Document:

esnd-ex1038_188.htm

Exhibit 10.38

 

November 10, 2015

Mr. Earl Shanks

5110 Garden Spring Court

Dayton, Ohio 45429

Dear Earl:

I am pleased to offer you the position of Senior Vice President and Chief Financial Officer of Essendant Inc. (the Company), effective November 12, 2015. In this position, you will report to me as a senior leader of the Company and be responsible for leading the Finance organization. The Company's Board of Directors, the Senior Leadership Team and I are excited at the prospect of working with you to take Essendant to the next level of success.

The specifics of the offer are outlined below:

Base Pay

Your annual base salary will be $475,000, less applicable tax withholdings, paid semi-monthly, effective on your date of hire.

Management Incentive Plan

As a key member of the management team, you are eligible to participate in the Management Incentive Plan (MIP), which provides you with the opportunity to earn a cash award after year-end, if a set of predetermined goals are achieved. Your target incentive award is 80% of your base salary. The plan currently allows for a maximum payout of 200% of your target award, based on performance against total Company MIP metrics. If a bonus is earned, payments are typically made during the first quarter of the subsequent year. Payments are pro-rated for partial years of service.

Awards are subject to approval by the HR Committee of the Board of Directors.

Long Term Incentive Plan

•      As a key member of the management team, you are also eligible to participate in the Company's 2015 Long-Term Incentive Plan (LTIP). The targeted annual economic value of your LTIP equity award is 150% of your base salary ($712,500).

The equity grants in the most recent year were awarded as follows:

	
 
	
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Restricted Stock awarded in September, designed to deliver 50% of the targeted annual economic value of your LTIP awards, and vesting in three annual installments, subject to the Company achieving at least $0.50 EPS during the four quarters preceding each annual vesting date.
	
 

	
 
	
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Restricted Stock Units awarded in March, designed to deliver 50% of the targeted annual economic value of your LTIP awards, and cliff vesting on the third anniversary of the grant date to the extent the Company achieves Cumulative Net Income and Working Capital Efficiency performance goals as defined in the award agreement with a maximum potential vesting of 200% of the Units awarded.
	
 

Officer Perquisite

You are eligible for a yearly perquisite allowance of $18,000, less applicable tax withholdings, paid semimonthly, effective on your date of hire.

Equity Grant

You will also receive a one-time restricted stock grant with an economic value of $250,000. The grant will occur as soon as administratively possible after your start date and will cliff vest on the third anniversary of the grant date, provided you are still employed by the Company and that the Company has achieved at least $0.50 EPS during the four quarters immediately preceding the vesting date. The number of shares will be determined based on the closing stock price on the grant date. In addition to your LTIP award in March of 2016, you will also receive an incremental restricted stock unit (RSU) award with an economic value of $250,000. The grant will cliff vest on the third anniversary of the grant date, provided you are still employed by the Company and to the extent that the Company has achieved the performance goals set forth in the RSU award agreement. The number of shares will be determined based on the closing stock price on the date of the grant.

Relocation

You will also be entitled to relocation from Dayton, Ohio to Chicago in accordance with the Lump Sum Program set forth in the Company Relocation Policy, policy number HR-008.

The Lump Sum Relocation Allowance offers flexibility in planning and executing an associate's relocation. It is intended to assist with expenses associated with finding a new home, temporary living, return trips home, miscellaneous expenses and the final move to the new location. The Relocation Allowance is determined by the associate's base salary. Your Lump Sum Relocation Allowance will be the gross amount of $285,000,

which is the maximum benefit of 60% of your base salary, and from which taxes will be deducted. Pursuant to the Relocation Policy, in the event you terminate your employment with the Company or are terminated for reasons set forth in the Company Relocation Policy prior to 11/12/2017, you will be required to reimburse the Company for the Relocation Allowance as set forth in that policy.

Benefit Programs

As a new hire, you will be eligible for benefits after 30 days of employment. The Company Employee Benefit Program includes:

	
 
	
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Health Benefits: Medical, dental, vision, EAP and Flexible Spending Accounts;

	
 
	
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Financial Security Benefits: 401 (k) Plan,Deferred Compensation Plan, Employee Stock Purchase Program, Short and Long Term disability income insurance, life insurance and accidental death and dismemberment insurance.
	
 

Please refer to the summary and rate sheet for more details.

Paid Time Off

You will be eligible for 26 days of Paid Time Off annually which will be pro-rated based on your start date for the first year of service with the Company. Paid time off accrues each pay period. You are eligible to accrue PTO 30 days after your hire date. In addition, we offer 10 holidays annually based on your hire date.

Severance Terms

The Executive Severance Plan is intended to provide certain eligible employees of Essendant severance benefits in the event of such employee's Eligible Termination or Eligible Change of Control Termination under the terms and conditions set forth in the plan. I have included a copy of the Executive Severance Plan for your review.

Offer Acceptance

This offer is contingent upon the acceptable results of a pre-employment drug screen and satisfactory background and credit checks.

Upon accepting this offer of employment, you represent and agree to the following: 1) you have no current employment contract, covenant not to compete, restrictive covenants, confidentiality agreement, or any other kind of agreement with any previous employer that would preclude you from accepting this offer and joining the Company or otherwise limit your activities once you become an employee, and 2) you will not bring with you any trade secrets or other confidential or proprietary information of your previous employer.

Upon employment, you will also be asked to sign and abide by the Company Confidentiality and NonDisclosure Agreement and Code of Business Conduct.

To accept our employment offer, we ask that you please sign and return this letter. A second copy is provided for your records. While this letter is intended to outline the terms of your employment, neither the terms of this offer letter, nor your acceptance, constitutes an employment contract or an assurance of future employment for any fixed period of time. Essendant is an at-will employer, which means your employment is for no definite period of time and can be terminated, at any time, with or without cause, and with or without notice, by you or the Company.

 

We believe you can make a meaningful contribution to our Company and look forward to working with you. If you have any questions, please contact me or Carole Tomko, SVP, Chief HR Officer, at 847-627-2110. Please return a signed copy of this letter to me indicating your understanding and acceptance.

Congratulations and welcome to Essendant.

Sincerely,

 

 

Robert B. Aiken Jr.

President & CEO

Accepted and agreed;

________________________________________Date: ___________________________

Earl C. Shanks

16982Exhibit

                

RED ROBIN GOURMET BURGERS, INC.
CASH INCENTIVE PLAN  
 
FORM OF
PERFORMANCE BASED CASH AWARD AGREEMENT  

This Performance Based Cash Award Agreement (this “Agreement”) between RED ROBIN GOURMET BURGERS, INC. (the “Corporation”) and __________ (“Participant”) is dated effective __________ (the “Date of Grant”). 
AGREEMENT
1.Award.  Subject to the terms and conditions hereof and of the Red Robin Gourmet Burgers, Inc. Cash Incentive Plan (the “Plan”), the Corporation hereby grants to Participant the right to earn a cash bonus (the “Award”) based upon the Corporation’s achievement of certain performance goals over the three fiscal year period commencing on __________ and ending on __________ (the “Performance Period”).  The target amount of Participant’s Award shall be $[____] (“Target Award”).  The actual amount of the Award, if any, shall be determined pursuant to Sections 2 through 4 below and may be greater than, equal to, or less than the Target Award based on the Corporation’s performance during the Performance Period.  Except as provided below, Participant must be employed continuously by or provide services to the Corporation from the Date of Grant through the last day of the Performance Period to receive any payment hereunder.  If Participant ceases to be employed by or ceases to provide services to the Corporation at any time prior to the last day of the Performance Period, then, except as provided below, this award shall be canceled immediately on the Separation Date and Participant shall cease to have any right or entitlement to receive any payment or other award hereunder.
2.    Calculation of Award Amount.  The amount of Participant’s Award, if any, shall be determined based on the Corporation’s performance over the Performance Period as measured by the following two metrics: Cumulative EBITDA (as defined below) and Average Return on Invested Capital (also defined below).  One half of the Target Award shall be assigned to each performance metric, and the amount earned as a result of each metric shall be calculated separately, in accordance with the table below.   The total Award amount, if any, shall be the sum of the amounts earned in respect of each performance metric.  

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	Cumulative EBITDA

Amount earned in respect of this metric shall equal:

(Target Award * 1/2 * EBIDTA % Payout)

	

Average Return on Invested Capital

Amount earned in respect of this metric shall equal:

(Target Award * 1/2 * ROIC % Payout)

	 
	Cumulative EBITDA for the Performance Period as a Percentage of Target
	EBITDA % Payout *
	 
	Average Return on Invested Capital for the Performance Period as a Percentage of Target
	ROIC % Payout *

	Threshold
	 
	 
	Threshold
	 
	 

	Target
	 
	 
	Target
	 
	 

	

Maximum
	 
	 
	

Maximum

	 
	 

*  If the Corporation’s performance during the Performance Period falls between any of the percentages in the table above, the EBITDA % Payout or ROIC % Payout, as applicable, shall be calculated using linear interpolation (e.g. if Cumulative EBITDA for the Performance Period is 103% of the target, the EBITDA % Payout would be 115%).
The Cumulative EBITDA and Average Return on Invested Capital targets to be used in accordance with the table above were established in writing by the Administrator on __________.  Such targets are not set forth herein and the parties agree that they shall not be specifically disclosed to the Participant as they relate to or contain future financial goals of the Corporation which have not and will not be disclosed to the public.  The Administrator shall adjust such Cumulative EBITDA and Average Return on Invested Capital targets to mitigate the unbudgeted impact of (i) material and either unusual or non-recurring gains or losses, (ii) accounting changes, or (iii) other material events, conditions, or items not foreseen at the time the Cumulative EBITDA and Average Return on Invested Capital targets were established, including, but not limited to, unforeseen impairments, changes in tax laws, executive transition and retirement costs, severance, and acquisitions or dispositions.
3.    Service Requirements; Termination of Employment.  
(a)    General.  Participant shall be eligible to receive an Award only if Participant remains employed by the Corporation through the last day of the Performance Period. If Participant ceases to be employed by the Corporation at any time prior to the last day of the Performance Period, then, except as otherwise provided below, this Agreement shall be canceled immediately on the Separation Date and Participant shall cease to have any right or entitlement to receive any payment hereunder.  Nothing contained in this Agreement or in the Plan shall confer upon Participant any right to continue in the employment of the Corporation or to continue at the same job level that Participant holds as of the Date of Grant. 
(b)    Accelerated Vesting upon Participant’s Death or Total Disability.  Notwithstanding Section 3(a) above, if Participant’s employment with the Corporation is terminated prior to the last day of the 

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Performance Period as a result of Participant’s death or Total Disability, then at the Separation Date the Performance Period shall be deemed to have ended and Participant’s Award, if any, shall be calculated in the manner set forth in Section 2 above except (i) appropriate adjustments shall be made by the Administrator to the targets for Cumulative EBITDA and Average Return on Invested Capital, and (ii) the amount of the Award, if any, will be pro-rated based on the number of days that Participant was employed by the Corporation between the Date of Grant and the Separation Date as a percentage of the total number of days in the Performance Period.
(c)    Accelerated Vesting upon Participant’s Retirement.  Notwithstanding Section 3(a) above, if Participant’s employment with the Corporation is terminated prior to the last day of the Performance Period as a result of Participant’s Retirement, then at the Separation Date, the Performance Period shall be deemed to have ended and Participant’s Award, if any, shall be calculated in the manner set forth in Section 2 above except (i) appropriate adjustments shall be made by the Administrator to the targets for Cumulative EBITDA and Average Return on Invested Capital, and (ii) the amount of the Award, if any, will be pro-rated based on the number of days that Participant was employed by the Corporation between the Date of Grant and the Separation Date as a percentage of the total number of days in the Performance Period.
4.    Change in Control Event.  If the Corporation undergoes a Change in Control Event prior to the last day of the Performance Period, then the Performance Period shall be deemed to have ended on the effective date of the Change in Control Event, and Participant shall be entitled to an Award calculated in the manner set forth in Section 2 above except appropriate adjustments shall be made by the Administrator to the targets for Cumulative EBITDA and Average Return on Invested Capital.
5.    Payment of Awards.  Participant’s Award, if any, shall be paid in cash within sixty-five (65) days after (i) the end of the Performance Period, or (ii) the Separation Date, if Section 3(b) or 3(c) is applicable (subject to any payment delay required by Section 11(b), below), or (iii) the Change in Control Event, if Section 4 is applicable.
6.    Tax Withholding.  The Corporation shall withhold from any Award payable hereunder all federal, state, local and other income and employment taxes required to be withheld from such Award.
7.    Non-Solicitation.  Participant, for the twelve (12) month period immediately following the date of termination of Participant’s employment, shall not, either on his or her own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner, or shareholder, or otherwise on behalf of any other person, firm, or corporation, directly or indirectly solicit or attempt to solicit away from the Corporation any of its employees or offer employment to any person who, on or during the six (6) months immediately preceding the date of such solicitation or offer, is or was an employee of the Corporation; provided, however, that a general solicitation or advertisement to which an employee of the Corporation responds shall in no event be deemed to result in a breach of this Section 7.
8.    Binding Effect.  This Agreement shall bind Participant and the Corporation and their beneficiaries, survivors, executors, administrators and transferees. 
9.    Conflicts and Interpretation.  Participant acknowledges receipt of a copy of the Plan, and agrees that this Award shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement.  In the event of any conflict between the terms and conditions of this Agreement and the terms and conditions of the Plan, the terms and conditions of the Plan shall control.

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10.    Amendment.  The Corporation may modify, amend or waive the terms of the Award, prospectively or retroactively, but no such modification, amendment or waiver shall impair the rights of Participant without his or her consent, except as required by applicable law or as necessary to avoid adverse tax or accounting consequences.  Prior to the effectiveness of any modification, amendment or waiver, the Corporation will provide notice to Participant and the opportunity for Participant to consult with the Corporation regarding such modification, amendment or waiver.  The waiver by either party of compliance with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.  
11.    Compliance with Code Section 409A.  
(a)    It is the intention of the parties that compensation payable under this Agreement shall not be subject to the additional tax imposed pursuant to Section 409A of the Code and the parties shall interpret this Agreement in a manner consistent with such intent. 
(b)    If Participant is a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code and would receive any payment sooner than 6 months after Participant’s Separation Date that, absent the application of this Section 11(b), would be subject to additional tax imposed pursuant to Section 409A of the Code as a result of such status as a specified employee, then such payment shall instead be payable on the date that is the earliest of (i) 6 months after Participant’s Separation Date or (ii) Participant’s death.
12.    Definitions.  Capitalized terms not otherwise defined herein shall have the same meanings ascribed to them in the Plan.  Whenever the following terms are used in this Agreement, they shall have the meanings set forth below.
(a)    “Average Return on Invested Capital” means (x) the Return on Invested Capital for each fiscal year of the Corporation during the Performance Period ÷ (y) the total number of fiscal years in the Performance Period.
(b)    “Change in Control Event” means a “Change in Control Event” as defined in the Plan, that also qualifies as a “change in control event” pursuant to Treasury Regulation Section 1.409A-3(i)(5).
(c)    “Cumulative EBITDA” means the net earnings of the Corporation over the relevant period plus (i) net interest expense, (ii) income taxes, (iii) depreciation, (iv) amortization expense, (v) impairments and (vii) other income (expense), net as reported in the Company’s income statement.
(d)    “Retirement” means the voluntary termination of employment by Participant from the Corporation when the Participant’s age plus years of service with the Corporation (in each case measured in complete, whole years) equals or exceeds 67, provided that at the date of termination the Participant is at least 58 years of age and has completed at least five years of service with the Corporation
(e)    “Return on Invested Capital” for a relevant period means:  
Net Operating Profit ÷ Average Invested Capital
 “Net Operating Profit” means net earnings for the relevant period plus (i) interest expense, (ii) income taxes, and (iii) other income (expense), net as reported in the Company’s income statement.

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“Average Invested Capital” means the average for the relevant period of the Corporation’s total long term debt, including capital lease obligations, plus (i) the Corporation’s total equity, and (ii) cumulative asset impairments, net of tax.
(f)    “Separation Date” shall be the date on which Participant’s employment with the Corporation ceases for any reason in a manner that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h), including Participant’s resignation for any reason, the Corporation’s termination of Participant’s employment for any reason including Total Disability, or Participant’s death.
(g)     “Total Disability” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Internal Revenue Code or as otherwise determined by the Administrator).

[Signature Page Follows.]

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IN WITNESS WHEREOF, the parties have executed this Performance Based Cash Award Agreement effective as of the Date of Grant.
RED ROBIN GOURMET BURGERS, INC.
 
By:          
    Name:                                           Date    Title:    
PARTICIPANT:         
       [NAME]                                         Date

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