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Carmike Cinemas DEF 14A 2014
DEF 14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  x                              Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨   Preliminary Proxy Statement
¨   Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to § 240.14a-12

CARMIKE CINEMAS, INC.

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

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

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

¨   Fee paid previously with preliminary materials:
¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount previously paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


Table of Contents

LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 28, 2014

The Annual Meeting of Stockholders of Carmike Cinemas, Inc. will be held at the offices of King & Spalding LLP located at 1180 Peachtree Street, Atlanta, Georgia 30309 on Wednesday, May 28, 2014, commencing at 9:00 a.m., local time.

At the meeting, the stockholders will be asked to:

 

  1. Elect the eight (8) director nominees described in this Proxy Statement to serve for the ensuing year or until their successors are duly elected and have qualified;

 

  2. Approve the amendment of our Amended and Restated Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance from 35 million to 52.5 million shares;

 

  3. Approve the adoption of the Carmike Cinemas, Inc. 2014 Incentive Stock Plan;

 

  4. Approve the adoption of the Carmike Cinemas, Inc. Employee Stock Purchase Plan;

 

  5. Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2014;

 

  6. Conduct an advisory vote to approve executive compensation, often referred to as a “say on pay”; and

 

  7. Transact any other business that may properly be brought before the meeting.

The Board of Directors has fixed the close of business on Friday, April 4, 2014, as the record date for the determination of stockholders entitled to notice of, and to vote at, the annual meeting or any adjournment thereof. Please mark, sign and date the proxy card and mail it promptly in the accompanying envelope. You may also vote your shares over the internet or by telephone as described on your proxy card or notice of internet availability of proxy materials.

By Order of the Board of Directors,

 

 

LOGO

DANIEL E. ELLIS

Senior Vice President, General Counsel and Secretary

Columbus, Georgia

April 18, 2014

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD AND RETURN IT IN THE ENVELOPE THAT HAS BEEN PROVIDED. YOU MAY ALSO VOTE YOUR SHARES OVER THE INTERNET OR BY TELEPHONE AS DESCRIBED ON YOUR PROXY CARD OR NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS. IN THE EVENT YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.


Table of Contents

TABLE OF CONTENTS

 

PROXY STATEMENT SUMMARY

     1   

GENERAL INFORMATION

     5   

QUORUM AND VOTING REQUIREMENTS

     7   

PROPOSAL ONE—ELECTION OF DIRECTORS

     9   

PROPOSAL TWO—AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

     12   

PROPOSAL THREE—APPROVAL OF 2014 STOCK INCENTIVE PLAN

     13   

PROPOSAL FOUR—APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN

     21   

PROPOSAL FIVE—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     26   

AUDIT COMMITTEE REPORT

     27   

FEES PAID TO INDEPENDENT AUDITORS

     28   

EXECUTIVE COMPENSATION

     29   

Compensation Discussion and Analysis

     29   

Summary Compensation Table

     46   

Grants of Plan-Based Awards in 2013

     48   

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

     49   

Outstanding Equity Awards at 2013 Fiscal Year End

     50   

Option Exercises and Stock Vested for the Fiscal Year Ended December 31, 2013

     51   

Nonqualified Deferred Compensation for 2013

     51   

Potential Payments upon Termination or Change in Control

     52   

PROPOSAL SIX—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     60   

COMPENSATION OF DIRECTORS

     61   

COMPENSATION POLICIES AND PRACTICES AND RISK MANAGEMENT

     62   

COMPENSATION COMMITTEE REPORT

     63   

CORPORATE GOVERNANCE

     64   

Corporate Governance Information

     64   

Board Meetings

     64   

Board Leadership Structure

     64   

Risk Oversight

     64   

Committees of the Board of Directors

     65   

Director Independence

     66   

Selection of Director Nominees

     67   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     69   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     71   

COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     71   

OTHER MATTERS

     71   

EQUITY COMPENSATION PLANS

     71   

OTHER INFORMATION FOR STOCKHOLDERS

     72   

Section 16(a) Beneficial Ownership Reporting and Compliance

     72   

Stockholder Proposals

     72   

Stockholder Communications with the Board of Directors

     74   

Annual Report

     74   

Householding

     74   

YOUR VOTE IS IMPORTANT

     74   

Appendix A—Carmike Cinemas, Inc. 2014 Incentive Stock Plan

  

Appendix B—Carmike Cinemas, Inc. Employee Stock Purchase Plan

  


Table of Contents

PROXY STATEMENT SUMMARY

The following is a summary of certain key disclosures in our proxy statement. This is only a summary, and it may not contain all of the information that is important to you. For more complete information, please review the entire proxy statement.

Annual Meeting of Stockholders

 

Time and Date:    9:00 a.m., local time, on Wednesday, May 28, 2014
Place:    Offices of King & Spalding LLP, located at 1180 Peachtree Street, Atlanta, Georgia 30309
Record Date:    April 4, 2014

Proposals to be Voted on and Board Voting Recommendations

 

Proposals

  

Recommendation

1.   Election of directors    FOR EACH NOMINEE
2.   Amendment to Amended and Restated Certificate of Incorporation to increase the authorized shares of common stock    FOR
3.   Approval of the Carmike Cinemas, Inc. 2014 Incentive Stock Plan    FOR
4.   Approval of the Carmike Cinemas, Inc. Employee Stock Purchase Plan    FOR
5.   Ratification of Deloitte & Touche LLP as auditors for the 2014 fiscal year    FOR
6.   Advisory vote to approve executive compensation    FOR

Director Nominees

 

Name

  

Age
(1)

  

Director
Since

  

Occupation

  

Independent

Roland C. Smith

   59    2002    Chairman and Chief Executive Officer of Office Depot, Inc.    Yes

Mark. R. Bell

   68    2011    Former Senior Partner at PricewaterhouseCoopers and Arthur Andersen    Yes

Jeffrey W. Berkman

   49    2009    Founding Partner of The Berkman Law Firm PLLC    Yes

Sean T. Erwin

   62    2012    Chairman of the Board and former Chief Executive Officer of Neenah Paper, Inc.    Yes

James A. Fleming

   55    2009    Executive Vice President and Chief Financial Officer of Columbia Property Trust, Inc.    Yes

Alan J. Hirschfield

   78    2002    Private investor and consultant; former Chief Executive Officer of Data Broadcasting Corporation, Twentieth Century Fox Film Corporation and Columbia Pictures, Inc.    Yes

S. David Passman III

   61    2003    President and Chief Executive Officer, Carmike Cinemas, Inc.    No

Patricia A. Wilson

   63    2004    Attorney; former General Counsel to NDCHealth Corporation    Yes

 

(1) As of February 14, 2014

 

 

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Table of Contents

Approval of an Amendment to the Certificate of Incorporation to Increase Authorized Common Stock

We are asking our stockholders to approve an amendment to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the number of authorized shares of Common Stock from 35 million shares to 52.5 million shares. The Board of Directors approved this amendment on January 29, 2014. The additional authorized shares of Common Stock will be available for general purposes, including capital raising transactions, acquisitions, employee benefit plans and other uses. We currently have no specific plans or understandings with respect to the issuance of any of the additional shares. The Board of Directors believes, however, that the proposal is desirable so that, if the opportunity arises, we will have more flexibility to issue shares of Common Stock, without the expense and delay of a special stockholders’ meeting, in connection with future opportunities.

Approval of the Carmike Cinemas, Inc. 2014 Incentive Stock Plan

Our Board of Directors believes that equity grants are a key aspect of Carmike’s ability to attract and retain qualified employees and outside directors. Accordingly, we are asking our stockholders to approve the Carmike Cinemas, Inc. 2014 Incentive Stock Plan (the “2014 Incentive Stock Plan”), to replace the existing Carmike Cinemas, Inc. 2004 Incentive Stock Plan (the “Old Plan”), which is expiring. No new shares of Common Stock will be reserved for issuance under the 2014 Incentive Stock Plan. The shares currently remaining available for future issuance under the Old Plan will instead be available for issuance under the 2014 Incentive Stock Plan. No new grants will be made under the Old Plan, following the effectiveness of the 2014 Incentive Stock Plan.

Approval of the Carmike Cinemas, Inc. Employee Stock Purchase Plan

Our Board of Directors believes that encouraging additional stock ownership by our employees is an effective method of further aligning the interests of our employees and our stockholders. Accordingly, we are asking our stockholders to approve the Carmike Cinemas, Inc. Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, our eligible employees will be able to make quarterly purchases of our common stock at a discount, determined by our Compensation and Nominating Committee, of up to 15%. Our Compensation and Nominating Committee has initially approved a 10% discount for purchases under the ESPP. 250,000 shares of our common stock will be reserved for issuance pursuant to purchases under the ESPP.

Ratification of Auditors

We are asking our stockholders to ratify the selection of Deloitte & Touche, LLP as our independent registered public accounting firm for fiscal 2014. Shown below is a summary of Deloitte & Touche LLP’s fees for services provided in fiscal 2012 and 2013.

 

     2013      2012  

Audit Fees

   $ 1,068,700       $ 962,800   
  

 

 

    

 

 

 

Audit-Related Fees

     869,704         459,634   

Tax Fees

     208,150         153,423   

All Other Fees

     —          —    
  

 

 

    

 

 

 

Total Fees Paid to Auditor

   $ 2,146,554       $ 1,575,857   
  

 

 

    

 

 

 

 

 

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Executive Summary of Fiscal 2013 Results

We completed a successful 2013 with attendance increasing 12.7% and box office revenues increasing 17.4% compared with 2012, primarily due to our recent acquisitions of certain assets from Rave Reviews Cinemas in November 2012, Cinemark USA, Inc. in August 2013 and Muvico Entertainment, L.L.C. in November 2013 and a successful domestic box office. Domestic box office revenues reached record levels for the second consecutive year and exceeded $10.9 billion in 2013. We continued to experience significant increases in concession and other per patron spending in 2013, achieving an increase of 6.8% over 2012. For 2013, total revenues were $634.8 million which represented an 18.9% increase from 2012. As a result of our performance in 2013, we exceeded our 2013 EBITDA performance goals under our incentive plans.

During the third quarter of 2013, we issued 5.2 million shares of our common stock resulting in net proceeds of $88.0 million. The common stock issuance provides us with greater ability to grow our circuit through acquisitions and new build-to-suit theatres. In addition to the aforementioned acquisitions, we opened five new build-to-suit theatres in 2013. We intend to complete additional theatres in 2014 and continue to pursue additional acquisitions. The Compensation and Nominating Committee has considered our 2013 performance and future operating plans in determining executive compensation for the Named Executive Officers.

Key 2013 Compensation Decisions

The Compensation and Nominating Committee believes that our compensation strategy has been effective in rewarding executives appropriately and in attracting and retaining highly qualified key executives. In furtherance of our overall goals of aligning employee and stockholder interests, rewarding pay for performance and providing competitive compensation to our key executives, the Compensation and Nominating Committee made the following key decisions in 2013:

 

   

Base salaries for senior executives were adjusted in 2013 based on market factors.

 

   

Short-term cash incentives are performance-based and include financial, non-financial, company-wide and individual targets. In 2013, these targets focused on the achievement of EBITDA goals, expense reduction and operating improvements. For 2013, cash incentives were earned at 102% of target, based on actual EBITDA, and cash incentives were earned at between 13% and 88% of target based upon other operating performance criteria, including individual performance goals. Overall, cash incentives were earned between 72% and 98% of target.

 

   

Long-term equity compensation grants are made on an annual basis and are structured to promote the retention of key executives and the achievement of performance goals. Two-thirds of such awards are performance-based. For 2013, equity incentives were earned at 102% of target, based on actual EBITDA.

 

   

Employment agreements and award agreements for each of the senior executives were amended to implement changes regarding the treatment of equity awards upon various termination scenarios as well as the addition of a target bonus as an additional element of severance in connection with a termination or resignation related to a change in control.

 

 

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2013 Compensation For Executives

Set forth below is the 2013 compensation for each Named Executive Officer as determined under Securities and Exchange Commission rules. See the notes accompanying the 2013 Summary Compensation Table on pages 46 and 47 for more information.

 

Name and Principal Position

  Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Total
($)
 

S. David Passman III

    690,000        69,000        1,409,400        637,043        33,420        271,104        3,109,967   

President and Chief

Executive Officer

             

Richard B. Hare

    350,000        35,000        361,746        256,331        12,538        87,827        1,103,442   

Senior Vice President—

Finance, Treasurer and

Chief Financial Officer

             

Fred W. Van Noy

    400,000        40,000        493,290        225,450        73,451        88,163        1,320,354   

Senior Vice President and

Chief Operating Officer

             

Daniel E. Ellis

    312,000        31,200        258,390        216,801        4,377        88,395        911,163   

Senior Vice President,

General Counsel and

Secretary

             

John Lundin

    245,000        —         150,336        61,740        —         12,655        469,731   

Vice President—Film

             

 

 

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GENERAL INFORMATION

This proxy statement and the accompanying proxy card are furnished to the stockholders of Carmike Cinemas, Inc. (which we refer to as “we,” “us,” “our” and “Carmike” in this proxy statement) in connection with the solicitation of proxies by the Board of Directors of Carmike for use at the Annual Meeting of Stockholders to be held on Wednesday, May 28, 2014 (the “Annual Meeting”), at the offices of King & Spalding LLP located at 1180 Peachtree Street, Atlanta, Georgia 30309 at 9:00 a.m., local time, and any adjournments thereof. All stockholders are encouraged to attend the meeting.

To reduce the costs of printing and distributing our proxy materials, we are furnishing proxy materials over the internet to many of our stockholders under the Securities and Exchange Commission’s notice and access rules. These stockholders will receive a notice of internet availability of proxy materials, instead of a paper copy of this proxy statement. The notice of internet availability of proxy materials contains instructions on how to access those documents and vote over the internet and how stockholders can receive a paper copy of our proxy materials, if they so desire. Carmike expects to mail this proxy statement and accompanying proxy card or a notice of internet availability of proxy materials to Carmike’s stockholders starting on or about April 18, 2014. Carmike’s 2013 Annual Report to stockholders, which should be read in conjunction with the matters discussed in this proxy statement, is also enclosed. Your proxy is requested, however, whether or not you attend in order to assure maximum participation.

Important Notice Regarding the Availability of Proxy Materials

for the Stockholder Meeting to Be Held on May 28, 2014.

The proxy statement and the 2013 Annual Report to stockholders

are available at https://www.cfpproxy.com/5234

At the Annual Meeting, stockholders will be requested to act upon the matters set forth in this proxy statement. If you are not present at the meeting, your shares can be voted only when represented by proxy. You do this by telephone or internet voting or by signing your proxy card and mailing it in the enclosed, prepaid and addressed envelope. When you sign and return the proxy card, or vote by telephone or over the internet (in each case as indicated on the proxy card or notice of internet availability of proxy materials, as applicable), you appoint S. David Passman III, Fred W. Van Noy and Daniel E. Ellis as your representatives at the meeting. Mr. Passman, Mr. Van Noy and Mr. Ellis will vote your shares at the meeting as you have instructed them. This way your shares will be voted whether or not you attend the annual meeting. If you return a signed card but do not provide voting instructions, your shares will be voted for the eight named nominees, for approval of the amendment of our Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance from 35 million to 52.5 million shares, for approval of the adoption of the Carmike Cinemas, Inc. 2014 Incentive Stock Plan, for approval the adoption of the Carmike Cinemas, Inc. Employee Stock Purchase Plan, for the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2014 and for the approval, on an advisory basis, of executive compensation. If any issue comes up for vote at the meeting that is not on the proxy card, Mr. Passman, Mr. Van Noy and Mr. Ellis will vote your shares, under your proxy, in their discretion.

The designation of a proxy may be revoked at any time before it is voted by your delivering a new duly executed proxy card bearing a later date, by voting via telephone or the internet at a later date, or by your appearing and voting in person at the meeting. The expenses incidental to the preparation and mailing of these proxy materials are being paid by Carmike. Special solicitation of proxies may, in certain instances, be made personally, or by telephone, electronic mail, facsimile or mail by one or more of our employees. In addition, we have retained Eagle Rock Proxy Advisors, LLC to assist in the solicitation of proxies. Such solicitation may be made personally, or by telephone, electronic mail, facsimile or mail. The anticipated cost of the services of Eagle Rock Proxy Advisors, LLC is $5,000, plus expenses.

 

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We expect to announce preliminary voting results at the meeting. Carmike will publish the final results of the stockholder voting on a Form 8-K that it will file with the Securities and Exchange Commission (the “SEC”) within four business days after the Annual Meeting.

The principal executive offices of Carmike are located at 1301 First Avenue, Columbus, Georgia 31901. The telephone number is (706) 576-3400.

 

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QUORUM AND VOTING REQUIREMENTS

The close of business on Friday, April 4, 2014 has been fixed as the record date for the determination of stockholders of Carmike entitled to notice of and to vote at the Annual Meeting. On that date, Carmike had outstanding 23,012,967 shares of Common Stock, $.03 par value (the “Common Stock”). Each share of Common Stock entitles the holder thereof to one vote per share on all matters properly coming before the meeting.

At the Annual Meeting, the holders of stock representing a majority of the voting power of all Common Stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, will constitute a quorum. Abstentions will be treated as present for purposes of determining a quorum.

Directors are elected by a plurality of the votes cast by the holders of the Common Stock at a meeting at which a quorum is present. This means that the eight directors receiving the greatest number of votes will be elected as directors. Votes may be cast in favor of or withheld from each nominee. Votes that are withheld will have no effect.

The amendment to our Certificate of Incorporation requires the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of all of our issued and outstanding Common Stock as of the record date. Votes may be cast “for” or “against” the amendment to our Certificate of Incorporation or a stockholder may abstain. Abstentions will be included in the number of votes present and entitled to vote and accordingly will be treated as “against” votes.

The approval of the Carmike Cinemas, Inc. 2014 Incentive Stock Plan will require the affirmative vote of a majority of the votes of the holders of the Common Stock represented and entitled to vote at a meeting at which a quorum is present. Votes may be cast “for” or “against” the approval of the Carmike Cinemas, Inc. 2014 Incentive Stock Plan or a stockholder may abstain. Abstentions will be included in the number of votes present and entitled to vote and accordingly will be treated as “against” votes.

The approval of the Carmike Cinemas, Inc. Employee Stock Purchase Plan will require the affirmative vote of a majority of the votes of the holders of the Common Stock represented and entitled to vote at a meeting at which a quorum is present. Votes may be cast “for” or “against” the approval of the Carmike Cinemas, Inc. Employee Stock Purchase Plan or a stockholder may abstain. Abstentions will be included in the number of votes present and entitled to vote and accordingly will be treated as “against” votes.

Ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2014 requires the affirmative vote of a majority of the votes of the holders of the Common Stock represented and entitled to vote at a meeting at which a quorum is present. Votes may be cast “for” or “against” ratification or a stockholder may abstain from voting. Abstentions will be included in the number of votes present and entitled to vote and accordingly will be treated as “against” votes.

The advisory vote on the compensation of the Named Executive Officers as disclosed in this proxy statement requires the affirmative vote of a majority of the votes of the holders of the Common Stock represented and entitled to vote at a meeting at which a quorum is present. Votes may be cast “for” or “against” approval or a stockholder may abstain from voting. Abstentions will be included in the number of votes present and entitled to vote and accordingly will be treated as “against” votes.

If your shares are held in street name, your brokerage firm may vote your shares under certain circumstances if you do not provide voting instructions. These circumstances include certain “routine” matters, such as Proposal 2 (the amendment to the Certificate of Incorporation to increase authorized common stock) and Proposal 5 (the ratification of Deloitte & Touche LLP). Therefore, if you do not provide voting instructions, your brokerage firm may either vote your shares on routine matters or leave your shares unvoted. When a brokerage firm votes its customers’ shares on a routine matter without receiving voting instructions, these shares are counted both for establishing a quorum to conduct business at the meeting and in determining the number of shares voted for or against the routine matter.

 

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A brokerage firm cannot vote customers’ shares on non-routine matters. All of the matters other than Proposal 2 and Proposal 5 are non-routine matters. If your brokerage firm has not received voting instructions on a non-routine matter, these shares are considered “broker non-votes” to the extent that the brokerage firm submits a proxy. Broker non-votes are counted for purposes of establishing a quorum to conduct business at the meeting. Broker non-votes will have no effect on the outcome of Proposals 1, 3, 4 and 6.

The table below summarizes the votes required and treatments of votes described above:

 

Proposal

Number

 

Item

  Board Voting
Recommendation
 

Votes Required for
Approval

  Abstentions   Uninstructed
shares
1   Election of directors   FOR EACH
NOMINEE
  Plurality of votes cast   No effect   No effect
2   Amendment to Amended and Restated Certificate of Incorporation   FOR   66 2/3% of votes of holders issued and outstanding Common Stock   Count as votes
against
  Discretionary
broker voting
permitted
3   Approval of 2014 Incentive Stock Plan   FOR   Majority of votes of holders represented and entitled to vote   Count as votes
against
  No effect
4   Approval of Employee Stock Purchase Plan   FOR   Majority of votes of holders represented and entitled to vote   Count as votes
against
  No effect
5   Ratification of Deloitte & Touche   FOR   Majority of votes of holders represented and entitled to vote   Count as votes
against
  Discretionary
broker voting
permitted
6   Advisory vote to approve executive compensation   FOR   Majority of votes of holders represented and entitled to vote   Count as votes
against
  No effect

 

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PROPOSAL ONE:

ELECTION OF DIRECTORS

The Board of Directors has nominated the eight individuals named below for election as directors of Carmike, each to serve until the next annual meeting of stockholders or until his or her respective successor is duly elected and qualified, or until his or her death, resignation, retirement or removal. The Compensation and Nominating Committee of the Board of Directors also evaluates other candidates for election to the Board of Directors from time to time and to fill vacancies on the Board between annual meetings.

Carmike’s Amended and Restated By-laws (the “By-laws”) state that the Board of Directors shall consist of eleven directors; however, at any annual or special meeting, the stockholders may, and at any meeting of the Board of Directors, the Board of Directors may, fix a different number of directors who shall constitute the full Board of Directors, but the full Board of Directors shall consist of not less than six and no more than twelve directors. The Board of Directors has currently set the size of the full Board at eight directors.

All eight individuals nominated by the Board of Directors for election are presently directors of Carmike. It is the present intention of the persons named in the accompanying form of proxy to vote such proxy (unless authority to so vote is withheld) for the election of the eight nominees named below as directors of Carmike.

The Board of Directors expects that each of the nominees will be available to stand for election and to serve as a director. In the event a vacancy among the original nominees occurs prior to the meeting, the proxies may be voted for a substitute nominee or nominees named by the Board and for the remaining nominees, or the Board may provide for a lesser number of directors.

The Board of Directors affirmatively determined that each of the nominees qualifies for election under the criteria for evaluation of directors. See “Corporate Governance—Selection of Director Nominees—General Criteria and Process” on page 67 of the proxy statement. In addition, the Board of Directors determined that each nominee, except Mr. Passman, qualifies as an independent director under applicable standards.

There are no family relationships among our directors or executive officers.

Nominees

The following is a description of the business experience of each nominee for at least the past five years. Ages are presented as of February 14, 2014:

Roland C. Smith, Chairman of the Board, 59, has been one of Carmike’s directors since April 2002, and has served as Chairman of the Board of Directors since June 2009. In addition, he currently serves as Chairman of the Compensation and Nominating Committee, and as a member of the Executive Committee. Mr. Smith is currently Chairman and CEO of Office Depot, Inc., a global provider of office products, services and solutions. He was President and Chief Executive Officer of Delhaize America and Executive Vice-President of Delhaize Group, from October 2012 to September 2013. Mr. Smith was a Special Advisor to The Wendy’s Company, a restaurant owner, operator and franchisor, from September 2011 to December 2011 and served as President and Chief Executive Officer of The Wendy’s Company from July 2011 to September 2011. Mr. Smith served as President and Chief Executive Officer of Wendy’s/Arby’s Group, Inc. and Chief Executive Officer of Wendy’s International, Inc., a restaurant owner, operator and franchisor, from September 2008 to July 2011. Mr. Smith served as the Chief Executive Officer of Triarc Companies, Inc. from June 2007 until September 2008 and the Chief Executive Officer of Arby’s Restaurant Group, Inc., a restaurant owner operator and franchisor, from April 2006 until September 2008. Mr. Smith served as President and Chief Executive Officer of American Golf Corporation and National Golf Properties, an owner and operator of golf courses, from February 2003 to November 2005. He was President and Chief Executive Officer of AMF Bowling Worldwide, Inc., an owner and

 

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operator of bowling centers, from April 1999 until January 2003. Mr. Smith previously served as President and Chief Executive Officer of the Triarc Restaurant Group (the predecessor to Arby’s Restaurant Group, Inc.) from February 1997 to April 1999. The Compensation and Nominating Committee considered Mr. Smith’s skills and experience demonstrated as a senior executive for several companies, as well as his familiarity and experience with the retail, leisure and entertainment industries in recommending that Mr. Smith be nominated as a director.

Mark R. Bell, 68, has been one of our directors since October 2011 and currently serves as Chairman of the Audit Committee and a member of the Corporate Governance Committee. Mr. Bell is a retired Senior Partner at PricewaterhouseCoopers and Arthur Andersen. Mr. Bell currently serves as a director and Audit Committee Chairman of Reliability First Corporation, a not-for-profit company whose mission is to serve and enhance electric service reliability and security, and as a director and Audit Committee Chairman of TRX Corporation, a global technology company specializing in travel technology and data services. The Compensation and Nominating Committee considered Mr. Bell’s skills and experience, including financial expertise, demonstrated in his over 36 year career serving clients in multiple industries, including energy, utility and telecom and his work with Fortune 500 and mid-cap companies, providing a wide range of professional services, in recommending that Mr. Bell be nominated as a director.

Jeffrey W. Berkman, 49, has been one of our directors since November 2009 and currently serves as a member of the Compensation and Nominating Committee and the Corporate Governance Committee. Mr. Berkman is founding Partner of The Berkman Law Firm, PLLC where he currently serves as a solo practitioner. Mr. Berkman previously served as Senior Vice President and General Counsel of Bigfoot Ventures Ltd., a venture capital firm, and several affiliates, including a movie and television production company, a real estate investment and development company and various internet based businesses since 2000. Prior to 2000, Mr. Berkman was a Senior Associate at the law firms of Davis, Scott, Weber & Edwards (now Hogan Lovells); Arent Fox; and Whitman Breed Abbot & Morgan (now Winston & Strawn). The Compensation and Nominating Committee considered Mr. Berkman’s skills and experience demonstrated in his legal career, including as General Counsel of Bigfoot, as well as his experience and familiarity with the entertainment industry in recommending that Mr. Berkman be nominated as a director.

Sean T. Erwin, 62, has been one of our directors since May 2012 and currently serves as a member of the Audit Committee and the Corporate Governance Committee. Mr. Erwin currently serves as the Chairman of the Board of Neenah Paper, Inc., a position he has held since November 2004. Previously, Mr. Erwin also served as Chief Executive Officer of Neenah Paper, Inc. from the time of its spin-off from Kimberly-Clark Corporation in November 2004 until May 2011. Prior to the spin-off, he served as an employee of Kimberly-Clark since 1978 and held increasingly senior positions in both finance and business management. In January 2004, Mr. Erwin was named President of Kimberly-Clark’s Pulp and Paper Sector, which comprised the businesses transferred to Neenah Paper Inc. by Kimberly-Clark. He served as the President of the Global Nonwoven business from early 2001. He has also served as the President of the European Consumer Tissue business, Managing Director of Kimberly-Clark Australia, as well as President of the Technical Paper business. Mr. Erwin was a Director of Elavon, Inc. (Formerly Nova Corp.) from July 2000 until its sale to U.S. Bancorp in 2001. The Compensation and Nominating Committee considered Mr. Erwin’s experience demonstrated as a senior public company executive as well as his expertise in finance and business management, in recommending that Mr. Erwin be nominated as a director.

James A. Fleming, 55, has been one of our directors since March 2009 and currently serves as a member of the Compensation and Nominating Committee. Mr. Fleming is Executive Vice President and Chief Financial Officer of Columbia Property Trust, Inc., one of the nation’s largest office real estate investment trusts. Mr. Fleming was Executive Vice President and Chief Financial Officer of Schottenstein Property Group, Inc., an owner, operator, acquirer and redeveloper of shopping centers from January 2011 to June 2013, and served as Executive Vice President and Chief Financial Officer of Cousins Properties Incorporated, a leading fully integrated real estate investment trust, based in Atlanta and listed on the New York Stock Exchange, from August 2004 to November 2010. From July 2001 to August 2004, Mr. Fleming was Senior Vice President, General

 

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Counsel and Secretary of Cousins Properties Incorporated. Prior to joining Cousins Properties, Mr. Fleming was a partner in the Atlanta law firm of Fleming & Ray from October 1994 until July 2001. The Compensation and Nominating Committee considered Mr. Fleming’s skills and experience demonstrated as a senior executive, including as a Chief Financial Officer and as a General Counsel, as well as his familiarity and experience with the commercial real estate industry in recommending that Mr. Fleming be nominated as a director.

Alan J. Hirschfield, 78, has been one of our directors since April 2002 and currently serves as a member of the Audit Committee and the Executive Committee. Mr. Hirschfield is a private investor and consultant. From 1992 to 2000, he was Co-Chief Executive Officer of Data Broadcasting Corporation, a global provider of financial and business information, which merged with Financial Times/Pearsons, Inc. From 1986 to 1990, Mr. Hirschfield served as a consultant/investor in the entertainment/media industry. From 1982 to 1986, he was the Chairman and Chief Executive Officer of Twentieth Century Fox Film Corporation. Mr. Hirschfield was President and Chief Executive Officer of Columbia Pictures, Inc. from 1973 to 1978. He currently serves on the Boards of Directors of Cantel Medical Corp. He formerly served on the Board of Directors of Leucadia National Corporation, a diversified holding company. Mr. Hirschfield served as a member of the Board of Directors of Interactive Data Corporation from 1992 to 2006 and as a member of the Board of Directors of Peregrine Systems, Inc. from 2003 to 2005. The Compensation and Nominating Committee considered Mr. Hirschfield’s skills and experience, including as a Chief Executive Officer, demonstrated throughout his career in the film and entertainment industries and his service on other public company boards, in recommending that Mr. Hirschfield be nominated as a director.

S. David Passman III, 61, has been our President and Chief Executive Officer since June 2009 and one of our directors since June 2003. Mr. Passman is a member of the Executive Committee. Mr. Passman served as the President and Chief Executive Officer of IBS-STL, Inc., or its predecessor, STL, Inc., a book publishing and distribution company, from June 2005 until January 2009. Mr. Passman served as the President of the Harland Printed Products and Harland Checks divisions of John H. Harland Co., a provider of printed products and software and related services to the financial institution market, from 1999 to 2003 and as Chief Financial Officer from 1996 to 1999. From 1981 to 1996, Mr. Passman was a partner in the tax division of Deloitte & Touche LLP, a public accounting firm. Mr. Passman served as the Managing Partner of the Atlanta, Georgia office of Deloitte & Touche LLP from 1993 to 1996. Mr. Passman is a Certified Public Accountant. The Compensation and Nominating Committee considered Mr. Passman’s skills and experience demonstrated as a senior executive, including as Chief Executive Officer and Chief Financial Officer, for several private and public companies, his knowledge of our business and industry, and his expertise in public accounting, in recommending that Mr. Passman be nominated as a director. In addition, it has been our historic practice that our Chief Executive Officer serves as a director.

Patricia A. Wilson, 63, has been one of our directors since April 2004 and currently serves as a member of the Compensation and Nominating Committee, and Chair of the Corporate Governance Committee. Ms. Wilson has been practicing as a private attorney since October 2002, advising both private and public companies in corporate and securities law. Ms. Wilson served as the General Counsel to NDCHealth Corporation, a provider of information systems and services to the healthcare market, from October 2000 to October 2002. Prior to joining NDCHealth Corporation, she was a partner with the law firm of Troutman Sanders LLP from 1988 to September 2000, practicing in the fields of corporate finance and securities law. The Compensation and Nominating Committee considered Ms. Wilson’s skills and experience demonstrated throughout her legal career advising public companies on corporate, securities and governance affairs in recommending that Ms. Wilson be nominated as a director.

The Board of Directors recommends a vote FOR the nominees set forth above.

 

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PROPOSAL TWO:

AMENDMENT TO THE AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF

AUTHORIZED SHARES OF COMMON STOCK

We are asking for your approval of an amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock from 35 million shares to 52.5 million shares. The Board of Directors approved this amendment on January 29, 2014.

If this proposal is approved by our stockholders, the first paragraph of Article FOURTH of the Certificate of Incorporation will be amended to read as follows:

“FOURTH: The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is 53,500,000, consisting of (i) 52,500,000 shares of Common Stock, par value $.03 per share (the “Common Stock”), and (ii) 1,000,000 shares of Preferred Stock, par value $1.00 per share (the “Preferred Stock”).”

The increase in authorized shares of Common Stock by 17.5 million shares will enhance the flexibility of our capital structure by allowing for the issuance of additional shares of Common Stock by the Board of Directors. As of April 1, 2014, there were 23,012,967 shares of Common Stock outstanding and an additional 1,050,084 shares of Common Stock were reserved for issuance under our equity compensation plans.

The additional authorized shares of Common Stock will be available for general purposes, including capital raising transactions, acquisitions, employee benefit plans and other uses. We currently have no specific plans or understandings with respect to the issuance of any of the additional shares. The Board of Directors believes, however, that the proposal is desirable so that, if the opportunity arises, we will have more flexibility to issue shares of Common Stock, without the expense and delay of a special stockholders’ meeting, in connection with future opportunities.

No further action or authorization by our stockholders will be necessary before issuance of the additional authorized shares of Common Stock, except as may be required for a particular transaction by applicable law or regulatory agencies or the rules of the Nasdaq Stock Market, Inc. or any other stock exchange on which our Common Stock may be listed in the future. Although the Board of Directors has no present intention of doing so, the additional shares of Common Stock could be used to make it more difficult for persons to obtain control of us. The issuance of the additional authorized shares of Common Stock could also have the effect, in certain circumstances of, among other things, diluting earnings per share, book value per share or voting power of the currently outstanding shares of Common Stock held by our existing stockholders.

If approved, this amendment will become effective upon filing of a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of Delaware, which we would do promptly after the Annual Meeting.

Our Board of Directors has determined that it is in our best interests and the best interests of our stockholders to amend the Certificate of Incorporation to increase the number of authorized shares of Common Stock.

The Board of Directors recommends a vote FOR the approval of the

proposal to amend the Certificate of Incorporation to increase the number of

authorized shares of Common Stock.

 

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PROPOSAL THREE:

APPROVAL OF THE CARMIKE CINEMAS, INC.

2014 INCENTIVE STOCK PLAN

On May 21, 2004, the stockholders approved the Carmike Cinemas, Inc. 2004 Incentive Stock Plan (the “Old Plan”). As of April 1, 2014, there were 1,050,084 shares of Carmike’s Common Stock available for issuance under the Old Plan. The Old Plan is scheduled to expire on May 21, 2014, and no future grants under the Old Plan may be made following that date.

Carmike’s Board of Directors believes that equity grants are a key aspect of Carmike’s ability to attract and retain qualified employees and outside directors. The Board of Directors, upon the recommendation of the Compensation and Nominating Committee, has adopted the Carmike Cinemas, Inc. 2014 Incentive Stock Plan, subject to stockholder approval, to replace the Old Plan. If approved by the stockholders, the 2014 Incentive Stock Plan will become effective immediately.

No new shares of Common Stock will be reserved for issuance under the 2014 Incentive Stock Plan. The shares currently remaining available for future issuance under the Old Plan will instead be available for issuance under the 2014 Incentive Stock Plan. No new grants will be made under the Old Plan, following the effectiveness of the 2014 Incentive Stock Plan. The purpose of the adoption of the 2014 Incentive Stock Plan is to ensure that Carmike is able to continue to grant equity awards to eligible employees and outside directors at levels deemed appropriate by the Compensation and Nominating Committee.

A description of the 2014 Incentive Stock Plan may be found under the caption “Description of 2014 Incentive Stock Plan” below.

The Board of Directors recommends a vote FOR approval of the 2014 Incentive Stock Plan.

 

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DESCRIPTION OF 2014 INCENTIVE STOCK PLAN

Carmike is providing the following description of the 2014 Incentive Stock Plan to you in connection with the solicitation of proxies for approval of Proposal 3. The following discussion summarizes the material terms of the 2014 Incentive Stock Plan, as proposed by Proposal 3. This discussion does not purport to be complete and is qualified in its entirety by reference to the 2014 Incentive Stock Plan as proposed, a copy of which is attached hereto as Appendix A.

Purpose

The primary purpose of the 2014 Incentive Stock Plan is (1) to attract and retain eligible employees, consultants and outside directors of Carmike, (2) to provide an incentive to eligible employees, consultants and outside directors to work to increase the value of Carmike’s Common Stock, and (3) to provide eligible employees, consultants and outside directors with a stake in the future of Carmike which corresponds to the stake of each of Carmike’s stockholders.

Administration

The 2014 Incentive Stock Plan is administered by the Compensation and Nominating Committee of Carmike’s Board of Directors, which, according to the plan, will have at least two members who satisfy the requirements of an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Each grant under the 2014 Incentive Stock Plan is evidenced by a certificate that incorporates such terms and conditions as the Compensation and Nominating Committee deems necessary or appropriate.

Coverage, Eligibility and Grant Limits

The 2014 Incentive Stock Plan provides for the grant of options, stock grants, stock unit grants, and stock appreciation rights (“SARs”) to eligible employees, consultants and outside directors. An eligible employee is any employee of Carmike or any subsidiary, parent or affiliate of Carmike who has been designated by the Compensation and Nominating Committee to receive a grant under the 2014 Incentive Stock Plan. A consultant is a consultant, agent or other individual who has rendered valuable services to Carmike or a parent, subsidiary or affiliate of Carmike, has been designated by the Compensation and Nominating Committee to receive a grant under the 2014 Incentive Stock Plan and meets the requirements for participating in an “Employee Benefit Plan” as defined in Rule 405 promulgated under the Securities Act of 1933, as amended. An outside director is any member of the Board of Directors who is not an employee of Carmike or a parent, subsidiary or affiliate of Carmike. All of Carmike’s existing directors, with the exception of S. David Passman III, qualify as outside directors for purposes of the 2014 Incentive Stock Plan.

No more than 750,000 shares of Common Stock are available for the grant of incentive stock options (“ISOs”). The maximum limits applicable to awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code will be as follows for any calendar year:

 

   

for awards paid in cash, 200% of the base salary paid to the eligible employee during the calendar year or $2 million, whichever is less;

 

   

for awards made in the form of options, other than awards to a newly hired eligible employee, the number of shares of Common Stock subject to options granted to any eligible employee in any calendar year will not exceed 500,000 shares;

 

   

for awards made in the form of SARs, other than awards to a newly hired eligible employee, the number of shares of Common Stock subject to SARs granted to any eligible employee in any calendar year will not exceed 500,000 shares;

 

   

for awards made in the form of stock grants, other than awards to a newly hired eligible employee, the number of shares of Common Stock subject to such grants made to any eligible employee in any calendar year will not exceed 250,000 shares;

 

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for awards made in the form of stock unit grants, other than awards to a newly hired eligible employee, the number of shares of Common Stock subject to such grants made to any eligible employee in any calendar year will not exceed 250,000 shares;

 

   

for awards made to an eligible employee in the calendar year in which he or she is hired by Carmike or one of our subsidiaries, the number of shares of Common Stock subject to such awards granted in such calendar year will not exceed, in the case of (i) options, 750,000 shares, (ii) SARs, 750,000 shares, (iii) stock grants, 375,000 shares and (iv) stock unit grants, 375,000 shares; and

 

   

for dividends or dividend equivalents paid with respect to awards, the amount paid to any eligible employee in any calendar year will not exceed the value of 250,000 shares of Common Stock determined as of the date payment of such dividends or dividend equivalents is made to such eligible employee.

For Awards that cover a period of more than one calendar year, the maximum award limit will be a multiple of the applicable calendar year maximum award limit described above, which multiple will be equal to the number of calendar years covered by the award.

Shares Available for Issuance

The number of shares available for issuance under the 2014 Incentive Stock Plan on its effective date will be the number of shares available for issuance under the Old Plan immediately before the approval of the 2014 Incentive Stock Plan. Thereafter, shares subject to grants under the Old Plan will become available for issuance under the 2014 Incentive Stock Plan upon the forfeiture of such shares or the expiration of the grants to which such shares are subject. Shares subject to grants under the 2014 Incentive Stock Plan will again become available for issuance under the 2014 Incentive Stock Plan upon the forfeiture of such shares. The number of shares that will become available for issuance in this manner depends on the extent to which shares are forfeited and grants expire and therefore is not known at this time. As of April 1, 2014 there were 1,050,084 shares of Common Stock available for issuance under the Old Plan. As of April 1, 2014, the closing price of a share of Common Stock was $30.30 as reported on the NASDAQ Global Market.

Options

Under the 2014 Incentive Stock Plan, non-incentive stock options (“Non-ISOs”) may be granted to eligible employees, consultants or outside directors by the Compensation and Nominating Committee, but ISOs, which are intended to qualify for special tax treatment under Section 422 of the Code, may only be granted to eligible employees. Each option granted under the 2014 Incentive Stock Plan entitles the optionee to purchase the number of shares of Common Stock specified in the grant at the option price specified in the related stock option certificate. The terms and conditions of each option granted under the 2014 Incentive Stock Plan are determined by the Compensation and Nominating Committee, but no option will be granted at an exercise price which is less than the fair market value of Common Stock as determined on the grant date in accordance with the 2014 Incentive Stock Plan. In addition, if the option is an ISO that is granted to a ten percent stockholder of Carmike, the option price may be no less than 110% of the fair market value of a share of Common Stock on the grant date. Moreover, no eligible employee may be granted ISOs which are first exercisable in any calendar year for stock having an aggregate fair market value (determined as of the date that the ISO was granted) that exceeds $100,000.

Each option granted under the 2014 Incentive Stock Plan shall be exercisable as provided in the related option certificate. If the only condition to the exercise of an option is the completion of a period of service, such period of service shall not be less than one year, starting on the date the option is granted, unless the Compensation and Nominating Committee determines that a shorter period of service (or no period of service) better serves Carmike’s interest. No option may be exercisable more than ten years from the grant date or, if the option is an ISO granted to a ten percent stockholder of Carmike, more than five years from the grant date.

 

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The Compensation and Nominating Committee may not, absent the approval of Carmike’s stockholders, take any action, whether through amendment, cancellation, replacement grants, or other means, to reduce the option price of any outstanding option or take any action to effect a cash buyout of any outstanding option which has an option price in excess of the fair market value of a share of Common Stock at the time.

Stock Appreciation Rights

SARs may be granted by the Compensation and Nominating Committee to eligible employees, consultants and outside directors under the 2014 Incentive Stock Plan, either as part of an option or as standalone SARs. The terms and conditions for an SAR granted as part of an option will be set forth in the option certificate for the related option, while the terms and conditions for a standalone SAR will be set forth in an SAR certificate. SARs entitle the holder to receive the appreciation of the fair market value of one share of Common Stock as of the date such right is exercised over the baseline price specified in the option or SAR certificate (the “SAR Base Price”), multiplied by the number of shares of Common Stock in respect of which the SAR is being exercised. The Base Price for an SAR must equal or exceed the fair market value of a share of Common Stock as determined on the grant date in accordance with the 2014 Incentive Stock Plan.If an SAR is granted together with an option, then the exercise of the SAR shall cancel the right to exercise the related option, and the exercise of a related option shall cancel the right to exercise the SAR. An SAR granted as a part of an option shall be exercisable only while the related option is exercisable. A standalone SAR shall be exercisable as provided in the related SAR certificate. If the only condition to the exercise of an SAR is the completion of a period of service, such period of service shall not be less than one year, starting on the date the SAR is granted, unless the Compensation and Nominating Committee determines that a shorter period of service (or no period of service) better serves Carmike’s interest. At the discretion of the Compensation and Nominating Committee, any payment due upon the exercise of an SAR can be made in cash or in shares of Common Stock or any combination of cash and shares of Common Stock.

The Compensation and Nominating Committee may not, and will not, absent the approval of Carmike’s stockholders, take any action, whether through amendment, cancellation, replacement grants, or other means, to reduce the SAR Base Price of any outstanding SAR or to effect a cash buyout of any outstanding SAR with a SAR Base Price in excess of the fair market value of a share of Common Stock at the time

Stock Grants

Stock grants are grants of Common Stock that are subject to such terms and conditions as the Compensation and Nominating Committee, acting in its absolute discretion, deems appropriate. The Compensation and Nominating Committee may prescribe that an eligible employee’s, consultant’s or outside director’s rights in a stock grant will be nontransferable or forfeitable or both unless certain conditions are satisfied. For example, a stock grant may be made subject to a requirement that the eligible employee continue employment or the outside director or consultant continue service with Carmike for a specified period or that Carmike or the eligible employee, consultant or outside director achieve stated performance goals or other objectives. If the only condition to the forfeiture of a stock grant is the completion of a period of service, such period of service shall not be less than three years, starting on the date the stock grant is made, unless the Compensation and Nominating Committee determines that a shorter period of service (or no period of service) better serves Carmike’s interest. Each stock grant shall be evidenced by a certificate that specifies the rights, if any, an eligible employee, consultant or outside director has with respect to such stock grant as well as any conditions applicable to the stock grant.

Stock Unit Grants

Stock unit grants are designed to result in a payment in cash or shares of Common Stock or any combination of cash and shares of Common Stock based on the number of units earned and vested in connection with such grant. Stock unit grants may be made by the Compensation and Nominating Committee subject to such terms and conditions as the committee acting in its absolute discretion deems appropriate. For example, a stock unit grant

 

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may be made subject to a requirement that the eligible employee continue employment or the consultant or outside director continue service with Carmike for a specified period or that Carmike or the eligible employee, consultant or outside director achieve stated performance or other objectives. If the only condition to the forfeiture of a stock unit is the completion of a period of service, such period of service shall not be less than three years, starting on the date the stock unit is granted, unless the Compensation and Nominating Committee determines that a shorter period of service (or no period of service) better serves Carmike’s interest. Each stock unit grant shall be evidenced by a certificate that specifies the rights, if any, an eligible employee, consultant or outside director has with respect to such stock unit grant as well as any conditions applicable to the stock unit grant.

Effect of Dividends and Voting Rights Under Stock Grants and Stock Unit Grants

If a dividend (whether in cash or shares of Common Stock) is paid on Common Stock issued under a stock grant or a stock unit grant while such Common Stock is subject to forfeiture conditions, Carmike will hold such dividend subject to the same conditions that apply to the shares of Common Stock issued under the stock grant or stock unit grant. The Compensation and Nominating Committee may provide that dividend equivalents will be credited with respect to a stock unit grant, payable in cash or stock. All dividend equivalents may be reinvested into additional shares of Common Stock. Carmike will hold any cash or Common Stock credited in connection with such dividend equivalents subject to the same conditions that apply to the related stock unit grant.

Except as otherwise set forth in the related stock grant certificate, the holder of a stock grant will have the right to vote the Common Stock issued thereunder during the period such Common Stock is subject to forfeiture conditions.

Transferability

No option, SAR, stock grant or stock unit grant made to an eligible employee, consultant or outside director is transferable by such eligible employee, consultant or outside director other than by will or by the laws of descent and distribution. Absent consent of the Compensation and Nominating Committee, an option or SAR shall be exercisable during an eligible employee’s, consultant’s or outside director’s lifetime only by such eligible employee, consultant or outside director.

Change in Control

Except as otherwise provided in the applicable award certificate, as of the date of a change in control, all conditions to the exercise of outstanding options and SARs and all issuance or forfeiture conditions on outstanding stock grants and stock unit grants will be deemed satisfied; provided that if the issuance or forfeiture condition relates to satisfying a performance goal and there is a target for such goal, such issuance or forfeiture condition shall be deemed satisfied only to the extent of such target unless such target has been exceeded before the date of the Change in Control, in which event such issuance or forfeiture condition shall be deemed satisfied to the extent such target had been so exceeded. The Board of Directors shall have the right, to the extent required as a part of the change in control transaction, to cancel all outstanding awards after giving eligible employees, consultants and outside directors a reasonable period of time to exercise their outstanding options and SARs or to take such other action as is necessary to receive Common Stock subject to stock grants and the cash or shares of Common Stock payable under stock unit grants.

A change in control means, generally, a change in control of Carmike of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect at the time of such “change in control”, provided that a change in control shall be deemed to have occurred at such time as: the acquisition by any person of 30% or more of the voting power for election of Carmike’s directors; the loss by Carmike’s incumbent directors, or their approved successors, of a majority of the Board of Directors during any period of two years or less; the consummation of a reorganization, merger, consolidation or share exchange whereby Common Stock is

 

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converted into or exchanged for the stock of another corporation; the consummation of a liquidation or dissolution of Carmike or a sale or disposition of 50% or more of the assets of Carmike; or the consummation of a reorganization, merger, consolidation or share exchange with respect to Carmike, unless Carmike stockholders own more than 60% of the shares of the resulting company and retain, with respect to other Carmike stockholders, substantially the same proportion of share ownership that they had in Carmike.

Amending or Terminating the 2014 Incentive Stock Plan

The 2014 Incentive Stock Plan may be amended by the Board of Directors to the extent it deems necessary or appropriate, but no amendment may be made on or after the date of a change in control to the section of the 2014 Incentive Stock Plan addressing change in control that might adversely affect any rights that would otherwise vest as of the date of a change in control. The 2014 Incentive Stock Plan may also be terminated by the Board of Directors at any time. The Board of Directors may not unilaterally modify, amend or cancel any option, SAR, stock grant or stock unit grant previously granted in a manner that would have an adverse effect on the holder unless the holder of such award consents or there is a transaction that would permit the Compensation and Nominating Committee to adjust the number, kind or class of shares of Common Stock reserved under the 2014 Incentive Stock Plan or a change in control. No amendment shall be made absent the approval of the stockholders of Carmike to the extent such approval is required under applicable law or the rules of the stock exchange on which shares of Common Stock are listed.

Adjustment of Shares

Capital Structure

The number, kind or class of shares of Common Stock reserved for issuance under the 2014 Incentive Stock Plan, the annual grant caps under the 2014 Incentive Stock Plan, the number, kind or class of shares of Common Stock subject to awards under the 2014 Incentive Stock Plan, and the option price of options and the SAR Base Price of SARs granted under the 2014 Incentive Stock Plan shall be adjusted by the Compensation and Nominating Committee in an equitable manner to reflect any equity restructuring or change in the capitalization of Carmike.

Other Transactions

As part of any transaction described in Section 424(a) of the Code, the Compensation and Nominating Committee has the right to adjust (i) the number, kind or class of shares of Common Stock reserved for issuance under the 2014 Incentive Stock Plan and the annual award limits under the 2014 Incentive Stock Plan and (ii) the number, kind or class of shares of Common Stock subject to outstanding awards under the 2014 Incentive Stock Plan (along with any related grant and forfeiture conditions ) and the related option price and SAR Base Price and, further, has the right to make awards to effect the assumption of, or in substitution for, stock grants, stock unit grants, options and stock appreciation rights granted by any other corporation to the extent that such transaction calls for the substitution or assumption of such grants.

Federal Income Tax Consequences

The rules concerning the federal income tax consequences with respect to grants made pursuant to the 2014 Incentive Stock Plan are technical, and reasonable persons may differ on the proper interpretation of such rules. Moreover, the applicable statutory and regulatory provisions are subject to change, as are their interpretations and applications, which may vary in individual circumstances. The following discussion is designed to provide only a brief, general summary description of the U.S. federal income tax consequences associated with grants under the 2014 Incentive Stock Plan, based on a good faith interpretation of the current U.S. federal income tax laws, regulations (including applicable proposed regulations) and judicial and administrative interpretations. The following discussion does not set forth any tax consequences other than U.S. federal income tax consequences, including any state, local or foreign tax consequences that may apply.

 

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ISOs

In general, an eligible employee will not recognize taxable income upon the grant or the exercise of an ISO (although the exercise of an ISO may in some cases trigger liability for the alternative minimum tax). Carmike will not be entitled to an income tax deduction upon the grant of an ISO.

The tax treatment of the disposition of Common Stock received pursuant to the exercise of an ISO depends upon whether the Common Stock is disposed of during or subsequent to either of the “holding periods” that end: (1) two years after the date of the grant of the ISO or (2) one year after the date of exercise of the ISO. If an eligible employee disposes of Common Stock received pursuant to the exercise of an ISO subsequent to the holding periods, the eligible employee will recognize long-term capital gain or loss with respect to the difference between the amount realized on the disposition (the “disposition price”) and the exercise price. Carmike will not be entitled to any income tax deduction as a result of such disposition. The holding period requirements are waived if an eligible employee dies.

If an eligible employee disposes of Common Stock received pursuant to the exercise of an ISO during the holding periods, then in the year of such disposition, the eligible employee generally will recognize ordinary income, and Carmike will be entitled to an income tax deduction, in an amount equal to the lesser of (1) the excess of the fair market value of the Common Stock on the date of exercise over the exercise price or (2) the excess of the disposition price over the exercise price. The eligible employee will recognize any gain in excess of this amount of ordinary income as short-term or long-term capital gain (depending on the applicable holding period).

Non-ISOs

An eligible employee, consultant or outside director will not recognize any taxable income upon the grant of a Non-ISO, and Carmike will not be entitled to an income tax deduction at the time of such grant. Upon the exercise of a Non-ISO, an eligible employee, consultant or outside director generally will recognize ordinary income, and Carmike will be entitled to an income tax deduction, in an amount equal to the excess of the fair market value of the Common Stock on the date of exercise over the exercise price. However, if an eligible employee or outside director cannot sell the Common Stock purchased through the exercise of the Non-ISO within six months of the grant of the Non-ISO without being subject to liability under Section 16(b) of the Exchange Act, the eligible employee or outside director will recognize ordinary income with respect to such Common Stock upon the earlier of six months after the grant of the Non-ISO or the first date the Common Stock can be sold without any such liability. An eligible employee, consultant or outside director will recognize any gain or loss upon the sale of the Common Stock as short-term or long-term capital gain or loss (depending on the applicable holding period).

SARs

Upon the exercise of an SAR for cash, shares of Common Stock or a combination of cash and shares of Common Stock, an eligible employee, consultant or outside director will recognize ordinary income equal to the amount of cash and the fair market value of the Common Stock received as a result of the exercise. Carmike will be entitled to an income tax deduction in an amount equal to the ordinary income recognized by the eligible employee, consultant or outside director upon exercise of the SAR in the taxable year in which the eligible employee, consultant or outside director recognizes such income.

Stock Grants

An eligible employee, consultant or outside director is generally not subject to income tax upon the grant of a stock grant, nor does the grant of a stock grant result in an income tax deduction for Carmike, unless the restrictions on the stock grant do not present a “substantial risk of forfeiture” or the stock is “transferable,” within the meaning of Section 83 of the Code. In the year that the shares of Common Stock subject to the stock grant become transferable or are no longer subject to substantial risk of forfeiture, the eligible employee, consultant or

 

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outside director will recognize ordinary income in an amount equal to the fair market value of such shares, generally determined on the earlier of the date the shares are no longer subject to a substantial risk of forfeiture or are transferable, less the amount paid for the shares, if any. However, if an eligible employee or outside director cannot sell the Common Stock acquired pursuant to the stock grant within six months of the grant of the stock grant without being subject to liability under Section 16(b) of the Exchange Act, the eligible employee or outside director will recognize ordinary income with respect to such Common Stock upon the earlier of six months after the grant of the stock grant or the first date the Common Stock can be sold without any such liability. If the eligible employee, consultant or outside director does not make an election to recognize income under Section 83(b) of the Code and the stock grant is forfeited, the eligible employee, consultant or outside director will not recognize income.

An eligible employee, consultant or outside director may elect to recognize income for U.S. federal tax purposes at the time of grant by filing an election under Section 83(b) of the Code within thirty days of the date of grant. An eligible employee, consultant or outside director who makes such an election will recognize ordinary income in an amount equal to the fair market value of the shares of Common Stock subject to the stock grant (less any amount paid for the shares) on the date of grant.

Carmike will be entitled to an income tax deduction in an amount equal to the ordinary income recognized by the eligible employee, consultant or outside director in the taxable year in which the eligible employee, consultant or outside director recognizes such income.

Stock Unit Grants

An eligible employee, consultant or outside director is not subject to income tax upon the grant of a stock unit grant, nor does the grant of a stock unit grant entitle Carmike to an income tax deduction. In the year that the stock unit grant is paid in cash, shares of Common Stock or a combination of cash and shares of Common Stock, the eligible employee, consultant or outside director will recognize ordinary income in an amount equal to any cash received plus the fair market value of any shares of Common Stock received under the stock unit grant. If the stock unit grant is forfeited, the eligible employee, consultant or outside director will not recognize income. Stock unit grants are subject to the requirements of Section 409A of the Code, and if a stock unit grant fails to satisfy these requirements, penalty taxes and interest may apply. Carmike generally will be entitled to an income tax deduction in an amount equal to the ordinary income recognized by the eligible employee, consultant or outside director in the taxable year in which the eligible employee, consultant or outside director recognizes such income.

Estimate of Benefits

The Compensation and Nominating Committee, subject to our stockholders approving the 2014 Incentive Stock Plan, has made the annual grant of stock-settled restricted stock units to our non-employee directors, effective at the annual meeting, as described in the table below. No other grants under the 2014 Incentive Stock Plan have been made at this time.

 

Name and Position

   Dollar Value     Number of Units  

Non-employee directors

   $ 450,000 (1)      Not determinable (2) 

 

(1) Represents awards to be valued at (i) $60,000 for each of our six non-employee directors other than our non-executive Chairman and (ii) $90,000 for our non-executive Chairman.

 

(2) The number of units to be awarded will be based on the trading price of our common stock over the 30 trading days prior to the effective grant date and is not determinable at this time.

 

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PROPOSAL FOUR:

APPROVAL OF THE CARMIKE CINEMAS, INC.

EMPLOYEE STOCK PURCHASE PLAN

Our Board of Directors believes that encouraging additional stock ownership by our employees is an effective method of further aligning the interests of our employees and our stockholders. The Board of Directors has adopted the Carmike Cinemas, Inc. Employee Stock Purchase Plan (the “ESPP”), subject to stockholder approval. If approved by the stockholders, the ESPP will become effective immediately.

A description of the ESPP may be found under the caption “Description of Employee Stock Purchase Plan” below.

The Board of Directors recommends a vote FOR approval of the Employee Stock Purchase Plan.

 

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DESCRIPTION OF EMPLOYEE STOCK PURCHASE PLAN

Carmike is providing the following description of the Carmike Cinemas, Inc. Employee Stock Purchase Plan (the “ESPP”) to you in connection with the solicitation of proxies for approval of Proposal 4. The following discussion summarizes the material terms of the ESPP, as proposed by Proposal 4. This discussion does not purport to be complete and is qualified in its entirety by reference to the ESPP as proposed, a copy of which is attached hereto as Appendix B.

Purpose

The purpose of the ESPP is to encourage ownership of Carmike’s Common Stock by eligible employees of Carmike and certain Carmike subsidiaries which have been designated as eligible to participate in the ESPP. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code.

Administration

The ESPP is administered by the Compensation and Nominating Committee of Carmike’s Board of Directors. The Compensation and Nominating Committee may delegate its administrative functions as it deems appropriate under the circumstances.

Shares Available under the ESPP

The ESPP authorizes the issuance of 250,000 shares of Carmike’s Common Stock. The number of shares under the ESPP will be adjusted by the Compensation and Nominating Committee for any change in the number of outstanding shares of Carmike’s Common Stock resulting from a subdivision or consolidation of shares, from the payment of dividends in the form of Carmike’s Common Stock or from any other increase or decrease in the number of shares of Carmike’s Common Stock effected without receipt of consideration by Carmike. In addition, the Compensation and Nominating Committee will adjust the number of shares under the ESPP in the event of any corporate transaction described in Section 424(a) of the Code.

Eligibility and Participation

Each person who is classified on the payroll of Carmike or an eligible subsidiary as an employee is eligible to participate in the ESPP, except:

 

   

an employee who has been employed by Carmike or by a participating subsidiary for less than one year;

 

   

an employee whose customary employment is 20 hours or less per week;

 

   

an employee whose customary employment is for not more than 5 months in any calendar year; and

 

   

an employee prohibited under applicable foreign or commonwealth law from participating in the ESPP.

Eligible employees may elect to participate in the ESPP for the purchase period (a calendar quarter) by properly completing and filing a subscription form with the Compensation and Nominating Committee at any time during the one-month period immediately preceding the purchase period.

Purchase of Shares

A subscription to purchase shares of Carmike’s Common Stock will be in effect until it is amended by the eligible employee or until the employee’s status as an “eligible employee” terminates. An eligible employee, as part of his or her election to participate in the ESPP, will authorize Carmike or a participating subsidiary to withhold an amount, which may not exceed ten percent (10%) of the eligible employee’s base salary or regular

 

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hourly wages each pay period (and which may be further limited by additional limitations under the ESPP and by certain statutory limitations). Each eligible employee’s payroll deductions will be credited to a subscription account established for him or her by the recordkeeper. An eligible employee may not make any contribution under the ESPP except through payroll deductions.

On the last day of the purchase period, the balance credited to an eligible employee’s subscription account automatically will be used to purchase shares (including fractional shares) of Carmike’s Common Stock at the purchase price (as defined below), up to any maximum number of shares permitted under the ESPP. The maximum amount that can be purchased during any purchase period also may be limited by the number of authorized shares remaining for sale under the ESPP.

In addition, no eligible employee will be permitted to accrue rights to purchase shares of Carmike’s Common Stock under the ESPP or under any other employee stock purchase plan (within the meaning of Code Section 423) or any other shares of stock of Carmike or any of Carmike’s subsidiaries under any other employee stock purchase plans (within the meaning of Code Section 423) at a rate which exceeds $25,000 of the fair market value of such stock for any calendar year (as determined as of the time such right is granted (within the meaning of Section 423 of the Code and the related regulations)).

If an eligible employee’s subscription account has a cash balance remaining at the end of a purchase period for any reason, including a limitation on the number of authorized shares, this balance will be refunded to the eligible employee in cash (without interest) as soon as practicable after the purchase period. The shares of Carmike’s Common Stock to be purchased under the ESPP may be authorized but unissued shares, or shares that have been reacquired by Carmike.

An eligible employee may amend his or her subscription once during a purchase period to increase, reduce or stop payroll deductions.

Purchase Price

The purchase price for shares of Carmike’s Common Stock will be determined by the Compensation and Nominating Committee prior to the first day of the applicable purchase period and will be no less than the lesser of (a) 85% of the closing price of Carmike’s Common Stock on the NASDAQ stock exchange on the first day of the purchase period or (b) 85% of the closing price of Carmike’s Common Stock on the NASDAQ stock exchange on the last day of the purchase period. The Compensation and Nominating Committee has initially approved a 10% discount for purchases under the ESPP.

Termination of Employment

If an individual’s eligibility status terminates for any reason before the last day of the purchase period, the termination will cause payroll deductions to cease immediately. If the eligible employee’s subscription account has a cash balance remaining when he or she terminates, this balance will be refunded to the eligible employee in cash (without interest) as soon as practicable.

Transferability of Shares

No shares of Carmike’s Common Stock acquired by an eligible employee under the ESPP may be assigned, encumbered, alienated, transferred, pledged, or otherwise disposed of in any way (other than by will or the laws of descent and distribution) for a period of one year following the acquisition of the shares by the eligible employee.

No eligible employee may assign, transfer or otherwise dispose of the balance credited to his or her subscription account, or his or her right to purchase Carmike’s Common Stock pursuant to the ESPP.

 

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Amendment and Termination of Plan

The ESPP may be amended from time to time by the Compensation and Nominating Committee. Certain amendments may be subject to the approval of Carmike’s shareholders to the extent this approval is required by Section 423 of the Code, the laws of the State of Delaware or the rules of the NASDAQ stock exchange. The Compensation and Nominating Committee may terminate the ESPP or any purchase period at any time. Upon the effective date of termination, all subscriptions will be void, no further payroll deductions will be made and each eligible employee’s subscription account balance will be distributed to him or her in cash (without interest) as soon as practicable.

Federal Income Tax Consequences

The rules concerning the federal income tax consequences with respect to awards made pursuant to the ESPP are technical, and reasonable persons may differ on the proper interpretation of the rules. Moreover, the applicable statutory and regulatory provisions are subject to change, as are their interpretations and applications, which may vary in individual circumstances. The following discussion is designed to provide only a brief, general summary description of the U.S. federal income tax consequences associated with the ESPP, based on a good faith interpretation of the current U.S. federal income tax laws, regulations (including applicable proposed regulations) and judicial and administrative interpretations. The following discussion does not set forth any tax consequences other than U.S. federal income tax consequences, including any state, local or foreign tax consequences that may apply. This summary assumes that the ESPP satisfies the requirements of Section 423 of the Code.

The amounts deducted from an eligible employee’s pay to purchase shares of Carmike’s Common Stock will be U.S. federal taxable income to the eligible employee. These amounts must be included in gross income for U.S. federal income tax purposes in the year in which the amounts otherwise would have been paid to the eligible employee. An eligible employee will not be required to recognize any income for U.S. federal income tax purposes upon the purchase of shares. However, the eligible employee will determine his or her U.S. federal taxable income for the year in which he or she sells or otherwise disposes of shares purchased under the ESPP in accordance with the following paragraphs.

The U.S. federal income tax consequences of a sale or disposition of shares of common stock acquired under the ESPP depend in part on the length of time the shares are held by an eligible employee. If an eligible employee sells or otherwise disposes of shares acquired under the ESPP (other than any transfer resulting from death) within two years after the grant date (within the meaning of Section 423 of the Code and the related regulations) for the purchase right, the eligible employee must recognize ordinary income for U.S. federal income tax purposes in the year of the sale or disposition. This ordinary income will be recognized in an amount equal to the fair market value of the shares on the date they were purchased less the purchase price. This amount of ordinary income is recognized by the eligible employee even if the fair market value of the shares has decreased since the date the shares were purchased. This ordinary income recognized is added to the eligible employee’s basis in the shares. After increasing the basis by the amount of the ordinary income recognized, any gain realized on the sale or disposition in excess of the basis in the shares will be taxed as capital gain, and any loss realized will be a capital loss. Whether the capital gain or loss will be long-term or short-term will depend on how long the shares were held.

If an eligible employee sells or otherwise disposes of shares of common stock acquired under the ESPP more than two years after the first day of the purchase period in which the shares were acquired, or the eligible employee dies, he or she must include as ordinary income for U.S. federal income tax purposes in the year of sale (or the taxable year ending with his or her death) an amount equal to the lesser of

 

   

the fair market value of the shares on the grant date (within the meaning of Section 423 of the Code and the related regulations) for the purchase right less the purchase price, or

 

   

the fair market value of the shares on the date he or she sells or otherwise disposes of the shares, or on the date of death, less the purchase price.

 

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Except in the case of a transfer as a result of death, the amount of the ordinary income recognized by the eligible employee is added to his or her basis in the shares. The basis of shares transferred as a result of the death of an eligible employee will not be increased as a result of the ordinary income recognized by the deceased eligible employee. After increasing the basis in the shares by the ordinary income recognized, any gain realized on the sale or disposition in excess of the eligible employee’s basis will be taxed as a long-term capital gain. Any loss realized will be treated as a long-term capital loss.

Carmike does not receive any U.S. federal income tax deduction as a result of issuing shares pursuant to the ESPP, except upon a sale or disposition of shares by an eligible employee prior to the expiration of the two year holding period. In this event, Carmike, or a participating subsidiary, generally will be entitled to a U.S. federal income tax deduction equal to the amount of ordinary income recognized by the eligible employee with respect to the sale or disposition of the shares.

 

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PROPOSAL FIVE:

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our Audit Committee has appointed Deloitte & Touche LLP to audit our consolidated financial statements for the year ending December 31, 2014 and the effectiveness of our internal control over financial reporting as of December 31, 2014, and to prepare reports on this audit. A representative of Deloitte & Touche LLP will be present at the Annual Meeting, will have the opportunity to make a statement and will be available to respond to appropriate questions by stockholders. We are asking our stockholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2014. Although ratification is not required by our By-Laws or otherwise, the Board of Directors is submitting the selection of Deloitte & Touche LLP to our stockholders for ratification because we value our stockholders’ views on our independent registered public accounting firm. If the appointment of Deloitte & Touche LLP is not ratified, the Audit Committee will reconsider the appointment. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Carmike and our stockholders.

The Board of Directors recommends a vote FOR the ratification of

Deloitte & Touche LLP as our independent registered public accounting firm for 2014.

 

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AUDIT COMMITTEE REPORT

The Audit Committee consists of Mark R. Bell as Chairman, Alan J. Hirschfield and Sean T. Erwin. Each of Messrs. Bell, Hirschfield and Erwin meets the applicable independence requirements of the SEC and the Nasdaq listing standards. In addition, each Audit Committee member meets the financial knowledge requirements under the Nasdaq listing standards and Mr. Bell, designated by the Board of Directors as the “audit committee financial expert” under SEC rules, meets the Nasdaq professional experience requirements as well. The Audit Committee operates under a written charter adopted by the Board of Directors on May 9, 2003, a copy of which is available on Carmike’s website at www.carmike.com.

The primary responsibility of the Audit Committee is to oversee Carmike’s financial reporting process on behalf of the Board of Directors and report the results of its activities to the Board of Directors. Management is responsible for preparing Carmike’s financial statements and the independent registered public accounting firm is responsible for auditing those financial statements in accordance with generally accepted auditing standards and for issuing a report thereon.

In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed with management Carmike’s audited financial statements as of and for the year ended December 31, 2013. The Audit Committee also has discussed with Deloitte & Touche LLP, Carmike’s independent registered public accounting firm for fiscal 2013, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

Deloitte & Touche LLP also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding their communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Deloitte & Touche LLP their independence.

Based on those reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be included in Carmike’s Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the SEC.

The foregoing has been furnished by the Audit Committee of Carmike’s Board of Directors.

 

By the Audit Committee:    Mark R. Bell, Chairman
March 3, 2014    Alan J. Hirschfield
   Sean T. Erwin

The foregoing report should not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act, and together with the Securities Act, the “Acts”), except to the extent that Carmike specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

 

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FEES PAID TO INDEPENDENT AUDITORS

Aggregate fees billed to us for the fiscal years ended December 31, 2013 and 2012 by our independent registered public accounting firm, Deloitte & Touche LLP, were as follows:

 

     2013      2012  

Audit Fees (1)

   $ 1,068,700       $ 962,800   
  

 

 

    

 

 

 

Audit-Related Fees (2)

     869,704         459,634   

Tax Fees (3)

     208,150         153,423   

All Other Fees

     —           —     
  

 

 

    

 

 

 

Total Fees Paid to Auditor

   $ 2,146,554       $ 1,575,857   
  

 

 

    

 

 

 

 

(1) Audit fees and expenses primarily relate to the 2013 and 2012 annual audits, the review of quarterly reports on Form 10-Q and the annual report on Form 10-K and the audit of internal controls over financial reporting.

 

(2) Includes fees for accounting advisory services related to the accounting treatment of transactions or events, including acquisitions.

 

(3) Includes fees for tax compliance, tax planning and advice services.

Audit Committee Policy for Pre-Approval of Independent Auditor Services

The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. The policy provides for the general pre-approval of specific types of services, gives detailed guidance to management as to the specific services that are eligible for general pre-approval and provides specific cost limits for each such service on an annual basis. The policy requires specific pre-approval of all other permitted services. Pursuant to its charter, the Audit Committee has delegated to its Chairman the authority to address any requests for pre-approval of services between Audit Committee meetings, and the Chairman must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The policy prohibits the Audit Committee from delegating to management the Audit Committee’s responsibility to pre-approve permitted services of the independent registered public accounting firm.

Requests for pre-approval for services that are eligible for general pre-approval must be detailed as to the services to be provided and the estimated total cost and are submitted to Carmike’s Chief Financial Officer or Controller. The Chief Financial Officer or Controller then determines whether the services requested fall within the detailed guidance of the Audit Committee in the policy as to the services eligible for general pre-approval. The Audit Committee will be informed on a regular basis regarding the services rendered by the independent registered public accounting firm in accordance with our general pre-approval policy.

None of the services related to the Tax Fees described above was approved by the Audit Committee pursuant to the waiver of pre-approval provisions set forth in applicable rules of the SEC.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

The goal of our executive compensation program is the same as our goal for operating Carmike—to create long-term value for our stockholders. To achieve this goal, we have designed and implemented compensation programs for our executives to reward them for sustained financial and operating performance, to align their interests with those of our stockholders, and to encourage them to remain with our company.

In this section, we summarize:

 

   

the role and activities of the Compensation and Nominating Committee, as well as outside compensation consultants and our executives, in matters of executive compensation, in general and during the fiscal year ended December 31, 2013;

 

   

compensation for our Named Executive Officers;

 

   

the philosophy, policies and principles of our executive compensation program;

 

   

the primary components of our executive compensation program—base salary, annual bonus, deferred compensation, long-term incentives, and benefits and perquisites;

 

   

the agreements with our Named Executive Officers;

 

   

certain insider trading, tax and accounting requirements; and

 

   

our compensation-related governance initiatives, including our stock ownership guidelines and holding period requirements, our incentive compensation recoupment policy and our policy not to provide excise tax gross-up payments.

Executive Summary of Fiscal 2013 Results

We completed a successful 2013 with attendance increasing 12.7% and box office revenues increasing 17.4% compared with 2012, primarily due to our recent acquisitions of certain assets from Rave Reviews Cinemas in November 2012, Cinemark USA, Inc. in August 2013 and Muvico Entertainment, L.L.C. in November 2013 and a successful domestic box office. Domestic box office revenues reached record levels for the second consecutive year and exceeded $10.9 billion in 2013. We continued to experience significant increases in concession and other per patron spending in 2013, achieving an increase of 6.8% over 2012. For 2013, total revenues were $634.8 million which represented an 18.9% increase from 2012. As a result of our performance in 2013, we exceeded our 2013 EBITDA performance goals under our incentive plans.

During the third quarter of 2013, we issued 5.2 million shares of our common stock resulting in net proceeds of $88.0 million. The common stock issuance provides us with greater ability to grow our circuit through acquisitions and new build-to-suit theatres. In addition to the aforementioned acquisitions, we opened five new build-to-suit theatres in 2013. We intend to complete additional theatres in 2014 and continue to pursue additional acquisitions. The Compensation and Nominating Committee has considered our 2013 performance and future operating plans in determining executive compensation for the Named Executive Officers.

Key 2013 Compensation Decisions

The Compensation and Nominating Committee believes that our compensation strategy has been effective in rewarding executives appropriately and in attracting and retaining highly qualified key executives. In furtherance of our overall goals of aligning employee and stockholder interests, rewarding pay for performance and providing competitive compensation to our key executives, the Compensation and Nominating Committee made the following key decisions in 2013:

 

   

Base salaries for senior executives were adjusted in 2013 based on market factors.

 

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Short-term cash incentives are performance-based and include financial, non-financial, company-wide and individual targets. In 2013, these targets focused on the achievement of EBITDA goals, expense reduction and operating improvements. For 2013, cash incentives were earned at 102% of target, based on actual EBITDA, and cash incentives were earned at between 13% and 88% of target based upon other operating performance criteria, including individual performance goals. Overall, cash incentives were earned between 72% and 98% of target.

 

   

Long-term equity compensation grants are made on an annual basis and are structured to promote the retention of key executives and the achievement of performance goals. Two-thirds of such awards are performance-based. For 2013, equity incentives were earned at 102% of target, based on actual EBITDA.

 

   

Employment agreements and award agreements for each of the senior executives were amended to implement changes regarding the treatment of equity awards upon various termination scenarios as well as the addition of a target bonus as an additional element of severance in connection with a termination or resignation related to a change in control.

The Compensation and Nominating Committee continues to monitor competitive industry compensation practices and our specific financial and operating goals. Accordingly, the committee may adopt changes to its approach and policies in response to changes in industry practice or company goals as it deems desirable or necessary.

Consideration of “Say on Pay” Voting Results

The Compensation and Nominating Committee considered the results of the stockholder “say on pay” vote at our 2013 annual meeting of stockholders. Because over 98% of votes cast approved our compensation program as described in our 2013 proxy statement, the Compensation and Nominating Committee believes that stockholders support our compensation policies and programs. Therefore, the Compensation and Nominating Committee continued to generally apply the same principles in determining the amounts and types of executive compensation for 2013 and in structuring 2014 compensation.

The Compensation and Nominating Committee

The Compensation and Nominating Committee is responsible for setting the overall compensation strategy and compensation policies for our senior executives and directors, including determining the forms and amount of compensation appropriate to achieve our strategic objectives. The Compensation and Nominating Committee’s functions are more fully described in its charter, which can be viewed at the investor relations page on our website at www.carmike.com. The Compensation and Nominating Committee annually reviews and recommends changes to its charter for approval by the Board of Directors.

Role of Compensation Consultants

The Compensation and Nominating Committee has the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of director or executive compensation. Since February 2010, the Compensation and Nominating Committee has engaged Mercer LLC as the Committee’s compensation consultant to assist the Committee in reviewing and analyzing Carmike’s compensation structure and practices generally, the reports from Pearl Meyer & Partners (management’s compensation consultant) and management’s compensation recommendations. Mercer LLC has not been engaged to provide any other services to Carmike. Carmike has engaged Pearl Meyer & Partners as management’s compensation consultant since June 2009. During 2013, Mercer LLC and Pearl Meyer & Partners provided various compensation recommendations, analyses and presentations, which included, among other items:

 

   

reviews and assessments of our share availability under our current long-term incentive plan;

 

   

reviews and assessments of the general market competitiveness of our current compensation structure for our senior executives;

 

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an examination of a peer group for executive and director compensation benchmarking purposes;

 

   

reviews and assessments of our current short-term and long-term incentive plans relative to peer group practices and broader market trends; and

 

   

recommended changes to our current programs.

The Compensation and Nominating Committee utilizes a compensation peer group for executive and director benchmarking purposes developed in conjunction with Mercer LLC. In constructing its peer group, the Compensation and Nominating Committee and Mercer LLC considered each company’s size (based on revenue), industry and number of employees, among other factors. The Compensation and Nominating Committee and Mercer LLC evaluated companies with revenue ranging from approximately one-third to four times Carmike’s revenue as well as other companies in the motion picture exhibition industry. The companies comprising this peer group are listed below. The companies indicated with an asterisk below were added to the peer group in 2013 to replace companies that had ceased to be publicly traded.

 

•    Ascent Capital Group, Inc.

 

•    The Marcus Corporation

 

•    Six Flags Entertainment Corporation

•    CEC Entertainment, Inc.

 

•    Reading International, Inc.

 

•    Texas Roadhouse, Inc.

•    Cinemark Holdings, Inc.

 

•    Regal Entertainment Group

 

•    Town Sports International Holdings*

•    International Speedway

Corporation*

 

•    Ruth’s Hospitality Group, Inc.

•    Ryman Hospitality

 

•    World Wrestling Entertainment, Inc.

•    Life Time Fitness, Inc.

 

Properties, Inc.*

 

Compensation Consultant Independence and Conflict of Interest Assessment

In light of new Nasdaq and SEC rules, we requested and received information from Pearl Meyer & Partners and Mercer LLC addressing their independence and potential conflicts of interest, including the following factors: (1) other services provided to us by the consulting firm; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation and Nominating Committee; (5) any company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Based on an assessment of these factors, including information gathered from directors and executive officers addressing business or personal relationships with the consulting firm or the individual consultants, the Compensation and Nominating Committee concluded that the work of Pearl Meyer & Partners and Mercer LLC did not raise any conflict of interest.

Role of Executives in Establishing Compensation for 2013

Generally, the Chief Executive Officer makes recommendations to the Compensation and Nominating Committee for base salary and bonus compensation amounts for other senior executives. The Compensation and Nominating Committee also consults with the Chief Executive Officer when establishing the financial and operating criteria for performance-based bonuses applicable to other senior executives; however, the Committee meets in executive session when considering the compensation of the Chief Executive Officer. The Compensation and Nominating Committee periodically invites the Chief Executive Officer and other members of the Board of Directors to attend Committee meetings in order to receive operating and financial information from

these officers and directors and to discuss goals, objectives and performance. The Compensation and Nominating Committee does not delegate any of its duties to management and regularly holds executive sessions without the members of management present.

 

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Compensation Committee Activity

Mr. Smith, as Chairman, sets the agenda for each meeting of the Compensation and Nominating Committee in consultation with management, counsel and the other Committee members. In 2013, the Compensation and Nominating Committee met eight times. During these meetings in 2013, the Compensation and Nominating Committee, among other items:

 

   

approved the payment of 2012 incentive bonuses for senior executives;

 

   

approved 2013 base salaries and incentive bonus objectives for the senior executive officers;

 

   

approved the addition of peer companies to our peer group;

 

   

approved seeking changes to the employment and separation agreements of certain Named Executive Officers and changes to long-term equity compensation grants, including treatment of equity grants upon various termination scenarios (as further described under “2013 Compensation Changes” below);

 

   

approved the grant of 64,050 shares of time-vested restricted stock and a target amount of 127,800 performance shares to a group of eleven senior executives, including the NEOs (as defined below), in February 2013;

 

   

recommended candidates for election to the Board of Directors;

 

   

completed its annual self-evaluation process;

 

   

approved a new deferred compensation plan for our senior executives; and

 

   

reviewed and approved changes to the Board’s committee membership.

To date, the Compensation and Nominating Committee has held five meetings in 2014. During these meetings in 2014, the Compensation and Nominating Committee, among other items:

 

   

approved the payment of 2013 incentive bonuses for senior executives;

 

   

approved discretionary bonuses for certain senior executives;

 

   

approved 2014 base salaries and incentive bonus objectives for the senior executive officers;

 

   

approved the grant of 40,450 shares of time-vested restricted stock and a target amount of 83,130 performance shares to a group of 13 senior executives, including the NEOs, in March 2014;

 

   

approved the addition of peer companies to our peer group;

 

   

approved changes to our non-employee director compensation as discussed in more detail in the section entitled “Compensation of Directors”;

 

   

approved the proposed Carmike Cinemas, Inc. Employee Stock Purchase Plan and the Carmike Cinemas, Inc. 2014 Incentive Stock Plan; and

 

   

recommended candidates for election to the Board of Directors.

Named Executive Officers for 2013

The Compensation and Nominating Committee reviews, analyzes and approves the compensation of our senior executive officers, including the “Named Executive Officers” or “NEOs” included in the tables set forth following this Compensation Discussion and Analysis. The NEOs for 2013 include our Chief Executive Officer, our Chief Financial Officer and the three other executive officers with the highest total compensation for 2013, calculated in accordance with the rules and regulations of the SEC. Our NEOs for 2013 were:

 

   

S. David Passman III, President and Chief Executive Officer;

 

   

Richard B. Hare, Senior Vice President—Finance, Treasurer and Chief Financial Officer;

 

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Fred W. Van Noy, Senior Vice President and Chief Operating Officer;

 

   

Daniel E. Ellis, Senior Vice President, General Counsel and Corporate Secretary; and

 

   

John Lundin, Vice President—Film.

Compensation Philosophy, Policies and Principles

The Compensation and Nominating Committee is responsible for establishing the policies and principles that form the basis of our executive compensation programs. The Compensation and Nominating Committee’s philosophy is to implement programs that are designed to:

 

   

attract and retain highly qualified key executives;

 

   

provide competitive base salaries and cash incentives as well as retirement savings;

 

   

motivate executives by rewarding performance that supports achievement of financial and operating goals; and

 

   

encourage employee stock ownership to align employee and stockholder interests.

We believe our compensation programs provide senior executives with a pay opportunity that is reasonable and competitive with the external market and that rewards performance. For example, in 2013, Carmike’s compensation policy for senior executives was designed to provide a competitive base of cash compensation (considering factors such as experience, qualifications and our recent performance) and tying incentive compensation to achieving specified levels of financial performance and specific operating goals. However, the Compensation and Nominating Committee believes that when our performance or the executive’s individual achievement exceeds performance objectives or does not meet expectations, overall pay should reflect actual performance. In connection with developing pay opportunities that are reasonable and competitive, the Compensation and Nominating Committee has utilized comparisons to published survey data and information gathered on our peer group.

We believe that a compensation structure related to performance reinforces our business objectives and the alignment of the employee’s interest with our stockholders. Senior executive compensation is linked to individual performance as well as overall company performance with respect to financial and operating objectives. The Compensation and Nominating Committee selects financial and operating metrics which it believes strongly correlate to key strategic goals and enhanced stockholder value over time. For instance, recent performance metrics have been designed in part to reflect our EBITDA targets and execution of strategic plans approved by the Board of Directors, as well as expense reductions.

Since 2010, the Compensation and Nominating Committee has had in place an equity-based long-term incentive compensation program under which it grants annual awards. The Compensation and Nominating Committee believes that an annual award program aligns Carmike with competitive practices and enhances the Committee’s ability to monitor and manage equity grants as a component of compensation. We grant long-term incentive awards to key employees at a regularly scheduled meeting of the Compensation and Nominating Committee, typically in February or March of each year.

Since 2012, our Compensation and Nominating Committee, upon recommendations received by management and Pearl Meyer & Partners (and reviewed by Mercer LLC), has eliminated the grant of stock options in favor of an equity grant mix that includes, by value, 33% time-based restricted stock and 66% performance shares. The Compensation and Nominating Committee believes that the elimination of stock options: (1) increases the performance-orientation of the program; (2) reduces our annual share usage; (3) better aligns the cost to us and the value we receive from the program; (4) increases a participant’s perceived value from the program; and (5) reflects the practices of our peer companies.

 

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As part of this approach to long-term equity grants, the Compensation and Nominating Committee has structured the terms of the performance share awards to senior executives in light of the principles described above. The performance share awards have the following attributes:

 

   

three separate one-year performance measurement periods;

 

   

annual EBITDA-based performance goals equivalent to the goals for the annual cash incentive bonus program;

 

   

a payout percentage ranging from 50% (for threshold performance) to 150% (for maximum performance) of the targeted amount of performance-based restricted shares, with no payout for less than threshold performance and a 100% payout for target performance;

 

   

the vesting of any earned performance-based shares after completion of the third performance period (if the executive remains employed through such date); and

 

   

Committee discretion to reduce the number of such earned shares granted to the target amount of shares if (1) the number of earned shares subject to potential vesting exceeds the target and (2) Carmike’s total shareholder return over the three-year period is negative.

Components of Executive Compensation

The basic components of executive compensation are:

 

   

base salary;

 

   

annual cash incentive bonus pursuant to our Annual Executive Bonus Program;

 

   

cash compensation pursuant to a deferred compensation program; and

 

   

long-term equity incentives.

In addition, our compensation program includes certain benefits and perquisites. Each component is described in more detail below.

Base Salary

Our base salary program is designed to provide our senior executives with a competitive base of cash compensation. The Compensation and Nominating Committee, in consultation with the Chief Executive Officer, annually reviews and approves base salaries for the other senior executive officers. The Compensation and Nominating Committee reviews and approves the base salary for the Chief Executive Officer. The Compensation and Nominating Committee considers various factors, which include individual performance over time, each individual’s role and responsibilities and a general assessment of competitive market practices, when setting base salaries.

In January 2013 and 2014, the Compensation and Nominating Committee, upon the recommendation of the Chief Executive Officer, Pearl Meyer & Partners and Mercer LLC (the Committee’s external compensation consultant), as well as the Committee’s experience and judgment, approved the 2013 and 2014 base salaries, respectively, for the NEOs as set forth in the following table. Mr. Passman did not recommend or participate in any determination regarding his base salary. The increases in 2013 and 2014 reflect the Compensation and Nominating Committee’s belief that such amounts were reasonable based on market comparisons (including the compensation peer group), recent growth through acquisitions and our recent performance.

 

Name

   2012 Base
Salary ($)
     2013 Base
Salary ($)
     2014 Base
Salary ($)
 

S. David Passman III

     665,000         690,000         740,000   

Richard B. Hare

     335,000         350,000         375,000   

Fred W. Van Noy

     385,000         400,000         425,000   

Daniel E. Ellis

     300,000         312,000         340,000   

John Lundin

     232,000         245,000         250,000   

 

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Annual Cash Incentive Bonuses—Annual Executive Bonus Program

The Carmike Cinemas, Inc. Annual Executive Bonus Program (the “Bonus Program”) was approved by Carmike’s stockholders on May 30, 2012. The purpose of the Bonus Program is to give each participant the opportunity to receive an annual incentive bonus for each fiscal year payable in cash, if, and to the extent, the Compensation and Nominating Committee determines that the performance goals set by the Committee for each participant for such year have been satisfied. In addition, the Bonus Program is designed to meet the requirements for performance-based compensation under Section 162(m) of the Code.

Overall, the Bonus Program is designed to motivate and retain senior executive officers by providing at-risk cash compensation contingent upon achieving certain company and individual objectives, which for 2013 were financial and operating in nature. The 2013 bonus targets for the senior executive officers were approved by the Compensation and Nominating Committee in March 2013, based upon a formula tied to Carmike’s achievement of certain levels of EBITDA and additional operating goals specifically identified by the Committee, which included the achievement of bonus goals by other employees and evaluations of the executive. The Compensation and Nominating Committee consulted with our Chief Executive Officer and considered the reviews of Pearl Meyer & Partners and Mercer LLC in determining the 2013 individual bonus target amounts and operating goals for the senior executive officers.

Process

In the first quarter of the fiscal year, the Compensation and Nominating Committee approves annual bonus target amounts for the senior executive officers for the current fiscal year. In addition, at this meeting, the Compensation and Nominating Committee approves the applicable performance goals (both financial and operational) for the senior executive officers for the current year. In setting these performance goals, the Compensation and Nominating Committee reviews our annual forecast and budget for the current fiscal year, reviews the key corporate objectives and operating goals for the current year (on a company-wide and individual basis) and identifies individual performance objectives for each senior executive officer.

In connection with or following the filing of our Annual Report on Form 10-K, typically at its March meeting, the Compensation and Nominating Committee determines the bonuses to be paid to the senior executive officers for the prior fiscal year by analyzing the pre-established performance goals (both financial and operational) compared against the actual performance results for the prior year. If our actual performance for that year exceeds the performance goals, the amounts granted to participants under the program may exceed the target bonus amount. Any additional bonus beyond a level previously set by the Compensation and Nominating Committee is made at the sole discretion of the Committee. Similarly, if performance falls below specified performance levels, our executives receive bonuses below the target amount, which depending on performance may result in no cash bonuses. In connection with 2013 bonus determinations for our senior executive officers, our Chief Executive Officer provided input and recommendations to the Compensation and Nominating Committee with respect to the analysis of individual performance objectives and the determination of bonus amounts.

Determining 2013 Target Cash Incentive Bonus Opportunity

In March 2013, the Compensation and Nominating Committee, upon the recommendation of the Chief Executive Officer, and based on the reviews and analyses from Pearl Meyer & Partners and Mercer LLC, set the 2013 annual target cash incentive bonus opportunities for senior executive officers as a percentage of each executive’s 2013 base salary amount. In setting these percentages, the Compensation and Nominating Committee considered information on competitive market practices in comparisons to published survey data, public proxy

information from other motion picture exhibition companies and the compensation peer group, but ultimately based its determination on the judgment and experience of the Committee.

 

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The 2012 and 2013 target incentive cash bonus opportunities for the NEOs, and the percentage of the 2013 base salary that each 2013 bonus opportunity represents, are described in the table below. There was no change to the target bonus opportunity as a percentage of base salary for any of the NEOs.

 

Name

   2012  Target
Bonus
Opportunity ($)
     2013 Target
Bonus
Opportunity ($)
     Percentage
Change
    Target
Bonus
Opportunity
as a
Percentage

of 2013 Base
Salary
 

S. David Passman III

     665,000         690,000         3.8     100

Richard B. Hare

     251,250         262,500         4.5     75

Fred W. Van Noy

     288,750         300,000         3.9     75

Daniel E. Ellis

     225,000         234,000         3.8     75

John Lundin

     81,200         85,750         5.6     35

Allocation of 2013 Target Opportunity and Payout Formula for Cash Incentive Bonus Opportunity

The Compensation and Nominating Committee allocates a percentage of the annual target cash incentive bonus opportunity to (i) financial-based performance criteria and (ii) operating performance criteria. During 2013, the percentage allocation between financial and operating criteria was determined at the discretion of the Compensation and Nominating Committee, in consultation with the Chief Executive Officer. These various allocations reflected the particular areas of financial and operational focus identified by management, the Compensation and Nominating Committee and the Board of Directors.

For 2013, the annual target cash incentive bonus opportunity to financial-based performance criteria and operating performance criteria for each Named Executive Officer was allocated as follows:

 

Name

   % Allocated to
Financial-Based
Performance Criteria
    % Allocated  to
Operating
Performance Criteria
 

S. David Passman III

     85     15

Richard B. Hare

     70     30

Fred W. Van Noy

     70     30

Daniel E. Ellis

     70     30

John Lundin

     50     50

The Compensation and Nominating Committee also determined a payout formula: (i) for the financial-based bonuses, based on achieving a target financial metric, which for 2013 was a specified level of EBITDA; and (ii) for the operational based bonuses, based on achieving specific operating goals. The payout formulas are typically weighted by the Compensation and Nominating Committee, to provide greater incentive for the senior executives to achieve the key performance goals identified by the Committee. In addition, as a condition to the payout of 2013 operational criteria-based bonuses, Carmike was required to achieve a minimum level of EBITDA, which in 2013 equaled 85% of the 2013 Bonus EBITDA Target (as defined below). As described below, the Compensation and Nominating Committee has also provided for maximum levels of bonus opportunity in connection with the financial-based bonuses and threshold performance obligations which must be met prior to the payment of a bonus.

2013 Financial Performance Goals and Bonus

For 2013 the financial-based bonus for each NEO was tied to the achievement of a targeted percentage of bonus adjusted EBITDA initially set at $114.4 million, or the “2013 Bonus EBITDA Target.” The Compensation and Nominating Committee selected the 2013 Bonus EBITDA Target utilizing Carmike’s 2013 fiscal year forecast and budget, previously approved by the Board of Directors in January 2013. Our bonus EBITDA for 2013 is different from EBITDA (which is defined as earnings before interest, taxes, depreciation and

 

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amortization) because we add back non-cash deferred compensation, extraordinary charges or losses, and impairment charges, among other items. At the time it was established, the 2013 Bonus EBITDA Target was considered by management and the Board to be achievable, but doing so would require that we achieve the performance set forth in the 2013 forecast and budget.

At the time it established the 2013 performance goals, the Compensation and Nominating Committee determined that the 2013 Bonus EBITDA Target would be adjusted based on actual industry box office results for 2013 to more closely align our EBITDA-based performance goals with our actual performance (by eliminating unexpected changes in box office results). This industry adjustment would result in an increase or decrease to the 2013 Bonus EBITDA Target if the percentage increase or decrease experienced by the industry box office results between 2013 and 2012 differed from Carmike’s anticipated box office results used to calculate the 2013 Bonus EBITDA Target. Accordingly, because industry box office results were approximately 0.5% lower than the results anticipated in calculating the 2013 Bonus EBITDA Target, this target amount was adjusted downward by approximately $0.6 million. We refer to this adjustment for actual industry box office performance as the “Box Office Index”.

The Compensation and Nominating Committee also established a 2013 Bonus EBITDA Target payout scale for NEOs which adjusts at a defined rate between the threshold, target and maximum amounts. The payout scale, after the Box Office Index, is shown in the following table:

 

     Threshold     Target     Maximum     Actual Result  

2013 Bonus EBITDA

   $ 96.7 million      $ 113.8 million      $ 142.2 million      $ 115.8 million   

Payout Percentage

     50%        100 %        150 %        102%   

The 2013 financial-based bonus amounts earned by the NEOs were as follows:

 

Name

   2013 Financial Bonus
Target ($)
     Financial Bonus Target
as a Percentage of
2013 Target Bonus
Opportunity
    2013 Financial
Bonus Payout ($)
     2013 Financial
Bonus Payout as
a Percentage of
2013 Financial
Bonus Target
 

S. David Passman III

     586,500         85     598,230         102

Richard B. Hare

     183,750         70     187,425         102

Fred W. Van Noy

     210,000         70     214,200         102

Daniel E. Ellis

     163,800         70     167,076         102

John Lundin

     42,875         50     43,733         102

2013 Operating Objectives and Bonus

In March 2013, the Compensation and Nominating Committee also approved the operating bonus targets for each NEO. All operating bonus targets were tied to the achievement of key operating objectives (including individual performance objectives) identified by the Compensation and Nominating Committee. For 2013, a component of the operating bonus targets was set to reflect our strategic objectives relating to (1) acquisition of screens and (2) increasing EBITDA through the acquisition of theatres and screens. Our key operating objectives included the following:

 

   

for Messrs. Passman, Van Noy, Hare and Ellis, the achievement of certain increases in screen count and EBITDA from acquired theatres;

 

   

for Mr. Hare, the supervision and performance of direct reports and meeting individual performance criteria (including such items as the successful oversight of key finance and accounting employee objectives) established by the Audit Committee;

 

   

for Mr. Van Noy, the percentage of theatres achieving certain increases in concessions spend per patron; and

 

   

for Messrs. Ellis and Lundin, the achievement of certain operational improvements in select theatres;

 

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The payout of 2013 operating bonuses was also conditioned upon our achievement of at least 85% of the 2013 Bonus EBITDA Target. If we achieved less than 85% of the 2013 Bonus EBITDA Target, the NEOs would not be entitled to the payment of a 2013 operating bonus. However, given that we achieved greater than 100% of the 2013 Bonus EBITDA Target, each NEO was eligible to receive a payout of their respective 2013 operating bonus.

The operating bonus targets and actual results for each NEO are shown as follows:

 

Name

   Percentage of
Operating
Bonus
    Operating Bonus Criteria  

Target

  

Actual Result

S. David

Passman III

     50   Certain
increases in screen count
from acquired
theatres (1)
  Such increases equaled
100% of the target
amounts
   Such increases equaled
75% of the target
amounts
     Payout ($)   $51,750    $38,813
     Payout (%)

 

  100%

 

   75%

 

     50   Certain increases in
EBITDA from acquired
theatres
  Such increases equaled

100% of the target amounts

   Such increases were less
than the targeted range
     Payout ($)   $51,750    $0
     Payout (%)   100%    0%

Richard B.

Hare

     33   Average of 2013 non-
EBITDA bonuses by
individuals reporting
directly to Mr. Hare
  Such average equaled

between 100% and 115%

of the target amounts

   Such average equaled
91% of the target
amounts
     Payout ($)   $26,250    $19,688
     Payout (%)   100%    75%
     33   Achievement of
individual performance
criteria, as determined
by the Audit Committee
  Exceeded expectations    Substantially exceeded
expectations
     Payout ($)   $26,250    $39,375
     Payout (%)   100%    150%
     17   Certain
increases in screen count
from acquired
theatres (1)
  Such increases equaled
100% of the target
amounts
   Such increases equaled
75% of the target
amounts
     Payout ($)   $13,125    $9,844
     Payout (%)   100%    75%
     17   Certain increases in
EBITDA from acquired
theatres
  Such increases equaled

100% of the target amounts

   Such increases were less
than the targeted range
     Payout ($)   $13,125    $0
     Payout (%)   100%    0%

Fred W.

Van Noy

     66   Percentage of theatres
achieving certain
increases in concession
per patron spend
  Percentage of theatres achieving
certain increases in concession
per patron spend equaled 100%
of the target amounts
   Such percentage was
less than the targeted range
     Payout ($)   $60,000    $0
     Payout (%)

 

  100%

 

   0%

 

     17   Certain
increases in screen count
from acquired
theatres (1)
  Such increases equaled
100% of the target
amounts
   Such increases equaled
75% of the target
amounts
     Payout ($)   $15,000    $11,250
     Payout (%)

 

  100%

 

   75%

 

     17   Certain increases in
EBITDA from acquired
theatres
  Such increases equaled

100% of the target

amounts

   Such increases were less
than the targeted range
     Payout ($)   $15,000    $0
     Payout (%)   100%    0%

 

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Name

   Percentage of
Operating
Bonus
    Operating Bonus Criteria  

Target

  

Actual Result

Daniel E.

Ellis

     33   Achievement of
operational improvements in
certain underperforming
theatres
  Operational improvements
greater than $500,000 and
less than $650,000
   Operational
improvements equaled
25% of the targeted
range
     Payout ($)   $23,400    $5,850
     Payout (%)   100%    25%
     33   Achievement of certain
reductions in real estate
occupancy costs
  Certain reductions in real
estate occupancy costs
greater than $475,000 and
less than $600,000
   Certain reductions in
real estate occupancy
costs
exceeded the 150th
percentile
     Payout ($)   $23,400    $35,100
     Payout (%)   100%    150%
     17   Certain
increases in screen count
from acquired
theatres (1)
  Such increases equaled
100% of the target
amounts
   Such increases equaled
75% of the target
amounts
     Payout ($)   $11,700    $8,775
     Payout (%)   100%    75%
     17   Certain increases in EBITDA
from acquired theatres
  Such increases equaled

100% of the target

amounts

   Such increases were less
than the targeted range
     Payout ($)   $11,700    $0
     Payout (%)   100%    0%
John Lundin      30   Improved Market Share (2)   956 points    Less than 856 points
     Payout ($)   $12,863    $0
     Payout (%)

 

  100%

 

   0%

 

     30   Number of theatres with
impairment charges greater
than $200,000
  3 theatres    1 theatre
     Payout ($)   $12,863    $18,008
     Payout (%)

 

  100%

 

   120%

 

     40   Achievement of certain
levels of attendance increases
at discount theatres
  Greater than $925,000

and less than or

equal to $975,000

   Attendance increases at

discount theatres were
less than 50% compared
to the prior year

     Payout ($)   $17,150    $0
     Payout (%)   100%    0%

 

(1) Target increases in screen count from acquired theatres and increases in EBITDA from acquired theatres were determined based on operating plans approved by the Board of Directors.
(2) Improved market share was determined by box office performance at targeted theatres located within competitive film zones. To determine the achievement of this award, a point scale was approved by the Compensation and Nominating Committee which tracked increases in market share (based on box office performance) over competing theatres for 32 select theatres located within film zones. One to two points were awarded each week if market share increased over the competing theatre’s market share.

Based upon the achievement of applicable performance objectives described above, the NEOs earned the following operating bonus amounts in 2013:

 

Name

   2013 Operating
Bonus Target ($)
     Bonus Target as a
Percentage of 2013
Target Bonus
Opportunity
    2013 Operating
Bonus Payout ($)
     2013 Operating
Bonus Payout
as a Percentage of
2013 Operating
Bonus Target
 

S. David Passman III

     103,500         15     38,813         38

Richard B. Hare

     78,750         30     68,907         88

Fred W. Van Noy

     90,000         30     11,250         13

Daniel E. Ellis

     70,200         30     49,725         71

John Lundin

     42,875         50     18,008         42

 

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Total 2013 Bonus Payout

The total 2013 bonuses paid to the NEOs (which equals the sum of the 2013 financial-based bonus and the 2013 operating bonus) were as follows:

 

Name

   2013 Target Bonus
Opportunity ($)
     2013 Total Bonus
Payout ($)
     2013 Total
Bonus Payout as a
Percentage of
2013 Target
Bonus  Opportunity
 

S. David Passman III

     690,000         637,043         92

Richard B. Hare

     262,500         256,331         98

Fred W. Van Noy

     300,000         225,450         75

Daniel E. Ellis

     234,000         216,801         93

John Lundin

     85,750         61,740         72

2013 Discretionary Bonuses

For 2013, in addition to the incentive bonus program described above, the Compensation and Nominating Committee determined to provide discretionary bonuses to each of Messrs. Passman, Hare, Van Noy and Ellis in an amount equal to 10% of their respective 2013 base salary. These bonuses were paid in recognition of the exceptional performance of these executives during 2013, in particular in connection with their significant efforts in successfully completing our acquisition of theatres from Muvico Entertainment, L.L.C. in a timely manner. The bonuses paid to Messrs. Passman, Hare, Van Noy and Ellis were $69,000, $40,000, $35,000 and $31,200, respectively.

Deferred Compensation Program

Prior to July 2013, we funded a non-qualified deferred compensation program for Messrs. Passman, Hare, Van Noy and Ellis, or the “Participating NEOs,” pursuant to which we paid additional cash compensation equal to 10% of the executives’ base salary and actual cash bonus. This non-qualified deferred compensation program was designed to provide retirement savings for senior executives. We directed this additional cash compensation first into the participant’s individual retirement account, up to the legal limit, with the remainder paid to an insurance company to pay premiums on annuity contracts owned by a trust established for each Participating NEO. The trust was treated as an employee grantor trust for federal income tax purposes. Each Participating NEO who participated in the deferred compensation program was taxed on the amount contributed on his behalf to his individual retirement account and applied to pay premiums on the annuity contracts owned by his trust. Distributions from the applicable trust are made upon or shortly after the Participating NEO reaches age 70 (unless he elected an earlier date after he reaches age 60), death or termination of employment due to disability. No contributions were made to this non-qualified deferred compensation program after July 1, 2013. As of December 31, 2013, we still maintained the trust accounts with earnings on trust assets being credited to the Participating NEO’s accounts. The amounts earned during 2013 by the Participating NEOs pursuant to this deferred compensation program are shown below in the Summary Compensation Table and the Nonqualified Deferred Compensation for 2013 table.

Beginning in July 2013, we adopted a new non-qualified deferred compensation program for the Participating NEOs, pursuant to which Carmike pays additional compensation equal to 10% of the executives’ base salary and actual cash bonus. Amounts contributed are credited to a bookkeeping account to be maintained in the name of that participant under the deferred compensation plan. Participants in the plan are immediately and fully vested in their respective account. Each participant’s account is credited with a deemed investment return determined as if the account were invested in one or more investment alternatives selected by the participant. The deferred compensation obligations are funded through corporate-owned life insurance policies that we intend to use to fund our obligations under the deferred compensation program.

 

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Allocations of our contributions and deemed investment returns to a participant’s deferred compensation program account will generally not be subject to federal income tax, and we will not receive a deduction for the amounts deferred or allocated to a participant’s account, until those amounts are distributed pursuant to the deferred compensation program.

We will distribute the balance of a participant’s deferred compensation program account attributable to our contributions upon the later of the participant’s separation from service or age 55, or upon the occurrence of an unforeseeable hardship (in an amount necessary to address the hardship). We will distribute the balance of a participant’s deferred compensation program account attributable to employee contributions upon the participant’s separation from service, whether or not the participant has attained age 55, or upon the occurrence of an unforeseeable hardship (in an amount necessary to address the hardship). The distribution will be in a lump sum or up to ten installments, as elected by the participant, except that the distribution will automatically be made in a lump sum in the case of a hardship distribution. Participants also may elect in advance to have all or a portion of their own contributions distributed prior to a separation from service upon a designated date, subject to requirements specified in the deferred compensation program. Such distributions may be made in a lump sum or in up to six installments. Although we currently intend to fund our obligations under the deferred compensation program using corporate-owned life insurance policies, our obligations to make distributions under the deferred compensation program will be our general, unsecured obligations and rank equally with our other unsecured and unsubordinated indebtedness.

Mr. Lundin is not a participant in the deferred compensation programs. Prior to 2012, we contributed additional cash compensation equal to 5% of his annual taxable cash compensation into Mr. Lundin’s individual retirement account. Beginning in 2012, we established a defined contribution retirement plan for all employees, in which Mr. Lundin is eligible to participate (“401(k) plan”). Our matching contribution varies based on how much compensation the employee elects to contribute up to a maximum of 5% of eligible compensation. Upon implementation of the 401(k) plan, we increased Mr. Lundin’s salary by 2.5%.

Long-Term Incentives

The Compensation and Nominating Committee believes that an annual award program aligns Carmike with competitive practices and enhances the Committee’s ability to monitor and manage equity grants as a component of compensation. We grant long-term incentive awards to key employees at a regularly scheduled meeting of the Compensation and Nominating Committee, typically in February or March of each year.

Since 2012, our Compensation and Nominating Committee, upon recommendations received by management and Pearl Meyer & Partners (and reviewed by Mercer LLC), has eliminated the grant of stock options in favor of an equity grant mix that includes, by value, 33% time-based restricted stock and 66% performance shares. The Compensation and Nominating Committee believes that the elimination of stock options: (1) increases the performance-orientation of the program; (2) reduces our annual share usage; (3) better aligns the cost to us and the value we receive from the program; (4) increases a participant’s perceived value from the program; and (5) reflects the practices of our peer companies. As part of this approach to long-term equity grants, the Compensation and Nominating Committee has structured the terms of the performance share awards to senior executives in light of the principles described above.

Currently, any equity-based awards granted by the Compensation and Nominating Committee are granted pursuant to the 2004 Incentive Stock Plan. The 2004 Incentive Stock Plan was originally approved by our stockholders in May 2004 and amendments were approved by our stockholders in May 2008 and 2011. The primary purpose of the 2004 Incentive Stock Plan is (i) to attract and retain eligible employees and outside directors of Carmike, (ii) to provide an incentive to eligible employees and outside directors to work to increase the value of our Common Stock, and (iii) to provide eligible employees and outside directors with a stake in the future of Carmike which corresponds to the stake of each of our stockholders. The 2004 Incentive Stock Plan is administered by the Compensation and Nominating Committee. Each grant under the 2004 Incentive Stock Plan is evidenced by a certificate that incorporates such terms and conditions as the Compensation and Nominating

 

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Committee deems necessary or appropriate. The 2004 Incentive Stock Plan provides for the grant of options to purchase Common Stock, grants of shares of Common Stock, stock units, and stock appreciation rights to certain eligible employees and to outside directors. A description of the effects of a change in control on grants made pursuant to the 2004 Incentive Stock Plan is contained below under the heading “Potential Payments Upon Termination or Change in Control.”

2013 Long-Term Incentive Awards

In connection with Carmike’s annual award program, the Compensation and Nominating Committee approved, effective February 28, 2013, performance share and time-based restricted stock awards to the NEOs, including the threshold, target and maximum amount available to be earned as of the grant date. These performance share awards reflected the restructured approach from previous grants described above. The following table summarizes these grants:

 

Name

   Time-Vesting
Restricted
Stock (#) (1)
     Performance Shares (2)  
      Threshold (#)      Target (#)      Maximum (#)  

S. David Passman III

     30,000         30,000         60,000         90,000   

Richard B. Hare

     7,700         7,700         15,400         23,100   

Fred W. Van Noy

     10,500         10,500         21,000         31,500   

Daniel E. Ellis

     5,500         5,500         11,000         16,500   

John Lundin

     3,200         3,200         6,400         9,600   

 

(1) The Compensation and Nominating Committee determined that the restricted stock will vest on February 28, 2016.

 

(2) Amounts shown are the aggregate amounts, to be earned ratably over three annual performance periods.

The senior executives’ performance share opportunity for the first of the three annual performance periods is based on the achievement of an EBITDA target for fiscal 2013, ranging from a grant of 18,967 shares (if our actual 2013 Bonus EBITDA equaled $96.7 million (giving effect to the Box Office Index)), to 56,900 shares (if our actual 2013 Bonus EBITDA equaled $142.2 million (giving effect to the Box Office Index)). Based on our actual 2013 Bonus EBITDA of $115.8 million, and the EBITDA-based bonus payout scale described above, the senior executives earned 102% of their performance share opportunity for the 2013 performance period for these 2013 grants, totaling 38,692 performance shares.

In addition, the same performance metrics applied to the 2013 performance period for the performance shares grant made in 2012. Accordingly, the senior executives earned 102% of their performance share opportunity for the 2013 performance period for the 2012 grant of performance shares.

The shares earned for the 2013 performance period by the senior executives are shown in the table below (and such shares will be issued in 2016):

 

Name

   Performance
Shares
(2012 Grant)
Earned (2013
Performance
Period) (#)
     Performance
Shares
(2013 Grant)
Earned (2013
Performance
Period) (#)
 

S. David Passman III

     23,800         20,400   

Richard B. Hare

     7,650         5,236   

Fred W. Van Noy

     8,500         7,140   

Daniel E. Ellis

     7,140         3,740   

John Lundin

     2,380         2,176   

 

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Each of these awards was made pursuant to the 2004 Incentive Stock Plan. In determining (a) the total value and mix of the awards, (b) the applicable performance measures and performance periods and (c) the vesting periods for awards granted to the NEOs in 2013, the Compensation and Nominating Committee consulted with our Chief Executive Officer and considered the recommendations and reviews of Pearl Meyer & Partners and Mercer LLC, which were primarily based on comparisons to published survey data, public proxy information from other motion picture exhibition companies and competitive market practices and the compensation peer group.

The Compensation and Nominating Committee believes that restricted stock and performance share awards can provide a link to company performance and maximizing stockholder value. We have used these awards to provide compensation that promotes our long-term financial interests, by creating both real ownership that encourages senior executives to think and act like stockholders and as a competitive retention and recruitment vehicle. For example, our awards to senior executives generally vest over a three-year period following the grant and recipients of restricted stock are entitled to receive ordinary cash dividends on and to vote such shares of restricted stock. No dividends or dividend-equivalents are earned or paid on performance shares, prior to the issuance of the underlying common stock.

2014 Long-Term Incentive Awards

The Compensation and Nominating Committee approved, effective March 3, 2014, the grant of 40,450 shares of time-vested restricted stock and up to a maximum 124,695 performance shares (at 150% of target) to a group of 13 senior executives, including the NEOs. The performance shares have the same attributes as the 2013 performance share grant described above.

Accordingly, the 2014 performance shares will be earned ratably over three years. For 2014, the first of the three tranches will be earned based on the achievement of an EBITDA target for fiscal 2014, ranging from 13,855 shares for achievement of 85% of the EBITDA target to 41,565 shares for the achievement of 125% of the EBITDA target. If earned, shares of common stock will be fully vested and issued in 2017.

Perquisites

We provide limited perquisites to our senior executive officers, including the personal use of an automobile, club membership dues and life and health insurance premiums and relocation. Information on the aggregate incremental cost to us of providing these benefits and perquisites to the NEOs in 2013 is shown in the Summary Compensation Table below.

Employment Agreement

In connection with Mr. Passman’s appointment as our Chief Executive Officer, we entered into an employment agreement with Mr. Passman effective June 4, 2009, which was amended on March 29, 2010, April 12, 2012 and May 15, 2013. The agreement sets forth Mr. Passman’s annual base salary, annual bonus and the terms of his June 2009 equity incentive award. A description of Mr. Passman’s employment agreement is contained below under the heading “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—S. David Passman III Employment Agreement.”

Separation Agreements

We have entered into separation agreements with each of Messrs. Van Noy, Hare, Lundin and Ellis. Our employment agreement with Mr. Passman contains the terms of any potential separation. These agreements provide a range of benefits to the executive if we at any time terminate the executive without cause or if the executive resigns for good reason in anticipation of or during the two-year period following a change in control. A description of these agreements is contained below under the heading “Potential Payments Upon Termination or Change in Control.” We have entered into these separation agreements as a means to retain our most senior

 

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executives, for such circumstances and in connection with such transactions when their services are most critical, by creating a mechanism that helps to eliminate the uncertainties and concerns which may arise in anticipation of or following a change in control.

Compensation-Related Governance Initiatives

Stock Ownership Guidelines

Our Corporate Governance Guidelines contain stock ownership guidelines applicable to executive officers and non-employee directors. Under the guidelines, the stock ownership goal is determined based on a dollar-amount multiple of the executive officer’s base salary, or the non-employee director’s annual cash retainer, as set forth below.

 

Position

   Multiple of Base
Salary / Annual
Cash Retainer
 

Chief Executive Officer

     3x   

Chief Operating Officer

     1.5x   

Chief Financial Officer

     1.5x   

General Counsel

     1.5x   

Non-employee directors

     3x   

The exact number of shares required under the ownership guideline is determined by dividing the dollar-amount multiple by the average closing share price for the 30-day period prior to March 4, 2011 (the effective date of the stock ownership guidelines). For executives or non-employee directors appointed after March 4, 2011, the number of shares is determined based on the average closing price for the 30-day period prior to appointment. The Board of Directors expects each executive officer and non-employee director to acquire his or her required ownership level within the later of five years following appointment as an executive officer or non-employee director or March 4, 2016.

The following types of holdings would satisfy the director and executive officer stock ownership requirements:

 

   

shares purchased on the open market;

 

   

shares owned outright by the director or executive, or by members of his or her immediate family residing in the same household, whether held individually or jointly;

 

   

restricted stock and stock-settled restricted stock units received pursuant to our compensation plans, whether or not vested;

 

   

performance shares earned (whether or not issued); and

 

   

shares held in trust for the benefit of the director or executive or his or her immediate family, or by a family limited partnership or other similar arrangement.

The Board of Directors recognizes that exceptions to the stock ownership guidelines may be necessary or appropriate in individual cases and the Chair of the Corporate Governance Committee may approve such exceptions from time to time as he or she deems appropriate. In addition, the Board of Directors or the Compensation and Nominating Committee will re-evaluate the stock ownership goals annually and may adjust these goals as they deem appropriate.

 

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Equity Holding Period Requirements

Our Corporate Governance guidelines also establish holding period requirements for equity received by executives and non-employee directors pursuant to our equity incentive and director compensation plans. The Board expects each executive officer and non-employee director to hold, for a period of at least 24 months after vesting:

 

   

50% of the net after-tax portion of restricted stock awards and restricted stock unit awards settled in shares of our common stock, and

 

   

50% of the net post-exercise and after-tax portion of shares of common stock issued upon exercise of stock option awards granted through our compensation plans.

These holding periods will continue to apply notwithstanding satisfaction of the stock ownership guidelines described above.

Incentive-Based Compensation Recoupment (“Clawback”) Policy

We have adopted an incentive-based compensation recovery policy for executive officers. If we are required to file an accounting restatement due to material noncompliance with any financial reporting requirement under the federal securities laws, we will seek to recover incentive-based compensation (including stock options) from any of our current or former executive officers who received incentive-based compensation during the three-year period preceding the date on which we are required to prepare the accounting restatement. We will seek to recover the excess of the incentive-based compensation paid to the executive officer based on the erroneous data over the incentive-based compensation that would have been paid to the executive officer if the financial accounting statements had been as presented in the restatement.

Excise Tax Gross-Up Policy

We are not obligated to provide excise tax gross-up payments to our employees under our existing employment arrangements. In addition, our Compensation and Nominating Committee has approved a policy in which we commit not to provide excise tax gross-up payments in the future.

Hedging, Pledging and Insider Trading Policy

We have implemented a written insider trading compliance policy which includes our policies with respect to hedging, derivatives and margin transactions. We expect our employees, officers and directors not to engage in speculative transactions that are designed to result in profit based on short-term fluctuations in the price of our securities. The insider trading compliance policy prohibits our employees or directors from engaging in hedging, derivative and margin transactions with respect to our securities. It also prohibits our directors and executive officers from pledging our securities (subject to receiving a specific waiver from our Corporate Governance Committee).

Tax Implications of Executive Compensation

Section 162(m) of the Code limits the amount of individual compensation for certain executives that may be deducted by the employer for federal income tax purposes in any one fiscal year to $1 million unless such compensation is “performance-based.” The determination of whether compensation is performance-based depends upon a number of factors, including stockholder approval of the plan under which the compensation is paid, the exercise price at which equity-based awards are granted, the disclosure to and approval by the stockholders of applicable performance standards, the composition of the Compensation and Nominating Committee, and certification by the Committee that performance standards were satisfied. Our annual cash incentive compensation for NEOs is structured to qualify as performance-based.

While the Compensation and Nominating Committee intends to structure incentive compensation for our Chief Executive Officer and other executives as performance-based compensation to the extent practicable, the Committee’s primary focus has been, and will continue to be, on compensating our Chief Executive Officer and other executives on a basis which the Committee determines will most likely best serve our long-term business interests. The extent to which we can deduct the compensation paid to an executive is one of many factors taken into account in making such determination.

 

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Table of Contents

Summary Compensation Table

 

Name and Principal
Position

  Year     Salary
($)
    Bonus
($)(1)
    Stock
Awards
($)(2)
    Option
Awards
($)(3)
    Non-Equity
Incentive Plan
Compensation
($)(4)
    Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings
($)(5)
    All Other
Compensation
($)(6)
    Total
($)
 

S. David Passman III

President and Chief Executive Officer

   

 
 

2013

2012
2011

  

  
  

   

 
 

690,000

665,000
630,000

  

  
  

   

 

 

69,000

—  

—  

  

 

 

   

 
 

1,409,400

1,327,600
367,000

  

  
  

   

 

 

—  

—  

346,048

 

  

  

   

 
 

637,043

894,758
726,390

  

  
  

   

 
 

33,420

16,560
—  

  

  
 

   

 
 

271,104

226,795
164,192

(7) 

  
  

   

 
 

3,109,967

3,130,713
2,233,630

  

  
  

Richard B. Hare

Senior Vice President—Finance, Treasurer and Chief Financial Officer

   
 
 
2013
2012
2011
  
  
  
   
 
 
350,000
335,000
325,000
  
  
  
   
 

 

35,000
25,000

—  

  
  

 

   
 
 
361,746
384,578
135,790
  
  
  
   

 

 

—  

—  

123,589

  

  

  

   
 
 
256,331
340,193
301,884
  
  
  
   
 

 

12,538
11,494

—  

  
  

 

   

 
 

87,827

73,239
55,246

(7) 

  
  

   
 
 
1,103,442
1,169,504
941,509
  
  
  

Fred W. Van Noy

Senior Vice President and Chief Operating Officer

   

 

 

2013

2012

2011

  

  

  

   

 

 

400,000

385,000

375,000

  

  

  

   

 

 

40,000

25,000

—  

  

  

 

   

 

 

493,290

436,400

161,480

  

  

  

   

 

 

—  

—  

138,419

 

 

  

   

 

 

225,450

357,761

295,594

  

  

  

   

 

 

73,451

45,313

—  

  

  

 

   

 

 

88,163

78,315

61,250

(7) 

  

  

   

 

 

1,320,354

1,327,789

1,031,743

  

  

  

Daniel E. Ellis

Senior Vice President, General Counsel and Secretary (8)

   

 

 

2013

2012

2011

  

  

  

   

 

 

312,000

300,000

124,583

  

  

  

   

 

 

31,200

25,000

—  

  

  

  

   

 

 

258,390

360,030

44,127

  

  

  

   

 

 

—  

—  

62,357

 

 

  

   

 

 

216,801

312,525

85,550

  

  

  

   

 

 

4,377

1,210

—  

  

  

 

   

 

 

88,395

59,779

48,920

(7) 

  

  

   

 

 

911,163

1,058,514

365,537

  

  

  

John Lundin

Vice President— Film

   

 

 

2013

2012

2011

  

  

  

   

 

 

245,000

232,000

225,000

  

  

  

   

 

 

—  

—  

—  

 

 

 

   

 

 

150,336

125,465

51,380

  

  

  

   

 

 

—  

—  

39,548

 

 

  

   

 

 

61,740

95,410

60,244

  

  

  

   

 

 

—  

—  

—  

 

 

 

   

 

 

12,655

12,580

24,806

  

  

  

   

 

 

469,731

465,455

400,978

  

  

  

 

(1) For 2013, in addition to the incentive bonus program, the Compensation and Nominating Committee determined to provide discretionary bonuses to each of Messrs. Passman, Hare, Van Noy and Ellis in an amount equal to 10% of their respective 2013 base salary. These bonuses were paid in recognition of the exceptional performance of these executives during 2013, in particular in connection with their significant efforts in successfully completing our acquisition of theatres from Muvico Entertainment, L.L.C. in a timely manner.

 

(2) The value of stock awards equals the fair value at grant date. The value is calculated in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 (“ASC 718”). The assumptions made in connection with the valuation of these awards are described in Note 10 to the notes to our consolidated financial statements in our 2013, 2012 and 2011 Annual Reports on Form 10-K. Awards with performance conditions are computed based on the probable outcome of the performance condition as of the grant date for the award. The grant date fair value for the 2013 performance share awards assumed target performance. Assuming maximum performance, the grant date fair value of performance awards and the time based restricted stock would have been $1,879,200, $482,328, $657,720, $344,520 and $97,092 to Messrs. Passman, Hare, Van Noy, Ellis and Lundin, respectively. A discussion of these awards can be found in the “Compensation Discussion and Analysis” above.

 

(3) The value of stock options equals the fair value at grant date. The value is calculated in accordance with ASC 718. The assumptions made in connection with the valuation of these awards are described in Note 10 to the notes to our consolidated financial statements in our 2013, 2012 and 2011 Annual Reports on Form 10-K.

 

(4) Equals amounts paid to the NEOs pursuant to our cash Bonus Program comprised of (a) the 2013, 2012 and 2011 financial performance bonus payouts, as applicable and (b) the 2013, 2012 and 2011 operating bonus payouts, as applicable. The 2013 payouts are described above under the heading “Compensation Discussion and Analysis—Components of Executive Compensation—Annual Cash Incentive Bonuses—Annual Executive Bonus Program.”

 

(5)

Prior to July 2013, the Company funded a deferred compensation program for a number of its senior executives, including Messrs. Passman, Hare, Van Noy and Ellis, pursuant to which it paid additional cash compensation equal to 10% of the individual’s annual taxable compensation, which until July 1, 2007 included equity-based compensation. The Company directed the additional cash compensation first into the participant’s individual retirement account, up to the

 

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  legal limit, with the remainder directed into a trust. Distributions from the applicable trust are made upon or shortly after normal retirement, disability, death or termination of employment of a participant. As of December 31, 2013, the Company still maintained the trust accounts with earnings on trust assets being credited to the Participating NEO’s accounts. Beginning in July 2013, the Company adopted a new deferred compensation program for Messrs. Passman, Hare, Van Noy and Ellis pursuant to which Carmike pays additional compensation equal to 10% of the individual’s annual taxable compensation. Amounts contributed under the new deferred compensation program are directed into one or more investment alternatives selected by the participant for corporate-owned life insurance policies that we intend to use to fund our obligation under the new deferred compensation program. Earnings on the investments under the new deferred compensation program are directed to each participant’s account and are fully vested when earned. The amounts set forth in the table equal all of the earnings on the assets held in the trust in 2013, 2012, and 2011, respectively (not just above-market earnings) as well as the earnings on the investments under the new deferred compensation program in 2013, and do not include earnings on amounts held in the participants’ individual retirement account.

 

(6) The amounts set forth in the “All Other Compensation” column include the following perquisites for 2013: Mr. Passman—$4,356 for group term life insurance premiums, $6,562 for the personal use of a company-provided automobile, $71,537 for living expenses ($41,880 net of income taxes), and $14,173 for club membership dues; Mr. Hare—$654 for group term life insurance premiums, $2,365 for the personal use of a company-provided automobile and $13,664 for club membership dues; Mr. Van Noy—$2,838 for group term life insurance premiums, $2,508 for the personal use of a company-provided automobile and $4,916 for club membership dues; Mr. Ellis—$900 for group term life insurance premiums, an automobile allowance of $9,000 and $12,942 for club membership dues; and Mr. Lundin—$4,356 for group term life insurance premiums, $6,916 for the personal use of a company-provided automobile and $1,383 for club membership dues.

 

(7) Pursuant to our deferred compensation programs in 2013, we contributed the following amounts (representing 10% of the executive’s base salary and cash bonus actually paid during calendar year 2013) for the applicable NEOs, which are included in the “All Other Compensation” column above: Mr. Passman $174,476; Mr. Hare $71,144; Mr. Van Noy $77,901; Mr. Ellis $65,553. The deferred compensation program is discussed further below under the heading “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table.”

 

(8) Mr. Ellis’ 2011 base salary, stock and option awards, non-equity incentive plan compensation and perquisites were determined pursuant to the terms of his offer letter executed in connection with his appointment as Senior Vice President, General Counsel and Corporate Secretary on August 1, 2011.

 

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Grants of Plan-Based Awards in 2013

 

Name

  Grant Date     Estimated Possible Payouts
Under
Non-Equity Incentive Plan
Awards (1)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards (4)
    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(2)
    Grant Date
Fair Value
of Stock
and
Option
Awards
($)(3)
 
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
     

S. David Passman III

   

 

 

2/28/2013

2/28/2013

—  

  

  

  

   

 

 

—  

—  

345,000

  

  

  

   

 

 

—  

—  

690,000

  

  

  

   

 

 

—  

—  

1,190,250

  

  

  

   

 

 

30,000

—  

—  

  

  

  

   

 

 

60,000

—  

—  

  

  

  

   

 

 

90,000

—  

—  

  

  

  

   

 

 

—  

30,000

—  

  

  

  

   

 

 

939,600

469,800

—  

  

  

  

Richard B. Hare

   

 

 

2/28/2013

2/28/2013

—  

  

  

  

   

 

 

—  

—  

131,250

  

  

  

   

 

 

—  

—  

262,500

  

  

  

   

 

 

—  

—  

433,125

  

  

  

   

 

 

7,700

—  

—  

  

  

  

   

 

 

15,400

—  

—  

  

  

  

   

 

 

23,100

—  

—  

  

  

  

   

 

 

—  

7,700

—  

  

  

  

   

 

 

241,164

120,582

—  

  

  

  

Fred W. Van Noy

   

 

 

2/28/2013

2/28/2013

—  

  

  

  

   

 

 

—  

—  

150,000

  

  

  

   

 

 

—  

—  

300,000

  

  

  

   

 

 

—  

—  

465,000

  

  

  

   

 

 

10,500

—  

—  

  

  

  

   

 

 

21,000

—  

—  

  

  

  

   

 

 

31,500

—  

—  

  

  

  

   

 

 

—  

10,500

—  

  

  

  

   

 

 

328,860

164,430

—  

  

  

  

Daniel E. Ellis

   

 

 

2/28/2013

2/28/2013

—  

  

  

  

   

 

 

—  

—  

111,150

  

  

  

   

 

 

—  

—  

234,000

  

  

  

   

 

 

—  

—  

386,100

  

  

  

   

 

 

5,500

—  

—  

  

  

  

   

 

 

11,000

—  

—  

  

  

  

   

 

 

16,500

—  

—  

  

  

  

   

 

 

—  

5,500

—  

  

  

  

   

 

 

172,260

86,130

—  

  

  

  

John Lundin

   

 

 

2/28/2013

2/28/2013

—  

  

  

  

   

 

 

—  

—  

51,450

  

  

  

   

 

 

—  

—  

85,750

  

  

  

   

 

 

—  

—  

128,626

  

  

  

   

 

 

3,200

—  

—  

  

  

  

   

 

 

6,400

—  

—  

  

  

  

   

 

 

9,600

—  

—  

  

  

  

   

 

 

—  

3,200

—  

  

  

  

   

 

 

100,224

50,112

—  

  

  

  

 

(1) Represents threshold, target and maximum award opportunities payable to each NEO pursuant to the 2013 Cash Bonus Program discussed above under the heading “Compensation Discussion and Analysis—Components of Executive Compensation—Annual Cash Incentive Bonuses—Annual Executive Bonus Program.” The amounts presented include both the financial-based bonus opportunity and the operating bonus opportunity.

 

(2) On February 28, 2013, the Compensation and Nominating Committee awarded shares of time-based restricted stock to each NEO. The time-based restricted stock will vest on February 28, 2016.

 

(3) In accordance with ASC 718, the fair market value of restricted stock awards on the grant date is calculated using the closing price on the date of the grant as reported on the NASDAQ global market. Awards with performance conditions are computed based on the probable outcome of the performance condition as of the grant date for the award.

 

(4) Represents the target number of performance shares granted in 2013. One-third of the target number of performance shares may be earned in 2013, 2014 and 2015, respectively. Amounts actually earned by the executive are based on the achievement of an EBITDA target for fiscal 2013, 2014 and 2015. Based on our actual 2013 Bonus EBITDA, the senior executives earned 102% of their target performance share opportunity for 2013. Specifically, for 2013, Mr. Passman earned 20,400 shares, Mr. Hare earned 5,236 shares, Mr. Van Noy earned 7,140 shares, Mr. Ellis earned 3,740 shares and Mr. Lundin earned 2,176 shares. Common stock pursuant to these performance shares will be issued in 2016.

 

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Table of Contents

Narrative Disclosure to Summary Compensation Table

and Grants of Plan-Based Awards Table

S. David Passman III Employment Agreement

In connection with Mr. Passman’s appointment as our Chief Executive Officer, we entered into an employment agreement with Mr. Passman effective June 4, 2009 (the “Commencement Date”), which was amended on March 29, 2010, April 12, 2012 and May 15, 2013. The agreement provides for an initial term of three years which will be automatically extended for one additional year on the second anniversary of the Commencement Date and for one additional year on each anniversary of the Commencement Date thereafter unless we, at least ninety days prior to any anniversary date, give written notice to Mr. Passman that there will be no such extension.

The agreement provides that Mr. Passman will receive an annual base salary subject to annual review for adjustment, and will be eligible to receive an annual bonus with a target amount of 50% of base salary (or such higher percentage as the Compensation and Nominating Committee may determine) and a maximum amount of 150% of base salary. Mr. Passman’s base salary for 2013 was $690,000. The actual amount of the annual bonus will be determined by the Compensation and Nominating Committee based upon Mr. Passman’s achievement of bonus goals and our and Mr. Passman’s performance for the relevant year. The agreement also provided for certain long term equity incentive grants that were made to Mr. Passman on June 4, 2009.

Mr. Passman’s employment agreement also contains provisions regarding payments upon a termination or change in control. A description of these provisions is contained below under the heading “Potential Payments Upon Termination or Change in Control.”

 

49


Table of Contents

Outstanding Equity Awards at 2013 Fiscal Year-End

 

    Option Awards     Stock Awards              

Name

  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
    Option
Exercise
Price ($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock
That Have
Not
Vested (#)
    Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($) (1)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested (#)
    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($) (1)
 

S. David Passman III

   

 

 

 

 

 

 

 

 

 

200,000

70,000

46,666

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

23,334

—  

—  

—  

—  

—  

—  

—  

  

  

(3) 

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

8.46

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

6/4/19

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

20,000

30,000

30,000

30,000

33,600

—  

—  

  

  

  

(4) 

(5) 

(6) 

(8) 

(10) 

  

  

   

 

 

 

 

 

 

 
 

 

—  

—  

—  

556,800

835,200

835,200

835,200

935,424
—  

—  

  

  

  

  

  

  

  

  
  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

46,667

60,000

  

  

  

  

  

  

  

  

(7) 

(9) 

   

 

 

 

 

 

 

 
 

 

—  

—  

—  

—  

—  

—  

—  

—  
1,299,200

1,670,400

  

  

  

  

  

  

  

  
  

  

Richard B. Hare

   

 

 

 

 

 

 

 

 

 

 

—  

45,000

25,000

16,666

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

8,334

—  

—  

—  

—  

—  

—  

—  

  

  

  

(3) 

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

40,000

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

(2) 

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

25.95

8.38

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

4/13/17

7/6/19

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

8,500

10,000

12,750

7,700

10,800

—  

—  

  

  

  

  

(4) 

(5) 

(6) 

(8) 

(10) 

  

  

   

 

 

 

 

 

 

 

 
 

 

—  

—  

—  

—  

236,640

278,400

354,960

214,368

300,672
—  

—  

  

  

  

  

  

  

  

  

  
  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

15,000

15,400

  

  

  

  

  

  

  

  

  

(7) 

(9) 

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

417,600

428,736

  

  

  

  

  

  

  

  

  

  

  

Fred W. Van Noy

   

 

 

 

 

 

 

 

 

 

 

—  

50,000

28,000

18,666

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

9,334

—  

—  

—  

—  

—  

—  

—  

  

  

  

(3) 

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

40,000

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

(2) 

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

25.95

8.38

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

4/13/17

7/6/19

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

10,000

12,000

15,000

10,500

12,000

—  

—  

  

  

  

  

(4) 

(5) 

(6) 

(8) 

(10) 

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

278,400

334,080

417,600

292,320

334,080

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

16,667

21,000

  

  

  

  

  

  

  

  

  

(7) 

(9) 

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

464,000

584,640

  

  

  

  

  

  

  

  

  

  

  

Daniel E. Ellis

   

 

 

 

 

 

 

 

10,000

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

5,000

—  

—  

—  

—  

—  

—  

—  

(3) 

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

6.23

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

8/1/21

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

—  

5,000

2,083

12,000

5,500

10,080

—  

—  

  

(4) 

(5) 

(6) 

(8) 

(10) 

  

  

   

 

 

 

 

 

 

 

—  

139,200

57,991

334,080

153,120

280,627

—  

—  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

14,000

11,000

  

  

  

  

  

  

(7) 

(9) 

   

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

389,760

306,240

  

  

  

  

  

  

  

  

John Lundin

   

 

 

 

 

 

 

 

 

 

15,000

8,000

5,334

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

2,666

—  

—  

—  

—  

—  

—  

—  

  

  

(3) 

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

7.22

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

1/25/20

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

3,000

4,000

4,500

3,200

3,360

—  

—  

  

  

  

(4) 

(5) 

(6) 

(8) 

(10) 

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

83,520

111,360

125,280

89,088

93,542

—  

—  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

4,667

6,400

  

  

  

  

  

  

  

  

(7) 

(9) 

   

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

194,880

178,176

  

  

  

  

  

  

  

  

  

  

 

(1) The aggregate market value of shares of restricted stock is determined by multiplying the number of unvested or unearned shares of restricted stock by the closing market price for our Common Stock on December 31, 2013 of $27.84 per share.

 

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Table of Contents
(2) One-third of these options will vest when Carmike achieves an increase in the trading price of its Common Stock (above the $25.95 exercise price) equal to 25%, 30% and 35%, respectively.

 

(3) One-third of these options vest on each of March 11, 2012, March 11, 2013 and March 11, 2014, except for the options awarded to Mr. Ellis, which will vest on August 1, 2012, 2013, and 2014, respectively.

 

(4) These shares of restricted stock vest in full on March 11, 2014 for Messrs. Passman, Hare, Van Noy and Lundin. The shares granted to Mr. Ellis vest in full on August 1, 2014.

 

(5) Represents the number of performance-based restricted stock awards earned for 2011 performance that vested on March 11, 2014.

 

(6) These shares of restricted stock vest in full on March 15, 2015.

 

(7) Represents the target number of performance shares granted in 2012 for the remaining 2013 and 2014 performance periods. One-third of the target number of performance shares were available to be earned in 2012, 2013 and 2014, respectively. Amounts actually earned by the executive are based on the achievement of an EBITDA target for fiscal 2012, 2013 and 2014.

 

(8) These shares of restricted stock vest in full on February 28, 2016.

 

(9) Represents the target number of performance shares granted in 2013. One-third of the target number of performance shares may be earned in 2013, 2014, and 2015, respectively. Amounts actually earned by the executive are based on the achievement of an EBITDA target for fiscal 2013, 2014 and 2015. Based on our actual 2013 Bonus EBITDA, the senior executives earned 102% of their target performance share opportunity for 2013. Specifically, for 2013, Mr. Passman earned 20,400 shares, Mr. Hare earned 5,236 shares, Mr. Van Noy earned 7,140 shares, Mr. Ellis earned 3,740 shares and Mr. Lundin earned 2,176 shares. Common stock pursuant to these performance shares will be issued in 2016.

 

(10) Represents the number of performance-based restricted stock awards earned for 2012 performance that are subject to additional time-based vesting requirements. These shares of restricted stock vest on March 15, 2015.

Option Exercises and Stock Vested

For the Fiscal Year Ended December 31, 2013

 

Name

   Option Awards      Stock Awards  
   Number of
Shares
Acquired
On Exercise (#)
     Value Realized
on Exercise ($)
     Number of
Shares
Acquired
on Vesting (#)(1)
     Value Realized
on Vesting($)(2)
 

S. David Passman III

     —           —           35,000         562,450   

Richard B. Hare

     —           —           13,500         216,945   

Fred W. Van Noy

     —           —           16,000         257,120   

Daniel E. Ellis

     —           —           —           —     

John Lundin

     —           —           5,000         80,350  

 

(1) These shares of restricted stock vested on March 3, 2013.

 

(2) The value is calculated by multiplying the number of shares of restricted stock by the closing market price for our Common Stock on March 3, 2013, the vesting date, of $16.07.

Nonqualified Deferred Compensation for 2013

See the description of our deferred compensation arrangements above under the caption “Components of Executive Compensation—Deferred Compensation Program.”

 

Name

   Executive
Contributions  in
Last FY
($)
     Registrant
Contributions
Earned in
Last FY
($)(1)
     Aggregate
Earnings/Losses
on all
Assets Held in
Trust During
Last FY
($)(2)
     Aggregate
Withdrawals  /
Distributions
($)
     Aggregate
Balance of  all
Assets Held in
Trust
at Last FYE
($)(3)
 

S. David Passman III

     —           158,476         33,420         —           258,160   

Richard B. Hare

     —           71,519         12,538         —           190,767   

Fred W. Van Noy

     —           78,276         73,451         —           625,457   

Daniel E. Ellis

     —           65,853         4,377         —           40,222   

John Lundin

     —           N/A         N/A         N/A         N/A   

 

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Table of Contents

 

(1) These amounts are also included in the “All Other Compensation” column of the Summary Compensation Table.

 

(2) Under our previous nonqualified deferred compensation program, the trustee invested the trust assets in annuity contracts as directed by the participant. Under our new deferred compensation program, cash contributions are directed into investment accounts held by the Company on behalf of each individual. The amounts set forth in this column equal the gains on the assets held in the trust under the prior deferred compensation program during 2013 and the gains on the assets held in the Participating NEO’s respective investment accounts under the new deferred compensation program during 2013. Gains on assets held under the prior deferred compensation program for 2013 for Messrs. Passman, Hare, Van Noy and Ellis were $32,870, $12,322, $73,252 and $4,070, respectively. Gains on assets held under the new deferred compensation program for 2013 for Messrs. Passman, Hare, Van Noy and Ellis were $550, $216, $199 and $307, respectively. These amounts are included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table.

 

(3) The aggregate balance of all assets held in trust or investment accounts under the prior and new deferred compensation plans set forth in this column does not include amounts held in the NEO’s individual retirement account.

Potential Payments upon Termination or Change in Control

The discussion below describes the amounts payable to the NEOs in the event of a termination of the executive’s employment or in connection with a change in control. The amounts shown assume that such termination or change in control was effective as of December 31, 2013, and thus include amounts earned through such time. The amounts described below are estimates of the amounts which would be paid to the executives upon their termination or in connection with a change in control. The actual amounts to be paid can only be determined at the time of such executive’s separation from us or at the time of the applicable change in control. Other than as described below, we have not agreed to pay any other amounts or to provide any other benefits to the NEOs upon termination of their employment with us, including pursuant to death, disability or retirement or in connection with a change in control.

S. David Passman III Employment Agreement

In connection with Mr. Passman’s appointment as our Chief Executive Officer, we entered into an employment agreement (the “Passman Employment Agreement”) with Mr. Passman effective June 4, 2009 (the “Commencement Date”), which was amended on March 29, 2010, April 12, 2012 and May 15, 2013. The Passman Employment Agreement provides for an initial term of three years (the “Term”) which will be automatically extended for one additional year on the second anniversary of the Commencement Date and for one additional year on each anniversary of the Commencement Date thereafter unless we, at least ninety days prior to any anniversary date, give written notice to Mr. Passman that there will be no such extension.

Payments Made Upon Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control

If we terminate Mr. Passman without cause (as defined below) or if at any time Mr. Passman resigns for good reason (as defined below) either in anticipation of a change in control (as defined below) or within two years after a change in control:

 

   

we will pay Mr. Passman two times his base salary (at a rate equal to the highest level of base salary paid to Mr. Passman in the year prior to his termination of employment) and two times his target annual bonus for the calendar year prior to the calendar year in which his termination of employment occurs;

 

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any restrictions on outstanding restricted stock grants made prior to January 1, 2013 will immediately expire and Mr. Passman’s right to such restricted stock grants will be non-forfeitable notwithstanding the terms under which such restricted stock grants were granted; and

 

   

we will continue for 24 months to provide the same health, dental and vision care coverage and life insurance coverage as Mr. Passman was provided under our employee benefit plans, policies and practices on the day prior to his termination, provided, however, Mr. Passman will pay for the cost of such coverage and we will reimburse him for 100% of the cost thereof.

Any separation benefits provided if we terminate Mr. Passman’s employment without cause or if Mr. Passman resigns either in anticipation of a change in control or within two years after a change in control will require Mr. Passman to execute a general release of claims in a form reasonably acceptable to us.

Death or Disability

Under his employment agreement, if Mr. Passman’s employment terminates due to death or disability, all of his options granted prior to May 1, 2013 will become exercisable as of the date his employment terminates and remain outstanding for 365 days and all of the restrictions on any restricted stock granted to Mr. Passman prior to May 1, 2013 shall expire, and such restricted stock shall become non-forfeitable. Performance-based restricted stock awards will be paid based on actual amounts earned for completed periods and will be prorated for the current period at the target amount.

Taxes

The Passman Employment Agreement does not contain a tax gross-up for “parachute” excise tax under Section 280G and Section 4999 of the Code.

Executive Separation Agreements

In 2003, we entered into a separation agreement with Fred W. Van Noy, our Senior Vice President and Chief Operating Officer, in 2007 we entered into a separation agreement with Richard B. Hare, our Senior Vice President—Finance, Treasurer and Chief Financial Officer, and in 2010, we entered into a separation agreement with John Lundin, our Vice-President—Film. Upon joining Carmike in 2011, we entered into a separation agreement with Daniel E. Ellis, our Senior Vice President, General Counsel and Secretary (the “Separation Agreements”). In 2008, we made tax-related amendments to the separation agreements with Mr. Hare and Mr. Van Noy. In 2011, we made additional tax-related amendments to our separation agreement with Mr. Van Noy and extended the period in which Mr. Van Noy is entitled to receive health and welfare benefits following his separation from Carmike. In 2013, we made amendments to the Separation Agreements regarding the treatment of equity awards in connection with certain employment termination events as well as the addition of a target bonus as an additional element of severance in connection with a termination or resignation related to a change in control. For purposes of the following description, we refer to Messrs. Van Noy, Hare, Ellis and Lundin as the “executives.” We did not enter into a stand-alone separation agreement with Mr. Passman because the terms of any potential separation are contained in his employment agreement.

Payments Made Upon Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control

If we terminate the executive without cause (as defined below) at any time or if he resigns for good reason (as defined below) either in anticipation of a change in control (as defined below) or within two years after a change in control, he will be entitled to a severance payment equal to two times his base salary (other than Mr. Lundin), which will be paid in 24 equal monthly installments beginning six months and one day following his termination of employment. Mr. Lundin is entitled to a severance payment equal to one times his base salary, which will be paid in 12 equal monthly installments beginning six months and one day following his termination of employment.

 

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If we terminate the executive without cause (as defined below) or if he resigns for good reason (as defined below), in each case either in anticipation of a change in control (as defined below) or within two years after a change in control, in addition to the severance payment described above, he will also receive a severance payment equal to two times his target bonus (other than Mr. Lundin), which will be paid in 24 equal monthly installments beginning six months and one day following his termination of employment. In such circumstances, Mr. Lundin is entitled to an additional severance payment equal to one times his target bonus, which will be paid in 12 equal monthly installments beginning six months and one day following his termination of employment.

In addition, in connection with any of the termination events described above, all of the restrictions on time-based restricted stock granted to the executive prior to January 1, 2013 shall expire, and the executive’s time-vested restricted stock shall become non-forfeitable as of his termination of employment.

Finally, each executive, excluding Messrs. Van Noy and Lundin, shall be entitled to continued welfare benefits for two years following his termination of employment. Mr. Van Noy shall be entitled to continued welfare benefits for thirty months following his termination of employment. Mr. Lundin shall be entitled to continued welfare benefits for one year following his termination of employment.

Death or Disability

Under the separation agreements, if the executive’s employment terminates due to death or disability, all options granted prior to May 1, 2013 will become exercisable as of the date that employment terminates and remain outstanding for 365 days and all of the restrictions on any restricted stock granted prior to May 1, 2013 shall expire, and such restricted stock shall become non-forfeitable. Performance-based restricted stock awards will be paid based on actual amounts earned for completed periods and will be prorated for the current period at the target amount.

Taxes

Following the 2011 amendment to Mr. Van Noy’s agreement, none of the Separation Agreements contain a tax gross-up for “parachute” excise tax under Section 280G and Section 4999 of the Code.

2004 Incentive Stock Plan and Award Agreements

Under the 2004 Incentive Stock Plan, our employees and outside directors and consultants are eligible to receive equity-based awards including incentive stock options, non-incentive stock options, stock appreciation rights, stock grants and stock units.

Under the 2004 Incentive Stock Plan, as of the “change effective date” of a change in control (as defined below), all options and all stock appreciation rights become exercisable, and all stock grants and stock unit grants vest. If required in the agreement effecting a change in control, the Board of Directors can cancel all options, stock appreciation rights, stock grants or stock unit grants after providing holders a reasonable period to exercise options and stock appreciation rights and to take any action necessary to receive stock subject to stock grants or cash payable under stock unit grants. However, any grant subject to a performance goal shall vest only to the extent of such performance goal unless the performance goal has been exceeded, and then it will vest to the extent the goal has been exceeded. These accelerated vesting provisions do not apply to performance shares.

Under the NEOs’ award agreements for outstanding performance shares:

 

   

in the case of death or disability, outstanding performance shares will become vested as a result of a “separation from service” (within the meaning of Section 409A of the Code), to the extent of actual results for performance periods completed prior to the separation and at target (on a pro-rated basis) for the performance period in which the separation occurs, and forfeited for performance periods beginning after the separation;

 

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in the case of a change in control, outstanding performance share awards will become fully vested:

 

   

with respect to shares earned based on actual results for performance periods completed prior to the change in control; and

 

   

at target for the performance period in which the change of control occurs and for future performance periods;

 

   

in the case of reaching retirement age (which is defined as age 55 with ten years of service or age 60 with five years of service) outstanding performance shares will become vested upon voluntary separation from service or involuntary separation from service without cause after reaching retirement age, to the following extent:

 

   

shares earned based on actual results for performance periods completed prior to the separation will vest;

 

   

shares earned based on actual results (pro-rated) for the performance period in which the separation occurs will vest; and

 

   

shares with respect to performance periods beginning after the separation will be forfeited.

Under the NEOs’ award agreements for outstanding options, such options will become vested upon voluntary termination or involuntary termination without cause after reaching retirement age (which is defined as age 55 with ten years of service or age 60 with five years of service), and will remain exercisable for the shorter of three years or the remaining term of the option.

 

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Potential Payments upon Termination or Change in Control

 

NEO/Scenario(1)

  Severance ($)     Continuing
Benefits  ($)
    Accelerated
Vesting ($)
    Total ($)  

S. David Passman III

       

Termination without cause

    2,760,000        24,169        1,392,000        4,176,169   

Termination without cause or resignation for good reason, in each case in anticipation of a change in control or within two years after a change in control (2)

    2,760,000        24,169        1,392,000        4,176,169   

Death or disability

    —          —          5,125,780        5,125,780   

Change in control (without termination)

    —          —          7,469,918        7,469,918   

Richard B. Hare

       

Termination without cause

    700,000        31,754        591,600        1,323,354   

Termination without cause or resignation for good reason, in each case in anticipation of a change in control or within two years after a change in control (2)

    1,225,000        31,754        591,600        1,848,354   

Death or disability

    —