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Carmike Cinemas DEF 14A 2015

Documents found in this filing:

  1. Def 14A
  2. Graphic
  3. Graphic
  4. Graphic
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, 2015

The Annual Meeting of Stockholders of Carmike Cinemas, Inc. will be held at the Carmike 15 Theatre, located at 5555 Whittlesey Boulevard, Columbus, Georgia 31909 on Thursday, May 28, 2015, commencing at 9:00 a.m., local time.

At the meeting, the stockholders will be asked to:

 

  1. Elect the seven (7) director nominees described in this Proxy Statement to serve for the ensuing year or until their successors are duly elected and have qualified;

 

  2. Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2015;

 

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

 

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

The Board of Directors has fixed the close of business on Thursday, April 2, 2015, 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 (if you received a 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 (if you received a proxy card) or over the internet as described on the 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 17, 2015

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD (IF YOU RECEIVED A 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 (IF YOU RECEIVED A PROXY CARD) OR OVER THE INTERNET AS DESCRIBED ON THE 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

     4   

QUORUM AND VOTING REQUIREMENTS

     5   

PROPOSAL ONE—ELECTION OF DIRECTORS

     6   

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

     9   

AUDIT COMMITTEE REPORT

     10   

FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     11   

EXECUTIVE COMPENSATION

     12   

Compensation Discussion and Analysis

     12   

Summary Compensation Table

     29   

Grants of Plan-Based Awards in 2014

     31   

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

     32   

Outstanding Equity Awards at 2014 Fiscal Year End

     33   

Option Exercises and Stock Vested for the Fiscal Year Ended December 31, 2014

     34   

Nonqualified Deferred Compensation for 2014

     35   

Potential Payments upon Termination or Change in Control

     39   

PROPOSAL THREE—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     43   

COMPENSATION OF DIRECTORS

     44   

COMPENSATION POLICIES AND PRACTICES AND RISK MANAGEMENT

     44   

COMPENSATION COMMITTEE REPORT

     45   

CORPORATE GOVERNANCE

     46   

Corporate Governance Information

     46   

Board Meetings

     46   

Board Leadership Structure

     46   

Risk Oversight

     47   

Committees of the Board of Directors

     47   

Director Independence

     48   

Selection of Director Nominees

     49   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     51   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     53   

COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     53   

OTHER MATTERS

     53   

EQUITY COMPENSATION PLANS

     53   

OTHER INFORMATION FOR STOCKHOLDERS

     54   

Section 16(a) Beneficial Ownership Reporting and Compliance

     54   

Stockholder Proposals

     54   

Stockholder Communications with the Board of Directors

     56   

Annual Report

     56   

Householding

     56   

YOUR VOTE IS IMPORTANT

     56   


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 Thursday, May 28, 2015
Place:    Carmike 15 Theatre, 5555 Whittlesey Boulevard, Columbus, Georgia 31909
Record Date:    April 2, 2015

Proposals to be Voted on and Board Voting Recommendations

 

Proposals

  

Recommendation

1.   Election of directors    FOR EACH NOMINEE
2.   Ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2015    FOR
3.   Advisory vote to approve executive compensation    FOR

Director Nominees

 

Name

  

Age
(1)

  

Director
Since

  

Occupation

  

Independent

Roland C. Smith

   60    2002    Chairman and Chief Executive Officer of Office Depot, Inc.    Yes

Mark. R. Bell

   69    2011    Former Senior Partner at PricewaterhouseCoopers and Arthur Andersen    Yes

Jeffrey W. Berkman

   50    2009    Founding Partner of The Berkman Law Firm PLLC    Yes

Sean T. Erwin

   63    2012    Chairman of the Board and former Chief Executive Officer of Neenah Paper, Inc.    Yes

James A. Fleming

   56    2009    Executive Vice President and Chief Financial Officer of Columbia Property Trust, Inc.    Yes

S. David Passman III

   62    2003    President and Chief Executive Officer, Carmike Cinemas, Inc.    No

Patricia A. Wilson

   64    2004    Attorney; former General Counsel to NDCHealth Corporation    Yes

 

(1) As of February 13, 2015

 

 

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Ratification of Appointment of Independent Registered Public Accounting Firm

We are asking our stockholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2015. Shown below is a summary of Deloitte & Touche LLP’s fees for services provided in 2013 and 2014.

 

     2014      2013  

Audit Fees

   $ 800,000       $ 800,000   
  

 

 

    

 

 

 

Audit-Related Fees

     531,818         973,204   

Tax Fees

     335,510         208,150   

All Other Fees

     —          —    
  

 

 

    

 

 

 

Total Fees Paid to Auditor

   $ 1,667,328       $ 1,981,354   
  

 

 

    

 

 

 

Executive Summary of 2014 Results

2014 was another year of significant growth and achievement for Carmike Cinemas. Throughout the year, we successfully integrated 29 theatres and approximately 300 screens into our expanding operating platform through a combination of merger and acquisitions and new build-to-suit theatres, all while outperforming the industry on a number of key operating metrics. Some of our more notable accomplishments in 2014 included:

 

   

Outperformed the industry by approximately 300 basis points on box office revenue per screen;

 

   

Extended our streak of concessions and other revenue per patron increases to 20 consecutive quarters on a year-over-year basis;

 

   

Successfully completed the acquisition of Digital Cinema Destination Corp. (“Digiplex”), adding more than 230 screens to our growing circuit;

 

   

Debuted five state-of-the-art Carmike Cinemas entertainment complexes with a total of 62 screens;

 

   

Began converting three theatres to our new casual in-theatre dining concept; and,

 

   

Doubled the number of locations providing adult beverages.

Coming off record industry box office years in 2012 and 2013, the 2014 industry box office faced significant headwinds. While the first quarter of 2014 saw industry box office revenues increase 5.6%, the second, third and fourth quarters saw box office declines of 6.5%, 12.9% and 4.4%, respectively. While we were not immune to these pressures, we delivered solid financial results with box office revenues increasing 7.2% and concessions and other revenues increasing 11.2% in 2014, primarily due to our recent growth initiatives. The Compensation and Nominating Committee has considered our 2014 performance relative to the industry and future operating plans in determining executive compensation for the Named Executive Officers.

Key 2014 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 2014:

 

   

Base salaries for senior executives were adjusted in 2014 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 2014, these targets focused on the achievement of EBITDA goals, expense reduction and operating improvements. For 2014, cash incentives were earned at 80% of target, based on actual EBITDA, and between 25% and 104% of target, based upon operating performance criteria, including individual performance goals. Overall, cash incentives were earned between 53% and 87% 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. For 2014, two-thirds of such awards are performance-based. For 2014, equity incentives were earned at 80% of target, based on actual EBITDA.

2014 Compensation For Named Executive Officers

Set forth below is the 2014 compensation for each Named Executive Officer as determined under Securities and Exchange Commission rules. See the notes accompanying the 2014 Summary Compensation Table on pages 29 and 30 for more information.

 

Name and Principal Position

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

S. David Passman III

    740,000        1,651,022        552,595        15,715        293,095        3,252,427   

President and Chief

Executive Officer

           

Richard B. Hare

    375,000        420,048        244,547        5,694        94,075        1,139,364   

Senior Vice President—

Finance, Treasurer and

Chief Financial Officer

           

Fred W. Van Noy

    425,000        595,068        216,591        15,435        80,509        1,332,603   

Senior Vice President and

Chief Operating Officer

           

Daniel E. Ellis

    340,000        303,368        221,978        6,903        78,971        951,220   

Senior Vice President,

General Counsel and

Secretary

           

John Lundin

    250,000        166,269        45,938        —         15,474        477,681   

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 Thursday, May 28, 2015 (the “Annual Meeting”), at the Carmike 15 Theatre located at 5555 Whittlesey Boulevard, Columbus, Georgia 31909 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 17, 2015. Carmike’s 2014 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, 2015.

The proxy statement and the 2014 Annual Report to stockholders

are available at http://www.astproxyportal.com/ast/19008/

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 can do this by telephone or internet voting or by signing your proxy card (if you received a proxy card) and mailing it in the enclosed, prepaid and addressed envelope, or by internet voting as described on the notice of internet availability of proxy materials. 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 proxy card but do not provide voting instructions, your shares will be voted for the seven named nominees, for the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2015 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 D.F. King & Co., Inc. 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 D.F. King & Co., Inc. is $5,000, plus expenses.

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 Thursday, April 2, 2015 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 24,485,842 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 seven 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 ratification of Deloitte & Touche LLP as our independent registered public accounting firm for 2015 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 to approve executive compensation 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 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.

A brokerage firm cannot vote customers’ shares on non-routine matters. All of the matters other than Proposal 2 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 and 3.

The table below summarizes the votes required and treatment 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   Ratification of Deloitte & Touche as our independent registered public accounting firm   FOR   Majority of votes of holders represented and entitled to vote   Count as votes
against
  Discretionary
broker voting
permitted
3   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 seven 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 seven directors.

All seven 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 seven 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 49 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 13, 2015:

Roland C. Smith, Chairman of the Board, 60, 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, 69, 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, 50, 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, 63, 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, 56, has been one of our directors since March 2009 and currently serves as a member of the Compensation and Nominating Committee and the Executive 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

 

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Vice President, General 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.

S. David Passman III, 62, 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, 64, has been one of our directors since April 2004 and currently serves as a member of the Audit Committee and 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:

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our Audit Committee intends to appoint Deloitte & Touche LLP to audit our consolidated financial statements for the year ending December 31, 2015 and the effectiveness of our internal control over financial reporting as of December 31, 2015, 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, 2015. 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 2015.

 

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AUDIT COMMITTEE REPORT

The Audit Committee consists of Mark R. Bell as Chairman, Sean T. Erwin and Patricia A. Wilson. Each of Messrs. Bell and Erwin and Ms. Wilson 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, as revised on February 27, 2015, 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, 2014. The Audit Committee also has discussed with Deloitte & Touche LLP, Carmike’s independent registered public accounting firm for fiscal 2014, 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, 2014 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 2, 2015    Sean T. Erwin
   Patricia A. Wilson

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 REGISTERED PUBLIC ACCOUNTING FIRM

Aggregate fees billed to us for the fiscal years ended December 31, 2014 and 2013 by our independent registered public accounting firm, Deloitte & Touche LLP, were as follows:

 

     2014      2013  

Audit Fees (1)

   $ 800,000       $ 800,000   
  

 

 

    

 

 

 

Audit-Related Fees (2)

     531,818         973,204   

Tax Fees (3)

     335,510         208,150   

All Other Fees

     —          —    
  

 

 

    

 

 

 

Total Fees Paid to Auditor

   $ 1,667,328       $ 1,981,354   
  

 

 

    

 

 

 

 

(1) Audit fees and expenses primarily relate to the 2014 and 2013 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, 2014;

 

   

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 2014 Results

2014 was another year of significant growth and achievement for Carmike Cinemas. Throughout the year, we successfully integrated 29 theatres and approximately 300 screens into our expanding operating platform through a combination of mergers and acquisitions and new build-to-suit theatres, all while outperforming the industry on a number of key operating metrics. Some of our more notable accomplishments in 2014 included:

 

   

Outperformed the industry by approximately 300 basis points on box office revenue per screen;

 

   

Extended our streak of concessions and other revenue per patron increases to 20 consecutive quarters on a year-over-year basis;

 

   

Successfully completed the acquisition of Digital Cinema Destination Corp. (“Digiplex”), adding more than 230 screens to our growing circuit;

 

   

Debuted five state-of-the-art Carmike Cinemas entertainment complexes with a total of 62 screens;

 

   

Began converting three theatres to our new casual in-theatre dining concept; and,

 

   

Doubled the number of locations providing adult beverages.

Coming off record industry box office years in 2012 and 2013, the 2014 industry box office faced significant headwinds. While the first quarter of 2014 saw industry box office revenues increase 5.6%, the second, third and fourth quarters saw box office declines of 6.5%, 12.9% and 4.4%, respectively. While we were not immune to these pressures, we delivered solid financial results with box office revenues increasing 7.2% and concessions and other revenues increasing 11.2% in 2014, primarily due to our recent growth initiatives. The Compensation and Nominating Committee has considered our 2014 performance relative to the industry and future operating plans in determining executive compensation for the Named Executive Officers.

 

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Key 2014 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 2014:

 

   

Base salaries for senior executives were adjusted in 2014 based on market factors.

 

   

Short-term cash incentives are performance-based and include financial, non-financial, company-wide and individual targets. In 2014, these targets focused on the achievement of EBITDA goals, expense reduction and operating improvements. For 2014, cash incentives were earned at 80% of target, based on actual EBITDA, and between 25% and 104% of target, based upon operating performance criteria, including individual performance goals. Overall, cash incentives were earned between 53% and 87% 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. For 2014, two-thirds of such awards are performance-based. For 2014, equity incentives were earned at 80% of target, based on actual EBITDA.

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 2014 annual meeting of stockholders. Because over 96% of votes cast approved our compensation program as described in our 2014 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 2014 and in structuring 2015 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, as necessary, 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

 

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to Carmike. Carmike has engaged Pearl Meyer & Partners as management’s compensation consultant since June 2009. During 2014, 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;

 

   

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

 

   

reviews and assessments of our Incentive Stock Plan, which was implemented in May 2014;

 

   

reviews and assessments of our Employee Stock Purchase Plan, which was implemented in May 2014;

 

   

reviews and assessments of our Nonqualified Deferred Compensation Plan;

 

   

reviews and assessments of perquisites offered to senior executives;

 

   

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. Changes to our peer group were made in 2014 to include a better mix of companies based on size and industry. The companies comprising this peer group are listed below. The companies indicated with an asterisk below were added to the peer group in 2014.

 

•     AMC Entertainment Holdings Inc.*

  

•     Life Time Fitness, Inc.

 

•     Ruth’s Hospitality Group, Inc.

•     Brio Bravo Restaurant Group, Inc.*

  

•     The Marcus Corporation

 

•     Six Flags Entertainment Corporation

•     Buffalo Wild Wings Inc.*

  

•     Reading International, Inc.

 

•     Town Sports International Holdings

•     CEC Entertainment, Inc.

  

•     Red Robin Gourmet Burgers Inc.*

 

•     Vail Resorts Inc.*

•     Cinemark Holdings Inc.

  

•     Regal Entertainment Group

 

•     World Wrestling Entertainment, Inc.

•     International Speedway Corporation

    

Compensation Consultant Independence and Conflict of Interest Assessment

In light of 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

 

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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 Mercer LLC is independent and the work of Pearl Meyer & Partners and Mercer LLC did not raise any conflict of interest.

Role of Executives in Establishing Compensation for 2014

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 management and 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.

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 2014, the Compensation and Nominating Committee met nine times. During these meetings in 2014, the Compensation and Nominating Committee, among other items:

 

   

approved the payment of 2013 incentive bonuses for senior executives;

 

   

approved the 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 11 senior executives, including the NEOs, in March 2014;

 

   

approved the grant of 950 shares of time-vested restricted stock to two senior executives in July 2014;

 

   

approved the addition of peer companies to our peer group;

 

   

approved changes to our non-employee director compensation;

 

   

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

 

   

recommended candidates for election to the Board of Directors; and

 

   

adopted changes to corporate governance guidelines regarding equity ownership and holding periods.

To date, the Compensation and Nominating Committee has held five meetings in 2015. During these meetings in 2015, the Compensation and Nominating Committee, among other items:

 

   

approved the payment of 2014 incentive bonuses for senior executives;

 

   

approved 2015 base salaries and incentive bonus objectives for the senior executive officers;

 

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approved the grant of 74,000 shares of time-vested restricted stock units and a target amount of 74,000 performance shares to a group of 18 senior executives, including the NEOs, in March 2015; and

 

   

approved changes to the mix of annual long-term equity awards granted, including time-vested restricted stock units and performance shares.

Named Executive Officers for 2014

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 2014 include our Chief Executive Officer, our Chief Financial Officer and the three other executive officers with the highest total compensation for 2014, calculated in accordance with the rules and regulations of the SEC. Our NEOs for 2014 were:

 

   

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

 

   

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

 

   

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 2014 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.

 

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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 from Pearl Meyer & Partners (and reviewed by Mercer LLC), has eliminated the grant of stock options in favor of an equity grant mix that includes for 2014, by value, 33% time-based restricted stock and 66% performance shares. The Compensation and Nominating Committee believes that the elimination of stock options: (1) reduces our annual share usage; (2) better aligns the cost to us and the value we receive from the program; (3) increases a participant’s perceived value from the program; and (4) 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. The performance share awards have the following attributes:

 

   

a three-year performance period, comprised of three separate one-year performance measurement periods;

 

   

annual EBITDA-based performance goals that are consistent with the goals for the annual cash incentive bonus program;

 

   

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

 

   

the vesting of any earned performance-based shares only 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 Section 162(m) Performance-Based 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.

 

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In January 2014 and 2015, the Compensation and Nominating Committee, upon the recommendation of the Chief Executive Officer, Pearl Meyer & Partners and Mercer LLC (the Committee’s compensation consultant), as well as the Committee’s experience and judgment, approved the 2014 and 2015 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 2014 and 2015 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

   2013 Base
Salary ($)
     2014 Base
Salary ($)
     2015 Base
Salary ($)
 

S. David Passman III

     690,000         740,000         770,000   

Richard B. Hare

     350,000         375,000         390,000   

Fred W. Van Noy

     400,000         425,000         440,000   

Daniel E. Ellis

     312,000         340,000         355,000   

John Lundin

     245,000         250,000         253,000   

Annual Cash Incentive Bonuses—Section 162(m) Performance-Based Program

The Carmike Cinemas, Inc. Section 162(m) Performance-Based Program (“Bonus Program”) gives each participant the opportunity to earn an annual incentive bonus 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 2014 were financial and operating in nature. The 2014 bonus targets for the senior executive officers were approved by the Compensation and Nominating Committee in March 2014, 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 2014 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

 

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performance levels, our executives receive bonuses below the target amount, which depending on performance may result in no cash bonuses. In connection with 2014 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 2014 Target Cash Incentive Bonus Opportunity

In March 2014, 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 2014 annual target cash incentive bonus opportunities for senior executive officers as a percentage of each executive’s 2014 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.

The 2013 and 2014 target incentive cash bonus opportunities for the NEOs, and the percentage of the 2014 base salary that each 2014 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

   2013 Target
Bonus
Opportunity ($)
     2014 Target
Bonus
Opportunity ($)
     Target
Bonus
Opportunity
as a 2013 and
Percentage
of 2014  Base
Salary
 

S. David Passman III

     690,000         740,000         100

Richard B. Hare

     262,500         281,250         75

Fred W. Van Noy

     300,000         318,750         75

Daniel E. Ellis

     234,000         255,000         75

John Lundin

     85,750         87,500         35

Allocation of 2014 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 2014, 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 2014, 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 2014 was a specified level of EBITDA; and

 

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(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 2014 operational criteria-based bonuses, Carmike was required to achieve a minimum level of EBITDA, which in 2014 equaled 85% of the 2014 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.

2014 Financial Performance Goals and Bonus

For 2014 the financial-based bonus for each NEO was tied to the achievement of a targeted percentage of bonus adjusted EBITDA initially set at $122.5 million, or the “2014 Bonus EBITDA Target.” The Compensation and Nominating Committee selected the 2014 Bonus EBITDA Target utilizing Carmike’s 2014 fiscal year forecast and budget, previously approved by the Board of Directors in January 2014. Our bonus EBITDA for 2014 for compensation purposes is different from EBITDA (which is defined as earnings before interest, taxes, depreciation and 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 2014 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 2014 forecast and budget.

At the time it established the 2014 performance goals, the Compensation and Nominating Committee determined that the 2014 Bonus EBITDA Target would be adjusted based on actual industry box office results for 2014 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 2014 Bonus EBITDA Target if the percentage increase or decrease experienced by the industry box office results between 2014 and 2013 differed from Carmike’s anticipated box office results used to calculate the 2014 Bonus EBITDA Target. Accordingly, because industry box office results were approximately 4.3% lower than the results anticipated in calculating the 2014 Bonus EBITDA Target, this target amount was adjusted downward by approximately $12.3 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 2014 Bonus EBITDA Target payout scale for NEOs which adjusts at a defined rate between the threshold, target and maximum amounts. The payout scale, after adjusting for the Box Office Index, is shown in the following table:

 

     Threshold     Target     Maximum     Actual Result     Actual EBITDA
Result as a Percentage
of Bonus EBITDA
Target
 

2014 Bonus EBITDA

   $  93.7 million      $  110.3 million      $  137.8 million      $  103.6 million        94

Payout Percentage

     50%        100%        150%        80%     

The 2014 financial-based bonus amounts earned (at 80% of target) by the NEOs were as follows:

 

Name

   Financial Bonus Target
as a Percentage of
2014 Target Bonus
Opportunity
    2014 Financial
Bonus Target ($)
     2014 Financial
Bonus Payout ($)
 

S. David Passman III

     85     629,000         503,200   

Richard B. Hare

     70     196,875         157,500   

Fred W. Van Noy

     70     223,125         178,500   

Daniel E. Ellis

     70     178,500         142,800   

John Lundin

     50     43,750         35,000   

 

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2014 Operating Objectives and Bonus

In March 2014, 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 2014, 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 the achievement of certain operational improvements in select theatres;

 

   

for Mr. Ellis, the achievement of certain thresholds related to the execution and amendments of certain lease agreements; and

 

   

for Mr. Lundin, the achievement of certain operational improvements in select theatres.

The payout of 2014 operating bonuses was also conditioned upon our achieving actual EBITDA of at least 85% of the 2014 Bonus EBITDA Target. If we achieved less than 85% of the 2014 Bonus EBITDA Target, the NEOs would not be entitled to the payment of a 2014 operating bonus. However, given that we achieved 94% of the 2014 Bonus EBITDA Target, each NEO was eligible to receive a payout of their respective 2014 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
89% of the target
amounts
     Payout ($)    $55,500    $49,395
     Payout (%)    100%    89%
   50%  

 

Certain increases in
EBITDA from acquired
theatres (1)

  

 

Such increases equaled

100% of the target amounts

  

 

Such increases were
less than the targeted range

     Payout ($)    $55,500    $0
     Payout (%)    100%    0%

Richard B.

Hare

   33%   Average of 2014 non-
EBITDA bonuses by
individuals reporting
directly to Mr. Hare
   Such average equaled
between 100% and 115%
of the target amounts
   Such average equaled
121% of the target
amounts
     Payout ($)    $28,125    $32,344
     Payout (%)    100%    115%
   33%   Achievement of
individual performance
criteria, as determined by
the Audit Committee
   Exceeded expectations    Substantially exceeded

expectations

     Payout ($)    $28,125    $42,188
     Payout (%)    100%    150%
   17%   Certain

increases in screen count

from acquired

theatres (1)

   Such increases equaled
100% of the target
amounts
   Such increases were less
than the targeted range
     Payout ($)    $14,063    $12,516
     Payout (%)    100%    89%

 

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Name

   Percentage of
Operating
Bonus
  Operating Bonus Criteria   

Target

  

Actual Result

   17%   Certain increases in
EBITDA from
acquired
theatres (1)
   Such increases equaled
100% of the target
amounts
   Such increases were less
than the targeted range
     Payout ($)    $14,063    $0
     Payout (%)    100%    0%

Fred W.

Van Noy

   33%   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
greater than 75% and
less than 100%

of the targeted range

     Payout ($)    $31,875    $23,906
     Payout (%)    100%    75%
   33%  

 

Achievement of
increases

in theatre-level cash
flow

from certain theatres

  

 

Such increases were greater
than 14.0% and less than 14.2%

   Such increases were less
than the targeted range

 

     Payout ($)    $31,875    $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
89% of the target
amounts

     Payout ($)    $15,938    $14,184
     Payout (%)    100%    89%
   17%  

 

Certain increases in
EBITDA from
acquired
theatres (1)

  

 

Such increases equaled

100% of the target

Amounts

  

 

Such increases were less
than the targeted range

     Payout ($)    $15,938    $0
     Payout (%)    100%    0%

Daniel E.

Ellis

   66%   Achievement of
certain targets in
lease executions or
amendments
   Such achievements

equaled 100% of the

target amounts

   Such achievements

Equaled 133% of the

target amounts

     Payout ($)    $51,000    $67,830
     Payout (%)    100%    133%
   17%   Certain
increases in screen
count
from acquired
theatres (1)
   Such increases equaled
100% of the target
amounts
   Such increases equaled
89% of the target
amounts
     Payout ($)    $12,750    $11,348
     Payout (%)    100%    89%
   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 ($)    $12,750    $0
     Payout (%)    100%    0%

John Lundin

   100%   Achievement of
certain

targeted reductions in

film rent

   Film rent fell

within the targeted

range

   Reductions in film rent
were greater than 25%
and less than 50%

of the targeted range

     Payout ($)    $43,750    $10,938
     Payout (%)    100%    25%

 

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(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.

Based upon the achievement of applicable performance objectives described above, the NEOs earned the following operating bonus amounts in 2014:

 

Name

   Bonus Target as a
Percentage of 2014
Target Bonus
Opportunity
    2014 Operating
Bonus Target ($)
     2014 Operating
Bonus Payout
as a Percentage of
2014 Operating
Bonus Target
    2014 Operating
Bonus Payout ($)
 

S. David Passman III

     15     111,000         45     49,395   

Richard B. Hare

     30     84,375         103     87,047   

Fred W. Van Noy

     30     95,625         40     38,091   

Daniel E. Ellis

     30     76,500         104     79,178   

John Lundin

     50     43,750         25     10,938   

Total 2014 Bonus Payout

The total 2014 bonuses paid to the NEOs (which equals the sum of the 2014 financial-based bonus and the 2014 operating bonus) were as follows:

 

Name

   2014 Target Bonus
Opportunity ($)
     2014 Total
Bonus Payout as a
Percentage of
2014 Target
Bonus  Opportunity
    2014 Total Bonus
Payout ($)
 

S. David Passman III

     740,000         75     552,595   

Richard B. Hare

     281,250         87     244,547   

Fred W. Van Noy

     318,750         68     216,591   

Daniel E. Ellis

     255,000         87     221,978   

John Lundin

     87,500         53     45,938   

Deferred Compensation Programs

Prior to July 2013, we funded a non-qualified deferred compensation program (“Secular Trust”) 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. We dissolved the trust accounts in November 2014 and all investments held under the plan were distributed to the respective participant. Earnings on trust assets held prior to dissolution of the trust accounts were credited to the Participating NEOs’ accounts and are shown below in the Summary Compensation Table and the Nonqualified Deferred Compensation for 2014 table.

Beginning in July 2013, we adopted a new non-qualified deferred compensation program (“COLI Plan”) for the Participating NEOs, pursuant to which Carmike pays additional compensation equal to 10% of the executives’ base salary and actual cash bonus. Mr. Lundin is not a participant in the deferred compensation

 

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program. 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.

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.

Long-Term Incentives

The Compensation and Nominating Committee believes that an annual equity 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 from Pearl Meyer & Partners (and reviewed by Mercer LLC), has eliminated the grant of stock options in favor of an equity grant mix that includes time-based restricted stock and performance shares. For 2014, the equity grant mix by value was 33% time-based restricted stock and 66% performance shares.

Currently, any equity-based awards granted by the Compensation and Nominating Committee are granted pursuant to the 2014 Incentive Stock Plan. The primary purpose of the 2014 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 2014 Incentive Stock Plan is administered by the Compensation and Nominating Committee. 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. The 2014 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 2014 Incentive Stock Plan is contained below under the heading “Potential Payments Upon Termination or Change in Control.”

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 2014, the Compensation and

 

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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 units 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 units are entitled to receive ordinary cash dividends on and to vote such shares of restricted stock units. Dividends or dividend-equivalents accrue on performance shares, but are only paid out upon the issuance of the underlying common stock if the performance shares are earned.

2014 Long-Term Incentive Awards

In connection with Carmike’s equity incentive award program, the Compensation and Nominating Committee approved, effective March 3, 2014, performance share and time-based restricted stock unit awards to the NEOs, including the threshold, target and maximum amount available to be earned as of the grant date for the performance shares. The following table summarizes these grants:

 

Name

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

S. David Passman III

     18,600         19,000         38,000         57,000   

Richard B. Hare

     4,700         4,850         9,700         14,550   

Fred W. Van Noy

     6,700         6,850         13,700         20,550   

Daniel E. Ellis

     3,400         3,500         7,000         10,500   

John Lundin

     1,800         1,950         3,900         5,850   

 

(1) The Compensation and Nominating Committee determined that the restricted stock will vest on March 3, 2017.

 

(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 the EBITDA targets for fiscal 2014 (giving effect to the Box Office Index) described in the Bonus Program above. Based on our actual 2014 Bonus EBITDA of $103.6 million, and the EBITDA-based bonus payout scale described above, the senior executives earned 80% of their performance share opportunity for the 2014 performance period for these 2014 grants.

In addition, the same performance metrics applied to the 2014 performance period for the performance shares grant made in 2012 and 2013. Accordingly, the senior executives earned 80% of their performance share opportunity for the 2014 performance period for the 2012 and 2013 grants of performance shares.

 

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The shares earned for the 2014 performance period by the senior executives are shown in the table below (and such shares will be issued in 2017):

 

Name

   Performance
Shares
(2012 Grant)
Earned (2014
Performance
Period) (#)
     Performance
Shares
(2013 Grant)
Earned (2014
Performance
Period) (#)
     Performance
Shares
(2014 Grant)
Earned (2014
Performance
Period) (#)
 

S. David Passman III

     18,668         16,000         10,133   

Richard B. Hare

     6,000         4,107         2,587   

Fred W. Van Noy

     6,668         5,600         3,654   

Daniel E. Ellis

     5,600         2,934         1,867   

John Lundin

     1,868         1,707         1,040   

Perquisites

We provide limited perquisites to our senior executive officers, including the personal use of an automobile, the personal use of corporate aircraft, 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 2014 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 and April 12, 2012. The employment agreement was restated and amended on 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 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 the lesser of a dollar-amount multiple of the executive officer’s base salary, or the non-employee director’s annual cash retainer, or a share-based target, as set forth below.

 

Position

   Share-Based
Target
     Applicable
Multiple
 

Chief Executive Officer

     148,000         6x   

Chief Operating Officer

     42,500         3x   

Chief Financial Officer

     37,500         3x   

General Counsel

     34,000         3x   

Non-employee directors

     13,000         6x   

 

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The share-based ownership goal will not change as a result of changes in an individual’s annual cash retainer or base salary or fluctuations in the Company’s stock price. However, when an individual is appointed to one of the executive officer positions specified above, that individual’s share-based ownership goal will be calculated by multiplying the individual’s base salary by the applicable multiple, dividing the result by the average closing price of the Company’s common stock during the 200 trading days prior to the date of appointment, and rounding to the nearest 500 shares. The share-based ownership goal to a newly appointed non-employee director is currently fixed at 13,000 shares.

The multiple-based ownership goal will initially be the same as the share-based ownership goal and will then be re-calculated as of December 31 of each year (the computation date of the stock ownership guidelines) by multiplying the individual’s base salary or annual retainer by the applicable multiple and dividing the result by the average closing price of the Company’s common stock during the 30 trading days prior to the computation date.

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.

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:

 

   

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 not apply once the stock ownership guidelines described above have been satisfied.

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

 

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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). None of our executive officers or directors holds any stock subject to pledge.

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 intended 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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Summary Compensation Table

 

Name and Principal
Position

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

S. David Passman III

President and Chief Executive Officer

    

 
 

2014

2013
2012

  

  
  

    

 
 

740,000

690,000
665,000

  

  
  

    

 
 

1,651,022

1,409,400
1,327,600

  

  
  

    

 
 

552,595

637,043
894,758

  

  
  

    

 
 

15,715

33,420
16,560

  

  
  

    

 
 

293,095

271,104
226,795

(5) 

  
  

   

 
 

3,252,427

3,109,967
3,130,713

  

  
  

Richard B. Hare

Senior Vice
President—Finance, Treasurer and Chief Financial Officer

    

 
 

2014

2013
2012

  

  
  

    
 
 
375,000
350,000
335,000
  
  
  
    
 
 
420,048
361,746
384,578
  
  
  
    
 
 
244,547
256,331
340,193
  
  
  
    
 

 

5,694
12,538

11,494

  
  

  

    

 
 

94,075

87,827
73,239

(5) 

  
  

   
 
 
1,139,364
1,103,442
1,169,504
  
  
  

Fred W. Van Noy

Senior Vice President
and Chief Operating Officer

    

 

 

2014

2013

2012

  

  

  

    

 

 

425,000

400,000

385,000

  

  

  

    

 

 

595,068

493,290

436,400

  

  

  

    

 

 

216,591

225,450

357,761

  

  

  

    

 

 

15,435

73,451

45,313

  

  

  

    

 

 

80,509

88,163

78,315

(5) 

  

  

   

 

 

1,332,603

1,320,354

1,327,789

  

  

  

Daniel E. Ellis

Senior Vice President, General Counsel and Secretary

    

 

 

2014

2013

2012

  

  

  

    

 

 

340,000

312,000

300,000

  

  

  

    

 

 

303,368

258,390

360,030

  

  

  

    

 

 

221,978

216,801

312,525

  

  

  

    

 

 

6,903

4,377

1,210

  

  

  

    

 

 

78,971

88,395

59,779

(5) 

  

  

   

 

 

951,220

911,163

1,058,514

  

  

  

John Lundin

Vice President—Film

    

 

 

2014

2013

2012

  

  

  

    

 

 

250,000

245,000

232,000

  

  

  

    

 

 

166,269

150,336

125,465

  

  

  

    

 

 

45,938

61,740

95,410

  

  

  

    

 

 

—  

—  

—  

 

 

 

    

 

 

15,474

12,655

12,580

  

  

  

   

 

 

477,681

469,731

465,455

  

  

  

 

(1) 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 2014, 2013 and 2012 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 2014 performance share awards assumed target performance for the full three-year performance period. Assuming maximum performance, the grant date fair value of performance awards would have been $1,662,690, $424,424, $599,444, $306,285 and $170,645 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.

 

(2) Equals amounts paid to the NEOs pursuant to our cash Bonus Program comprised of (a) the 2014, 2013 and 2012 financial performance bonus payouts, as applicable and (b) the 2014, 2013 and 2012 operating bonus payouts, as applicable. The 2014 payouts are described above under the heading “Compensation Discussion and Analysis—Components of Executive Compensation—Annual Cash Incentive Bonuses—Annual Section 162(m) Performance-Based Program.”

 

(3) 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 cash taxable compensation. The Company directed the additional cash compensation first into the participant’s individual retirement account, up to the legal limit, with the remainder directed into trusts for the benefit of each participant. Distributions from the applicable trust are made upon or shortly after normal retirement, disability, death or termination of employment of a participant. No new contributions were made to this program during 2014. The table above includes the earnings on the assets held in the trust in 2014, 2013 and 2012, respectively and do not include earnings on amounts held in the participants’ individual retirement account. In November 2014, the Company dissolved the trusts and all investments held under the plan were distributed to the respective participant.

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 cash

 

29


Table of Contents

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 include the earnings on the investments under the new deferred compensation program in 2013 and 2014.

 

(4) The amounts set forth in the “All Other Compensation” column include the following perquisites for 2014: Mr. Passman—$4,356 for group term life insurance premiums, $8,945 for the personal use of a company-provided automobile, $47,535 for the personal use of company aircraft, $73,744 for living expenses ($43,130 net of income taxes), and $15,161 for club membership dues; Mr. Hare—$990 for group term life insurance premiums, $11,229 for the personal use of a company-provided automobile, $6,905 for the personal use of company aircraft and $8,943 for club membership dues; Mr. Van Noy—$3,870 for group term life insurance premiums, $2,726 for the personal use of a company-provided automobile and $5,493 for club membership dues; Mr. Ellis—$1,350 for group term life insurance premiums, an automobile allowance of $9,000, $223 for the personal use of company aircraft and $9,398 for club membership dues; and Mr. Lundin—$8,382 for group term life insurance premiums, $5,665 for the personal use of a company-provided automobile and $1,427 for club membership dues. We calculate the incremental cost of personal use of company aircraft as the actual cost of fuel and oil, prorated amounts of repairs and maintenance, travel, lodging and other expenses for crew, in-flight food and beverages, landing and ground handling fees, hangar or aircraft parking costs and certain other smaller variable costs for each personal trip leg. Fixed costs that would be incurred in any event to operate company aircraft are not included.

 

(5) Pursuant to our deferred compensation program in 2014, we contributed the following amounts (representing 10% of the executive’s base salary and cash bonus actually paid during calendar year 2014) for the applicable NEOs, which are included in the “All Other Compensation” column above: Mr. Passman $143,354; Mr. Hare $66,008; Mr. Van Noy $68,420; Mr. Ellis $59,000. The deferred compensation program is discussed further below under the heading “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table.”

 

30


Table of Contents

Grants of Plan-Based Awards in 2014

 

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

   

 

 

3/3/2014

3/3/2014

—  

  

  

 

   

 

 

—  

—  

370,000

 

  

  

   

 

 

—  

—  

740,000

  

  

  

   

 

 

—  

—  

1,276,500

  

  

  

   

 

 

19,000

—  

—  

  

  

  

   

 

 

38,000

—  

—  

  

  

  

   

 

 

57,000

—  

—  

  

  

  

   

 

 

—  

18,600

—  

  

  

  

   

 

 

1,108,460

542,562

—  

  

  

  

Richard B. Hare

   

 

 

3/3/2014

3/3/2014

—  

  

  

  

   

 

 

—  

—  

140,625

  

  

  

   

 

 

—  

—  

281,250

  

  

  

   

 

 

—  

—  

464,063

  

  

  

   

 

 

4,850

—  

—  

  

  

  

   

 

 

9,700

—  

—  

  

  

  

   

 

 

14,550

—  

—  

  

  

  

   

 

 

—  

4,700

—  

  

  

  

   

 

 

282,949

137,099

—  

  

  

  

Fred W. Van Noy

   

 

 

3/3/2014

3/3/2014

—  

  

  

  

   

 

 

—  

—  

159,375

  

  

  

   

 

 

—  

—  

318,750

  

  

  

   

 

 

—  

—  

494,063

  

  

  

   

 

 

6,850

—  

—  

  

  

  

   

 

 

13,700

—  

—  

  

  

  

   

 

 

20,550

—  

—  

  

  

  

   

 

 

—  

6,700

—  

  

  

  

   

 

 

399,629

195,439

—  

  

  

  

Daniel E. Ellis

   

 

 

3/3/2014

3/3/2014

—  

  

  

  

   

 

 

—  

—  

127,500

  

  

  

   

 

 

—  

—  

255,000

  

  

  

   

 

 

—  

—  

420,750

  

  

  

   

 

 

3,500

—  

—  

  

  

  

   

 

 

7,000

—  

—  

  

  

  

   

 

 

10,500

—  

—  

  

  

  

   

 

 

—  

3,400

—  

  

  

  

   

 

 

204,190

99,178

—  

  

  

  

John Lundin

   

 

 

3/3/2014

3/3/2014

—  

  

  

  

   

 

 

—  

—  

32,813

  

  

  

   

 

 

—  

—  

87,500

  

  

  

   

 

 

—  

—  

131,250

  

  

  

   

 

 

1,950

—  

—  

  

  

  

   

 

 

3,900

—  

—  

  

  

  

   

 

 

5,850

—  

—  

  

  

  

   

 

 

—  

1,800

—  

  

  

  

   

 

 

113,763

52,506

—  

  

  

  

 

(1) Represents threshold, target and maximum award opportunities payable to each NEO pursuant to the 2014 Cash Bonus Program discussed above under the heading “Compensation Discussion and Analysis—Components of Executive Compensation—Annual Cash Incentive Bonuses—Annual Section 162(m) Performance-Based Program.” The amounts presented include both the financial-based bonus opportunity and the operating bonus opportunity.

 

(2) On March 3, 2014, the Compensation and Nominating Committee awarded shares of time-based restricted stock units to each NEO. The time-based restricted stock will vest on March 3, 2017.

 

(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. For the 2014 performance shares granted, grant date fair value assumes target performance for the full three-year performance period.

 

(4) Represents the target number of performance shares granted in 2014. One-third of the target number of performance shares may be earned in 2014, 2015 and 2016, respectively. Amounts actually earned by the executive are based on the achievement of an EBITDA target for fiscal 2014, 2015 and 2016. Based on our actual 2014 Bonus EBITDA, the senior executives earned 80% of their target performance share opportunity for 2014. Specifically, for 2014, Mr. Passman earned 10,133 shares, Mr. Hare earned 2,587 shares, Mr. Van Noy earned 3,654 shares, Mr. Ellis earned 1,867 shares and Mr. Lundin earned 1,040 shares. Common stock pursuant to these performance shares will be issued in 2017.

 

31


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 and April 12, 2012. The employment agreement was amended and restated on 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 2014 was $740,000. 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.

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.”

 

32


Table of Contents

Outstanding Equity Awards at 2014 Fiscal Year-End

 

    Option Awards     Stock Awards              

Name

  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    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

70,000

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

 

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

8.46

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

6/4/19

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

30,000

30,000

18,600

57,400

20,400

—  

—  

—  

  

  

  

(3) 

(5) 

(8)

(7) 

(9)

  

  

  

   

 

 

 

 

 

 

 
 

 

 

—  

—  

—  

788,100

788,100

488,622

1,507,898

535,908
—  

—  

—  

  

  

  

  

  

  

  

  
  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

18,668

36,000

35,466

  

  

  

  

  

  

  

  

(4) 

(6) 

(10) 

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

490,408

945,720

931,692

  

  

  

  

  

  

  

  

  

  

  

Richard B. Hare

   

 

 

 

 

 

 

 

 

 

 

 

26,666

45,000

25,000

25,000

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

13,334

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

(2) 

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

25.95

8.38

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

4/13/17

7/6/19

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

12,750

7,700

4,700

18,450

5,236

—  

—  

—  

  

  

  

  

(3) 

(5) 

(8) 

(7) 

(9) 

  

  

  

   

 

 

 

 

 

 

 

 
 

 

 

—  

—  

—  

—  

334,943

202,279

123,469

484,682

137,550
—  

—  

—  

  

  

  

  

  

  

  

  

  
  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

6,000

9,241

9,054

  

  

  

  

  

  

  

  

  

(4) 

(6) 

(10) 

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

157,620

242,761

237,849

  

  

  

  

  

  

  

  

  

  

  

  

Fred W. Van Noy

   

 

 

 

 

 

 

 

 

 

 

 

26,666

50,000

28,000

28,000

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

13,334

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

(2) 

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

25.95

8.38

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

4/13/17

7/6/19

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

15,000

10,500

6,700

20,500

7,140

—  

—  

—  

  

  

  

  

(3) 

(5) 

(8) 

(7) 

(9) 

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

394,050

275,835

176,009

538,535

187,568

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

6,668

12,600

12,787

  

  

  

  

  

  

  

  

  

(7) 

(9) 

(10) 

   

 

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

175,168

331,002

335,914

  

  

  

  

  

  

  

  

  

  

  

  

Daniel E. Ellis

   

 

 

 

 

 

 

 

 

15,000

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

6.23

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

8/1/21

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

—  

12,000

5,500

3,400

17,220

3,740

—  

—  

—  

  

(3) 

(5) 

(8) 

(7) 

(9) 

  

  

  

   

 

 

 

 

 

 

 

 

—  

315,240

144,485

89,318

452,369

98,250

—  

—  

—  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

5,600

6,600

6,534

  

  

  

  

  

  

(7) 

(9) 

(10) 

   

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

147,112

173,382

171,648

  

  

  

  

  

  

  

  

  

John Lundin

   

 

 

 

 

 

 

 

 

 

 

15,000

8,000

8,000

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

7.22

10.92

7.34

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

1/25/20

3/3/20

3/11/21

—  

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

4,500

3,200

1,800

5,740

2,176

—  

—  

—  

  

  

  

(3) 

(5) 

(8) 

(7) 

(9) 

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

118,215

84,064

47,286

150,790

57,164

—  

—  

—  

  

  

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

1,868

3,841

3,640

  

  

  

  

  

  

  

  

(7) 

(9) 

(10) 

   

 

 

 

 

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

—  

49,072

100,903

95,623

  

  

  

  

  

  

  

  

  

  

  

 

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(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, 2014 of $26.27 per share.

 

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

 

(4) Represents the target number of performance shares granted in 2012 for the remaining 2014 performance period. 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. Based on actual 2014 Bonus EBITDA, the executives earned 80% of their target performance share opportunity for 2014. Specifically, for 2014, Mr. Passman earned 18,668 shares, Mr. Hare earned 6,000 shares, Mr. Van Noy earned 6,668 shares, Mr. Ellis earned 5,600 shares and Mr. Lundin earned 1,868 shares.

 

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

 

(6) Represents the target number of performance shares granted in 2013 for the remaining 2014 and 2015 performance periods. One-third of the target number of performance shares were available to 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 actual 2014 Bonus EBITDA, the executives earned 80% of their target performance share opportunity for 2014. Specifically, for 2014, Mr. Passman earned 16,000 shares, Mr. Hare earned 4,107 shares, Mr. Van Noy earned 5,600 shares, Mr. Ellis earned 2,934 shares and Mr. Lundin earned 1,707 shares.

 

(7) Represents the number of performance-based restricted stock awards earned for 2012 performance that were subject to additional time-based vesting requirements. These shares of restricted stock vested in full on March 15, 2015.

 

(8) These restricted stock units vest in full on March 3, 2017.

 

(9) Represents the number of performance-based restricted stock awards earned for 2013 performance that are subject to additional time-based vesting requirements. These shares of restricted stock vest in full on February 28, 2016.

 

(10) Represents the target number of performance shares granted in 2014. One-third of the target number of performance shares may be earned in 2014, 2015, and 2016, respectively. Amounts actually earned by the executive are based on the achievement of an EBITDA target for fiscal 2014, 2015 and 2016. Based on our actual 2014 Bonus EBITDA, the executives earned 80% of their target performance share opportunity for 2014. Specifically, for 2014, Mr. Passman earned 10,133 shares, Mr. Hare earned 2,587 shares, Mr. Van Noy earned 3,654 shares, Mr. Ellis earned 1,867 shares and Mr. Lundin earned 1,040 shares. Common stock pursuant to these performance shares will be issued in 2017.

Option Exercises and Stock Vested

For the Fiscal Year Ended December 31, 2014

 

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

     —          —          50,000         1,577,500   

Richard B. Hare

     —          —          18,500         583,675   

Fred W. Van Noy

     —          —          22,000         694,100   

Daniel E. Ellis

     —          —          7,083         223,969   

John Lundin

     —          —          7,000         220,850   

 

(1) These shares of restricted stock vested on March 11, 2014, with the exception of 5,000 shares for Mr. Ellis which vested on August 1, 2014.

 

(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 11, 2014, the vesting date, of $31.55, with the exception of 5,000 shares for Mr. Ellis which vested on August 1, 2014. The closing market price for our Common Stock on August 1, 2014 was $31.65.

 

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Nonqualified Deferred Compensation for 2014

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

 

Name

 

Plan

  Executive
Contributions in
Last FY
($)
    Registrant
Contributions
Earned in
Last FY
($) (1)
    Aggregate
Earnings/Losses
During
Last FY
($) (2)
    Aggregate
Withdrawals /
Distributions
($) (3)
    Aggregate
Balance at
Last FYE
($) (4)
 

S. David Passman III

  Secular Trust     —          —          6,094        (245,908     —     
  COLI Plan     —          144,604        9,621        —          165,459   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Total     —          144,604        15,715        (245,908     165,459   

Richard B. Hare

  Secular Trust     —          —          2,569        (184,893     —     
  COLI Plan     —          66,633        3,125        —          75,561   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Total     —          66,633        5,694        (184,893     75,561   

Fred W. Van Noy

  Secular Trust     —          —          11,485        (629,692     —     
  COLI Plan     —          69,045        3,950        —          79,899   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Total     —          69,045        15,435        (629,692     79,899   

Daniel E. Ellis

  Secular Trust     —          —          1,485        (33,856     —     
  COLI Plan     —          59,700        5,418        —          70,458   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Total     —          59,700        6,903        (33,856     70,458   

John Lundin

  Secular Trust     —          N/A        N/A        N/A        N/A   
  COLI Plan     —          N/A        N/A        N/A        N/A   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

 

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

 

(2) Under our deferred compensation programs, 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 Participating NEO’s respective investment accounts under the deferred compensation programs during 2014. These amounts are included in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table.

 

(3) No contributions were made to the Secular Trust during 2014. We dissolved the trust accounts in November 2014 and all investments held under the plan were distributed to the respective participant.

 

(4) The aggregate balance of all assets held in trust or investment accounts under the deferred compensation plan 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, 2014, 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.

 

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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 and April 12, 2012. The employment agreement was amended and restated on 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;

 

   

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.

No Tax Gross-Up

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

 

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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, the Separation Agreements were amended and restated which primarily related to 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) 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.

If we terminate the executive without cause (as defined below) or at anytime 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.

No Tax Gross-Ups

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.

 

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2014 Incentive Stock Plan and Award Agreements

Under the 2014 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 2014 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. Any grant subject to a performance goal shall vest only with respect to shares earned based on actual results for performance periods completed prior to the change in control and at the target amount for the performance period in which the change of control occurs and for future performance periods.

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;

 

   

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, with or 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        14,740        6,476,474        9,251,214   

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        14,740        6,476,474        9,251,214   

Death or disability

    —          —          6,476,474        6,476,474   

Change in control (without termination)

    2,760,000        14,740        6,476,474        9,251,214   

Voluntary termination (3)

    2,760,000        14,740        6,476,474        9,251,214   

Richard B. Hare

       

Termination without cause

    750,000        31,863        339,209        1,121,072   

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)

    1,275,000        31,863        1,925,418        3,232,281   

Death or disability

    —          —          1,925,418        1,925,418   

Change in control (without termination)

    1,275,000        31,863        1,925,418        3,232,281   

Fred W. Van Noy

       

Termination without cause (3)

    850,000        25,921        2,418,349        3,294,270   

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)

    1,450,000        25,921        2,418,349        3,894,270   

Death or disability

    —          —          2,418,349        2,418,349   

Change in control (without termination)

    1,450,000        25,921        2,418,349        3,894,270   

Voluntary termination (3)

    1,450,000        25,921        2,418,349        3,894,270   

Daniel E. Ellis

       

Termination without cause

    680,000        32,523        315,240        1,027,763   

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)

    1,148,000        32,523        1,591,804        2,772,327   

Death or disability

    —          —          1,591,804        1,591,804   

Change in control (without termination)

    1,148,000        32,523        1,591,804        2,772,327   

John Lundin

       

Termination without cause

    250,000        23,411        118,215        391,626   

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)

    335,750        23,411        118,215        477,376   

Death or disability

    —          —          703,117        703,117   

Change in control (without termination)

    250,000        23,411        703,117        976,528   

 

(1) This table assumes the termination, resignation and/or change in control occurred as of December 31, 2014, and accelerated vesting amounts are based on our closing stock price of $26.27 per share as of that date.

 

(2) Does not include payment of amounts in connection with the consummation of the change in control.

 

(3) Because Mr. Van Noy and Mr. Passman have reached retirement age, as defined above, they will receive accelerated vesting of outstanding options and performance shares under the circumstances described above under “2014 Incentive Stock Plan and Award Agreements.”

 

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Table of Contents

Key Definitions

During the two-year period following a change in control, the Separation Agreements and the Passman Employment Agreement define “cause” to mean:

 

   

the executive is convicted of, pleads guilty to, or confesses or otherwise admits to any felony or any act of fraud, misappropriation or embezzlement or the executive otherwise engages in a fraudulent act or course of conduct which has a material and adverse effect on us;

 

   

there is any act or omission by the executive involving malfeasance or gross negligence in the performance of his duties and responsibilities, or the exercise of his powers as an executive, where such act or omission actually has a material and adverse effect on our business;

 

   

the executive breaches any of the restrictive covenants described below; or

 

   

the executive violates any provision of our code of conduct if the consequence to such violation clearly would have been a termination of an employee by us.

Prior to a change in control or after the two-year period following a change in control, the Separation Agreements and the Passman Employment Agreement define “cause” to mean:

 

   

the executive is convicted of, pleads guilty to, or confesses or otherwise admits to any felony or any act of fraud, misappropriation or embezzlement or the executive otherwise engages in a fraudulent act or course of conduct;

 

   

there is any act or omission by the executive involving malfeasance or negligence in the performance of his duties and responsibilities, or the exercise of his powers as an executive, where such act or omission is reasonably likely to materially and adversely affect our business;

 

   

the executive breaches any of the restrictive covenants described below; or

 

   

the executive violates any provision of our code of conduct if the consequence to such violation ordinarily would be a termination of the employee by us.

The Separation Agreements and the Passman Employment Agreement define “change in control” to mean:

 

   

a change in control within the meaning of Section 14(a) of the Exchange Act;

 

   

any person or group (provided further, in the case of Mr. Van Noy’s agreement, that such person is not a signatory to the shareholders’ agreement dated January 31, 2002 (the “Stockholders Agreement”) or a person or group which acquires stock in a transaction with a signatory to the Stockholders Agreement) becomes the beneficial owner of 45% or more of the combined voting power of our Common Stock;

 

   

a majority of our Board of Directors is replaced within a two-year period by directors not approved by 2/3 of the existing Board;

 

   

our stockholders approve a reorganization, merger, consolidation or share exchange in which we are not the surviving company;

 

   

our stockholders approve a sale of 50% or more of our assets or business;

 

   

our stockholders approve the dissolution or liquidation of us; or

 

   

our stockholders approve our combination with another company, unless following the combination, our stockholders have more than 60% of the Common Stock of the combined company in substantially the same proportions in which they owned our stock.

During the two-year period following a change in control, the Separation Agreements and the Passman Employment Agreement define “good reason” to mean:

 

   

a reduction in the executive’s base salary or a reduction in the executive’s combined opportunity to receive any incentive compensation and bonuses;

 

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a reduction in the scope, importance or prestige of the executive’s duties, responsibilities or authority (other than as a result of a mere change in the executive’s title if such change in title is consistent with our organizational structure following a change in control);

 

   

the transfer of the executive’s primary work site from the executive’s primary work site as of the date of the change in control to a new primary work site which is more than 50 miles from the executive’s then current primary work site (with certain exceptions); or

 

   

we fail to continue to provide the executive the health and welfare benefits, deferred compensation benefits, executive perquisites and stock option and restricted stock grants that are in the aggregate comparable in value to those provided to the executive immediately prior to the change in control.

Under the 2014 Incentive Stock Plan, a “change in control” means:

 

   

a change in control within the meaning of Section 14(a) of the Exchange Act;

 

   

the acquisition by any person of 30% or more of the voting power for election of our directors;

 

   

the incumbent members of our Board of Directors, or their approved successors, ceasing to be a majority of the Board of Directors during any period of two years or less;

 

   

a reorganization, merger, consolidation or share exchange approved by our stockholders whereby our Common Stock is converted into or exchanged for the stock of another corporation;

 

   

a sale or disposition of 50% or more of our assets;

 

   

a reorganization, merger, consolidation or share exchange approved by our stockholders, unless our stockholders control the resulting company and retain, with respect to our other stockholders, substantially the same proportion of share ownership that they had in us; or

 

   

the approval by stockholders of a complete liquidation or dissolution of us.

The “change effective date” for a change in control means, generally, the date of closing for a change in control pursuant to a transaction with a closing date (such as a merger, consolidation, reorganization, share exchange, sale or disposition of assets) or the date of reporting in accordance with applicable law for other changes in control. Until there is a “change effective date” for a change in control, there will be no accelerated vesting of awards. For example, if our stockholders approve a merger, but the merger does not ultimately close, there will be no accelerated vesting of awards.

Restrictive Covenants

For a period of two years following the termination of Mr. Passman, Mr. Hare, Mr. Van Noy or Mr. Ellis, and for one year following the termination of Mr. Lundin, pursuant to the terms of the Separation Agreements and the Passman Employment Agreement, as applicable, the NEOs have agreed not to:

 

   

for purposes of competing with us, solicit or seek to solicit any of our suppliers with whom the executive had a personal business interaction, at any time during the two years prior (one year prior for Mr. Lundin) to the termination of the executive’s employment;

 

   

employ or seek to employ any of our employees serving in an executive, managerial, or supervisory capacity during the term of the executive’s employment, with whom the executive had business dealings during the two years prior to the termination of the executive’s employment, unless such employee has ceased to be employed by us for a period of at least one year;

 

   

use or disclose any trade secret that the executive may have acquired during the term of his employment for so long as such information remains a trade secret; or

 

   

use or disclose any confidential or proprietary information that the executive may have acquired during the term of, in the course of, or as a result of his employment.

 

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If we breach our obligations to an executive under his Separation Agreement or to Mr. Passman under the Passman Employment Agreement, the restrictive covenants are removed completely.

Deferred Compensation Program

As described previously, in July 2013 we entered into a deferred compensation program for a number of our senior executives, including Messrs. Passman, Hare, Van Noy and Ellis, the “Participating NEOs.” Upon a change in control, a successor to us is not obligated to continue making payments under the deferred compensation agreements upon the earlier of a Participating NEO’s termination of employment or the date on which the Participating NEO is eligible for payment under the Participating NEO’s agreement. A Participating NEO, or his beneficiary, is eligible for payment 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.

Information regarding the amounts earned by the Participating NEOs during 2014 are set forth above in the Summary Compensation Table in the “All Other Compensation” column and in the Nonqualified Deferred Compensation for 2014 table.

 

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PROPOSAL THREE: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Pay that reflects performance and alignment of pay with the long-term interests of our stockholders are key principles that underlie our compensation program. In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), stockholders have the opportunity to vote, on an advisory basis, on the compensation of our Named Executive Officers. This is often referred to as a “say on pay”, and provides you, as a stockholder, with the ability to cast a vote with respect to our 2014 executive compensation programs and policies and the compensation paid to the Named Executive Officers as disclosed in this proxy statement through the following resolution:

“RESOLVED, that the stockholders approve the compensation of the Named Executive Officers, as described in the Compensation Discussion and Analysis section and in the compensation tables and accompanying narrative disclosure in this proxy statement.”

As discussed in the Compensation Discussion and Analysis section, the compensation paid to our Named Executive Officers reflects the following principles of our compensation program:

 

   

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.

Although the vote on this Proposal Three is non-binding, the Compensation and Nominating Committee will review the voting results. To the extent there is any significant negative vote, we will consult directly with stockholders to better understand the concerns that influenced the vote. The Compensation and Nominating Committee would consider the constructive feedback obtained through this process in making decisions about future compensation arrangements for our Named Executive Officers.

As required by the Dodd-Frank Act, this vote does not overrule any decisions by the Board of Directors and will not create or imply any change to or any additional fiduciary duties of the Board of Directors.

The Board of Directors recommends a vote FOR the approval, on an advisory basis, of executive compensation.

 

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COMPENSATION OF DIRECTORS

Our non-employee directors (other than the non-executive chairman) receive annual cash compensation consisting of a $65,000 retainer. The non-executive Chairman of the Board of Directors receives an annual retainer of $85,000. Members of the Audit Committee (other than the chairman) receive an annual retainer of $7,500 and the Chairman of the Audit Committee receives an annual $12,500 retainer. The Chairman of the Compensation and Nominating Committee receives an annual $7,500 retainer and the Chair of the Corporate Governance Committee receives an annual retainer of $2,500. Our employees do not receive any additional compensation for serving on the Board of Directors.

For 2014, our non-employee directors receive annual equity compensation in the form of a stock-settled restricted stock unit grant valued at $60,000, issued at each annual meeting of stockholders and vesting in full at our next annual meeting of stockholders. Our non-executive Chairman of the Board receives an additional stock-settled restricted stock unit grant valued at $30,000 issued at each annual meeting of stockholders that vests in full at our next annual meeting of stockholders. Upon their initial election to the Board of Directors, we provide our non-employee directors a one-time grant of stock-settled restricted stock units valued at $22,500, vesting in full on the first anniversary of such director’s election to the Board.

We reimburse our non-employee directors for reasonable expenses incurred in connection with Board-related activities. These expenses may include meals, lodging and transportation, including the reimbursement for use of corporate aircraft incurred in conjunction with meetings of the Board of Directors or other Company business.

Director compensation for 2014 is as follows:

 

Name (1)

   Fees
Earned or Paid
in Cash ($)
     Stock Awards
($) (2)
     Total ($)  

Mark R. Bell (3)

   $ 71,335       $ 60,000       $ 131,335   

Jeffrey W. Berkman

   $ 59,835       $ 60,000       $ 119,835   

Sean T. Erwin

   $ 66,335       $ 60,000       $ 126,335   

James A. Fleming

   $ 58,835       $ 60,000       $ 118,835   

Alan J. Hirschfield

   $ 65,335       $ 60,000       $ 125,335   

Roland C. Smith (4)

   $ 86,335       $ 90,000       $ 176,335   

Patricia A. Wilson (5)

   $ 62,335       $ 60,000       $ 122,335   

 

(1) S. David Passman III, our President and Chief Executive Officer, is not included in this table as he did not receive compensation for his service as a director. The compensation received by Mr. Passman as an employee is shown in the Summary Compensation Table above.

 

(2) The amount reflects the grant date fair value of the stock awards. 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 2014 Annual Report on Form 10-K. As of December 31, 2014, each director had outstanding 1,910 unvested restricted stock units, which will vest at our Annual Meeting. Mr. Smith, as the non-executive Chairman of the Board, had outstanding an additional 955 unvested restricted stock units which will vest at the Annual Meeting.

 

(3) Mr. Bell is the Chairman of the Audit Committee.

 

(4) Mr. Smith is the non-executive Chairman of the Board and the Chairman of the Compensation and Nominating Committee.

 

(5) Ms. Wilson is the Chair of the Corporate Governance Committee.

COMPENSATION POLICIES AND PRACTICES AND RISK MANAGEMENT

In setting compensation, our Compensation and Nominating Committee considers the risks to our stockholders that may be inherent in our overall compensation program. The Compensation and Nominating Committee has reviewed our compensation policies and practices and concluded that our compensation program is designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy and does not encourage executives to take unnecessary or excessive risks.

 

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COMPENSATION COMMITTEE REPORT

The Compensation and Nominating Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement for the 2015 Annual Meeting of Stockholders and, based on this review and these discussions with management, the Compensation and Nominating Committee has recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this proxy statement for the 2015 Annual Meeting of Stockholders for filing with the SEC.

 

By the Compensation and Nominating Committee:    Roland C. Smith, Chairman
   Jeffrey W. Berkman
   James A. Fleming
   Patricia A. Wilson
April 8, 2015   

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 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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CORPORATE GOVERNANCE

Corporate Governance Information

Our Corporate Governance Guidelines, Code of Conduct for Officers, Directors and Employees, Code of Ethics for Senior Executive and Financial Officers, Incentive-Based Compensation Recoupment (Clawback) Policy and the charters for the Compensation and Nominating Committee, Corporate Governance Committee and Audit Committee are available, along with other corporate governance information, on our company website at www.carmike.com.

Board Meetings

The business of Carmike is managed under the direction of the Board of Directors. The Board of Directors met six times during the year ended December 31, 2014. Each of the incumbent directors attended at least 75% of the aggregate of: (1) the total meetings of the Board of Directors held during the period that he or she served during 2014 and (2) the total meetings held by all committees of the Board on which he or she served during 2014. The Board of Directors has adopted a policy whereby directors are expected to attend Carmike’s Annual Meeting of Stockholders. At the 2014 Annual Meeting of Stockholders, all of the members of the Board of Directors were present.

Board Leadership Structure

Until January 2009, Carmike operated under the traditional U.S. board leadership structure with our Chief Executive Officer serving as Chairman of the Board. In addition, between 2006 and January 2009, our Board of Directors also utilized a lead independent director to provide a source of Board leadership complementary to that of the Chief Executive Officer and Chairman of the Board. Upon the departure of our former Chief Executive Officer, the Board of Directors re-evaluated its leadership structure. Beginning in June 2009 with the appointment of Mr. Passman as our new President and Chief Executive Officer, the Board determined that it would be preferable for one of our independent directors to serve as non-executive Chairman of the Board. Mr. Smith was elected our non-executive Chairman of the Board on June 4, 2009. Mr. Smith has over twelve years experience serving on our Board, and currently serves as Chairman and Chief Executive Officer of Office Depot, Inc. At this time, we believe this Board leadership structure is appropriate for our company and our stockholders.

We believe it is the Chief Executive Officer’s responsibility to run the company and the Chairman’s responsibility to run the Board of Directors. We believe it is beneficial to have an independent Chairman of the Board whose sole job is leading the Board. In making the decision to appoint an independent Chairman of the Board, the Board of Directors considered the time that Mr. Passman is required to devote to the Chief Executive Officer position. By having another director serve as Chairman of the Board, Mr. Passman is able to focus his entire energy on running Carmike. In addition, this provides strong leadership for our Board of Directors, while also positioning the Chief Executive Officer as the leader of our company in the eyes of our employees and other stakeholders.

The Board of Directors determines its leadership structure from time to time. As part of the annual board self-evaluation process, the Board of Directors evaluates its leadership structure to ensure that the structure is appropriate for Carmike and its stockholders. We recognize that different board leadership structures may be appropriate for Carmike in the future, depending upon the applicable circumstances. However, the Board of Directors believes the current leadership structure, with Mr. Passman as Chief Executive Officer and Mr. Smith as Chairman of the Board, is the appropriate structure for Carmike at this time.

 

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Risk Oversight

The Audit Committee is primarily responsible for overseeing Carmike’s risk management processes on behalf of the full Board of Directors. The Audit Committee receives reports from management periodically regarding Carmike’s assessment of risks. In addition, the Audit Committee reports regularly to the full Board of Directors, which also considers Carmike’s risk profile. The Audit Committee and the full Board of Directors focus on the most significant risks facing Carmike and on Carmike’s general risk management strategy, and also ensure that risks undertaken by Carmike are consistent with the Board of Director’s risk management philosophy. While the Board of Directors oversees Carmike’s risk management, Carmike’s management is responsible for the day-to-day risk management process. This division of responsibilities is an effective approach for addressing the risks facing Carmike, and the Board’s leadership structure supports this approach.

Committees of the Board of Directors

Executive Committee

The Executive Committee consists of S. David Passman III, as Chairman, Roland C. Smith, and James A. Fleming. Alan J. Hirschfield served on the Executive Committee during the year ended December 31, 2014. The Executive Committee met one time during the year ended December 31, 2014.

The primary purpose of the Executive Committee is to assist the Board of Directors in fulfilling its responsibilities relating to capital expenditures, investments, acquisitions and financing activities based on the criteria established in the Committee’s charter. The Executive Committee is responsible for reviewing and approving transactions and agreements related to dispositions, acquisitions, joint ventures, capital expenditures, developments and refurbishments, indebtedness and vendor and supplier obligations.

Compensation and Nominating Committee

The Compensation and Nominating Committee consists of Roland C. Smith, as Chairman, Jeffrey W. Berkman, James A. Fleming and Patricia A. Wilson. The Board of Directors has determined that all members of the Compensation and Nominating Committee are independent as defined under the rules and regulations of the SEC and applicable listing standards of The Nasdaq Stock Market, Inc. (the “Nasdaq listing standards”), including the enhanced independence standards for compensation committee members. In addition, the Board of Directors has determined that each member meets the requirements of a “non-employee director” under Rule 16b-3 promulgated under the Exchange Act and an “outside director” under Section 162(m) of Code. The Compensation and Nominating Committee met nine times during the year ended December 31, 2014.

The Compensation and Nominating Committee is responsible for, among other things:

 

   

approving all salary arrangements and other remuneration for the Chief Executive Officer and other senior officers of Carmike;

 

   

administering our incentive stock plans;

 

   

reviewing annual incentive opportunity levels and goals;