set forth in Section 4) for one automobile, including reimbursement for fuel and routine maintenance costs, for 24 months following the Separation Date; and (vi) each of Employee’s stock options and restricted stock or restricted stock unit awards granted under the Incentive Plan (as defined below) during the Employment Term shall continue to be eligible to vest for 24 months following the Separation Date in accordance with their terms. The Severance Benefits are contingent on Employee’s compliance with Section 7 and Employee entering into a separation and release of claims agreement in a form substantially consistent with Exhibit A (the “Release”), and which Release must become irrevocable within 60 days following the Separation Date. Employer will provide Employee with the Severance Benefits, as applicable, in accordance with Employer’s regular payroll practices, on or commencing on the first payroll period and paid monthly thereafter following the date the Release becomes irrevocable. To the extent that any of the benefits provided under this Section 6f constitutes “non-qualified deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the 60th day following the Separation Date, but for the condition on executing the Release, shall not be made until the first regularly scheduled payroll date following such 60th day, after which any remaining benefits shall thereafter be provided to Employee according to the applicable schedule set forth herein. For the sake of clarity, in the event of any termination of Employee’s employment for a reason other than Cause or for Good Reason, the Employee will be entitled solely to the Accrued Obligations.
g. Change in Control. In the event of a Change in Control (as defined in Employer’s 2018 Omnibus Incentive Plan (the “Incentive Plan”)) at any time during the Employment Term, Employee shall become entitled to the following (i) a cash lump payment of an amount equal to the Severance Benefits set forth in Section 6f (i), (ii), (iii), and (v), payable within 60 days following the Change in Control; and (ii) the accelerated vesting of 100% of all equity incentives granted under the Incentive Plan (with performance vested equity being deemed to have vested at target level performance). The benefits set forth in this Section 6g are in addition to, and are not a replacement of, the Severance Benefits set forth in Section 6f.
7. Restrictive Covenants.
a. Disclosure of Information. Employee hereby acknowledges and agrees that the Employer Group’s Confidential Information (as defined below) is regarded as valuable by Employer, is not generally known in the relevant industry, and that the Employer Group has a legitimate right and business need to protect its Confidential Information. Employee acknowledges that keeping the Employer Group’s Confidential Information confidential is essential to the growth and stability of the Employer Group. Employee therefore agrees to hold such information in strictest confidence and shall not at any time, directly or indirectly, disclose such information to any third party or use such information other than for the benefit of the Employer Group. Employee shall disclose such information only to employees, representatives, and agents of the Employer Group with a need to know such information. The restrictions set forth in this paragraph shall apply during the Employment Term and following the termination of employment until the end of time, whether the termination of employment is voluntary or involuntary. For purposes of this Agreement, “Confidential Information” shall mean any information, knowledge, or data with respect to the Employer Group’s business, services, trade secrets, technologies, systems, clients, prospects, and sales, marketing and service methods, including, but not limited to, discoveries, ideas, concepts, designs, drawings, specifications, equipment, techniques, computer flow charts and programs, computer software (whether owned or licensed by the Employer Group), hardware, firmware, models, data, documentation, manuals, diagrams, research and development, performance information, know-how, business pricing policies and other internal policies, data systems, methods, systems documentation, practices, inventions, processes, procedures, formulae, employee lists or resumes, financial information (including financial statements), tax returns, client lists, prospect lists, information relating to past, present or prospective clients, information belonging to the Employer Group’s clients, personally identifiable information of clients’ employees, salary and benefit information of clients’ employees, market analysis, strategies, plans and projections for future growth and development, and compilations of information which are not readily available to the general public. Confidential Information includes all software development information, source and object codes, all information stored or maintained in any computer system or program used or maintained by the Employer Group, all information stored or maintained in any laptop computer or handheld device provided by the Employer Group to Employee, all client files, prospect files, legal contracts, purchase orders, and all information relating to client or vendor pricing. All of the foregoing information, whether oral, written, memorized, or electronically stored, together with analyses, compilations, studies, notes of conversation, or other documents prepared for or by the Employer Group or Employee that contain or otherwise reflect Confidential Information, is also included with the term Confidential Information. Confidential Information does not include (i) any information in the public domain; or (ii) any information received unsolicited from a third party under no obligation of secrecy.
b. Whistleblower Protection. Notwithstanding the foregoing, nothing in this Agreement or in any other agreement between Employee and Employer or any affiliate thereof shall prohibit or restrict Employee from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority (including the U.S. Securities and Exchange Commission) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Employee from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, and/or pursuant to the Sarbanes-Oxley Act; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires Employee to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify Employer or any affiliate that Employee has engaged in any such conduct.
c. Return of Confidential Information. Upon termination of Employee’s employment with Employer for any reason whatsoever or upon the written request of Employer, Employee shall immediately destroy, delete and/or return to Employer all Confidential Information and all copies, abstracts, handwritten records and electronic records thereof, and Employee shall certify in writing to Employer that Employee does not retain originals, copies, abstracts, handwritten records or electronic records of any Confidential Information. Employee agrees that retention of any such Confidential Information in Employee’s memory does not permit Employee to use or disclose such information following Employee’s termination of employment with Employer.
d. Non-Compete. In further consideration of the compensation to be paid to Employee hereunder, Employee acknowledges that in the course of their employment with the Employer Group (which, for purposes of this Section 7d and Section 7e, following a Change in Control, shall only include Employer and its subsidiaries, as determined immediately before such Change in Control), she shall become familiar, and during their employment with Employer they have become familiar, with Employer’s trade secrets and with other Confidential Information concerning the Employer Group (and their respective its predecessors, subsidiaries and affiliates) and that their services have been and shall be of special, unique and extraordinary value to Employer. Therefore, Employee agrees that during their employment and for a period of one year following the Separation Date (the “Non-Compete Period”), Employee shall not directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any business or enterprise identical to or similar to any such business that is engaged in by the Employer Group and its respective franchises, which shall include any restaurant business that derives more than 25% of its revenues from the sale of steak and steak dishes and which has an average guest check greater than $65, escalating by 5% per year, as of the date of this Agreement and which is located in the United States, which shall for purposes of illustration and not limitation include the following chains and their parent companies, subsidiaries and other affiliates: Morton’s Restaurant Group, The Palm, Smith & Wollensky, Del Frisco’s, Sullivan’s, The Capital Grille, Mastro’s, Fleming’s, and Shula’s. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation that is publicly traded, so long as Employee has no active participation in the business of such corporation. This restriction will not apply if Employee is employed as an officer of a business, including, but not limited to, a casino or hotel, that as an ancillary service provides fine dining as defined in this paragraph. The term “ancillary” assumes that less than 50% of the business revenues are derived from its dining facilities.
e. Non-Solicit. Employee acknowledges that the Employer Group’s employees now or hereafter employed by the Employer Group are an integral part of the Employer Group’s business, that information relating to such employees are part of the Employer Group’s Confidential Information, and that the loss of such employees will have a substantial adverse effect on the Employer Group’s business. Therefore, during the term of Employee’s employment with the Employer Group and during the Non-Compete Period, Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any non-hourly or management employee of any member of the Employer Group to leave the employ of the Employer Group or in any way interfere with the relationship between the Employer Group and any employee thereof, (ii) hire any person who was an employee of any member of the Employer Group at any time during Employee’s employment with Employer, unless such person responded to a general solicitation or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of any member of the Employer Group to cease doing business between any such customer, supplier, licensee or business relation and Employer or any subsidiary or affiliate (including, without limitation, making any negative, derogatory or disparaging statements or communications regarding the Employer Group).
f. Reasonableness and Modification of Restrictions. Employee further acknowledges and agrees that the provisions set forth in this Section 7 are reasonable in scope, duration, and area, and are reasonably necessary to protect the legitimate business interests of the Employer Group, and particularly the Employer Group’s interest in protecting its Confidential Information, and the restrictive covenants in this Agreement are in addition to, and not in lieu of, any other agreement between Employee and the Employer Group addressing confidentiality, non-competition and/or non-solicitation. If any provision of this Section 7 is held to be unenforceable due to the scope, duration, or area of its application, the parties intend and agree that the court making such determination shall modify such scope, duration, or area, or all of them to what the court considers reasonable, and such provision shall then be enforced in such modified form.
8. Surrender of Books and Records. Employee acknowledges that all files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials used or created by Employee or used or created by Employer in connection with the conduct of its business, shall at all times remain the property of the Employer Group and that upon termination of employment hereunder, irrespective of the time, manner or cause of said termination, Employee will surrender to Employer all such files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials.
9. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement or the validity, legality or enforceability of such provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when (a) delivered personally or by overnight courier to the following address of the other party hereto (or such other address for such party as shall be specified by notice given pursuant to this Section 10) or (b) sent by email to the following facsimile number of the other party hereto (or such other facsimile number for such party as shall be specified by notice given pursuant to this Section 10), with the confirmatory copy delivered by overnight courier to the address of such party pursuant to this Section 10:
If to Employer, to:
Ruth’s Hospitality Group, Inc.
Attention: General Counsel
1030 West Canton Ave., Suite 100
Winter Park, FL 32789
Email: mlynch@ruthschris.com
If to Employee, to:
the last known address of Employee according to Employer records.
11. Governing Law and Resolution of Dispute. This Agreement shall be governed by and construed in accordance with the laws of or applicable to the State of Florida. Any dispute, controversy or claim arising out of or relating to Employee’s employment hereunder, or the breach therefore, shall be resolved by arbitration conducted in accordance with the rules then existing of the American Arbitration Association, applying the substantive law of the State of Florida. The parties further agree that any such arbitration shall be conducted in Orange County, Florida.
12. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
13. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties (including the Prior Agreement), written or oral, which may have related in any manner to the subject matter hereof.
14. Successors and Assigns. This Agreement may not be assigned by either party without the written consent of the other party hereto. Except as stated herein, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.
15. Withholding. All amounts payable hereunder will be subject to deduction for all required income, payroll and other withholdings.
16. Representations and Warranties. Employee represents, warrants and agrees that she has all right, power, authority and capacity, and is free to enter into this Agreement; that by doing so, Employee will not violate or interfere with the rights of any other person or entity; and that Employee is not subject to any contract, understanding or obligation that will or might prevent, interfere or conflict with or impair Employee’s performance of this Agreement. Employee further represents, warrants, and agrees that she will not enter into any agreement or other obligation while this Agreement is in effect that might conflict or interfere with the operation of this Agreement or his obligations hereunder. Employee agrees to indemnify and hold Employer harmless with respect to any losses, liabilities, demands, claims, fees, expenses, damages and costs (including attorneys’ fees and costs) resulting from or arising out of any claim or action based upon Employee’s entering into this Agreement.
17. Modification. Neither this Agreement nor the provisions contained herein may be extended, renewed, amended or modified other than by a written agreement executed by Employee and Employer.
18. Construction. The rule that a contract is construed against the party drafting the contract is hereby waived, and shall have no applicability in construing this Agreement or the terms hereof. Any headings and captions used herein are only for convenience and shall not affect the construction or interpretation of this Agreement.
19. Legal Representation. The parties understand that this is a legally binding contract and acknowledge and agree that they have had a reasonable opportunity to consult with legal counsel of their choice prior to execution.
20. Survival of Obligations. The parties expressly agree that Employee’s obligations set forth in this Agreement, as well as any other obligations that would naturally survive termination of an employment agreement, shall survive termination of Employee’s employment (whether voluntary or involuntary and whether with or without Cause and whether with or without Good Reason) and shall also survive the end of the term of this Agreement.
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same original instrument. A facsimile signature shall be deemed an original signature for purposes of execution of this Agreement.
22. Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary:
a. General. All provisions of this Agreement are intended to comply with Section 409A of the Code and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of Employee’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.
b. Reimbursements. To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by Employer no later than the last day of Employee’s taxable year following the taxable year in which such expense was incurred by Employee, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that, the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.
c. Payment Dates. If any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Employee’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of Employee’s death or (ii) the date that is six months after the Separation Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to Employee (or Employee’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, Employer makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall Employer be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Employee on account of non-compliance with Section 409A.
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Signature Page FollowsIN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
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EMPLOYER: |
EMPLOYEE: |
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By: __________________________ Name: [●] Its: [●] |
_____________________________ Cheryl J. Henry |
EXHIBIT A
General Release
I, Cheryl J. Henry, in consideration of and subject to the performance by Ruth’s Hospitality Group, Inc. (as such company’s name may change from time to time and including such company’s successors and assigns, the “Company”), of its obligations under the Employment Agreement, dated as of August 1, 2022 (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees, successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “Released Parties”) to the extent provided below (this “General Release”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.
1. Schedule 1 attached hereto sets forth the termination and severance benefits to which I will be entitled in accordance with the terms of this Agreement (the “Severance Benefits”). I understand that the Severance Benefits represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive payment of the Severance Benefits unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy, or arrangement maintained or hereafter established by the Company or its affiliates.
2. Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement that expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators, and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties that I, my spouse, or any of my heirs, executors, administrators, or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under the Agreement; or for compensation or equity or equity-based compensation; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).
3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.
4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 that arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).
5. I agree that I hereby waive all rights to sue or obtain equitable, remedial, or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claim, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding, excepting only any monetary award to which I may become entitled pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Additionally, I am not waiving (a) any right to any accrued base salary earned by me prior to my termination of employment or any severance benefits to which I am entitled under the Agreement, (b) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Company’s organizational documents or otherwise, or (c) my rights as an equity or security holder in the Company or its affiliates.
6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected, and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.
7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.
8. I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees.
9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal, or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.
10. Any nondisclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, any other self-regulatory organization, or any governmental entity.
11. I represent that, as of the effective date of this General Release, I am not aware of any Claim by me other than the Claims that are released by this General Release. I acknowledge that I may hereafter discover Claims or facts in addition to or different than those that I now know or believe to exist with respect to the subject matter of the release set forth in paragraph 2 above and that, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.
12. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision had never been contained herein.
By signing this General Release, I represent and agree that:
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I have read this General Release carefully; |
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I understand all of its terms and know that I am giving up important rights, including, but not limited to, rights under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act of 1963; the Americans with Disabilities Act of 1990; and the Employee Retirement Income Security Act of 1974, as amended; |
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I voluntarily consent to everything in it; |
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I have been advised to consult with an attorney before executing it and I have done so or, after careful reading and consideration, I have chosen not to do so of my own volition; |
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I have had at least 45 days from the date of my receipt of this General Release to consider it, and the changes made since my receipt of this General Release are not material or were made at my request and will not restart the required 45-day period; |
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I understand that I have seven days after the execution of this General Release to revoke it and that this General Release shall not become effective or enforceable until the revocation period has expired; |
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I have signed this General Release knowingly and voluntarily and with the advice of any counsel retained to advise me with respect to it; and |
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I agree that the provisions of this General Release may not be amended, waived, changed, or modified except by an instrument in writing signed by an authorized representative of the Company and by me. |
Signed: ______________________________ Dated: ______________________________
SCHEDULE 1
Severance Benefits
Exhibit 10.2
Employment Agreement
Ruth’s Hospitality Group, Inc. (hereafter referred to as “Employer”) and Kristy Chipman (hereinafter referred to as “Employee”) agree upon the following terms of employment of Employee by Employer. This employment agreement (this “Agreement”) shall take effect as of August 1, 2022 (the “Effective Date”).
WHEREAS, Employer and Employee are currently party to that certain Employment Agreement, dated as of November 30, 2020 (the “Prior Agreement”), which, prior to the Effective Date, governs the employment relationship between Employer and Employee; and
WHEREAS, Employer and Employee wish to terminate the Prior Agreement and enter into this Agreement, which, as of the Effective Date, will govern the employment relationship between Employer and Employee.
NOW THEREFORE, in consideration of Employer’s continued employment of Employee and the mutual obligations and rights set forth in this Agreement, the parties hereto agree as follows:
1. Duties. Employee shall be employed during the Employment Term (as defined in Section 3) in the position of Executive Vice President, Chief Financial Officer and Chief Operating Officer. Employee will advance the best interests of Employer at all times during their employment and shall at all such times faithfully, industriously and to the best of their ability, perform all duties as may be required of them by virtue of their title and position and in accordance with the job description for his/her title and position as established by Employer’s Board of Directors (the “Board”) and/or its designee from time to time. Employee shall report to Employer’s Chief Executive Officer. Employee shall comply with any and all written personnel policies, corporate policies and employment manuals of Employer in the conduct of their duties.
2. Extent of Service. Employee shall continue to devote their full time and best efforts to the performance of their duties to Employer, its parent and subsidiary entities, affiliates, successors and assigns (collectively, the “Employer Group”). Employee shall not engage in any business or perform any services in any capacity that would, in the reasonable judgment of the Board, interfere with the full and proper performance by Employee of their duties. The foregoing is not intended to restrict Employee’s ability to: (a) engage in charitable, civic or community activities to the extent that such activities do not materially interfere with their duties hereunder; (b) serve on the board of directors (or similar governing bodies) of another company (provided that, the Board, in its sole discretion, has granted prior written consent, which consent shall not be reasonably withheld); nor (c) to enter into passive investments that do not compete in any way with Employer’s business.
3. Term/Annual Renewals. This Agreement shall expire and terminate and be of no further effect (with the exception of periods herein that, by their terms, survive the termination of this Agreement) on the close of business of the first anniversary of the Effective Date; provided, however, that this Agreement shall automatically renew and extend for additional one-year periods if Employee is not otherwise in default, remains in the employ of Employer, and neither Employer or Employee has given the other party a minimum of 60 days’ notice prior to the expiration of any given one-year period that this Agreement shall terminate upon expiration of the applicable period. The period of Employee’s employment with Employer pursuant to the terms hereof shall be referred to herein as the “Employment Term.”
4. Compensation.
a. Salary. For all duties to be performed by Employee in the capacity referenced hereunder, Employee shall receive an annual base salary of $550,000 (as adjusted, the “Base Salary”), less all applicable taxes and withholdings that cannot be reduced and that shall be paid in accordance with Employer’s normal payroll practice. Employee’s Base Salary will be subject to annual review by the Compensation Committee of the Board of Directors (the “Compensation Committee”).
b. Annual Bonus. Following the end of each fiscal year, Employee will be entitled to a discretionary bonus of up to 75% of their then-current Base Salary (the “Annual Bonus”), based on achievement (as determined by the Compensation Committee) of the budget and performance targets set by the Compensation Committee on an annual basis pursuant to Employer’s annual bonus plan applicable to the Employer’s senior executives (the “Bonus Plan”) and which may be increased or decreased according to the Bonus Plan. The Annual Bonus, if earned, shall be paid to Employee after the issuance of Employer’s audited financial statements relating to the applicable bonus performance year, but in any event by March 15 of the calendar year following the applicable performance year.
c. Automobile Allowance. During the Employment Term, Employee shall receive from Employer a monthly automobile allowance of $900, less applicable taxes and withholdings.
5. Benefits.
a. Vacation/Leave. Employee shall be entitled to four weeks of paid vacation per calendar year, with normal sick and holiday leave as defined by Employer’s policies.
b. Benefit Plans. Employee shall be entitled to participate in the health and welfare plans provided by Employer for its executives (including any and all applicable retirement plans) to the extent that Employee is eligible under the plan documents governing those programs. Employer benefits are subject to change at any time in Employer’s sole discretion.
c. Reimbursement of Expenses. Employer agrees to reimburse Employee for reasonable and appropriate Employer-related expenses (as determined by Employer) paid by Employee in furtherance of their duties, including, but not limited to, travel expenses, food, lodging, entertainment expenses and automobile expenses, upon submission of proper accounting records for such expenses.
6. Termination. Notwithstanding any other provision hereof, the Employment Term shall be terminated as set forth in this Section a. The date on which the Employment Term ends pursuant to the terms hereof shall be referred to herein as the “Separation Date.”
a. General. If the Employment Term ends for any reason (whether pursuant to actions taken by Employer, Employee or otherwise), then Employer shall pay or provide to Employee (or Employee’s legal representative or estate, if applicable): (i) any earned but unpaid Base Salary or Annual Bonus through the Separation Date; (ii) any unpaid expense reimbursements in accordance with applicable policy (including any automobile reimbursements, if applicable); (iii) any accrued but unused vacation, which amounts shall be paid to Employee in a lump sum within 30 days following the Separation Date; and (iv) vested employee benefits payable in accordance with the terms of the applicable employee benefit plan (collectively, the “Accrued Obligations”). Except as otherwise specifically provided herein, Employee’s rights in respect of equity-related awards will be determined by the terms of the applicable plan and agreement.
b. Disability or Incapacity. If, for a period of 90 consecutive days during the Employment Term, Employee is disabled or incapacitated for mental, physical or other cause to the extent that she is unable to perform their duties as herein contemplated during such 90-day period, Employer shall immediately thereafter have the right to terminate this Agreement upon providing ten days’ written notice to Employee and shall be obligated to pay Employee compensation up to the date of such termination.
c. Death. Employee’s employment with Employer shall terminate immediately upon Employee’s death. In the event of Employee’s death, Employer shall pay Employee’s Accrued Obligations and any outstanding Severance Benefits to either (i) the beneficiary or beneficiaries designated in writing by Employee to Employer and delivered to Employer prior to Employee’s death or (ii) in the absence of such designation, in accordance with Section 222.15, Florida Statutes, or if there are no such family members, then to Employee’s estate.
d. With or Without Cause. Employer may terminate Employee’s employment for any reason, with or without Cause, at any time. For purposes of this Agreement, “Cause” shall mean any of the following: (i) Employee’s theft or embezzlement, or attempted theft or embezzlement, of money or property of the Employer Group, their perpetuation or attempted perpetuation of fraud, or their participation in a fraud or attempted fraud, in respect of the Employer Group or their unauthorized appropriation of, or their attempt to misappropriate, any tangible or intangible assets or property of the Employer Group; (ii) any material act or acts of disloyalty, misconduct or moral turpitude by Employee injurious to the interest, property, operations, business or reputation of the Employer Group or their commission of a crime that results in injury to any member of the Employer Group; or (iii) Employee’s willful disregard of lawful directive given by a superior or the Board or a violation of an Employer employment policy injurious to the interest of Employer; provided that, in each case, Employee shall have been given written notice from Employer describing in reasonable detail the event or circumstance Employer believes gives rise to a right to terminate Employee for Cause and Employee shall have 15 days to remedy the condition to the satisfaction of Employer. Employee’s failure to cure such condition(s) within such 15-day period shall result in the termination of Employee for Cause.
e. With or Without Good Reason. Employee may terminate their employment with Employer for any reason, with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) a material diminution of, or the assignment by the Board to Employee of any material duties that are clearly inconsistent with, Employee’s status, title and position as Executive Vice President, Chief Financial Officer and Chief Operating Officer of Employer (which includes Employee no longer holding their title in the ultimate parent company of Employer following a Change in Control (as defined below) of Employer); (ii) a reduction in Employee’s Base Salary or target bonus opportunity or a failure by Employer to pay Employee any amounts required to be paid under this Agreement, which failure continues uncured for a period of 15 days after written notice thereof is given by Employee to the Board; (iii) the requirement that Employee relocate their principal work location by more than 50 miles from the Company’s headquarters at 1030 West Canton Ave., Winter Park, FL 32789, other than in a direction that reduces Employee’s daily commuting distance; (iv) Employer provides Employee notice as contemplated by Section 3 of its decision not to renew this Agreement on the terms set forth herein; or (v) a material breach of the Agreement by Employer or any material and repeated interference by the Board or any Employer employee or stockholder with Employee’s ability or authority to discharge their duties or responsibilities hereunder that continues after the reasonable notice and opportunity to cure. Notwithstanding the occurrence of any of the foregoing events or circumstances, a resignation shall not be deemed to constitute resignation for Good Reason unless (x) Employee gives Employer written notice of the purported Good Reason not more than 60 days after the initial existence of such event or circumstance, (y) such event or circumstance has not been cured within 30 days following Employer’s receipt of such notice and (z) if Employer does not cure such circumstance, Employee actually terminates their employment not more than 30 days following the end of the applicable cure period.
f. Severance Benefits. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason, then Employee shall be entitled to receive the following benefits (collectively, the “Severance Benefits”): (i) an amount equal to Employee’s then-current Base Salary, payable in 12 equal monthly installments following the Separation Date; (ii) an amount equal to 50% of Employee’s Annual Bonus for the performance year immediately preceding the year of the Separation Date, payable in 12 equal monthly installments following the Separation Date; (iii) a prorated share (based on the amount of days employed during the applicable performance year) of the Employee’s Annual Bonus for the year of the Separation Date, based on actual performance for the year and payable when such Annual Bonus would have otherwise been payable (but no later than March 15 of the year immediately following the year of the Separation Date); (iv) continued health, welfare and retirement benefits according to the same terms and conditions to which Employee would have been entitled for 12 months following the Separation Date; and (v) continued automobile allowances (as set forth in Section 4) for one automobile, including reimbursement for fuel and routine maintenance costs, for 12 months following the Separation Date. The Severance Benefits are contingent on Employee’s compliance with Section 7 and Employee entering into a separation and release of claims agreement in a form substantially consistent with Exhibit A (the “Release”), and which Release must become irrevocable within 60 days following the Separation Date. Employer will provide Employee with the Severance Benefits, as applicable, in accordance with Employer’s regular payroll practices, on or commencing on the first payroll period and paid monthly thereafter following the date the Release becomes irrevocable. To the extent that any of the benefits provided under this Section 6f constitutes “non-qualified deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the 60th day following the Separation Date, but for the condition on executing the Release, shall not be made until the first regularly scheduled payroll date following such 60th day, after which any remaining benefits shall thereafter be provided to Employee according to the applicable schedule set forth herein. For the sake of clarity, in the event of any termination of Employee’s employment for a reason other than Cause or for Good Reason, the Employee will be entitled solely to the Accrued Obligations.
g. Change in Control. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason within 18 months following a Change in Control (as defined in Employer’s 2018 Omnibus Incentive Plan (the “Incentive Plan”)), in addition to the Severance Benefits, Employee shall become entitled to the accelerated vesting of 100% of all equity incentives granted under the Incentive Plan (with performance vested equity being deemed to have vested at target level performance).
7. Restrictive Covenants.
a. Disclosure of Information. Employee hereby acknowledges and agrees that the Employer Group’s Confidential Information (as defined below) is regarded as valuable by Employer, is not generally known in the relevant industry, and that the Employer Group has a legitimate right and business need to protect its Confidential Information. Employee acknowledges that keeping the Employer Group’s Confidential Information confidential is essential to the growth and stability of the Employer Group. Employee therefore agrees to hold such information in strictest confidence and shall not at any time, directly or indirectly, disclose such information to any third party or use such information other than for the benefit of the Employer Group. Employee shall disclose such information only to employees, representatives, and agents of the Employer Group with a need to know such information. The restrictions set forth in this paragraph shall apply during the Employment Term and following the termination of employment until the end of time, whether the termination of employment is voluntary or involuntary. For purposes of this Agreement, “Confidential Information” shall mean any information, knowledge, or data with respect to the Employer Group’s business, services, trade secrets, technologies, systems, clients, prospects, and sales, marketing and service methods, including, but not limited to, discoveries, ideas, concepts, designs, drawings, specifications, equipment, techniques, computer flow charts and programs, computer software (whether owned or licensed by the Employer Group), hardware, firmware, models, data, documentation, manuals, diagrams, research and development, performance information, know-how, business pricing policies and other internal policies, data systems, methods, systems documentation, practices, inventions, processes, procedures, formulae, employee lists or resumes, financial information (including financial statements), tax returns, client lists, prospect lists, information relating to past, present or prospective clients, information belonging to the Employer Group’s clients, personally identifiable information of clients’ employees, salary and benefit information of clients’ employees, market analysis, strategies, plans and projections for future growth and development, and compilations of information which are not readily available to the general public. Confidential Information includes all software development information, source and object codes, all information stored or maintained in any computer system or program used or maintained by the Employer Group, all information stored or maintained in any laptop computer or handheld device provided by the Employer Group to Employee, all client files, prospect files, legal contracts, purchase orders, and all information relating to client or vendor pricing. All of the foregoing information, whether oral, written, memorized, or electronically stored, together with analyses, compilations, studies, notes of conversation, or other documents prepared for or by the Employer Group or Employee that contain or otherwise reflect Confidential Information, is also included with the term Confidential Information. Confidential Information does not include (i) any information in the public domain; or (ii) any information received unsolicited from a third party under no obligation of secrecy.
b. Whistleblower Protection. Notwithstanding the foregoing, nothing in this Agreement or in any other agreement between Employee and Employer or any affiliate thereof shall prohibit or restrict Employee from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority (including the U.S. Securities and Exchange Commission) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Employee from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, and/or pursuant to the Sarbanes-Oxley Act; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires Employee to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify Employer or any affiliate that Employee has engaged in any such conduct.
c. Return of Confidential Information. Upon termination of Employee’s employment with Employer for any reason whatsoever or upon the written request of Employer, Employee shall immediately destroy, delete and/or return to Employer all Confidential Information and all copies, abstracts, handwritten records and electronic records thereof, and Employee shall certify in writing to Employer that Employee does not retain originals, copies, abstracts, handwritten records or electronic records of any Confidential Information. Employee agrees that retention of any such Confidential Information in Employee’s memory does not permit Employee to use or disclose such information following Employee’s termination of employment with Employer.
d. Non-Compete. In further consideration of the compensation to be paid to Employee hereunder, Employee acknowledges that in the course of their employment with the Employer Group (which, for purposes of this Section 7(d) and Section 7(e), following a Change in Control, shall only include Employer and its subsidiaries, as determined immediately before such Change in Control), she shall become familiar, and during their employment with Employer they have become familiar, with Employer’s trade secrets and with other Confidential Information concerning the Employer Group (and their respective its predecessors, subsidiaries and affiliates) and that their services have been and shall be of special, unique and extraordinary value to Employer. Therefore, Employee agrees that during their employment and for a period of one year following the Separation Date (the “Non-Compete Period”), Employee shall not directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any business or enterprise identical to or similar to any such business that is engaged in by the Employer Group and its respective franchises, which shall include any restaurant business that derives more than 25% of its revenues from the sale of steak and steak dishes and which has an average guest check greater than $65, escalating by 5% per year, as of the date of this Agreement and which is located in the United States, which shall for purposes of illustration and not limitation include the following chains and their parent companies, subsidiaries and other affiliates: Morton’s Restaurant Group, The Palm, Smith & Wollensky, Del Frisco’s, Sullivan’s, The Capital Grille, Mastro’s, Fleming’s, and Shula’s. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation that is publicly traded, so long as Employee has no active participation in the business of such corporation. This restriction will not apply if Employee is employed as an officer of a business, including, but not limited to, a casino or hotel, that as an ancillary service provides fine dining as defined in this paragraph. The term “ancillary” assumes that less than 50% of the business revenues are derived from its dining facilities.
e. Non-Solicit. Employee acknowledges that the Employer Group’s employees now or hereafter employed by the Employer Group are an integral part of the Employer Group’s business, that information relating to such employees are part of the Employer Group’s Confidential Information, and that the loss of such employees will have a substantial adverse effect on the Employer Group’s business. Therefore, during the term of Employee’s employment with the Employer Group and during the Non-Compete Period, Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any non-hourly or management employee of any member of the Employer Group to leave the employ of the Employer Group or in any way interfere with the relationship between the Employer Group and any employee thereof, (ii) hire any person who was an employee of any member of the Employer Group at any time during Employee’s employment with Employer, unless such person responded to a general solicitation or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of any member of the Employer Group to cease doing business between any such customer, supplier, licensee or business relation and Employer or any subsidiary or affiliate (including, without limitation, making any negative, derogatory or disparaging statements or communications regarding the Employer Group).
f. Reasonableness and Modification of Restrictions. Employee further acknowledges and agrees that the provisions set forth in this Section 7 are reasonable in scope, duration, and area, and are reasonably necessary to protect the legitimate business interests of the Employer Group, and particularly the Employer Group’s interest in protecting its Confidential Information, and the restrictive covenants in this Agreement are in addition to, and not in lieu of, any other agreement between Employee and the Employer Group addressing confidentiality, non-competition and/or non-solicitation. If any provision of this Section 7 is held to be unenforceable due to the scope, duration, or area of its application, the parties intend and agree that the court making such determination shall modify such scope, duration, or area, or all of them to what the court considers reasonable, and such provision shall then be enforced in such modified form.
8. Surrender of Books and Records. Employee acknowledges that all files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials used or created by Employee or used or created by Employer in connection with the conduct of its business, shall at all times remain the property of the Employer Group and that upon termination of employment hereunder, irrespective of the time, manner or cause of said termination, Employee will surrender to Employer all such files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials.
9. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement or the validity, legality or enforceability of such provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when (a) delivered personally or by overnight courier to the following address of the other party hereto (or such other address for such party as shall be specified by notice given pursuant to this Section 10) or (b) sent by email to the following facsimile number of the other party hereto (or such other facsimile number for such party as shall be specified by notice given pursuant to this Section 10), with the confirmatory copy delivered by overnight courier to the address of such party pursuant to this Section 10:
If to Employer, to:
Ruth’s Hospitality Group, Inc.
Attention: General Counsel
1030 West Canton Ave., Suite 100
Winter Park, FL 32789
Email: mlynch@ruthschris.com
If to Employee, to:
the last known address of Employee according to Employer records.
11. Governing Law and Resolution of Dispute. This Agreement shall be governed by and construed in accordance with the laws of or applicable to the State of Florida. Any dispute, controversy or claim arising out of or relating to Employee’s employment hereunder, or the breach therefore, shall be resolved by arbitration conducted in accordance with the rules then existing of the American Arbitration Association, applying the substantive law of the State of Florida. The parties further agree that any such arbitration shall be conducted in Orange County, Florida.
12. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
13. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties (including the Prior Agreement), written or oral, which may have related in any manner to the subject matter hereof.
14. Successors and Assigns. This Agreement may not be assigned by either party without the written consent of the other party hereto. Except as stated herein, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.
15. Withholding. All amounts payable hereunder will be subject to deduction for all required income, payroll and other withholdings.
16. Representations and Warranties. Employee represents, warrants and agrees that she has all right, power, authority and capacity, and is free to enter into this Agreement; that by doing so, Employee will not violate or interfere with the rights of any other person or entity; and that Employee is not subject to any contract, understanding or obligation that will or might prevent, interfere or conflict with or impair Employee’s performance of this Agreement. Employee further represents, warrants, and agrees that she will not enter into any agreement or other obligation while this Agreement is in effect that might conflict or interfere with the operation of this Agreement or his obligations hereunder. Employee agrees to indemnify and hold Employer harmless with respect to any losses, liabilities, demands, claims, fees, expenses, damages and costs (including attorneys’ fees and costs) resulting from or arising out of any claim or action based upon Employee’s entering into this Agreement.
17. Modification. Neither this Agreement nor the provisions contained herein may be extended, renewed, amended or modified other than by a written agreement executed by Employee and Employer.
18. Construction. The rule that a contract is construed against the party drafting the contract is hereby waived, and shall have no applicability in construing this Agreement or the terms hereof. Any headings and captions used herein are only for convenience and shall not affect the construction or interpretation of this Agreement.
19. Legal Representation. The parties understand that this is a legally binding contract and acknowledge and agree that they have had a reasonable opportunity to consult with legal counsel of their choice prior to execution.
20. Survival of Obligations. The parties expressly agree that Employee’s obligations set forth in this Agreement, as well as any other obligations that would naturally survive termination of an employment agreement, shall survive termination of Employee’s employment (whether voluntary or involuntary and whether with or without Cause and whether with or without Good Reason) and shall also survive the end of the term of this Agreement.
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same original instrument. A facsimile signature shall be deemed an original signature for purposes of execution of this Agreement.
22. Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary:
a. General. All provisions of this Agreement are intended to comply with Section 409A of the Code and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of Employee’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.
b. Reimbursements. To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by Employer no later than the last day of Employee’s taxable year following the taxable year in which such expense was incurred by Employee, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that, the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.
c. Payment Dates. If any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Employee’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of Employee’s death or (ii) the date that is six months after the Separation Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to Employee (or Employee’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, Employer makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall Employer be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Employee on account of non-compliance with Section 409A.
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Signature Page FollowsIN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
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EMPLOYER: |
EMPLOYEE: |
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By: __________________________ Name: Cheryl J. Henry Its: Chief Executive Officer |
_____________________________ Kristy Chipman |
EXHIBIT A
General Release
I, Kristy Chipman, in consideration of and subject to the performance by Ruth’s Hospitality Group, Inc. (as such company’s name may change from time to time and including such company’s successors and assigns, the “Company”), of its obligations under the Employment Agreement, dated as of August 1, 2022 (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees, successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “Released Parties”) to the extent provided below (this “General Release”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.
1. Schedule 1 attached hereto sets forth the termination and severance benefits to which I will be entitled in accordance with the terms of this Agreement (the “Severance Benefits”). I understand that the Severance Benefits represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive payment of the Severance Benefits unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy, or arrangement maintained or hereafter established by the Company or its affiliates.
2. Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement that expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators, and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties that I, my spouse, or any of my heirs, executors, administrators, or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under the Agreement; or for compensation or equity or equity-based compensation; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).
3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.
4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 that arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).
5. I agree that I hereby waive all rights to sue or obtain equitable, remedial, or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claim, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding, excepting only any monetary award to which I may become entitled pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Additionally, I am not waiving (a) any right to any accrued base salary earned by me prior to my termination of employment or any severance benefits to which I am entitled under the Agreement, (b) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Company’s organizational documents or otherwise, or (c) my rights as an equity or security holder in the Company or its affiliates.
6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected, and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.
7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.
8. I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees.
9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal, or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.
10. Any nondisclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, any other self-regulatory organization, or any governmental entity.
11. I represent that, as of the effective date of this General Release, I am not aware of any Claim by me other than the Claims that are released by this General Release. I acknowledge that I may hereafter discover Claims or facts in addition to or different than those that I now know or believe to exist with respect to the subject matter of the release set forth in paragraph 2 above and that, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.
12. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision had never been contained herein.
By signing this General Release, I represent and agree that:
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I have read this General Release carefully; |
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I understand all of its terms and know that I am giving up important rights, including, but not limited to, rights under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act of 1963; the Americans with Disabilities Act of 1990; and the Employee Retirement Income Security Act of 1974, as amended; |
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I voluntarily consent to everything in it; |
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I have been advised to consult with an attorney before executing it and I have done so or, after careful reading and consideration, I have chosen not to do so of my own volition; |
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I have had at least 45 days from the date of my receipt of this General Release to consider it, and the changes made since my receipt of this General Release are not material or were made at my request and will not restart the required 45-day period; |
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I understand that I have seven days after the execution of this General Release to revoke it and that this General Release shall not become effective or enforceable until the revocation period has expired; |
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I have signed this General Release knowingly and voluntarily and with the advice of any counsel retained to advise me with respect to it; and |
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I agree that the provisions of this General Release may not be amended, waived, changed, or modified except by an instrument in writing signed by an authorized representative of the Company and by me. |
Signed: ______________________________ Dated: ______________________________
SCHEDULE 1
Severance Benefits
Exhibit 10.3
Employment Agreement
Ruth’s Hospitality Group, Inc. (hereafter referred to as “Employer”) and Marcy Lynch (hereinafter referred to as “Employee”) agree upon the following terms of employment of Employee by Employer. This employment agreement (this “Agreement”) shall take effect as of August 1, 2022 (the “Effective Date”).
WHEREAS, Employer and Employee are currently party to that certain Terms of Employment and Salary Continuation Agreement, dated as of March 1, 2021 (the “Prior Agreement”), which, prior to the Effective Date, governs the employment relationship between Employer and Employee; and
WHEREAS, Employer and Employee wish to terminate the Prior Agreement and enter into this Agreement, which, as of the Effective Date, will govern the employment relationship between Employer and Employee.
NOW THEREFORE, in consideration of Employer’s continued employment of Employee and the mutual obligations and rights set forth in this Agreement, the parties hereto agree as follows:
1. Duties. Employee shall be employed during the Employment Term (as defined in Section 3) in the position of Senior Vice President and General Counsel. Employee will advance the best interests of Employer at all times during their employment and shall at all such times faithfully, industriously and to the best of their ability, perform all duties as may be required of them by virtue of their title and position and in accordance with the job description for his/her title and position as established by Employer’s Board of Directors (the “Board”) and/or its designee from time to time. Employee shall report to Employer’s Chief Executive Officer. Employee shall comply with any and all written personnel policies, corporate policies and employment manuals of Employer in the conduct of their duties.
2. Extent of Service. Employee shall continue to devote their full time and best efforts to the performance of their duties to Employer, its parent and subsidiary entities, affiliates, successors and assigns (collectively, the “Employer Group”). Employee shall not engage in any business or perform any services in any capacity that would, in the reasonable judgment of the Board, interfere with the full and proper performance by Employee of their duties. The foregoing is not intended to restrict Employee’s ability to: (a) engage in charitable, civic or community activities to the extent that such activities do not materially interfere with their duties hereunder; (b) serve on the board of directors (or similar governing bodies) of another company (provided that, the Board, in its sole discretion, has granted prior written consent, which consent shall not be reasonably withheld); nor (c) to enter into passive investments that do not compete in any way with Employer’s business.
3. Term/Annual Renewals. This Agreement shall expire and terminate and be of no further effect (with the exception of periods herein that, by their terms, survive the termination of this Agreement) on the close of business of the first anniversary of the Effective Date; provided, however, that this Agreement shall automatically renew and extend for additional one-year periods if Employee is not otherwise in default, remains in the employ of Employer, and neither Employer or Employee has given the other party a minimum of 60 days’ notice prior to the expiration of any given one-year period that this Agreement shall terminate upon expiration of the applicable period. The period of Employee’s employment with Employer pursuant to the terms hereof shall be referred to herein as the “Employment Term.”
4. Compensation.
a. Salary. For all duties to be performed by Employee in the capacity referenced hereunder, Employee shall receive an annual base salary of $395,000 (as adjusted, the “Base Salary”), less all applicable taxes and withholdings that cannot be reduced and that shall be paid in accordance with Employer’s normal payroll practice. Employee’s Base Salary will be subject to annual review by the Compensation Committee of the Board of Directors (the “Compensation Committee”).
b. Annual Bonus. Following the end of each fiscal year, Employee will be entitled to a discretionary bonus of up to 60% of their then-current Base Salary (the “Annual Bonus”), based on achievement (as determined by the Compensation Committee) of the budget and performance targets set by the Compensation Committee on an annual basis pursuant to Employer’s annual bonus plan applicable to the Employer’s senior executives (the “Bonus Plan”) and which may be increased or decreased according to the Bonus Plan. The Annual Bonus, if earned, shall be paid to Employee after the issuance of Employer’s audited financial statements relating to the applicable bonus performance year, but in any event by March 15 of the calendar year following the applicable performance year.
c. Automobile Allowance. During the Employment Term, Employee shall receive from Employer a monthly automobile allowance of $900, less applicable taxes and withholdings.
5. Benefits.
a. Vacation/Leave. Employee shall be entitled to four weeks of paid vacation per calendar year, with normal sick and holiday leave as defined by Employer’s policies.
b. Benefit Plans. Employee shall be entitled to participate in the health and welfare plans provided by Employer for its executives (including any and all applicable retirement plans) to the extent that Employee is eligible under the plan documents governing those programs. Employer benefits are subject to change at any time in Employer’s sole discretion.
c. Reimbursement of Expenses. Employer agrees to reimburse Employee for reasonable and appropriate Employer-related expenses (as determined by Employer) paid by Employee in furtherance of their duties, including, but not limited to, travel expenses, food, lodging, entertainment expenses and automobile expenses, upon submission of proper accounting records for such expenses.
6. Termination. Notwithstanding any other provision hereof, the Employment Term shall be terminated as set forth in this Section a. The date on which the Employment Term ends pursuant to the terms hereof shall be referred to herein as the “Separation Date.”
a. General. If the Employment Term ends for any reason (whether pursuant to actions taken by Employer, Employee or otherwise), then Employer shall pay or provide to Employee (or Employee’s legal representative or estate, if applicable): (i) any earned but unpaid Base Salary or Annual Bonus through the Separation Date; (ii) any unpaid expense reimbursements in accordance with applicable policy (including any automobile reimbursements, if applicable); (iii) any accrued but unused vacation, which amounts shall be paid to Employee in a lump sum within 30 days following the Separation Date; and (iv) vested employee benefits payable in accordance with the terms of the applicable employee benefit plan (collectively, the “Accrued Obligations”). Except as otherwise specifically provided herein, Employee’s rights in respect of equity-related awards will be determined by the terms of the applicable plan and agreement.
b. Disability or Incapacity. If, for a period of 90 consecutive days during the Employment Term, Employee is disabled or incapacitated for mental, physical or other cause to the extent that she is unable to perform their duties as herein contemplated during such 90-day period, Employer shall immediately thereafter have the right to terminate this Agreement upon providing ten days’ written notice to Employee and shall be obligated to pay Employee compensation up to the date of such termination.
c. Death. Employee’s employment with Employer shall terminate immediately upon Employee’s death. In the event of Employee’s death, Employer shall pay Employee’s Accrued Obligations and any outstanding Severance Benefits to either (i) the beneficiary or beneficiaries designated in writing by Employee to Employer and delivered to Employer prior to Employee’s death or (ii) in the absence of such designation, in accordance with Section 222.15, Florida Statutes, or if there are no such family members, then to Employee’s estate.
d. With or Without Cause. Employer may terminate Employee’s employment for any reason, with or without Cause, at any time. For purposes of this Agreement, “Cause” shall mean any of the following: (i) Employee’s theft or embezzlement, or attempted theft or embezzlement, of money or property of the Employer Group, their perpetuation or attempted perpetuation of fraud, or their participation in a fraud or attempted fraud, in respect of the Employer Group or their unauthorized appropriation of, or their attempt to misappropriate, any tangible or intangible assets or property of the Employer Group; (ii) any material act or acts of disloyalty, misconduct or moral turpitude by Employee injurious to the interest, property, operations, business or reputation of the Employer Group or their commission of a crime that results in injury to any member of the Employer Group; or (iii) Employee’s willful disregard of lawful directive given by a superior or the Board or a violation of an Employer employment policy injurious to the interest of Employer; provided that, in each case, Employee shall have been given written notice from Employer describing in reasonable detail the event or circumstance Employer believes gives rise to a right to terminate Employee for Cause and Employee shall have 15 days to remedy the condition to the satisfaction of Employer. Employee’s failure to cure such condition(s) within such 15-day period shall result in the termination of Employee for Cause.
e. With or Without Good Reason. Employee may terminate their employment with Employer for any reason, with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) a material diminution of, or the assignment by the Board to Employee of any material duties that are clearly inconsistent with, Employee’s status, title and position as Senior Vice President and General Counsel of Employer (which includes Employee no longer holding their title in the ultimate parent company of Employer following a Change in Control (as defined below) of Employer); (ii) a reduction in Employee’s Base Salary or target bonus opportunity or a failure by Employer to pay Employee any amounts required to be paid under this Agreement, which failure continues uncured for a period of 15 days after written notice thereof is given by Employee to the Board; (iii) the requirement that Employee relocate their principal work location by more than 50 miles from the Company’s headquarters at 1030 West Canton Ave., Winter Park, FL 32789, other than in a direction that reduces Employee’s daily commuting distance; (iv) Employer provides Employee notice as contemplated by Section 3 of its decision not to renew this Agreement on the terms set forth herein; or (v) a material breach of the Agreement by Employer or any material and repeated interference by the Board or any Employer employee or stockholder with Employee’s ability or authority to discharge their duties or responsibilities hereunder that continues after the reasonable notice and opportunity to cure. Notwithstanding the occurrence of any of the foregoing events or circumstances, a resignation shall not be deemed to constitute resignation for Good Reason unless (x) Employee gives Employer written notice of the purported Good Reason not more than 60 days after the initial existence of such event or circumstance, (y) such event or circumstance has not been cured within 30 days following Employer’s receipt of such notice and (z) if Employer does not cure such circumstance, Employee actually terminates their employment not more than 30 days following the end of the applicable cure period.
f. Severance Benefits. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason, then Employee shall be entitled to receive the following benefits (collectively, the “Severance Benefits”): (i) an amount equal to Employee’s then-current Base Salary, payable in 12 equal monthly installments following the Separation Date; (ii) an amount equal to 50% of Employee’s Annual Bonus for the performance year immediately preceding the year of the Separation Date, payable in 12 equal monthly installments following the Separation Date; (iii) a prorated share (based on the amount of days employed during the applicable performance year) of the Employee’s Annual Bonus for the year of the Separation Date, based on actual performance for the year and payable when such Annual Bonus would have otherwise been payable (but no later than March 15 of the year immediately following the year of the Separation Date); (iv) continued health, welfare and retirement benefits according to the same terms and conditions to which Employee would have been entitled for 12 months following the Separation Date; and (v) continued automobile allowances (as set forth in Section 4) for one automobile, including reimbursement for fuel and routine maintenance costs, for 12 months following the Separation Date. The Severance Benefits are contingent on Employee’s compliance with Section 7 and Employee entering into a separation and release of claims agreement in a form substantially consistent with Exhibit A (the “Release”), and which Release must become irrevocable within 60 days following the Separation Date. Employer will provide Employee with the Severance Benefits, as applicable, in accordance with Employer’s regular payroll practices, on or commencing on the first payroll period and paid monthly thereafter following the date the Release becomes irrevocable. To the extent that any of the benefits provided under this Section 6f constitutes “non-qualified deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the 60th day following the Separation Date, but for the condition on executing the Release, shall not be made until the first regularly scheduled payroll date following such 60th day, after which any remaining benefits shall thereafter be provided to Employee according to the applicable schedule set forth herein. For the sake of clarity, in the event of any termination of Employee’s employment for a reason other than Cause or for Good Reason, the Employee will be entitled solely to the Accrued Obligations.
g. Change in Control. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason within 18 months following a Change in Control (as defined in Employer’s 2018 Omnibus Incentive Plan (the “Incentive Plan”)), in addition to the Severance Benefits, Employee shall become entitled to the accelerated vesting of 100% of all equity incentives granted under the Incentive Plan (with performance vested equity being deemed to have vested at target level performance).
7. Restrictive Covenants.
a. Disclosure of Information. Employee hereby acknowledges and agrees that the Employer Group’s Confidential Information (as defined below) is regarded as valuable by Employer, is not generally known in the relevant industry, and that the Employer Group has a legitimate right and business need to protect its Confidential Information. Employee acknowledges that keeping the Employer Group’s Confidential Information confidential is essential to the growth and stability of the Employer Group. Employee therefore agrees to hold such information in strictest confidence and shall not at any time, directly or indirectly, disclose such information to any third party or use such information other than for the benefit of the Employer Group. Employee shall disclose such information only to employees, representatives, and agents of the Employer Group with a need to know such information. The restrictions set forth in this paragraph shall apply during the Employment Term and following the termination of employment until the end of time, whether the termination of employment is voluntary or involuntary. For purposes of this Agreement, “Confidential Information” shall mean any information, knowledge, or data with respect to the Employer Group’s business, services, trade secrets, technologies, systems, clients, prospects, and sales, marketing and service methods, including, but not limited to, discoveries, ideas, concepts, designs, drawings, specifications, equipment, techniques, computer flow charts and programs, computer software (whether owned or licensed by the Employer Group), hardware, firmware, models, data, documentation, manuals, diagrams, research and development, performance information, know-how, business pricing policies and other internal policies, data systems, methods, systems documentation, practices, inventions, processes, procedures, formulae, employee lists or resumes, financial information (including financial statements), tax returns, client lists, prospect lists, information relating to past, present or prospective clients, information belonging to the Employer Group’s clients, personally identifiable information of clients’ employees, salary and benefit information of clients’ employees, market analysis, strategies, plans and projections for future growth and development, and compilations of information which are not readily available to the general public. Confidential Information includes all software development information, source and object codes, all information stored or maintained in any computer system or program used or maintained by the Employer Group, all information stored or maintained in any laptop computer or handheld device provided by the Employer Group to Employee, all client files, prospect files, legal contracts, purchase orders, and all information relating to client or vendor pricing. All of the foregoing information, whether oral, written, memorized, or electronically stored, together with analyses, compilations, studies, notes of conversation, or other documents prepared for or by the Employer Group or Employee that contain or otherwise reflect Confidential Information, is also included with the term Confidential Information. Confidential Information does not include (i) any information in the public domain; or (ii) any information received unsolicited from a third party under no obligation of secrecy.
b. Whistleblower Protection. Notwithstanding the foregoing, nothing in this Agreement or in any other agreement between Employee and Employer or any affiliate thereof shall prohibit or restrict Employee from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority (including the U.S. Securities and Exchange Commission) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Employee from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, and/or pursuant to the Sarbanes-Oxley Act; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires Employee to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify Employer or any affiliate that Employee has engaged in any such conduct.
c. Return of Confidential Information. Upon termination of Employee’s employment with Employer for any reason whatsoever or upon the written request of Employer, Employee shall immediately destroy, delete and/or return to Employer all Confidential Information and all copies, abstracts, handwritten records and electronic records thereof, and Employee shall certify in writing to Employer that Employee does not retain originals, copies, abstracts, handwritten records or electronic records of any Confidential Information. Employee agrees that retention of any such Confidential Information in Employee’s memory does not permit Employee to use or disclose such information following Employee’s termination of employment with Employer.
d. Non-Solicit. Employee acknowledges that the Employer Group’s employees now or hereafter employed by the Employer Group are an integral part of the Employer Group’s business, that information relating to such employees are part of the Employer Group’s Confidential Information, and that the loss of such employees will have a substantial adverse effect on the Employer Group’s business. Therefore, during the term of Employee’s employment with the Employer Group and during the Non-Compete Period, Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any non-hourly or management employee of any member of the Employer Group to leave the employ of the Employer Group or in any way interfere with the relationship between the Employer Group and any employee thereof, (ii) hire any person who was an employee of any member of the Employer Group at any time during Employee’s employment with Employer, unless such person responded to a general solicitation or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of any member of the Employer Group to cease doing business between any such customer, supplier, licensee or business relation and Employer or any subsidiary or affiliate (including, without limitation, making any negative, derogatory or disparaging statements or communications regarding the Employer Group).
e. Reasonableness and Modification of Restrictions. Employee further acknowledges and agrees that the provisions set forth in this Section 7 are reasonable in scope, duration, and area, and are reasonably necessary to protect the legitimate business interests of the Employer Group, and particularly the Employer Group’s interest in protecting its Confidential Information, and the restrictive covenants in this Agreement are in addition to, and not in lieu of, any other agreement between Employee and the Employer Group addressing confidentiality, non-competition and/or non-solicitation. If any provision of this Section 7 is held to be unenforceable due to the scope, duration, or area of its application, the parties intend and agree that the court making such determination shall modify such scope, duration, or area, or all of them to what the court considers reasonable, and such provision shall then be enforced in such modified form.
8. Surrender of Books and Records. Employee acknowledges that all files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials used or created by Employee or used or created by Employer in connection with the conduct of its business, shall at all times remain the property of the Employer Group and that upon termination of employment hereunder, irrespective of the time, manner or cause of said termination, Employee will surrender to Employer all such files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials.
9. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement or the validity, legality or enforceability of such provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when (a) delivered personally or by overnight courier to the following address of the other party hereto (or such other address for such party as shall be specified by notice given pursuant to this Section 10) or (b) sent by email to the following facsimile number of the other party hereto (or such other facsimile number for such party as shall be specified by notice given pursuant to this Section 10), with the confirmatory copy delivered by overnight courier to the address of such party pursuant to this Section 10:
If to Employer, to:
Ruth’s Hospitality Group, Inc.
Attention: Chief People Officer
1030 West Canton Ave., Suite 100
Winter Park, FL 32789
Email: dhyatt@ruthschris.com
If to Employee, to:
the last known address of Employee according to Employer records.
11. Governing Law and Resolution of Dispute. This Agreement shall be governed by and construed in accordance with the laws of or applicable to the State of Florida. Any dispute, controversy or claim arising out of or relating to Employee’s employment hereunder, or the breach therefore, shall be resolved by arbitration conducted in accordance with the rules then existing of the American Arbitration Association, applying the substantive law of the State of Florida. The parties further agree that any such arbitration shall be conducted in Orange County, Florida.
12. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
13. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties (including the Prior Agreement), written or oral, which may have related in any manner to the subject matter hereof.
14. Successors and Assigns. This Agreement may not be assigned by either party without the written consent of the other party hereto. Except as stated herein, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.
15. Withholding. All amounts payable hereunder will be subject to deduction for all required income, payroll and other withholdings.
16. Representations and Warranties. Employee represents, warrants and agrees that she has all right, power, authority and capacity, and is free to enter into this Agreement; that by doing so, Employee will not violate or interfere with the rights of any other person or entity; and that Employee is not subject to any contract, understanding or obligation that will or might prevent, interfere or conflict with or impair Employee’s performance of this Agreement. Employee further represents, warrants, and agrees that she will not enter into any agreement or other obligation while this Agreement is in effect that might conflict or interfere with the operation of this Agreement or his obligations hereunder. Employee agrees to indemnify and hold Employer harmless with respect to any losses, liabilities, demands, claims, fees, expenses, damages and costs (including attorneys’ fees and costs) resulting from or arising out of any claim or action based upon Employee’s entering into this Agreement.
17. Modification. Neither this Agreement nor the provisions contained herein may be extended, renewed, amended or modified other than by a written agreement executed by Employee and Employer.
18. Construction. The rule that a contract is construed against the party drafting the contract is hereby waived, and shall have no applicability in construing this Agreement or the terms hereof. Any headings and captions used herein are only for convenience and shall not affect the construction or interpretation of this Agreement.
19. Legal Representation. The parties understand that this is a legally binding contract and acknowledge and agree that they have had a reasonable opportunity to consult with legal counsel of their choice prior to execution.
20. Survival of Obligations. The parties expressly agree that Employee’s obligations set forth in this Agreement, as well as any other obligations that would naturally survive termination of an employment agreement, shall survive termination of Employee’s employment (whether voluntary or involuntary and whether with or without Cause and whether with or without Good Reason) and shall also survive the end of the term of this Agreement.
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same original instrument. A facsimile signature shall be deemed an original signature for purposes of execution of this Agreement.
22. Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary:
a. General. All provisions of this Agreement are intended to comply with Section 409A of the Code and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of Employee’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.
b. Reimbursements. To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by Employer no later than the last day of Employee’s taxable year following the taxable year in which such expense was incurred by Employee, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that, the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.
c. Payment Dates. If any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Employee’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of Employee’s death or (ii) the date that is six months after the Separation Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to Employee (or Employee’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, Employer makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall Employer be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Employee on account of non-compliance with Section 409A.
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Signature Page FollowsIN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
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EMPLOYER: |
EMPLOYEE: |
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By: __________________________ Name: Cheryl J. Henry Its: Chief Executive Officer |
_____________________________ Marcy Lynch |
EXHIBIT A
General Release
I, Marcy Lynch, in consideration of and subject to the performance by Ruth’s Hospitality Group, Inc. (as such company’s name may change from time to time and including such company’s successors and assigns, the “Company”), of its obligations under the Employment Agreement, dated as of August 1, 2022 (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees, successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “Released Parties”) to the extent provided below (this “General Release”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.
1. Schedule 1 attached hereto sets forth the termination and severance benefits to which I will be entitled in accordance with the terms of this Agreement (the “Severance Benefits”). I understand that the Severance Benefits represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive payment of the Severance Benefits unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy, or arrangement maintained or hereafter established by the Company or its affiliates.
2. Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement that expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators, and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties that I, my spouse, or any of my heirs, executors, administrators, or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under the Agreement; or for compensation or equity or equity-based compensation; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).
3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.
4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 that arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).
5. I agree that I hereby waive all rights to sue or obtain equitable, remedial, or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claim, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding, excepting only any monetary award to which I may become entitled pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Additionally, I am not waiving (a) any right to any accrued base salary earned by me prior to my termination of employment or any severance benefits to which I am entitled under the Agreement, (b) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Company’s organizational documents or otherwise, or (c) my rights as an equity or security holder in the Company or its affiliates.
6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected, and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.
7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.
8. I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees.
9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal, or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.
10. Any nondisclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, any other self-regulatory organization, or any governmental entity.
11. I represent that, as of the effective date of this General Release, I am not aware of any Claim by me other than the Claims that are released by this General Release. I acknowledge that I may hereafter discover Claims or facts in addition to or different than those that I now know or believe to exist with respect to the subject matter of the release set forth in paragraph 2 above and that, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.
12. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision had never been contained herein.
By signing this General Release, I represent and agree that:
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1. |
I have read this General Release carefully; |
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2. |
I understand all of its terms and know that I am giving up important rights, including, but not limited to, rights under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act of 1963; the Americans with Disabilities Act of 1990; and the Employee Retirement Income Security Act of 1974, as amended; |
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I voluntarily consent to everything in it; |
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4. |
I have been advised to consult with an attorney before executing it and I have done so or, after careful reading and consideration, I have chosen not to do so of my own volition; |
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5. |
I have had at least 45 days from the date of my receipt of this General Release to consider it, and the changes made since my receipt of this General Release are not material or were made at my request and will not restart the required 45-day period; |
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6. |
I understand that I have seven days after the execution of this General Release to revoke it and that this General Release shall not become effective or enforceable until the revocation period has expired; |
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7. |
I have signed this General Release knowingly and voluntarily and with the advice of any counsel retained to advise me with respect to it; and |
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8. |
I agree that the provisions of this General Release may not be amended, waived, changed, or modified except by an instrument in writing signed by an authorized representative of the Company and by me. |
Signed: ______________________________ Dated: ______________________________
SCHEDULE 1
Severance Benefits
Exhibit 10.4
Employment Agreement
Ruth’s Hospitality Group, Inc. (hereafter referred to as “Employer”) and David Hyatt (hereinafter referred to as “Employee”) agree upon the following terms of employment of Employee by Employer. This employment agreement (this “Agreement”) shall take effect as of August 1, 2022 (the “Effective Date”).
WHEREAS, Employer and Employee are currently party to that certain Terms of Employment and Salary Continuation Agreement, dated as of March 1, 2021 (the “Prior Agreement”), which, prior to the Effective Date, governs the employment relationship between Employer and Employee; and
WHEREAS, Employer and Employee wish to terminate the Prior Agreement and enter into this Agreement, which, as of the Effective Date, will govern the employment relationship between Employer and Employee.
NOW THEREFORE, in consideration of Employer’s continued employment of Employee and the mutual obligations and rights set forth in this Agreement, the parties hereto agree as follows:
1. Duties. Employee shall be employed during the Employment Term (as defined in Section 3) in the position of Senior Vice President and Chief People Officer. Employee will advance the best interests of Employer at all times during their employment and shall at all such times faithfully, industriously and to the best of their ability, perform all duties as may be required of them by virtue of their title and position and in accordance with the job description for his/her title and position as established by Employer’s Board of Directors (the “Board”) and/or its designee from time to time. Employee shall report to Employer’s Chief Executive Officer. Employee shall comply with any and all written personnel policies, corporate policies and employment manuals of Employer in the conduct of their duties.
2. Extent of Service. Employee shall continue to devote their full time and best efforts to the performance of their duties to Employer, its parent and subsidiary entities, affiliates, successors and assigns (collectively, the “Employer Group”). Employee shall not engage in any business or perform any services in any capacity that would, in the reasonable judgment of the Board, interfere with the full and proper performance by Employee of their duties. The foregoing is not intended to restrict Employee’s ability to: (a) engage in charitable, civic or community activities to the extent that such activities do not materially interfere with their duties hereunder; (b) serve on the board of directors (or similar governing bodies) of another company (provided that, the Board, in its sole discretion, has granted prior written consent, which consent shall not be reasonably withheld); nor (c) to enter into passive investments that do not compete in any way with Employer’s business.
3. Term/Annual Renewals. This Agreement shall expire and terminate and be of no further effect (with the exception of periods herein that, by their terms, survive the termination of this Agreement) on the close of business of the first anniversary of the Effective Date; provided, however, that this Agreement shall automatically renew and extend for additional one-year periods if Employee is not otherwise in default, remains in the employ of Employer, and neither Employer or Employee has given the other party a minimum of 60 days’ notice prior to the expiration of any given one-year period that this Agreement shall terminate upon expiration of the applicable period. The period of Employee’s employment with Employer pursuant to the terms hereof shall be referred to herein as the “Employment Term.”
4. Compensation.
a. Salary. For all duties to be performed by Employee in the capacity referenced hereunder, Employee shall receive an annual base salary of $310,000 (as adjusted, the “Base Salary”), less all applicable taxes and withholdings that cannot be reduced and that shall be paid in accordance with Employer’s normal payroll practice. Employee’s Base Salary will be subject to annual review by the Compensation Committee of the Board of Directors (the “Compensation Committee”).
b. Annual Bonus. Following the end of each fiscal year, Employee will be entitled to a discretionary bonus of up to 50% of their then-current Base Salary (the “Annual Bonus”), based on achievement (as determined by the Compensation Committee) of the budget and performance targets set by the Compensation Committee on an annual basis pursuant to Employer’s annual bonus plan applicable to the Employer’s senior executives (the “Bonus Plan”) and which may be increased or decreased according to the Bonus Plan. The Annual Bonus, if earned, shall be paid to Employee after the issuance of Employer’s audited financial statements relating to the applicable bonus performance year, but in any event by March 15 of the calendar year following the applicable performance year.
c. Automobile Allowance. During the Employment Term, Employee shall receive from Employer a monthly automobile allowance of $700, less applicable taxes and withholdings.
5. Benefits.
a. Vacation/Leave. Employee shall be entitled to four weeks of paid vacation per calendar year, with normal sick and holiday leave as defined by Employer’s policies.
b. Benefit Plans. Employee shall be entitled to participate in the health and welfare plans provided by Employer for its executives (including any and all applicable retirement plans) to the extent that Employee is eligible under the plan documents governing those programs. Employer benefits are subject to change at any time in Employer’s sole discretion.
c. Reimbursement of Expenses. Employer agrees to reimburse Employee for reasonable and appropriate Employer-related expenses (as determined by Employer) paid by Employee in furtherance of their duties, including, but not limited to, travel expenses, food, lodging, entertainment expenses and automobile expenses, upon submission of proper accounting records for such expenses.
6. Termination. Notwithstanding any other provision hereof, the Employment Term shall be terminated as set forth in this Section a. The date on which the Employment Term ends pursuant to the terms hereof shall be referred to herein as the “Separation Date.”
a. General. If the Employment Term ends for any reason (whether pursuant to actions taken by Employer, Employee or otherwise), then Employer shall pay or provide to Employee (or Employee’s legal representative or estate, if applicable): (i) any earned but unpaid Base Salary or Annual Bonus through the Separation Date; (ii) any unpaid expense reimbursements in accordance with applicable policy (including any automobile reimbursements, if applicable); (iii) any accrued but unused vacation, which amounts shall be paid to Employee in a lump sum within 30 days following the Separation Date; and (iv) vested employee benefits payable in accordance with the terms of the applicable employee benefit plan (collectively, the “Accrued Obligations”). Except as otherwise specifically provided herein, Employee’s rights in respect of equity-related awards will be determined by the terms of the applicable plan and agreement.
b. Disability or Incapacity. If, for a period of 90 consecutive days during the Employment Term, Employee is disabled or incapacitated for mental, physical or other cause to the extent that she is unable to perform their duties as herein contemplated during such 90-day period, Employer shall immediately thereafter have the right to terminate this Agreement upon providing ten days’ written notice to Employee and shall be obligated to pay Employee compensation up to the date of such termination.
c. Death. Employee’s employment with Employer shall terminate immediately upon Employee’s death. In the event of Employee’s death, Employer shall pay Employee’s Accrued Obligations and any outstanding Severance Benefits to either (i) the beneficiary or beneficiaries designated in writing by Employee to Employer and delivered to Employer prior to Employee’s death or (ii) in the absence of such designation, in accordance with Section 222.15, Florida Statutes, or if there are no such family members, then to Employee’s estate.
d. With or Without Cause. Employer may terminate Employee’s employment for any reason, with or without Cause, at any time. For purposes of this Agreement, “Cause” shall mean any of the following: (i) Employee’s theft or embezzlement, or attempted theft or embezzlement, of money or property of the Employer Group, their perpetuation or attempted perpetuation of fraud, or their participation in a fraud or attempted fraud, in respect of the Employer Group or their unauthorized appropriation of, or their attempt to misappropriate, any tangible or intangible assets or property of the Employer Group; (ii) any material act or acts of disloyalty, misconduct or moral turpitude by Employee injurious to the interest, property, operations, business or reputation of the Employer Group or their commission of a crime that results in injury to any member of the Employer Group; or (iii) Employee’s willful disregard of lawful directive given by a superior or the Board or a violation of an Employer employment policy injurious to the interest of Employer; provided that, in each case, Employee shall have been given written notice from Employer describing in reasonable detail the event or circumstance Employer believes gives rise to a right to terminate Employee for Cause and Employee shall have 15 days to remedy the condition to the satisfaction of Employer. Employee’s failure to cure such condition(s) within such 15-day period shall result in the termination of Employee for Cause.
e. With or Without Good Reason. Employee may terminate their employment with Employer for any reason, with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) a material diminution of, or the assignment by the Board to Employee of any material duties that are clearly inconsistent with, Employee’s status, title and position as Senior Vice President and Chief People Officer of Employer (which includes Employee no longer holding their title in the ultimate parent company of Employer following a Change in Control (as defined below) of Employer); (ii) a reduction in Employee’s Base Salary or target bonus opportunity or a failure by Employer to pay Employee any amounts required to be paid under this Agreement, which failure continues uncured for a period of 15 days after written notice thereof is given by Employee to the Board; (iii) the requirement that Employee relocate their principal work location by more than 50 miles from the Company’s headquarters at 1030 West Canton Ave., Winter Park, FL 32789, other than in a direction that reduces Employee’s daily commuting distance; (iv) Employer provides Employee notice as contemplated by Section 3 of its decision not to renew this Agreement on the terms set forth herein; or (v) a material breach of the Agreement by Employer or any material and repeated interference by the Board or any Employer employee or stockholder with Employee’s ability or authority to discharge their duties or responsibilities hereunder that continues after the reasonable notice and opportunity to cure. Notwithstanding the occurrence of any of the foregoing events or circumstances, a resignation shall not be deemed to constitute resignation for Good Reason unless (x) Employee gives Employer written notice of the purported Good Reason not more than 60 days after the initial existence of such event or circumstance, (y) such event or circumstance has not been cured within 30 days following Employer’s receipt of such notice and (z) if Employer does not cure such circumstance, Employee actually terminates their employment not more than 30 days following the end of the applicable cure period.
f. Severance Benefits. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason, then Employee shall be entitled to receive the following benefits (collectively, the “Severance Benefits”): (i) an amount equal to Employee’s then-current Base Salary, payable in 12 equal monthly installments following the Separation Date; (ii) an amount equal to 50% of Employee’s Annual Bonus for the performance year immediately preceding the year of the Separation Date, payable in 12 equal monthly installments following the Separation Date; (iii) a prorated share (based on the amount of days employed during the applicable performance year) of the Employee’s Annual Bonus for the year of the Separation Date, based on actual performance for the year and payable when such Annual Bonus would have otherwise been payable (but no later than March 15 of the year immediately following the year of the Separation Date); (iv) continued health, welfare and retirement benefits according to the same terms and conditions to which Employee would have been entitled for 12 months following the Separation Date; and (v) continued automobile allowances (as set forth in Section 4) for one automobile, including reimbursement for fuel and routine maintenance costs, for 12 months following the Separation Date. The Severance Benefits are contingent on Employee’s compliance with Section 7 and Employee entering into a separation and release of claims agreement in a form substantially consistent with Exhibit A (the “Release”), and which Release must become irrevocable within 60 days following the Separation Date. Employer will provide Employee with the Severance Benefits, as applicable, in accordance with Employer’s regular payroll practices, on or commencing on the first payroll period and paid monthly thereafter following the date the Release becomes irrevocable. To the extent that any of the benefits provided under this Section 6f constitutes “non-qualified deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the 60th day following the Separation Date, but for the condition on executing the Release, shall not be made until the first regularly scheduled payroll date following such 60th day, after which any remaining benefits shall thereafter be provided to Employee according to the applicable schedule set forth herein. For the sake of clarity, in the event of any termination of Employee’s employment for a reason other than Cause or for Good Reason, the Employee will be entitled solely to the Accrued Obligations.
g. Change in Control. In the event Employee’s employment is terminated by Employer without Cause or by Employee for Good Reason within 18 months following a Change in Control (as defined in Employer’s 2018 Omnibus Incentive Plan (the “Incentive Plan”)), in addition to the Severance Benefits, Employee shall become entitled to the accelerated vesting of 100% of all equity incentives granted under the Incentive Plan (with performance vested equity being deemed to have vested at target level performance).
7. Restrictive Covenants.
a. Disclosure of Information. Employee hereby acknowledges and agrees that the Employer Group’s Confidential Information (as defined below) is regarded as valuable by Employer, is not generally known in the relevant industry, and that the Employer Group has a legitimate right and business need to protect its Confidential Information. Employee acknowledges that keeping the Employer Group’s Confidential Information confidential is essential to the growth and stability of the Employer Group. Employee therefore agrees to hold such information in strictest confidence and shall not at any time, directly or indirectly, disclose such information to any third party or use such information other than for the benefit of the Employer Group. Employee shall disclose such information only to employees, representatives, and agents of the Employer Group with a need to know such information. The restrictions set forth in this paragraph shall apply during the Employment Term and following the termination of employment until the end of time, whether the termination of employment is voluntary or involuntary. For purposes of this Agreement, “Confidential Information” shall mean any information, knowledge, or data with respect to the Employer Group’s business, services, trade secrets, technologies, systems, clients, prospects, and sales, marketing and service methods, including, but not limited to, discoveries, ideas, concepts, designs, drawings, specifications, equipment, techniques, computer flow charts and programs, computer software (whether owned or licensed by the Employer Group), hardware, firmware, models, data, documentation, manuals, diagrams, research and development, performance information, know-how, business pricing policies and other internal policies, data systems, methods, systems documentation, practices, inventions, processes, procedures, formulae, employee lists or resumes, financial information (including financial statements), tax returns, client lists, prospect lists, information relating to past, present or prospective clients, information belonging to the Employer Group’s clients, personally identifiable information of clients’ employees, salary and benefit information of clients’ employees, market analysis, strategies, plans and projections for future growth and development, and compilations of information which are not readily available to the general public. Confidential Information includes all software development information, source and object codes, all information stored or maintained in any computer system or program used or maintained by the Employer Group, all information stored or maintained in any laptop computer or handheld device provided by the Employer Group to Employee, all client files, prospect files, legal contracts, purchase orders, and all information relating to client or vendor pricing. All of the foregoing information, whether oral, written, memorized, or electronically stored, together with analyses, compilations, studies, notes of conversation, or other documents prepared for or by the Employer Group or Employee that contain or otherwise reflect Confidential Information, is also included with the term Confidential Information. Confidential Information does not include (i) any information in the public domain; or (ii) any information received unsolicited from a third party under no obligation of secrecy.
b. Whistleblower Protection. Notwithstanding the foregoing, nothing in this Agreement or in any other agreement between Employee and Employer or any affiliate thereof shall prohibit or restrict Employee from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental authority (including the U.S. Securities and Exchange Commission) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Employee from any such governmental authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any such governmental authority relating to a possible violation of law, and/or pursuant to the Sarbanes-Oxley Act; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the individual’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Agreement requires Employee to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify Employer or any affiliate that Employee has engaged in any such conduct.
c. Return of Confidential Information. Upon termination of Employee’s employment with Employer for any reason whatsoever or upon the written request of Employer, Employee shall immediately destroy, delete and/or return to Employer all Confidential Information and all copies, abstracts, handwritten records and electronic records thereof, and Employee shall certify in writing to Employer that Employee does not retain originals, copies, abstracts, handwritten records or electronic records of any Confidential Information. Employee agrees that retention of any such Confidential Information in Employee’s memory does not permit Employee to use or disclose such information following Employee’s termination of employment with Employer.
d. Non-Compete. In further consideration of the compensation to be paid to Employee hereunder, Employee acknowledges that in the course of their employment with the Employer Group (which, for purposes of this Section 7(d) and Section 7(e), following a Change in Control, shall only include Employer and its subsidiaries, as determined immediately before such Change in Control), he shall become familiar, and during their employment with Employer they have become familiar, with Employer’s trade secrets and with other Confidential Information concerning the Employer Group (and their respective its predecessors, subsidiaries and affiliates) and that their services have been and shall be of special, unique and extraordinary value to Employer. Therefore, Employee agrees that during their employment and for a period of one year following the Separation Date (the “Non-Compete Period”), Employee shall not directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any business or enterprise identical to or similar to any such business that is engaged in by the Employer Group and its respective franchises, which shall include any restaurant business that derives more than 25% of its revenues from the sale of steak and steak dishes and which has an average guest check greater than $65, escalating by 5% per year, as of the date of this Agreement and which is located in the United States, which shall for purposes of illustration and not limitation include the following chains and their parent companies, subsidiaries and other affiliates: Morton’s Restaurant Group, The Palm, Smith & Wollensky, Del Frisco’s, Sullivan’s, The Capital Grille, Mastro’s, Fleming’s, and Shula’s. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation that is publicly traded, so long as Employee has no active participation in the business of such corporation. This restriction will not apply if Employee is employed as an officer of a business, including, but not limited to, a casino or hotel, that as an ancillary service provides fine dining as defined in this paragraph. The term “ancillary” assumes that less than 50% of the business revenues are derived from its dining facilities.
e. Non-Solicit. Employee acknowledges that the Employer Group’s employees now or hereafter employed by the Employer Group are an integral part of the Employer Group’s business, that information relating to such employees are part of the Employer Group’s Confidential Information, and that the loss of such employees will have a substantial adverse effect on the Employer Group’s business. Therefore, during the term of Employee’s employment with the Employer Group and during the Non-Compete Period, Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any non-hourly or management employee of any member of the Employer Group to leave the employ of the Employer Group or in any way interfere with the relationship between the Employer Group and any employee thereof, (ii) hire any person who was an employee of any member of the Employer Group at any time during Employee’s employment with Employer, unless such person responded to a general solicitation or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of any member of the Employer Group to cease doing business between any such customer, supplier, licensee or business relation and Employer or any subsidiary or affiliate (including, without limitation, making any negative, derogatory or disparaging statements or communications regarding the Employer Group).
f. Reasonableness and Modification of Restrictions. Employee further acknowledges and agrees that the provisions set forth in this Section 7 are reasonable in scope, duration, and area, and are reasonably necessary to protect the legitimate business interests of the Employer Group, and particularly the Employer Group’s interest in protecting its Confidential Information, and the restrictive covenants in this Agreement are in addition to, and not in lieu of, any other agreement between Employee and the Employer Group addressing confidentiality, non-competition and/or non-solicitation. If any provision of this Section 7 is held to be unenforceable due to the scope, duration, or area of its application, the parties intend and agree that the court making such determination shall modify such scope, duration, or area, or all of them to what the court considers reasonable, and such provision shall then be enforced in such modified form.
8. Surrender of Books and Records. Employee acknowledges that all files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials used or created by Employee or used or created by Employer in connection with the conduct of its business, shall at all times remain the property of the Employer Group and that upon termination of employment hereunder, irrespective of the time, manner or cause of said termination, Employee will surrender to Employer all such files, lists, books, records, photographs, videotapes, slides, specifications, drawings or any other materials.
9. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement or the validity, legality or enforceability of such provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
10. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when (a) delivered personally or by overnight courier to the following address of the other party hereto (or such other address for such party as shall be specified by notice given pursuant to this Section 10) or (b) sent by email to the following facsimile number of the other party hereto (or such other facsimile number for such party as shall be specified by notice given pursuant to this Section 10), with the confirmatory copy delivered by overnight courier to the address of such party pursuant to this Section 10:
If to Employer, to:
Ruth’s Hospitality Group, Inc.
Attention: General Counsel
1030 West Canton Ave., Suite 100
Winter Park, FL 32789
Email: mlynch@ruthschris.com
If to Employee, to:
the last known address of Employee according to Employer records.
11. Governing Law and Resolution of Dispute. This Agreement shall be governed by and construed in accordance with the laws of or applicable to the State of Florida. Any dispute, controversy or claim arising out of or relating to Employee’s employment hereunder, or the breach therefore, shall be resolved by arbitration conducted in accordance with the rules then existing of the American Arbitration Association, applying the substantive law of the State of Florida. The parties further agree that any such arbitration shall be conducted in Orange County, Florida.
12. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
13. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties (including the Prior Agreement), written or oral, which may have related in any manner to the subject matter hereof.
14. Successors and Assigns. This Agreement may not be assigned by either party without the written consent of the other party hereto. Except as stated herein, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties and their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.
15. Withholding. All amounts payable hereunder will be subject to deduction for all required income, payroll and other withholdings.
16. Representations and Warranties. Employee represents, warrants and agrees that he has all right, power, authority and capacity, and is free to enter into this Agreement; that by doing so, Employee will not violate or interfere with the rights of any other person or entity; and that Employee is not subject to any contract, understanding or obligation that will or might prevent, interfere or conflict with or impair Employee’s performance of this Agreement. Employee further represents, warrants, and agrees that he will not enter into any agreement or other obligation while this Agreement is in effect that might conflict or interfere with the operation of this Agreement or his obligations hereunder. Employee agrees to indemnify and hold Employer harmless with respect to any losses, liabilities, demands, claims, fees, expenses, damages and costs (including attorneys’ fees and costs) resulting from or arising out of any claim or action based upon Employee’s entering into this Agreement.
17. Modification. Neither this Agreement nor the provisions contained herein may be extended, renewed, amended or modified other than by a written agreement executed by Employee and Employer.
18. Construction. The rule that a contract is construed against the party drafting the contract is hereby waived, and shall have no applicability in construing this Agreement or the terms hereof. Any headings and captions used herein are only for convenience and shall not affect the construction or interpretation of this Agreement.
19. Legal Representation. The parties understand that this is a legally binding contract and acknowledge and agree that they have had a reasonable opportunity to consult with legal counsel of their choice prior to execution.
20. Survival of Obligations. The parties expressly agree that Employee’s obligations set forth in this Agreement, as well as any other obligations that would naturally survive termination of an employment agreement, shall survive termination of Employee’s employment (whether voluntary or involuntary and whether with or without Cause and whether with or without Good Reason) and shall also survive the end of the term of this Agreement.
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same original instrument. A facsimile signature shall be deemed an original signature for purposes of execution of this Agreement.
22. Section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary:
a. General. All provisions of this Agreement are intended to comply with Section 409A of the Code and the applicable Treasury regulations and administrative guidance issued thereunder (collectively, “Section 409A”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of Employee’s employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.
b. Reimbursements. To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by Employer no later than the last day of Employee’s taxable year following the taxable year in which such expense was incurred by Employee, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that, the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period in which the arrangement is in effect.
c. Payment Dates. If any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Employee’s receipt of such payment or benefit is not delayed until the earlier of (i) the date of Employee’s death or (ii) the date that is six months after the Separation Date (such date, the “Section 409A Payment Date”), then such payment or benefit shall not be provided to Employee (or Employee’s estate, if applicable) until the Section 409A Payment Date. Notwithstanding the foregoing, Employer makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall Employer be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Employee on account of non-compliance with Section 409A.
* * * * *
Signature Page FollowsIN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
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EMPLOYER: |
EMPLOYEE: |
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By: __________________________ Name: Cheryl J. Henry Its: Chief Executive Officer |
_____________________________ David Hyatt |
EXHIBIT A
General Release
I, David Hyatt, in consideration of and subject to the performance by Ruth’s Hospitality Group, Inc. (as such company’s name may change from time to time and including such company’s successors and assigns, the “Company”), of its obligations under the Employment Agreement, dated as of August 1, 2022 (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees, successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “Released Parties”) to the extent provided below (this “General Release”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.
1. Schedule 1 attached hereto sets forth the termination and severance benefits to which I will be entitled in accordance with the terms of this Agreement (the “Severance Benefits”). I understand that the Severance Benefits represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive payment of the Severance Benefits unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy, or arrangement maintained or hereafter established by the Company or its affiliates.
2. Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement that expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators, and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties that I, my spouse, or any of my heirs, executors, administrators, or assigns, may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under the Agreement; or for compensation or equity or equity-based compensation; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “Claims”).
3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.
4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 that arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).
5. I agree that I hereby waive all rights to sue or obtain equitable, remedial, or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claim, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding, excepting only any monetary award to which I may become entitled pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Additionally, I am not waiving (a) any right to any accrued base salary earned by me prior to my termination of employment or any severance benefits to which I am entitled under the Agreement, (b) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Company’s organizational documents or otherwise, or (c) my rights as an equity or security holder in the Company or its affiliates.
6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected, and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.
7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.
8. I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees.
9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal, or other counsel I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.
10. Any nondisclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, any other self-regulatory organization, or any governmental entity.
11. I represent that, as of the effective date of this General Release, I am not aware of any Claim by me other than the Claims that are released by this General Release. I acknowledge that I may hereafter discover Claims or facts in addition to or different than those that I now know or believe to exist with respect to the subject matter of the release set forth in paragraph 2 above and that, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.
12. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision had never been contained herein.
By signing this General Release, I represent and agree that:
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1. |
I have read this General Release carefully; |
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2. |
I understand all of its terms and know that I am giving up important rights, including, but not limited to, rights under the Age Discrimination in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act of 1963; the Americans with Disabilities Act of 1990; and the Employee Retirement Income Security Act of 1974, as amended; |
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3. |
I voluntarily consent to everything in it; |
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4. |
I have been advised to consult with an attorney before executing it and I have done so or, after careful reading and consideration, I have chosen not to do so of my own volition; |
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5. |
I have had at least 45 days from the date of my receipt of this General Release to consider it, and the changes made since my receipt of this General Release are not material or were made at my request and will not restart the required 45-day period; |
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6. |
I understand that I have seven days after the execution of this General Release to revoke it and that this General Release shall not become effective or enforceable until the revocation period has expired; |
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7. |
I have signed this General Release knowingly and voluntarily and with the advice of any counsel retained to advise me with respect to it; and |
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8. |
I agree that the provisions of this General Release may not be amended, waived, changed, or modified except by an instrument in writing signed by an authorized representative of the Company and by me. |
Signed: ______________________________ Dated: ______________________________
SCHEDULE 1
Severance Benefits
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Cheryl J. Henry, certify that:
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I have reviewed this quarterly report on Form 10-Q of Ruth’s Hospitality Group, Inc. (the “Company”); |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
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The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
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5. |
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: August 5, 2022
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By |
/s/ CHERYL J. HENRY |
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Cheryl J. Henry |
|
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Chairperson of the Board, President, Chief Executive Officer and Director of |
|
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Ruth’s Hospitality Group, Inc. |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Kristy Chipman, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Ruth’s Hospitality Group, Inc. (the “Company”); |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
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4. |
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
|
5. |
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: August 5, 2022
|
By |
/s/ KRISTY CHIPMAN |
|
Kristy Chipman |
|
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Executive Vice President, Chief Financial Officer, Principal Accounting Officer and Chief Operating Officer of Ruth’s Hospitality Group, Inc. (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Ruth’s Hospitality Group, Inc. (the “Company”) for the quarter ended June 26, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 5, 2022
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By |
/s/ CHERYL J. HENRY |
|
Cheryl J. Henry |
|
|
Chairperson of the Board, President, Chief Executive Officer and Director of Ruth’s Hospitality Group, Inc. |
Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Ruth’s Hospitality Group, Inc. (the “Company”) for the quarter ended June 26, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Executive Vice President and Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 5, 2022
|
By |
/s/ KRISTY CHIPMAN |
|
Kristy Chipman |
|
| Executive Vice President, Chief Financial Officer, Principal Accounting Officer and Chief Operating Officer of Ruth’s Hospitality Group, Inc. (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Jun. 26, 2022 |
Dec. 26, 2021 |
|---|---|---|
| Allowance for doubtful accounts | $ 99 | $ 106 |
| Property and equipment, accumulated depreciation | $ 201,473 | $ 195,853 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
| Common stock, shares issued (in shares) | 33,142,303 | 33,575,337 |
| Common stock, shares outstanding (in shares) | 33,142,303 | 33,575,337 |
| Treasury stock, shares (in shares) | 71,950 | 71,950 |
| Franchise Rights [Member] | ||
| Finite-lived intangible assets, accumulated amortization | $ 9,902 | $ 8,779 |
| Lease And Other Intangible Assets [Member] | ||
| Finite-lived intangible assets, accumulated amortization | $ 1,763 | $ 1,698 |
Condensed Consolidated Income Statement (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Revenues: | ||||
| Revenue | $ 128,647 | $ 110,910 | $ 254,779 | $ 198,193 |
| Costs and expenses: | ||||
| Food and beverage costs | 35,962 | 31,607 | 74,573 | 54,528 |
| Restaurant operating expenses | 54,241 | 45,400 | 108,880 | 82,983 |
| Marketing and advertising | 4,747 | 3,232 | 9,662 | 5,225 |
| General and administrative costs | 9,327 | 8,774 | 18,568 | 15,970 |
| Depreciation and amortization expenses | 5,135 | 5,084 | 9,928 | 10,147 |
| Pre-opening costs | 743 | 159 | 1,625 | 604 |
| Loss on legal settlement | 6,000 | 0 | 6,000 | 0 |
| Loss on impairment | 0 | 394 | 0 | 394 |
| Total costs and expenses | 116,155 | 94,650 | 229,236 | 169,851 |
| Operating income | 12,492 | 16,260 | 25,543 | 28,342 |
| Other income (expense): | ||||
| Interest expense, net | (239) | (1,128) | (563) | (2,431) |
| Other | 34 | 36 | 62 | 80 |
| Income before income taxes | 12,287 | 15,168 | 25,042 | 25,991 |
| Income tax expense | 1,952 | 2,757 | 4,294 | 4,455 |
| Net income | $ 10,335 | $ 12,411 | $ 20,748 | $ 21,536 |
| Basic earnings per common share (in dollars per share) | $ 0.31 | $ 0.36 | $ 0.62 | $ 0.63 |
| Diluted earnings per common share (in dollars per share) | $ 0.31 | $ 0.36 | $ 0.61 | $ 0.62 |
| Shares used in computing earnings per common share: | ||||
| Basic (in shares) | 33,529,727 | 34,398,251 | 33,559,783 | 34,340,492 |
| Diluted (in shares) | 33,866,977 | 34,652,869 | 33,868,651 | 34,620,626 |
| Cash dividends declared per common share (in dollars per share) | $ 0.14 | $ 0 | $ 0.26 | $ 0 |
| Restaurant Sales [Member] | ||||
| Revenues: | ||||
| Revenue | $ 120,758 | $ 104,165 | $ 239,472 | $ 185,801 |
| Franchise [Member] | ||||
| Revenues: | ||||
| Revenue | 5,129 | 4,528 | 9,860 | 8,320 |
| Service, Other [Member] | ||||
| Revenues: | ||||
| Revenue | $ 2,760 | $ 2,217 | $ 5,447 | $ 4,072 |
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | |
|---|---|---|
Jun. 26, 2022 |
Mar. 27, 2022 |
|
| Cash dividends, per common share (in dollars per share) | $ 0.14 | $ 0.12 |
Note 1 - The Company and Basis of Presentation |
6 Months Ended |
|---|---|
Jun. 26, 2022 | |
| Notes to Financial Statements | |
| Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] |
(1) The Company and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Ruth’s Hospitality Group, Inc. and its subsidiaries (collectively, the "Company") as of June 26, 2022 and December 26, 2021 and for the thirteen and twenty-six week periods ended June 26, 2022 and June 27, 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated financial statements include the financial statements of Ruth’s Hospitality Group, Inc. and its wholly owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.
Ruth’s Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment. Ruth’s Hospitality Group, Inc. operates Company-owned Ruth’s Chris Steak House restaurants and sells franchise rights to Ruth’s Chris Steak House franchisees giving the franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise agreement. As of June 26, 2022, there were 151 Ruth’s Chris Steak House restaurants, including 74 Company-owned restaurants, restaurants operating under contractual agreements and 74 franchisee-owned restaurants, including 23 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Philippines, Singapore and Taiwan. All Company-owned restaurants are located in the United States. Subsequent to the end of the quarter, two new Company-owned Ruth's Chris Steak House restaurants were opened in Worcester, MA and Long Beach, CA.
The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. The interim results of operations for the periods ended June 26, 2022 and June 27, 2021 are not necessarily indicative of the results that may be achieved for the full fiscal year. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021.
The Company operates on a 52- or 53-week fiscal year ending on the last Sunday in December. The fiscal quarters ended June 26, 2022 and June 27, 2021 each contained thirteen weeks and are referred to herein as the second quarter of fiscal year 2022 and the second quarter of fiscal year 2021, respectively. Fiscal years 2022 and 2021 are both 52-week years.
COVID-19 Impact
In March 2020 the World Health Organization declared the novel coronavirus 2019 (COVID-19) a pandemic and the United States declared it a National Public Health Emergency, which has resulted in a significant reduction in revenue at the Company’s restaurants due to mandatory restaurant closures, capacity limitations, social distancing guidelines or other restrictions mandated by governments across the world, including federal, state and local governments in the United States. As a result of these developments, the Company has experienced a significant negative impact on its revenues, results of operations and cash flows compared to periods prior to the onset of the pandemic. As of June 26, 2022, all of the Company-owned and -managed restaurants were open. This continues to be an unprecedented event in the Company’s history, and as the COVID-19 pandemic continues to evolve, it remains uncertain how the conditions surrounding COVID-19 will continue to change. The Company has and could continue to experience macroeconomic impacts arising from the long duration of the COVID-19 pandemic, including operating restrictions, labor shortages and supply chain disruptions. The extent to which COVID-19 will continue to impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the unknown duration and severity of the COVID-19 pandemic, which may be impacted by new and evolving variants of the COVID-19 virus, the adoption rate of the COVID-19 vaccines in the jurisdictions in which the Company operates, the actions taken to contain the impact of COVID-19, and further actions that may be taken to limit the resulting public health and economic impact.
Following increases in the number of cases of COVID-19 throughout the United States and a spike in COVID-19 cases as a result of the Omicron and subsequent variants, some of our restaurants may become subject to COVID-19-related restrictions such as mask requirements for team members, guests or both. We continue to monitor state, local, and federal government regulatory and public health responses to the COVID-19 pandemic.
Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reporting of revenue and expenses during the periods presented to prepare these condensed consolidated financial statements in conformity with GAAP. Significant items subject to such estimates and assumptions include the carrying amounts of property and equipment, goodwill, franchise rights, operating lease right of use assets and obligations related to gift cards, income taxes, operating lease liabilities, incentive compensation, workers’ compensation and medical insurance. Actual results could differ from those estimates.
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Note 2 - Fair Value Measurements |
6 Months Ended | ||||||||||||||||||||||||||||||||||
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Jun. 26, 2022 | |||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||
| Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block] |
(2) Fair Value Measurements
The carrying amounts of cash and cash equivalents, receivables, prepaid expenses, accounts payable and accrued expenses and other current liabilities are reasonable estimates of their fair values due to their short duration. Borrowings classified as long-term debt as of June 26, 2022 and December 26, 2021 have variable interest rates that reflect currently available terms and conditions for similar debt. The carrying value, plus unpaid interest and deferred financing costs of $938 thousand at June 26, 2022, represents a reasonable estimate of fair value (Level 2).
The Company did not have any non-financial assets measured at fair value on a non-recurring basis as of June 26, 2022.
The Company’s non-financial assets measured at fair value on a non-recurring basis as of December 26, 2021 were as follows (in thousands):
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Note 3 - Leases |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Leases [Text Block] |
(3) Leases
The Company leases restaurant facilities and equipment. The Company determines whether an arrangement is or contains a lease at contract inception. The Company’s leases are all classified as operating leases, which are included as operating lease right of use assets (“ROU assets”) and operating lease liabilities in the Company’s condensed consolidated balance sheet. Operating lease liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. ROU assets are measured based on the operating lease liabilities adjusted for lease incentives, initial indirect costs and impairments of operating lease assets. Minimum lease payments include only the fixed lease components of the agreements, as well as any variable rate payments that depend on an index, which are measured initially using the index at the lease commencement dates. To determine the present value of future minimum lease payments, the Company estimates incremental borrowing rates based on the information available at the lease commencement dates, or amendment date for contract modifications. The Company estimates its incremental borrowing rates by determining the synthetic credit rating of the Company using quantitative and qualitative analysis and then adjusting the synthetic credit rating to a collateralized credit rating. A spread curve is then developed using the U.S. corporate bond yield curve of the same credit rating and the U.S. Treasury curve to determine the rate for different terms. The expected lease terms include options to extend when it is reasonably certain the Company will exercise the options up to a total term of 20 years. Total lease cost is expensed on a straight-line basis over the life of a lease. Additionally, incentives received from landlords used to fund leasehold improvements reduce the ROU assets related to those leases and are amortized as reductions to lease expense over the lives of the leases. Variable lease payments that do not depend on a rate or index, payments associated with non-lease components and short-term rentals (leases with terms less than 12 months) are expensed as incurred.
On April 10, 2020, the FASB issued a staff Q&A (the “Staff Q&A”) to provide guidance on its remarks at the April 8, 2020 Board meeting about accounting for rent concessions resulting from the COVID-19 pandemic. The Staff Q&A affirmed the discussion at the April 8, 2020 meeting by allowing entities to forgo performing the lease-by-lease legal analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions as long as the concessions are related to COVID-19 and the changes to the lease do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. In addition, the Staff Q&A affirmed that entities may make an election to account for eligible concessions, regardless of their form, either by (1) applying the modification framework for these concessions in accordance with Topic 842 or (2) accounting for the concessions as if they were made under the enforceable rights included in the original agreement.
Due to the impacts of the COVID-19 pandemic, the Company initiated negotiations with its landlords to modify its restaurant lease agreements. Where applicable, the Company has elected to account for eligible lease concessions as if they were made under the enforceable rights included in the original agreement pursuant to the Staff Q&A.
As of June 26, 2022, all of the Company-owned Ruth’s Chris Steak House restaurants operated in leased premises, with the exception of the restaurant in Ft. Lauderdale, FL, which is an owned property, and the restaurants in Anaheim, CA, Lake Mary, FL, Princeton, NJ and South Barrington, IL, which operate on leased land. The leases generally provide for minimum annual rental payments with scheduled minimum rent payment increases during the terms of the leases. Certain leases also provide for rent deferral during the initial term, lease incentives in the form of tenant allowances to fund leasehold improvements, and/or contingent rent provisions based on the sales at the underlying restaurants. Most of the Company’s restaurant leases have remaining lease terms of year to 20 years, some of which include options to extend the leases for 5 years or more. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of June 26, 2022, the weighted average remaining lease term and discount rate for operating leases is 13.7 years and 5.4%, respectively.
The components of lease expense are as follows (in thousands):
As of June 26, 2022, maturities of lease liabilities are summarized as follows (in thousands):
Supplemental cash flow information related to operating leases was as follows (in thousands):
Additionally, as of June 26, 2022, the Company has executed three leases for new Ruth’s Chris Steak House Restaurant locations with undiscounted fixed payments over the initial term of $13.2 million. These leases will commence when the landlords make the properties available to the Company. These leases are expected to commence during the next 12 months. These leases are expected to have an economic lease term of 20 years. The Company will assess the reasonably certain lease term at the lease commencement date.
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Note 4 - Revenue |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Text Block] |
(4) Revenue
In the following tables, the Company’s revenue is disaggregated by major component for each category on the consolidated statements of operations (in thousands).
The following table provides information about receivables and deferred revenue liabilities from contracts with customers (in thousands).
Significant changes in the deferred revenue balance and the unearned franchise fees balance during the first twenty-six weeks of fiscal year 2022 are presented in the following table (in thousands).
Significant changes in the deferred revenue balance and the unearned franchise fees balance during the first twenty-six weeks of fiscal year 2021 are presented in the following table (in thousands).
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Note 5 - Long-term Debt |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
(5) Long-term Debt
Long-term debt consists of the following (in thousands):
As of June 26, 2022, the Company had $40.0 million of outstanding indebtedness under its senior credit facility with approximately $95.3 million of borrowings available, net of outstanding letters of credit of approximately $4.7 million. As of June 26, 2022, the weighted average interest rate on the Company’s outstanding debt was 3.7% and the weighted average interest rate on its outstanding letters of credit was 1.9%. In addition, the fee on the Company’s unused senior credit facility was 0.3%.
The amended and restated credit agreement the Company entered into on October 18, 2021 with Wells Fargo Bank, National Association as administrative agent, and certain other lenders (as amended, "Credit Agreement") provides for a revolving credit facility of $140.0 million with a $10.0 million sub-facility of letters of credit and a $5.0 million sub-facility for swingline loans. Subject to the satisfaction of certain conditions and lender consent, the revolving credit facility may be increased up to a maximum of $200.0 million. The Credit Agreement has a maturity date of .
The Credit Agreement contains customary representations and affirmative and negative covenants (including limitations on indebtedness and liens) as well as financial covenants, as described below, requiring a minimum fixed coverage charge ratio as defined in the Credit Agreement (“Fixed Charge Coverage Ratio”) limiting the Company’s actual leverage ratio as defined in the Credit Agreement (“Maximum Consolidated Leverage Ratio”). The October 2021 amendment and restatement of the Credit Agreement restored the Fixed Charge Coverage Ratio and Maximum Consolidated Leverage Ratio to a Fixed Charge Coverage Ratio equal to or greater than and Maximum Consolidated Leverage Ratio no greater than Effective with the October 2021 amendment and restatement of the Credit Agreement, dividends and share repurchases are not limited if the Company's Consolidated Leverage Ratio is less than and holds a minimum liquidity of $25.0 million. The Credit Agreement also contains events of default customary for credit facilities of this type (with customary grace periods, as applicable), including nonpayment of principal or interest when due; material incorrectness of representations and warranties when made; breach of covenants; bankruptcy and insolvency; unsatisfied ERISA obligations; unstayed material judgment beyond specified periods; default under other material indebtedness; and certain changes of control of the Company. If any event of default occurs and is not cured within the applicable grace period or waived, the outstanding loans may be accelerated by lenders holding a majority of the commitments and the lenders’ commitments may be terminated. The obligations under the Credit Agreement are guaranteed by certain of the Company’s subsidiaries and are secured by a lien on substantially all of the Company’s personal property assets other than any equity interest in current and future subsidiaries of the Company.
Interest rate margins and the fee for the unused commitment are calculated based on the Maximum Consolidated Leverage Ratio, and at the Company’s option, revolving loans may bear interest at either:
The applicable margin is based on the Company’s Maximum Consolidated Leverage Ratio, ranging from (a) 1.50% to 2.25% above the applicable LIBOR rate or (b) 0.50% to 1.25% above the applicable Base Rate.
As of June 26, 2022, we were in compliance with all covenants pertaining to the Credit Agreement.
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Note 6 - Shareholders' Equity |
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| Stockholders' Equity Note Disclosure [Text Block] |
(6) Shareholders’ Equity
In October 2019, the Company’s Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $60 million of outstanding common stock from time to time. As a result of the impacts to our business arising from the COVID-19 pandemic, the Company suspended its share repurchase program. During the third quarter of fiscal year 2021 the Company resumed its share repurchase program and 887,515 shares were repurchased at an aggregate cost of $16.6 million, or an average cost of $18.69 per share, through December 27, 2021. During the first twenty-six weeks of fiscal year 2022, 529,734 shares were repurchased at an aggregate cost of $9.5 million, or an average cost of $18.01 per share. As of June 26, 2022, $15.4 million remained available for future purchases under the share repurchase program. Subsequent to the end of the second quarter our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $60 million of outstanding common stock from time to time. This share repurchase plan replaced the previous share repurchase plan announced in October 2019, which has been retired.
As a result of the impacts to our business arising from the COVID-19 pandemic, the Company previously suspended its dividend payments. During the first quarter of fiscal year 2022, the Company resumed its dividend. The Company’s Board of Directors declared the following dividends during the periods presented (amounts in thousands, except per share amounts):
Subsequent to the end of the second quarter of fiscal year 2022, the Company's Board of Directors declared a regular quarterly cash dividend of $0.14 per common and restricted share, or approximately $4.8 million in the aggregate based on the number of shares currently outstanding, payable on September 2, 2022 to stockholders of record as of the close of business on August 19, 2022.
Outstanding unvested restricted stock is not included in common stock outstanding amounts. Restricted stock awards outstanding as of June 26, 2022 totaled 729,694 shares. Restricted stock units outstanding as of June 26, 2022 totaled 79,143 shares. Performance-based stock awards (in the form of market stock units and performance stock units) outstanding as of June 26, 2022 totaled 205,769 shares.
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Note 7 - Segment Information |
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| Segment Reporting Disclosure [Text Block] |
(7) Segment Information
The Company has reportable segments – the Company-owned steakhouse segment and the franchise operations segment. The Company does not rely on any major customers as a source of revenue. The Company-owned Ruth’s Chris Steak House restaurants, all of which are located in North America, operate within the full-service dining industry, providing similar products to similar customers. Revenues are derived principally from food and beverage sales. As of June 26, 2022, (i) the Company-owned steakhouse restaurant segment included 74 Ruth’s Chris Steak House restaurants and Ruth’s Chris Steak House restaurants operating under contractual agreements and (ii) the franchise operations segment included 74 franchisee-owned Ruth’s Chris Steak House restaurants. Segment profits for the Company-owned steakhouse restaurant segments equal segment revenues less segment expenses. Segment revenues for the Company-owned steakhouse restaurants include restaurant sales, management agreement income and other restaurant income. Gift card breakage revenue is not allocated to operating segments. Not all operating expenses are allocated to operating segments. Segment expenses for the Company-owned steakhouse segment include food and beverage costs and restaurant operating expenses. No other operating costs are allocated to the Company-owned steakhouse segment for the purpose of determining segment profits because such costs are not directly related to the operation of individual restaurants. The accounting policies applicable to each segment are consistent with the policies used to prepare the consolidated financial statements. The profit of the franchise operations segment equals franchise income, which consists of franchise royalty fees and franchise opening fees. No costs are allocated to the franchise operations segment.
Segment information related to the Company’s two reportable business segments follows (in thousands):
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Note 8 - Stock-based Employee Compensation |
6 Months Ended |
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Jun. 26, 2022 | |
| Notes to Financial Statements | |
| Share-Based Payment Arrangement [Text Block] |
(8) Stock-Based Employee Compensation
On May 15, 2018, the Company’s stockholders approved a new 2018 Omnibus Incentive Plan (the "2018 Plan") which replaced the Amended and Restated 2005 Equity Incentive Plan (the "2005 Plan"), which expired on . The 2018 Plan authorizes 2.5 million shares reserved for future grants. Awards that were previously awarded under the 2005 Plan that are forfeited or cancelled in the future are made available for grant or issuance under the 2018 Plan. The 1,649,394 shares that were authorized but unissued under the 2005 Plan as of May 15, 2018 were cancelled. As of June 26, 2022, there were no shares of common stock issuable upon exercise of currently outstanding options, and 33,420 currently outstanding unvested restricted stock awards under the 2005 Plan. As of June 26, 2022, there were 981,185 currently outstanding unvested restricted stock awards, restricted stock units, and performance stock awards under the 2018 Plan. As of June 26, 2022, the 2018 Plan has 1,643,633 shares available for future grants. During the first twenty-six weeks of fiscal year 2022, the Company issued 250,704 restricted stock awards and units and -based stock units to directors, officers and other employees of the Company. Of the 425,365 restricted stock units, restricted stock units and performance stock awards issued during the first twenty-six weeks of fiscal year 2022, 94,341 shares will vest in fiscal year 2023, 94,341 shares will vest in fiscal year 2024, 229,463 shares will vest in fiscal year 2025 and 7,220 shares will vest in fiscal year 2027. Of the 229,463 shares that will vest in fiscal year 2025, 174,661 shares are variable, based on performance targets, and are reflected assuming they will be earned at 100% of target. Total stock compensation expense recognized during the first twenty-six weeks of fiscal years 2022 and 2021 was $3.9 million and $2.7 million, respectively.
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Note 9 - Income Taxes |
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| Income Tax Disclosure [Text Block] |
(9) Income Taxes
Income tax expense differs from amounts computed by applying the federal statutory income tax rate to income from continuing operations before income taxes as follows:
The employment-related tax credits line in the effective tax rate schedule above is comprised mainly of federal FICA tip credits which the Company utilizes to reduce its periodic federal income tax expense. A restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain wages (the FICA tip credit). The credit against income tax liability is for the full amount of eligible FICA taxes. Employers cannot deduct from taxable income the amount of FICA taxes taken into account in determining the credit.
The Company files consolidated and separate income tax returns in the United States federal jurisdiction and many state jurisdictions, respectively. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations for the years before 2017.
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Note 10 - Earnings Per Share |
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| Earnings Per Share [Text Block] |
(10) Earnings Per Share
The following table sets forth the computation of earnings per share (amounts in thousands, except share and per share amounts):
Diluted earnings per share for the second quarter of fiscal year 2022 excludes restricted shares of 45,683 which were outstanding during the period but were anti-dilutive and had no exercise price. There were no anti-dilutive shares during the second quarter of fiscal year 2021. Diluted earnings per share for the first twenty-six weeks of fiscal year 2022 and 2021 excludes restricted shares of 22,714 and 347, respectively, which were outstanding during the period but were anti-dilutive and had no exercise price.
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Note 11 - Commitments and Contingencies |
6 Months Ended |
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Jun. 26, 2022 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
(11) Commitments and Contingencies
The Company is subject to various claims, possible legal actions and other matters arising in the normal course of business. Management does not expect disposition of these other matters to have a material adverse effect on the financial position, results of operations or liquidity of the Company. The Company expenses legal fees as incurred.
The legislation and regulations related to tax and unclaimed property matters are complex and subject to varying interpretations by both government authorities and taxpayers. The Company remits a variety of taxes and fees to various governmental authorities, including excise taxes, property taxes, sales and use taxes, and payroll taxes. The taxes and fees remitted by the Company are subject to review and audit by the applicable governmental authorities which could assert claims for additional assessments. Although management believes that its tax positions are reasonable, various taxing authorities may challenge certain of the positions taken by the Company which may result in additional liability for taxes and interest. These tax positions are reviewed periodically based on the availability of new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits, the identification of new tax contingencies, or the rendering of relevant court decisions. An unfavorable resolution of assessments by a governmental authority could negatively impact the Company’s results of operations and cash flows in future periods.
The Company is subject to unclaimed or abandoned property (escheat) laws which require the Company to turn over to certain state governmental authorities the property of others held by the Company that has been unclaimed for specified periods of time. The Company is subject to audit of its escheatment practices by individual U.S. states.
On February 26, 2018, a former restaurant hourly employee filed a class action lawsuit in the Superior Court of the State of California for the County of Riverside, alleging that the Company violated the California Labor Code and California Business and Professions Code, by failing to pay minimum wages, permit required meal and rest breaks and provide accurate wage statements, among other claims. On September 2, 2020, the class action lawsuit was amended to include two additional proposed class representatives. This lawsuit seeks unspecified penalties under California's Private Attorney's General Act in addition to other monetary payments (Quiroz Guerrero, et al. v. Ruth's Hospitality Group, Inc, et al.; Case No RIC1804127) (the "Quiroz Guerroro Action"). Additionally, on July 29, 2021, September 17, 2021, and October 19, 2021, other former restaurant hourly employees filed complaints in the Superior Court of the State of California for the County of San Francisco, the County of Los Angeles, and the County of Contra Costa alleging causes of action substantially similar to the allegations made in the Quiroz Guerrero Action (collectively, with the Quiroz Guerroro Action, the "Class Action Litigations"), which cases may be consolidated with the Quiroz Guerrero Action. On May 11, 2022 a Memorandum of Understanding was signed with the plaintiffs in the Class Action Litigations agreeing to a $6.0 million legal settlement. On June 8, 2022, the plaintiffs submitted a Petition for Coordination and Motion for Stay to the Chairperson of the Judicial Council, requesting assignment of a judge to determine whether it is appropriate to coordinate the Class Action Litigations to effectuate settlement approval in one venue.
The Company currently buys a majority of its beef from two suppliers. Although there are a limited number of beef suppliers, management believes that other suppliers could provide similar product on comparable terms. A change in suppliers, however, could cause supply shortages and a possible loss of sales, which would affect operating results adversely. The COVID-19 pandemic has affected and may again in the future adversely affect our revenue and operating costs, and we cannot predict how long the pandemic will last or what other government responses may occur.
Our restaurant operations could be further disrupted if large numbers of our employees are diagnosed with COVID-19. If a significant portion of our workforce is unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition, or results of operations.
Our suppliers could be adversely impacted by the COVID-19 pandemic. If our suppliers' employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, we could face shortages of food items or other supplies at our restaurants, and our operations and sales could be adversely impacted by such supply interruptions.
Additional government regulations or legislation as a result of COVID-19 in addition to decisions we have made and may make in the future relating to the compensation of and benefit offerings for our restaurant Team Members could also have an adverse effect on our business. We cannot predict the types of additional government regulations or legislation that may be passed relating to employee compensation or benefits as a result of the COVID-19 pandemic.
The Company could experience other potential impacts as a result of the COVID-19 pandemic that are not completely known at this time, including, but not limited to, charges from potential adjustments to the carrying amount of goodwill, indefinite-lived intangibles and long-lived impairment charges. Our actual results may differ materially from the Company's current estimates as the scope of the COVID-19 pandemic evolves, depending largely though not exclusively on the duration of the disruption to our business. |
Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 26, 2022 | |
| Accounting Policies [Abstract] | |
| Basis of Accounting, Policy [Policy Text Block] | The accompanying unaudited condensed consolidated financial statements of Ruth’s Hospitality Group, Inc. and its subsidiaries (collectively, the "Company") as of June 26, 2022 and December 26, 2021 and for the thirteen and twenty-six week periods ended June 26, 2022 and June 27, 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated financial statements include the financial statements of Ruth’s Hospitality Group, Inc. and its wholly owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.
Ruth’s Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment. Ruth’s Hospitality Group, Inc. operates Company-owned Ruth’s Chris Steak House restaurants and sells franchise rights to Ruth’s Chris Steak House franchisees giving the franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise agreement. As of June 26, 2022, there were 151 Ruth’s Chris Steak House restaurants, including 74 Company-owned restaurants, restaurants operating under contractual agreements and 74 franchisee-owned restaurants, including 23 international franchisee-owned restaurants in Aruba, Canada, China, Hong Kong, Indonesia, Japan, Mexico, Philippines, Singapore and Taiwan. All Company-owned restaurants are located in the United States. Subsequent to the end of the quarter, two new Company-owned Ruth's Chris Steak House restaurants were opened in Worcester, MA and Long Beach, CA.
The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. The interim results of operations for the periods ended June 26, 2022 and June 27, 2021 are not necessarily indicative of the results that may be achieved for the full fiscal year. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021.
The Company operates on a 52- or 53-week fiscal year ending on the last Sunday in December. The fiscal quarters ended June 26, 2022 and June 27, 2021 each contained thirteen weeks and are referred to herein as the second quarter of fiscal year 2022 and the second quarter of fiscal year 2021, respectively. Fiscal years 2022 and 2021 are both 52-week years.
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| Impact of Unusual Risks and Uncertainties [Policy Text Block] | COVID-19 Impact
In March 2020 the World Health Organization declared the novel coronavirus 2019 (COVID-19) a pandemic and the United States declared it a National Public Health Emergency, which has resulted in a significant reduction in revenue at the Company’s restaurants due to mandatory restaurant closures, capacity limitations, social distancing guidelines or other restrictions mandated by governments across the world, including federal, state and local governments in the United States. As a result of these developments, the Company has experienced a significant negative impact on its revenues, results of operations and cash flows compared to periods prior to the onset of the pandemic. As of June 26, 2022, all of the Company-owned and -managed restaurants were open. This continues to be an unprecedented event in the Company’s history, and as the COVID-19 pandemic continues to evolve, it remains uncertain how the conditions surrounding COVID-19 will continue to change. The Company has and could continue to experience macroeconomic impacts arising from the long duration of the COVID-19 pandemic, including operating restrictions, labor shortages and supply chain disruptions. The extent to which COVID-19 will continue to impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the unknown duration and severity of the COVID-19 pandemic, which may be impacted by new and evolving variants of the COVID-19 virus, the adoption rate of the COVID-19 vaccines in the jurisdictions in which the Company operates, the actions taken to contain the impact of COVID-19, and further actions that may be taken to limit the resulting public health and economic impact.
Following increases in the number of cases of COVID-19 throughout the United States and a spike in COVID-19 cases as a result of the Omicron and subsequent variants, some of our restaurants may become subject to COVID-19-related restrictions such as mask requirements for team members, guests or both. We continue to monitor state, local, and federal government regulatory and public health responses to the COVID-19 pandemic.
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| Use of Estimates, Policy [Policy Text Block] | Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reporting of revenue and expenses during the periods presented to prepare these condensed consolidated financial statements in conformity with GAAP. Significant items subject to such estimates and assumptions include the carrying amounts of property and equipment, goodwill, franchise rights, operating lease right of use assets and obligations related to gift cards, income taxes, operating lease liabilities, incentive compensation, workers’ compensation and medical insurance. Actual results could differ from those estimates.
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Note 2 - Fair Value Measurements (Tables) |
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| Fair Value Measurements, Nonrecurring [Table Text Block] |
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Note 3 - Leases (Tables) |
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Jun. 26, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 4 - Revenue (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 5 - Long-term Debt (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 6 - Shareholders' Equity (Tables) |
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Note 7 - Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Reconciliation of Assets from Segment to Consolidated [Table Text Block] |
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Note 9 - Income Taxes (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] |
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Note 10 - Earnings Per Share (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 2 - Fair Value Measurements (Details Textual) $ in Thousands |
Jun. 26, 2022
USD ($)
|
|---|---|
| Assets, Fair Value Disclosure, Total | $ 938 |
Note 2 - Fair Value Measurements - Assets Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands |
Jun. 26, 2022 |
Dec. 26, 2021 |
|---|---|---|
| Fair Value | $ 938 | |
| Fair Value, Nonrecurring [Member] | Long Lived Assets [Member] | ||
| Fair Value | $ 0 | |
| Significant Other Observable Inputs (Level 3) | 0 | |
| Total Losses on Impairment | 1,766 | |
| Fair Value, Nonrecurring [Member] | Long Lived Assets [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Fair Value | $ 0 |
Note 3 - Leases (Details Textual) $ in Millions |
6 Months Ended |
|---|---|
|
Jun. 26, 2022
USD ($)
| |
| Lessee, Operating Lease, Option to Extend | 20 |
| Number of Leases Amended | 1 |
| Lessee, Operating Lease, Renewal Term (Year) | 5 years |
| Operating Lease, Weighted Average Remaining Lease Term (Year) | 13 years 8 months 12 days |
| Operating Lease, Weighted Average Discount Rate, Percent | 5.40% |
| Number of Leases Executed | 3 |
| Operating Lease, Initial Direct Cost Expense, over Term | $ 13.2 |
| Lessee, Operating Lease, Lease Not yet Commenced, Term of Contract (Year) | 20 years |
| Maximum [Member] | |
| Lessee, Operating Lease, Remaining Lease Term (Year) | 20 years |
Note 3 - Leases - Schedule of Components of Lease Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Operating lease cost | $ 6,302 | $ 4,125 | $ 12,401 | $ 8,476 |
| Variable lease cost | 3,378 | 4,315 | 6,684 | 7,260 |
| Total lease cost | $ 9,680 | $ 8,440 | $ 19,085 | $ 15,736 |
Note 3 - Leases - Schedule of Maturities of Lease Liabilities (Details) $ in Thousands |
Jun. 26, 2022
USD ($)
|
|---|---|
| 2022, excluding the first twenty-six weeks ended June 26, 2022 | $ 18,326 |
| 2023 | 26,110 |
| 2024 | 25,900 |
| 2025 | 24,902 |
| 2026 | 23,657 |
| Thereafter | 220,812 |
| Total future minimum rental commitments | 339,707 |
| Imputed interest | (106,752) |
| Operating Lease, Liability, Total | $ 232,955 |
Note 3 - Leases - Schedule of Supplemental Cash Flow Related to Operating Leases (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Cash paid for amounts included in the measurement of lease liabilities | $ 12,532 | $ 10,760 |
| Right-of-use assets obtained in exchange for lease obligations | 29,997 | 1,096 |
| Reduction of right-of-use assets and lease obligations from lease modifications and terminations | $ 0 | $ (8,572) |
Note 4 - Revenue - Summary of Disaggregated Revenue by Major Component for Each Category (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Revenue | $ 128,647 | $ 110,910 | $ 254,779 | $ 198,193 |
| Restaurant Sales [Member] | ||||
| Revenue | 120,758 | 104,165 | 239,472 | 185,801 |
| Franchise [Member] | ||||
| Revenue | 5,129 | 4,528 | 9,860 | 8,320 |
| Service, Other [Member] | ||||
| Revenue | 2,760 | 2,217 | 5,447 | 4,072 |
| UNITED STATES | ||||
| Revenue | 127,994 | 110,488 | 253,497 | 197,307 |
| UNITED STATES | Restaurant Sales [Member] | ||||
| Revenue | 120,758 | 104,165 | 239,472 | 185,801 |
| UNITED STATES | Franchise [Member] | ||||
| Revenue | 4,476 | 4,106 | 8,578 | 7,434 |
| UNITED STATES | Service, Other [Member] | ||||
| Revenue | 2,760 | 2,217 | 5,447 | 4,072 |
| Non-US [Member] | ||||
| Revenue | 653 | 422 | 1,282 | 886 |
| Non-US [Member] | Restaurant Sales [Member] | ||||
| Revenue | 0 | 0 | 0 | 0 |
| Non-US [Member] | Franchise [Member] | ||||
| Revenue | 653 | 422 | 1,282 | 886 |
| Non-US [Member] | Service, Other [Member] | ||||
| Revenue | $ 0 | $ 0 | $ 0 | $ 0 |
Note 4 - Revenue - Summary of Receivables and Deferred Revenue Liabilities From Contracts With Customers (Details) - USD ($) $ in Thousands |
6 Months Ended | |||
|---|---|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
Dec. 26, 2021 |
Dec. 27, 2020 |
|
| Accounts receivable, less allowance for doubtful accounts 2022 - $99; 2021 - $106 | $ 12,757 | $ 24,179 | ||
| Deferred revenue | 58,689 | $ 53,727 | 69,029 | $ 59,030 |
| Unearned franchise fees | 2,377 | 2,070 | $ 2,219 | $ 2,186 |
| Decreases in the beginning balance from gift card redemptions | (22,729) | (18,380) | ||
| Increases due to proceeds received, excluding amounts recognized during the period | 12,494 | 13,065 | ||
| Decreases due to recognition of franchise development and opening fees | (142) | (116) | ||
| Increases due to proceeds received for franchise development and opening fees | 300 | |||
| Other | $ (105) | $ 12 | ||
Note 4 - Revenue - Summary of Receivables and Deferred Revenue Liabilities From Contracts With Customers (Details) (Parentheticals) - USD ($) $ in Thousands |
Jun. 26, 2022 |
Dec. 26, 2021 |
|---|---|---|
| Allowance for doubtful accounts | $ 99 | $ 106 |
Note 5 - Long-term Debt - Debt Disclosure (Details) - USD ($) $ in Millions |
Jun. 26, 2022 |
Dec. 26, 2021 |
|---|---|---|
| Revolving credit facility | $ 40 | $ 70 |
| Long-Term Debt, Excluding Current Maturities, Total | $ 40 | $ 70 |
Note 6 - Shareholders' Equity - Schedule of Dividends Declared and Payable (Details) - USD ($) $ / shares in Units, $ in Thousands |
May 06, 2022 |
Jan. 06, 2022 |
|---|---|---|
| Dividend Per Share (in dollars per share) | $ 0.14 | $ 0.12 |
| Record Date | May 19, 2022 | Feb. 03, 2022 |
| Total Amount | $ 4,680 | $ 4,109 |
| Payment Date | Jun. 02, 2022 | Feb. 17, 2022 |
Note 7 - Segment Information (Details Textual) |
6 Months Ended |
|---|---|
Jun. 26, 2022 | |
| Number of Operating Segments | 2 |
| Entity Operated Units [Member] | |
| Number of Restaurants | 74 |
| Operated Under Contractual Agreements [Member] | |
| Number of Restaurants | 3 |
| Franchised Units [Member] | |
| Number of Restaurants | 74 |
Note 7 - Segment Information - Segment Information, Operating Profit (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Revenue | $ 128,647 | $ 110,910 | $ 254,779 | $ 198,193 |
| Segment profits | 37,343 | 32,995 | 68,816 | 58,976 |
| Unallocated operating income | 1,101 | 908 | 2,510 | 1,706 |
| Marketing and advertising expenses | (4,747) | (3,232) | (9,662) | (5,225) |
| General and administrative costs | (9,327) | (8,774) | (18,568) | (15,970) |
| Depreciation and amortization expenses | (5,135) | (5,084) | (9,928) | (10,147) |
| Pre-opening costs | (743) | (159) | (1,625) | (604) |
| Loss on settlement | (6,000) | (0) | (6,000) | (0) |
| Loss on impairment | 0 | (394) | 0 | (394) |
| Interest expense, net | (239) | (1,128) | (563) | (2,431) |
| Other income | 34 | 36 | 62 | 80 |
| Income before income taxes | 12,287 | 15,168 | 25,042 | 25,991 |
| Capital expenditures | 13,043 | 2,145 | 23,093 | 2,504 |
| Operating Segments [Member] | Company Owned Steakhouse Restaurants [Member] | ||||
| Revenue | 122,417 | 105,474 | 242,409 | 188,167 |
| Segment profits | 32,214 | 28,467 | 58,956 | 50,656 |
| Capital expenditures | 9,634 | 2,054 | 16,541 | 2,413 |
| Operating Segments [Member] | Franchise Operations [Member] | ||||
| Revenue | 5,129 | 4,528 | 9,860 | 8,320 |
| Segment profits | 5,129 | 4,528 | 9,860 | 8,320 |
| Segment Reconciling Items [Member] | ||||
| Revenue | 1,101 | 908 | 2,510 | 1,706 |
| Corporate, Non-Segment [Member] | ||||
| Capital expenditures | $ 3,409 | $ 91 | $ 6,552 | $ 91 |
Note 7 - Segment Information - Segment Information, Assets (Details) - USD ($) $ in Thousands |
Jun. 26, 2022 |
Dec. 26, 2021 |
|---|---|---|
| Assets | $ 513,812 | $ 535,979 |
| Operating Segments [Member] | Company Owned Steakhouse Restaurants [Member] | ||
| Assets | 417,088 | 404,929 |
| Operating Segments [Member] | Franchise Operations [Member] | ||
| Assets | 2,712 | 2,801 |
| Corporate, Non-Segment [Member] | ||
| Assets | $ 94,012 | $ 128,249 |
Note 9 - Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) |
6 Months Ended | |
|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Income tax expense at statutory rates | 21.00% | 21.00% |
| State income taxes, net of federal benefit | 4.00% | 4.50% |
| Federal employment tax credits | (10.00%) | (9.70%) |
| Non-deductible executive compensation | 2.20% | 2.00% |
| Stock-based compensation | (0.00%) | (0.60%) |
| Other | (0.00%) | (0.10%) |
| Effective tax rate | 17.20% | 17.10% |
Note 10 - Earnings Per Share (Details Textual) - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 26, 2022 |
Jun. 27, 2021 |
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 45,683 | 0 | 22,714 | 347 |
Note 10 - Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 26, 2022 |
Mar. 27, 2022 |
Jun. 27, 2021 |
Mar. 28, 2021 |
Jun. 26, 2022 |
Jun. 27, 2021 |
|
| Net income | $ 10,335 | $ 10,413 | $ 12,411 | $ 9,125 | $ 20,748 | $ 21,536 |
| Basic (in shares) | 33,529,727 | 34,398,251 | 33,559,783 | 34,340,492 | ||
| Diluted (in shares) | 33,866,977 | 34,652,869 | 33,868,651 | 34,620,626 | ||
| Basic earnings per common share (in dollars per share) | $ 0.31 | $ 0.36 | $ 0.62 | $ 0.63 | ||
| Diluted earnings per common share (in dollars per share) | $ 0.31 | $ 0.36 | $ 0.61 | $ 0.62 | ||
Note 11 - Commitments and Contingencies (Details Textual) $ in Millions |
May 13, 2022
USD ($)
|
Jun. 26, 2022 |
|---|---|---|
| Number of Suppliers | 2 | |
| Class Action Litigations [Member] | ||
| Litigation Settlement, Amount Awarded to Other Party | $ 6 |
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