QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
March 27, 2020 (unaudited) | December 27, 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable, net of allowance of $25,618 in 2020 and $8,846 in 2019 | |||||||
Inventories, net | |||||||
Prepaid expenses and other current assets | |||||||
Total current assets | |||||||
Equipment, leasehold improvements and software, net | |||||||
Operating lease right-of-use assets | |||||||
Goodwill | |||||||
Intangible assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Accrued liabilities | |||||||
Short-term operating lease liabilities | |||||||
Accrued compensation | |||||||
Current portion of long-term debt | |||||||
Total current liabilities | |||||||
Long-term debt, net of current portion | |||||||
Operating lease liabilities | |||||||
Deferred taxes, net | |||||||
Other liabilities and deferred credits | |||||||
Total liabilities | |||||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 27, 2020 and December 27, 2019 | |||||||
Common Stock, - $0.01 par value, 100,000,000 shares authorized, 30,989,742 and 30,341,941 shares issued and outstanding at March 27, 2020 and December 27, 2019, respectively | |||||||
Additional paid in capital | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Retained earnings | |||||||
Total stockholders’ equity | |||||||
Total liabilities and stockholders’ equity | $ | $ |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Net sales | $ | $ | |||||
Cost of sales | |||||||
Gross profit | |||||||
Operating expenses | |||||||
Operating (loss) income | ( | ) | |||||
Interest expense | |||||||
Loss on asset disposal | |||||||
(Loss) income before income taxes | ( | ) | |||||
Provision for income taxes | ( | ) | |||||
Net (loss) income | $ | ( | ) | $ | |||
Other comprehensive (loss) income: | |||||||
Foreign currency translation adjustments | ( | ) | |||||
Comprehensive (loss) income | $ | ( | ) | $ | |||
Net (loss) income per share: | |||||||
Basic | $ | ( | ) | $ | |||
Diluted | $ | ( | ) | $ | |||
Weighted average common shares outstanding: | |||||||
Basic | |||||||
Diluted |
Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance December 27, 2019 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Stock compensation | — | — | ||||||||||||||||||||
Cumulative translation adjustment | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Shares surrendered to pay tax withholding | ( | ) | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||
Balance March 27, 2020 | $ | $ | $ | ( | ) | $ | $ |
Balance December 28, 2018 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Cumulative effect adjustment due to adoption of new accounting standard | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Stock compensation | ( | ) | — | — | — | |||||||||||||||||
Exercise of stock options | — | — | — | |||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | ||||||||||||||||||
Shares surrendered to pay tax withholding | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||
Balance March 29, 2019 | $ | $ | $ | ( | ) | $ | $ |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of intangible assets | |||||||
Provision for allowance for doubtful accounts | |||||||
Non-cash operating lease expense | |||||||
Deferred taxes | ( | ) | |||||
Amortization of deferred financing fees | |||||||
Stock compensation | |||||||
Change in fair value of contingent earn-out liabilities | ( | ) | |||||
Loss on asset disposal | |||||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | |||||||
Inventories | |||||||
Prepaid expenses and other current assets | ( | ) | ( | ) | |||
Accounts payable, accrued liabilities and accrued compensation | ( | ) | ( | ) | |||
Other assets and liabilities | |||||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Capital expenditures | ( | ) | ( | ) | |||
Cash paid for acquisitions, net of cash received | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Payment of debt, finance lease and other financing obligations | ( | ) | ( | ) | |||
Proceeds from exercise of stock options | |||||||
Surrender of shares to pay withholding taxes | ( | ) | ( | ) | |||
Cash paid for contingent earn-out liability | ( | ) | |||||
Borrowings under asset-based loan facility | |||||||
Net cash provided by (used in) financing activities | ( | ) | |||||
Effect of foreign currency on cash and cash equivalents | ( | ) | ( | ) | |||
Net change in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents-beginning of period | |||||||
Cash and cash equivalents-end of period | $ | $ |
Thirteen Weeks Ended | |||||||||||||
March 27, 2020 | March 29, 2019 | ||||||||||||
Center-of-the-Plate | $ | % | $ | % | |||||||||
Dry Goods | % | % | |||||||||||
Pastry | % | % | |||||||||||
Cheese and Charcuterie | % | % | |||||||||||
Dairy and Eggs | % | % | |||||||||||
Oils and Vinegars | % | % | |||||||||||
Kitchen Supplies | % | % | |||||||||||
Total | $ | % | $ | % |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Net (loss) income per share: | |||||||
Basic | $ | ( | ) | $ | |||
Diluted | $ | ( | ) | $ | |||
Weighted average common shares: | |||||||
Basic | |||||||
Diluted |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Numerator: | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Denominator: | |||||||
Weighted average basic common shares outstanding | |||||||
Dilutive effect of stock options and unvested common shares | |||||||
Weighted average diluted common shares outstanding |
Thirteen Weeks Ended | |||||
March 27, 2020 | March 29, 2019 | ||||
Restricted share awards (“RSAs”) | |||||
Convertible notes |
Fells Point | Bassian | Sid Wainer | Other Acquisitions | Total | |||||||||||||||
Balance December 27, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Acquisition value | |||||||||||||||||||
Cash payments | ( | ) | ( | ) | |||||||||||||||
Changes in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
Balance March 27, 2020 | $ | $ | $ | $ | $ |
March 27, 2020 | December 27, 2019 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Convertible Senior Notes | $ | $ | $ | $ | |||||||||||
Convertible Unsecured Note | $ | $ | $ | $ |
Thirteen Weeks Ended | ||||||||
March 27, 2020 | — | March 29, 2019 | ||||||
Net sales | $ | $ | ||||||
Loss before income taxes | ( | ) | ( | ) |
Sid Wainer | Other Acquisitions | |||||
Current assets | $ | $ | ||||
Customer relationships | ||||||
Trademarks | ||||||
Goodwill | ||||||
Fixed assets | ||||||
Right-of-use assets | ||||||
Lease liabilities | ( | ) | ( | ) | ||
Current liabilities | ( | ) | ( | ) | ||
Earn-out liability | ( | ) | ( | ) | ||
Total consideration | $ | $ |
Useful Lives | March 27, 2020 | December 27, 2019 | ||||||||
Land | Indefinite | $ | $ | |||||||
Buildings | 20 years | |||||||||
Machinery and equipment | 5-10 years | |||||||||
Computers, data processing and other equipment | 3-7 years | |||||||||
Software | 3-7 years | |||||||||
Leasehold improvements | 1-40 years | |||||||||
Furniture and fixtures | 7 years | |||||||||
Vehicles | 5-7 years | |||||||||
Other | 7 years | |||||||||
Construction-in-process | ||||||||||
Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||||
Equipment, leasehold improvements and software, net | $ | $ |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Depreciation expense | $ | $ | |||||
Software amortization | $ | $ | |||||
$ | $ |
Carrying amount as of December 27, 2019 | $ | ||
Acquisitions | |||
Foreign currency translation | ( | ) | |
Carrying amount as of March 27, 2020 | $ |
March 27, 2020 | Gross Carrying Amount | Accumulated Amortization | Net Amount | ||||||||
Customer relationships | $ | $ | ( | ) | $ | ||||||
Non-compete agreements | ( | ) | |||||||||
Trademarks | ( | ) | |||||||||
Total | $ | $ | ( | ) | $ |
December 27, 2019 | |||||||||||
Customer relationships | $ | $ | ( | ) | $ | ||||||
Non-compete agreements | ( | ) | |||||||||
Trademarks | ( | ) | |||||||||
Total | $ | $ | ( | ) | $ |
2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total | $ |
March 27, 2020 | December 27, 2019 | |||||||
Senior secured term loan | $ | $ | ||||||
Convertible senior notes | ||||||||
Asset-based loan facility | ||||||||
Convertible unsecured note | ||||||||
Finance lease and other financing obligations | ||||||||
Deferred finance fees and original issue discount | ( | ) | ( | ) | ||||
Total debt obligations | ||||||||
Less: current installments | ( | ) | ( | ) | ||||
Total debt obligations excluding current installments | $ | $ |
Shares | Weighted Average Grant Date Fair Value | ||||||
Unvested at December 27, 2019 | $ | ||||||
Granted | |||||||
Vested | ( | ) | |||||
Forfeited | ( | ) | |||||
Unvested at March 27, 2020 | $ |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Supplemental cash flow disclosures: | |||||||
Cash paid for income taxes, net of cash received | $ | $ | |||||
Cash paid for interest, net of cash received | $ | $ | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Operating cash flows from finance leases | $ | $ | |||||
ROU assets obtained in exchange for lease liabilities: | |||||||
Operating leases | $ | $ | |||||
Finance leases | $ | $ | |||||
Other non-cash investing and financing activities: | |||||||
Convertible notes issued for acquisitions | $ | $ | |||||
Contingent earn-out liabilities for acquisitions | $ | $ |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Net sales | $ | 375,431 | $ | 357,027 | |||
Cost of sales | 284,530 | 266,838 | |||||
Gross profit | 90,901 | 90,189 | |||||
Operating expenses | 107,917 | 84,039 | |||||
Operating (loss) income | (17,016 | ) | 6,150 | ||||
Interest and other expense | 5,166 | 4,585 | |||||
(Loss) income before income taxes | (22,182 | ) | 1,565 | ||||
Provision for income taxes | (8,097 | ) | 431 | ||||
Net (loss) income | $ | (14,085 | ) | $ | 1,134 |
2020 | 2019 | $ Change | % Change | |||||||||||
Net sales | $ | 375,431 | $ | 357,027 | $ | 18,404 | 5.2 | % |
2020 | 2019 | $ Change | % Change | |||||||||||
Gross profit | $ | 90,901 | $ | 90,189 | $ | 712 | 0.8 | % | ||||||
Gross profit margin | 24.2 | % | 25.3 | % |
2020 | 2019 | $ Change | % Change | |||||||||
Operating expenses | 107,917 | 84,039 | $ | 23,878 | 28.4 | % | ||||||
Percentage of net sales | 28.7 | % | 23.5 | % |
2020 | 2019 | $ Change | % Change | |||||||||
Interest and other expense | 5,166 | 4,585 | $ | 581 | 12.7 | % |
2020 | 2019 | $ Change | % Change | |||||||||
Provision for income taxes | (8,097 | ) | 431 | $ | (8,528 | ) | (1,978.7 | )% | ||||
Effective tax rate | 36.5 | % | 27.5 | % |
March 27, 2020 | December 27, 2019 | ||||||
Senior secured term loan | $ | 238,129 | $ | 238,129 | |||
Total convertible debt | $ | 154,000 | $ | 154,000 | |||
Borrowings outstanding on asset-based loan facility | $ | 100,000 | $ | — | |||
Finance leases and other financing obligations | $ | 16,337 | $ | 3,905 |
March 27, 2020 | December 27, 2019 | ||||||
Cash and cash equivalents | $ | 193,517 | $ | 140,233 | |||
Working capital, excluding cash and cash equivalents | $ | 146,746 | $ | 162,772 | |||
Availability under asset-based loan facility | $ | 33,359 | $ | 133,359 |
Thirteen Weeks Ended | |||||||
March 27, 2020 | March 29, 2019 | ||||||
Net (loss) income | $ | (14,085 | ) | $ | 1,134 | ||
Non-cash charges | $ | 19,678 | $ | 9,855 | |||
Changes in working capital | $ | 16,392 | $ | (3,598 | ) | ||
Cash provided by operating activities | $ | 21,985 | $ | 7,391 | |||
Cash used in investing activities | $ | (66,543 | ) | $ | (32,115 | ) | |
Cash provided by (used in) financing activities | $ | 97,975 | $ | (367 | ) |
Total Number of Shares Repurchased(1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs | ||||||||||
December 28, 2019 to January 24, 2020 | — | $ | — | — | — | ||||||||
January 25, 2020 to February 21, 2020 | 22,899 | 37.28 | — | — | |||||||||
February 22, 2020 to March 27, 2020 | 136,733 | 13.50 | — | — | |||||||||
Total | 159,632 | $ | 16.91 | — | — |
(1) | During the thirteen weeks ended March 27, 2020, we withheld 159,632 shares of our common stock to satisfy tax withholding requirements related to restricted shares of our common stock awarded to our officers and key employees resulting from either elections under 83(b) of the Internal Revenue Code of 1986, as amended, or upon vesting of such awards. |
Exhibit No. | Description | |
Certificate of Designation of the Voting Powers, Designation, Preferences and Relative, Participating, Optional or Other Special Rights and Qualifications, Limitations and Restrictions of the Series A Preferred Stock of The Chefs’ Warehouse, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on March 23, 2020) | ||
Rights Agreement, dated as of March 22, 2020, between The Chefs’ Warehouse, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 23, 2020) | ||
Form of Restricted Share Award Agreement under The Chefs’ Warehouse, Inc. 2019 Omnibus Equity Incentive Plan* | ||
The Chefs’ Warehouse, Inc. Executive Change in Control Plan* | ||
Form of Executive Severance Agreement* | ||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
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THE CHEFS’ WAREHOUSE, INC. | |||
(Registrant) | |||
Date: May 6, 2020 | /s/ James Leddy | ||
James Leddy | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||
Date: May 6, 2020 | /s/ Timothy McCauley | ||
Timothy McCauley | |||
Chief Accounting Officer | |||
(Principal Accounting Officer) |
Percentage of Restricted Shares | Date |
50% | March 25, 2021 |
50% | March 25, 2022 |
To the Grantee: | The address then maintained with respect to the Grantee in the Company’s records. |
1. | Taxpayer's General Information: |
• | Name: ________________________________________ |
· | Address: ______________________________________ |
· | Social Security # or Taxpayer ID #: __________________ |
2. | Description of Property with respect to which the election is being made: |
3. | Date on which the property was transferred: |
4. | Taxable year for which the election is being made: |
5. | Nature of restriction or restrictions to which the property is subject: |
6. | The fair market value of the property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse): |
7. | The amount (if any) paid for the property: |
8. | The amount to include in gross income is $ |
IF you live in: | Use this address |
Florida, Louisiana, Mississippi, Texas | Department of the Treasury Internal Revenue Service Austin, TX 73301-0002 |
Alaska, Arizona, California, Colorado, Hawaii, Idaho, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming | Department of the Treasury Internal Revenue Service Fresno, CA 93888-0002 |
Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Wisconsin | Department of the Treasury Internal Revenue Service Fresno, CA 93888-0002 |
Alabama, Georgia, Kentucky, Missouri, New Jersey, North Carolina, South Carolina, Tennessee, Virginia | Department of the Treasury Internal Revenue Service Kansas City, MO 64999-0002 |
Delaware, Maine, Massachusetts, Missouri, New Hampshire, New York, Vermont | Department of the Treasury Internal Revenue Service Kansas City, MO 64999-0002 |
Connecticut, District of Columbia, Maryland, Pennsylvania, Rhode Island, West Virginia | Department of the Treasury Internal Revenue Service Ogden, UT 84201-0002 |
A foreign country, U.S. possession or territory* or use an APO or FPO address, or file Form 2555, 2555-EZ, 4563, or 8891, or are a dual-status alien | Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 |
1. | Purpose. The purpose of The Chefs’ Warehouse, Inc. Executive Change in Control Plan (the “Plan”) is to assist selected officers and executives of The Chefs’ Warehouse, Inc. (the “Company”) in making a successful transition upon certain involuntary terminations following a Change in Control of the Company and to reduce the potential distraction of management personnel in the face of the uncertainty that a potential Change in Control could engender. |
2. | Definitions. For purposes of this Plan, the following words and phrases have the meanings specified below: |
2.1 | “Accountants” has the meaning set forth in Section 8.2. |
2.2 | “Administrator” has the meaning set forth in Section 3. |
2.3 | “Base Salary” the highest rate of annual base salary approved to be paid to the Participant by the Company (regardless of whether it is paid in cash or another form, including equity) during the greater of the twelve (12)-month period preceding (a) the Participant’s date of termination and (b) the Change in Control Date. |
2.4 | “Board” means the Board of Directors of the Company. |
2.5 | “Cause” means any one or more of the following: |
(a) | the Participant’s commission of, or plea of nolo contendere to (i) any felony or (ii) another crime, in either case involving dishonesty or which reflects negatively upon the Company or its affiliates or otherwise impair or impede its operations; |
(b) | the Participant’s engaging in any willful misconduct, gross negligence, act of dishonesty, violence or threat of violence that is injurious to the Company or its affiliates; |
(c) | the Participant’s material breach of any material written policy of the Company or its affiliates; |
(d) | the Participant’s material failure to comply with any material applicable laws and regulations or professional standards relating to the business of the Company or its affiliates; or |
(e) | any other misconduct by the Participant that is injurious to the financial condition or business reputation of the Company or its affiliates. |
2.6 | “Change in Control” means any one of the following: |
(a) | any person or entity, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than the Company or a wholly-owned Subsidiary thereof or any employee benefit plan of the Company or any of its Subsidiaries, becomes the beneficial owner of the Company’s securities having 35% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business); |
(b) | as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction are held in the aggregate by the holders of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction; |
(c) | during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period; or |
(d) | the stockholders of the Company approve a plan of complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a liquidation of the Company into a wholly owned subsidiary. |
2.7 | “Change in Control Date” means the date on which a Change in Control is consummated. |
2.8 | “Code” means the U.S. Internal Revenue Code of 1986, as amended, and any successor thereto. |
2.9 | “Committee” means the Compensation Committee of the Board. |
2.10 | “Company” means The Chefs’ Warehouse, Inc., and any successor. |
2.11 | “Covered Payments” has the meaning set forth in Section 8.1. |
2.12 | “Date of Separation” means, with respect to a Participant, the date on which a Participant incurs a termination of employment. |
2.13 | “Eligible Executive” has the meaning set forth in Section 4. |
2.14 | “Excise Tax” has the meaning set forth in Section 8.1. |
2.15 | “Good Reason” means any one or more of the following actions or omissions: |
(a) | any material reduction in a Participant’s position, authority, duties or responsibilities following the Change in Control as compared to such level immediately prior to the Change in Control; |
(b) | any material reduction in a Participant’s annual base salary or bonus opportunity as in effect immediately prior to the Change in Control; or |
(c) | the relocation (other than by mutual agreement) of the office at which the Participant is to perform the majority of his or her duties following the Change in Control to a location more than 30 miles from the location at which the Participant performed such duties prior to the Change in Control. |
2.16 | “Participant” has the meaning set forth in Section 4. |
2.17 | “Payment Date” has the meaning set forth in Section 6.1. |
2.18 | “Plan” means this The Chefs’ Warehouse, Inc. Executive Change in Control Severance Plan, as described in this document and as amended from time to time. |
2.19 | “Release” has the meaning set forth in Section 7. |
2.20 | “Severance Multiple” means the number applicable to a Participant’s position as set forth on Exhibit A, as amended from time to time. |
2.21 | “Subsidiary” means any Person (other than the Company) of which 50% or more of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company. |
3. | Administration. The Plan shall be administered by the Committee (the “Administrator”). Subject to the provisions of the Plan, the Administrator shall have exclusive authority to interpret and administer the Plan, to establish, amend and rescind appropriate rules and regulations relating to the Plan, to delegate some or all of its authority under the Plan to the extent permitted by law, and to take all such steps and make all such determinations in connection with the Plan and the benefits granted pursuant to the Plan as it may deem necessary or advisable. Any decision of the Administrator in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. |
4. | Eligibility. Eligibility under the Plan is limited to certain senior executives and officers of the Company as determined by the Administrator from time to time (“Eligible Executives”). The Administrator in its sole discretion will select and notify those Eligible Executives who will participate in the Plan (“Participants”). |
5. | No Effect on Equity Awards. This Plan does not alter or amend any vesting or other terms and conditions of any equity-based compensation awards under the Company’s equity incentive compensation plan(s), which shall be governed by the terms and conditions set forth in the equity incentive compensation plan(s) and separate written grant agreements. |
6. | Change in Control Severance Benefits. |
6.1 | Upon a termination of a Participant’s employment by the Company without Cause or a resignation by the Participant for Good Reason during the two (2)-year period commencing on the Change in Control Date, subject to the provisions of the Plan, the Participant shall receive the following benefits: |
(a) | A cash amount equal to the Participant’s Base Salary multiplied by the applicable Severance Multiple; |
(b) | A cash amount equal to the Participant’s target annual bonus for the year of termination multiplied by the applicable Severance Multiple; and |
(c) | (i) if the termination of employment occurs during the calendar year in which the Change in Control occurs, a prorated target annual bonus for the year of termination and (ii) if the termination of employment occurs in a calendar year following the calendar year in which the Change in Control occurs, a prorated annual bonus for the year of termination paid at the same time and in the same form as annual bonuses are paid to active employees generally based on actual performance in respect of the performance year; provided, however, that all individual performance goals shall be deemed attained at 100%. |
6.2 | Benefits Payment. In addition, upon a termination of a Participant’s employment by the Company without Cause or a resignation by the Participant for Good Reason during the two (2)-year period commencing on the Change in Control Date, in lieu of benefits continuation, the Company shall pay to the Participant on the Payment Date, a lump-sum cash payment in the amount set forth on Exhibit B. Nothing in this Section 6.2 shall be construed to impair or reduce a Participant’s rights under COBRA or other applicable law. |
6.3 | Outplacement Payment. In addition, upon a termination of a Participant’s employment by the Company without Cause or a resignation by the Participant for Good Reason during the two (2)-year period commencing on the Change in Control Date, in lieu of reimbursement for outplacement services, the Company shall pay to the Participant on the Payment Date, a lump-sum cash payment in the amount set forth on Exhibit C. |
6.4 | Legal Fees. The Company shall pay all legal fees incurred by a Participant in connection with the Participant’s enforcement of his or her rights under the Plan. |
7. | Release. |
7.1 | Release. A Participant shall only be entitled to receive the payments and benefits pursuant to Section 6 if he or she shall have executed and delivered (and, if applicable, not revoked) a release of claims against the Company (and its officers, directors, employees, affiliates, stockholders, etc.) in a form satisfactory to the Company in the Company’s sole discretion (the “Release”), and such Release shall be in full force and effect. The form of Release shall be delivered to the Participant by the Company at the time of, or within seven (7) days following, the termination of the Participant’s employment. From the date of delivery of the form of Release to the Participant by the Company, the Participant shall have a minimum of twenty-one (21) and a maximum of forty-five (45) days, as set forth therein, to review and execute the Release and deliver it to the Company. If required by law in order for the Release to become fully effective, the Participant shall be given the opportunity to revoke all or a portion the Release within seven (7) days after execution and delivery thereof (the “Release Revocation Period”). Should the Participant revoke all or any portion of the Release within any such revocation period, then the Participant will be treated hereunder as if he or she did not execute the Release. |
7.2 | If a Participant breaches any provision of the Release, the Administrator may determine that the Participant (i) will forfeit any unpaid portion of the payments provided pursuant to this Plan and (ii) will repay to the Company any amounts previously paid to him or her. |
8. | Section 280G. |
8.1 | Notwithstanding any other provision of this Plan or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to a Participant or for the Participant’s benefit pursuant to the terms of this Plan or otherwise (“Covered Payments”) constitute parachute payments within the meaning of Section 280G of the Code and would, but for this Section 8 be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then the Covered Payments shall be payable either (i) in full or (ii) reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax, whichever of the foregoing (i) or (ii) results in the Executive’s receipt on an after-tax basis of the greatest amount of benefits after taking into account the applicable federal, state, local and foreign income, employment and excise taxes (including the Excise Tax). Any such reduction shall be made by the Company in its sole discretion consistent with the requirements of Section 409A of the Code. |
8.2 | Any determination required under this Section 8 shall be made in writing in good faith by the accounting firm which was the Company’s independent auditor immediately before the Change in Control (the “Accountants”). The Company and the Participant shall provide the Accountants with such information and documents as the Accountants may reasonably request in order to make a determination under this Section 8. The Company shall be responsible for all fees and expenses of the Accountants. |
9. | Section 409A. Notwithstanding anything to the contrary contained in this Plan, the payments and benefits provided under this Plan are intended to comply with or be exempt from Section 409A of the Code, and the provisions of this Plan shall be interpreted or construed with that intent. The Administrator may modify the payments and benefits under this Plan at any time solely as necessary to avoid adverse tax consequences under Section 409A; provided, however, that this Section 9 shall not create any obligation on the part of the Administrator to make such modifications or take any other action. |
9.1 | It is intended that the terms “termination” and “termination of employment” as used herein shall constitute a “separation from service” within the meaning of Section 409A. |
9.2 | Anything in the Plan to the contrary notwithstanding, each payment of compensation made to a Participant shall be treated as a separate and distinct payment from all other such payments for purposes of Section 409A. |
9.3 | The actual date of payment pursuant to the Plan shall be within the sole discretion of the Company. In no event may a Participant be permitted to control the year in which payment occurs. |
9.4 | Anything in the Plan to the contrary notwithstanding, if a Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of the Participant’s termination of employment, then any payment or benefit which would be considered “nonqualified deferred compensation” within the meaning of Section 409A that the Participant is entitled to receive upon the Participant’s termination of employment and which otherwise would be payable during the six-month period immediately following the Participant’s termination of employment will instead be paid or made available on the first day of the seventh month following the Participant’s termination of employment (or, if earlier, the date of the Participant’s death). |
9.5 | With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) 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; and (iii) such payments shall be made on or before the last day of the Participant’s taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder. |
10. | Withholding. The Company shall be entitled to withhold from payments to or on behalf of the Participant taxes and other authorized deductions. |
11. | Governing Law. This Plan shall be construed, interpreted and governed in accordance with the laws of the State of Delaware, without reference to rules relating to conflicts of law. Any disputes under this Plan shall be settled in the courts of New York County, New York. |
12. | Effect on Other Plans. This Plan supersedes in all respects any severance or change in control benefit plans, arrangements or policies of the Company that apply to Participants upon a Change in Control. Notwithstanding the foregoing, the Company and the Board reserve the right to adhere to other policies and practices that may be in effect for other groups of employees. |
13. | Amendment and Modification. Prior to a Change in Control, this Plan (including Exhibit A) may be modified, amended or terminated at any time by the Administrator without notice to Participants. Notwithstanding the foregoing, for a period of two (2) years following a Change in Control, the Plan (including Exhibit A) may not be discontinued, terminated or amended in such a manner that decreases the benefits payable to any Participant or that makes any provision less favorable for any Participant without the consent of the Participant. |
14. | No Employment Rights. Neither this Plan nor the benefits hereunder shall be a term of the employment of any employee, and the Company shall not be obligated in any way to continue the Plan. The terms of this Plan shall not give any employee the right to be retained in the employment of the Company. |
15. | Effective Date. This Plan shall become effective as of the date of its adoption by the Board. |
Executive | Applicable Severance Multiple |
Chief Executive Officer | 3 |
Section 16 Officers | 2 |
Other Eligible Executives | 1 |
Executive | Lump Sum Benefits Payment |
Chief Executive Officer | $75,000 |
Section 16 Officers | $50,000 |
Other Eligible Executives | $25,000 |
Executive | Lump Sum Benefits Payment |
Chief Executive Officer | $30,000 |
Section 16 Officers | $30,000 |
Other Eligible Executives | $20,000 |
2.1 | a cash amount equal to [2x/1.5x] (i) Employee’s Base Salary (as defined below) and (ii) target annual bonus for the year of termination, to be paid in equal payroll installments over [24 months]/[18 months] commencing on the first payroll period following the Release Effective Date; provided that if there is a Change in Control (as defined in the Company’s Executive Change in Control Plan) during the period where Employee is receiving installment payments, all outstanding installment payments under this section shall be paid in a lump-sum as of or within 60 days of the Change in Control; |
2.2 | a lump sum cash payment of [$50,000]/[$37,500] in lieu of benefits continuation, provided that nothing in this section shall be construed to impair or reduce Employee’s rights under COBRA or other applicable law; |
2.3 | a lump sum cash payment of $30,000 in lieu of reimbursement for outplacement services; and |
2.4 | to extent applicable, any earned but unpaid annual bonus with respect to the year prior to the year of termination. |
6.1 | “Base Salary” means the highest rate of annual base salary approved to be paid to Employee by the Company (regardless of whether it is paid in cash or another form, including equity) during the twelve (12)-month period preceding Employee’s date of termination. |
6.2 | “Good Reason” means (i) a material reduction in Employee’s position, authority, duties or responsibilities; (ii) any material reduction in Employee’s annual base salary or bonus opportunity; or (iii) the relocation (other than by mutual agreement) of the office at which Employee is to perform the majority of his or her duties to a location more than 30 miles from the location at which Employee performed such duties prior to the change; provided, however, that Employee must notify the Company of the conduct that is the basis for the potential Good Reason termination in writing within forty-five (45) days of its initial existence, such notice shall describe the conduct Employee believes to constitute Good Reason and the Company shall have fifteen (15) days to cure such conduct. If the Company cures the conduct that is the basis for the potential termination for Good Reason within such fifteen (15) day period, Employee’s notice of termination shall be deemed withdrawn. If Employee does not give notice to the Company within ninety (90) days after an event giving rise to Good Reason, Employee’s right to claim Good Reason termination on the basis of such event shall be deemed waived. |
12.1 | It is intended that the terms “termination” and “termination of employment” as used herein shall constitute a “separation from service” within the meaning of Section 409A. |
12.2 | Anything in this Agreement to the contrary notwithstanding, each payment of compensation made to Employee shall be treated as a separate and distinct payment from all other such payments for purposes of Section 409A. |
12.3 | The actual date of payment pursuant to this Agreement shall be within the sole discretion of the Company. In no event may Employee be permitted to control the year in which payment occurs. |
12.4 | Anything in this Agreement to the contrary notwithstanding, if Employee is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of Employee’s termination of employment, then any payment or benefit which would be considered “nonqualified deferred compensation” within the meaning of Section 409A that Employee is entitled to receive upon Employee’s termination of employment and which otherwise would be payable during the six-month period immediately following Employee’s termination of employment will instead be paid or made available on the first day of the seventh month following Employee’s termination of employment (or, if earlier, the date of Employee’s death). |
12.5 | With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) 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; and (iii) such payments shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder. |
1. | I have reviewed this quarterly report on Form 10-Q of The Chefs’ Warehouse, Inc.; |
2. | Based on my knowledge, this quarterly 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; |
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 registrant as of, and for, the periods presented in this report; |
4. | The registrant’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 Rule 13a-15(f) and Rule 15d-15(f)) for the registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
(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 registrant’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 registrant’s internal control over financial reporting. |
Dated: May 6, 2020 | /s/ Christopher Pappas | |
By: | Christopher Pappas | |
Chairman, President and Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of The Chefs’ Warehouse, Inc.; |
2. | Based on my knowledge, this quarterly 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; |
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 registrant as of, and for, the periods presented in this report; |
4. | The registrant’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 Rule 13a-15(f) and Rule 15d-15(f)) for the registrant 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 registrant, 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 registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
(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 registrant’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 registrant’s internal control over financial reporting. |
Dated: May 6, 2020 | /s/ James Leddy | |
By: | James Leddy | |
Chief Financial Officer | ||
(Principal Financial Officer) |
(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: May 6, 2020 | By: | /s/ Christopher Pappas |
Christopher Pappas | ||
Chairman, President and Chief Executive Officer | ||
(Principal Executive Officer) |
(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: May 6, 2020 | By: | /s/ James Leddy |
James Leddy | ||
Chief Financial Officer | ||
(Principal Financial Officer) |