UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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FAMOUS DAVE’S OF AMERICA, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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FAMOUS DAVE’S OF AMERICA, INC.
12701 Whitewater Drive, Suite 190
Minnetonka, Minnesota 55343
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2018
TO THE SHAREHOLDERS OF FAMOUS DAVE’S OF AMERICA, INC.:
Please take notice that the annual meeting of shareholders of Famous Dave’s of America, Inc. (the “Annual Meeting”) will be
held, pursuant to due call by the Board of Directors of the Company, at the offices of Gray Plant Mooty, 500 IDS Center, 80 South
Eighth Street, Minneapolis, Minnesota on Tuesday, May 15, 2018, at 3:00 p.m., or at any adjournment or adjournments thereof, for
the purpose of considering and taking appropriate action with respect to the following:
(1) The election of seven directors;
(2) The ratification of the appointment of Grant Thornton LLP as the independent registered public accounting firm of the
Company for fiscal 2018;
(3) Advisory approval of the Company’s executive compensation (“say-on-pay”);
(4) The approval of an amendment to the Company’s 2015 Equity Incentive Plan to increase the number of shares of common
stock reserved for issuance from 700,000 shares to 1,000,000 shares; and
(5) The transaction of any other business as may properly come before the Annual Meeting or any adjournments thereof.
Pursuant to due action of the Board of Directors, shareholders of record on March 20, 2018 will be entitled to vote at the Annual
Meeting or any adjournments thereof.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be Held on May 15, 2018
The proxy statement for the Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 31,
2017 are available to you on the Internet. We encourage you to review all of the important information contained in the proxy
materials before voting. To view the proxy statement and Annual Report to Shareholders on the Internet, visit
www.famousdaves.com/proxymaterials.
April 4, 2018
By Order of the Board of Directors
/s/ Jeffery Crivello
Jeffery Crivello
Chief Executive Officer
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FAMOUS DAVE’S OF AMERICA, INC.
12701 Whitewater Drive, Suite 190
Minnetonka, Minnesota 55343
PROXY STATEMENT
Annual Meeting of Shareholders to be Held
May 15, 2018
VOTING AND REVOCATION OF PROXY
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Famous Dave’s of
America, Inc. to be used at the annual meeting of shareholders of the Company (the “Annual Meeting”) to be held at the offices of
Gray Plant Mooty, 500 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota on Tuesday, May 15, 2018, at 3:00 p.m.
Throughout this Proxy Statement, the terms “the Company,” “Famous Dave’s,” “we,” “our,” “us,” and similar terms refer to Famous
Dave’s of America, Inc.
The Annual Meeting is being held for the purpose of considering and taking appropriate action with respect to the following:
(1) The election of seven directors;
(2) The ratification of the appointment of Grant Thornton LLP as the independent registered public accounting firm of the
Company for fiscal 2018;
(3) Advisory approval of the Company’s executive compensation (“say-on-pay”);
(4) The approval of an amendment to the Company’s 2015 Equity Incentive Plan to increase the number of shares of common
stock reserved for issuance from 700,000 shares to 1,000,000 shares; and
(5) The transaction of any other business as may properly come before the Annual Meeting or any adjournments thereof.
The approximate date on which this Proxy Statement and the accompanying proxy were first sent or provided to shareholders
was April 4, 2018.
PROXIES AND VOTING
Your vote is extremely important. You may attend the Annual Meeting and vote in person, or you may vote by following the
directions on the proxy card for the Annual Meeting. Even if you own only a few shares, and whether or not you plan to attend the
meeting in person, you are requested to vote your proxy either (1) through the Internet at the address listed on the Notice Regarding
Availability of Proxy Materials or the proxy card, (2) by calling a toll-free telephone number listed on the proxy card or (3) by
marking, signing and dating the proxy card and mailing it in the envelope provided. If you own your shares in the name of a bank or
broker, and you wish to be able to vote at the Annual Meeting, you must obtain a proxy, executed in your favor, from the bank or
broker, indicating that you owned Company shares as of the record date.
The Board of Directors has set the close of business on March 20, 2018 as the “Record Date” for the Annual Meeting. Only
holders of the Company’s common stock as of the Record Date, or their duly appointed proxies, are entitled to notice of and will be
entitled to vote at the Annual Meeting or any adjournments thereof. On the Record Date, there were 7,467,241 shares of the
Company’s common stock outstanding. Each such share entitles the holder thereof to one vote upon each matter to be presented at the
Annual Meeting. A quorum, consisting of a majority of the outstanding shares of the Company’s common stock entitled to vote at the
Annual Meeting, must be present in person or represented by proxy before action may be taken at the Annual Meeting.
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Each proxy returned to the Company will be voted in accordance with the instructions indicated thereon. If no direction is given
by a shareholder, the shares will be voted as recommended by the Company’s Board of Directors. If any nominee for the Board of
Directors should withdraw or otherwise become unavailable for reasons not presently known, the proxies that would have otherwise
been voted for such nominee will be voted for such substitute nominee as may be selected by the Board of Directors. If a shareholder
abstains from voting on any matter, the abstention will be counted for purposes of determining whether a quorum is present at the
Annual Meeting for the transaction of business as well as shares entitled to vote on that matter. On matters other than the election of
directors, an action of the shareholders generally requires the affirmative vote of a majority of shares present in person or represented
by proxy at the Annual Meeting and entitled to vote on the matter. Accordingly, an abstention on any matter other than the election of
directors will have the same effect as a vote against that matter. A non-vote occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner. Broker non-votes on a matter are counted as present for purposes of
establishing a quorum for the Annual Meeting, but are not considered entitled to vote on that particular matter. Consequently, non-
votes generally do not have the same effect as a negative vote on the matter.
A shareholder giving a proxy may revoke it at any time before it is exercised by (i) giving written notice of revocation to the
Secretary of the Company, (ii) delivering a duly executed proxy bearing a later date, or (iii) voting in person at the Annual Meeting.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not, alone, revoke that proxy; revocation must be
announced by the shareholder at the time of the Annual Meeting. Unless so revoked, the shares represented by each proxy will be
voted at the Annual Meeting and at any adjournments thereof.
NOTICE TO BENEFICIAL OWNERS OF SHARES HELD IN BROKER ACCOUNTS:
New York Stock Exchange Rule 452 prohibits NYSE member organizations from giving a proxy to vote with respect to an
election of directors (Proposal No. 1), Say-on-pay (Proposal No. 3) and Amendment to the 2015 Equity Incentive Plan (Proposal No.
4) without receiving voting instructions from a beneficial owner. Because NYSE Rule 452 applies to all brokers that are members of
the NYSE, this prohibition applies to the Annual Meeting even though the Company is not listed on the New York Stock Exchange.
Therefore, brokers will not be entitled to vote shares at the Annual Meeting with respect to Proposal No. 1, No. 3 and No. 4 without
instructions by the beneficial owner of the shares. AS A RESULT, BENEFICIAL OWNERS OF SHARES HELD IN BROKER
ACCOUNTS ARE ADVISED THAT, IF THEY DO NOT TIMELY PROVIDE INSTRUCTIONS TO THEIR BROKER,
THEIR SHARES WILL NOT BE VOTED IN CONNECTION WITH THESE PROPOSALS.
PROPOSAL No. 1 – Election of Directors
PROPOSALS
The shareholders have set the size of the Board of Directors at eight and we currently have seven directors. Five of these
directors have been nominated for re-election at the Annual Meeting along with two new nominees, leaving one vacancy. Peter O.
Haeg and Richard Welch are the two new nominees. If elected, each nominee has consented to serve as a director of the Company and
to hold office until the next annual shareholders’ meeting, and until his or her successor is elected and shall have qualified, or until his
or her earlier death, resignation, removal or disqualification.
The following paragraphs provide information as of the date of this Proxy Statement about each nominee. The information
presented includes information that each nominee has given us about his or her age, all positions he or she holds within the Company,
his or her principal occupation and business experience for the past five years, and the names of other publicly-held companies of
which he or she currently serves as a director or has served as a director during the past five years. In addition to the information
presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion
that he or she should serve as a director, our director nominees have experience in developing and overseeing businesses and
implementing near term and long range strategic plans. We also believe that all of our director nominees have a reputation for
integrity, honesty and adherence to high ethical standards. Collectively, they have demonstrated business acumen and an ability to
exercise sound judgment, as well as a commitment of service to our Company and our Board. Although we don’t believe that share
ownership alone qualifies any person to serve as a director of our Company, we believe that the beneficial ownership of our Board
nominees (collectively 23.6% as of the Record Date) aligns their interests with those of our shareholders and will drive our Board’s
focus on maximizing shareholder value.
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Jeffery Crivello, age 39, has been our chief executive officer since November 2017 and director since August 2017. Since
January 2015, Mr. Crivello served as the Chief Financial Officer of PW Partners Capital Management, LLC, a hedge fund manager
with a consumer focus, where he had primary responsibility for operations and accounting. PW Partners has had board of directors’
representation with Famous Dave’s of America, Inc. since 2013, BJ’s Restaurants, Inc. since 2014, Del Taco Holdings, Inc. since
2015, and Town Sports International Holdings, Inc. since 2015. Since 2001, Mr. Crivello has served as President of TREW Capital
Management, Inc., a consulting and investment firm where he had primary responsibility for operations. From 2012 to 2015, Mr.
Crivello served as a Managing Member of Maize Capital Group, LLC, a commodity investment firm. He graduated from the
University of Wisconsin-Whitewater with a B.S. degree in finance. Mr. Crivello began serving as a director as a result of Patrick
Walsh’s resignation and become Chief Executive Officer pursuant to the terms of the Stock Purchase Agreement between the
Company and PW Partners, LLC, dated November 10, 2017.
Mr. Crivello’s restaurant-investing background, particularly his experience with casual dining chains, qualifies him to
serve as a director of our Company. We believe that Mr. Crivello’s unique perspective in growing other concepts will be
invaluable to the future growth of Famous Dave’s.
Anand D. Gala, age 44, has been a director of our Company since July 2015. Mr. Gala is the Founder, President and Chief
Executive Officer of Gala Holdings International, a diversified holding company that conducts consulting, restaurant development and
management operations. Current portfolio brands under Gala Holdings International ownership and operation include Famous Dave’s
and Fresh Griller. Since 2007, Mr. Gala has also been Founder and Managing Partner of Gala Development Partners, LLC, a firm
focused on the acquisition, development and management of commercial real estate comprising retail and office properties. From
February 1998 until May 2014, Mr. Gala served as Founder, President and Chief Executive Officer of Golden West Restaurants, Inc.,
a franchise developer of Applebee’s restaurants throughout California. From 2000 until 2010, Mr. Gala served as Founder, President
and Chief Executive Officer of Gala AZ Holdings, a developer of Del Taco restaurants in Arizona. Mr. Gala graduated from the
University of Southern California with a B. S. in Biology.
Mr. Gala’s background in the restaurant industry and his substantial experience in franchise operations, including as
a Famous Dave’s franchisee, qualify him to serve as a director of our Company. We believe that maintaining good
relationships with our franchisees is extremely important to our organization given the impact that franchise operations have
on the results of our operations. As a well-respected Famous Dave’s franchisee, Mr. Gala is uniquely positioned to advise the
Company on matters related to both franchise relations and operations.
Peter O. Haeg, age 54, has been co-managing partner of Farnam Street Partners LP, a private investment partnership focused
on small cap value investing, and Farnam Street Special Opportunities Fund, a private partnership focused on private equity
investments, since 1998. Mr. Haeg is a graduate of the University of Minnesota. Mr. Haeg is being nominated as a director pursuant to
the terms of the Stock Purchase Agreement between the Company and PW Partners, LLC, dated November 10, 2017.
Mr. Haeg is the co-managing partner of an investment fund that beneficially owns 6.7% of our Company as of the
Record Date. Mr. Haeg brings the perspective of a professional institutional shareholder to Board discussions, which we
believe adds a strategic resource to a Board seeking to maximize shareholder value.
Joseph M. Jacobs, age 65, has been a director since July 2015 and served as Chairman of the Board from July 2015 to
February 2017. Mr. Jacobs co-founded Wexford Capital LP, a registered investment advisor, in 1994 and serves as its President. Mr.
Jacobs has primary responsibility for overseeing the activities of Wexford Capital LP’s private equity funds. He has also served on the
boards and creditors’ committees of a number of public and private companies in which Wexford has held investments. From 1982 to
1994, Mr. Jacobs was employed by Bear Stearns & Co., Inc., where he attained the position of Senior Managing Director. While at
Bear Stearns, Mr. Jacobs was active in bankruptcies and restructurings and was responsible for all real estate investment banking
activities, including debt and equity financing of real estate on both a private and public basis, real estate investment, and advisory
services. From 1979 to 1982, he was employed as a commercial lending officer at Citibank, N.A. Mr. Jacobs holds an MBA from
Harvard Business School and a BS in economics from the Wharton School of the University of Pennsylvania.
Mr. Jacobs is affiliated with investment funds that collectively hold the largest beneficial ownership stake in the
Company. Mr. Jacobs brings the perspective of a professional institutional shareholder to Board discussions, which we believe
adds a strategic resource to a Board seeking to maximize shareholder value. Mr. Jacobs’ broad knowledge of corporate
governance and management, obtained though his experience in overseeing portfolio companies, is also a valuable resource to
the Board.
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Richard A. Shapiro, age 47, has been a director since July 2015. Mr. Shapiro joined Wexford Capital LP, a registered
investment advisor, in 2011 and became a Partner in 2014. Mr. Shapiro serves as Portfolio Manager and Co-Head of Equities and is a
member of the hedge fund investment committee. From 2007 to 2011, Mr. Shapiro was a Managing Director and Portfolio Manager at
Millennium Management, managing a long-short portfolio. From 2004 to 2006, Mr. Shapiro was Managing Director and Portfolio
Manager in the equities division of Amaranth Advisors. From 1997 to 1999 and 2001 to 2004, Mr. Shapiro also gained investment
experience at Putnam Investments, 1 to 1 Venture Partners and Lee Munder Capital. Mr. Shapiro holds an MBA from Georgetown
University and a BS in Business Administration from the University of Southern California.
Mr. Shapiro offers the perspective of a professional institutional shareholder. Further, Mr. Shapiro’s experience in
overseeing the management of positions in various investments position him to assist the Board in analyzing strategic
opportunities and advise with respect to executing on the Company’s overall goals and objectives.
Richard Welch, age 47, has been a Managing Director at Colony NorthStar, Inc., a leading global real estate investment
management firm that creates long-term value through investing in real estate and real estate-related assets, since May 2017. He
currently serves as the Interim Head of Healthcare at Colony. Mr. Welch is responsible for managing certain financial and operational
aspects of Colony's investment portfolio and operating businesses. Prior to joining the predecessor of Colony in 2005, Mr. Welch was
a vice president in the Investment Banking Division of Goldman, Sachs & Co. focusing on mergers and acquisitions and debt and
equity financings for companies in the real estate, retail, consumer product, and defense industries. Mr. Welch received a Master of
Business Administration from The Wharton School, University of Pennsylvania and a Bachelor of Science from the University of
Southern California. He became a Certified Public Accountant in 1995; his current status is not practicing. Mr. Welch has also served
on the board of directors of Griffin-American Healthcare REIT IV since January 2018.
Mr. Welch has an extensive background in financial analysis and a broad understanding of the operational, financial
and strategic issues facing public companies. In light of his education, background and experience, the Board believes that Mr.
Welch provides the Board with a strategic focus on maximizing shareholder value.
Bryan L. Wolff, age 39, has been a director since July 2015. Since March 2017, he has served as a Managing Director at
Anthos Capital Management, a Santa Monica-based growth equity firm. From August 2015 to March 2017, he served as Chief
Financial Officer of Thrive Market, Inc., a healthy and organic food ecommerce company. From September 2014 to August 2015, he
served as Chief Financial Officer of DogVacay, Inc. (sold to Rover), an online service connecting pet owners with sitters across the
U.S. and Canada. From January 2012 until August 2014, Mr. Wolff served as Chief Financial Officer of Bonobos, Inc. (sold to
Walmart), a men’s fashion and accessories retailer. From March 2010 through December 2011, Mr. Wolff was an Analyst at Luxor
Capital, LP. Mr. Wolff previously had roles at both AllianceBernstein and McKinsey & Co. Mr. Wolff earned a Masters of Business
Administration from Stanford’s Graduate School of Business, and a Bachelor's of Engineering in Computer Science from Princeton
University.
Mr. Wolff has served as Chief Financial Officer and led the finance and accounting functions at multiple companies,
qualifying him to serve on the Company’s Board of Directors and its Audit Committee as an “audit committee financial
expert.” Based on his background and experience, Mr. Wolff is qualified to assist the Board in overseeing the Company’s
financial and accounting functions and evaluating the Company’s internal controls over financial reporting.
Vote Required
Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to
vote on the election of directors. The nominees receiving the highest number of affirmative votes will be elected. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for the election of the seven nominees named above. If you do
not vote for a particular nominee, or you withhold authority for one or all nominees, your vote will not count either “for” or “against”
the nominee, although it will be counted for purposes of determining whether there is a quorum. If any director nominee should
withdraw or otherwise become unavailable for reasons not presently known, the proxies which would have otherwise been voted for
that director nominee may be voted for a substitute director nominee selected by the Company’s Board of Directors.
The Board recommends that you vote FOR the election of each named nominee
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PROPOSAL No. 2 – Ratification of the Appointment of Independent Registered Public Accounting Firm
The Board of Directors and management of the Company are committed to the quality, integrity and transparency of the
Company’s financial reports. In accordance with the duties set forth in its written charter, the Audit Committee of the Company’s
Board of Directors has appointed Grant Thornton LLP as the Company’s independent registered public accounting firm for the 2018
fiscal year. A representative of Grant Thornton LLP is expected to attend this year’s Annual Meeting and be available to respond to
appropriate questions from shareholders, and will have the opportunity to make a statement if he or she desires to do so.
Grant Thornton billed the Company a total of $395,985 and $381,143 for the years ended December 31, 2017 and January 1, 2017,
respectively.
Audit Fees – Audit fees billed by Grant Thornton were $375,705 and $361,643 for the audits of the Company’s 2017 and 2016
financial statements during the years ended December 31, 2017 and January 1, 2017, respectively.
Audit Related Fees – Audit-related fees billed by Grant Thornton were $20,280 and $19,500 for the audits of the Company’s 2016
and 2015 401(k) financial statements during the years ended December 31, 2017 and January 1, 2017, respectively.
Tax Fees – There were no tax fees billed by Grant Thornton during the years ended December 31, 2017 and January 1, 2017.
All Other Fees –There were no other fees billed by Grant Thornton during the years ended December 31, 2017 and January 1, 2017.
The Audit Committee of the Board of Directors has reviewed the services provided by Grant Thornton LLP during fiscal year
2017 and the fees billed for such services. After consideration, the Audit Committee has determined that the receipt of these fees by
Grant Thornton LLP is compatible with the provision of independent audit services. The Audit Committee discussed these services
and fees with Grant Thornton LLP and Company management to determine that they are permitted under the rules and regulations
concerning auditor independence promulgated by the Securities and Exchange Commission to implement the Sarbanes-Oxley Act of
2002, as well as the American Institute of Certified Public Accountants.
Pre-Approval Policy
The Company’s Audit Committee charter (a copy of which is available at the Company’s website at www.famousdaves.com)
provides that all audit and non-audit accounting services that are permitted to be performed by the Company’s independent registered
public accounting firm under applicable rules and regulations must be pre-approved by the Audit Committee or by designated
members of the Audit Committee, other than with respect to de minimis exceptions permitted under the Sarbanes-Oxley Act of 2002.
During fiscal 2017, all services performed by Grant Thornton LLP were pre-approved in accordance with the Audit Committee
charter.
Prior to or as soon as practicable following the beginning of each fiscal year, a description of the audit, audit-related, tax, and
other services expected to be performed by the independent registered public accounting firm in the following fiscal year is presented
to the Audit Committee for approval. Following such approval, any requests for audit, audit-related, tax, and other services not
presented and pre-approved must be submitted to the Audit Committee for specific pre-approval and cannot commence until such
approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. However, the authority to grant
specific pre-approval between meetings, as necessary, has been delegated to the chairman of the Audit Committee. The chairman must
update the Audit Committee at the next regularly scheduled meeting of any services that were granted specific pre-approval. In
addition, the Audit Committee has granted pre-approval for the Chief Executive Officer and the Chief Financial Officer to spend up to
$5,000 annually in additional permitted audit fees with Grant Thornton LLP, which authority and amount will be reviewed and
approved annually.
Vote Required
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at
the Annual Meeting will be required to ratify the appointment of Grant Thornton LLP as the Company’s independent registered public
accounting firm for fiscal 2018. If the shareholders do not ratify the appointment of Grant Thornton LLP, the Audit Committee may
reconsider its selection, but is not required to do so. Notwithstanding the proposed ratification of the appointment of Grant Thornton
LLP by the shareholders, the Audit Committee, in its discretion, may direct the appointment of new independent auditors at any time
during the year without notice to, or the consent of, the shareholders, if the Audit Committee determines that such a change would be
in the best interests of the Company and its shareholders.
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The Board recommends that you vote FOR the ratification of Grant Thornton LLP as the independent registered public
accounting firm of the Company for fiscal 2018.
PROPOSAL No. 3 – Advisory Vote on Executive Compensation
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the Company’s shareholders
are entitled to vote to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy
Statement in accordance with the rules of the Securities and Exchange Commission. This “say-on-pay” vote is not intended to address
any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy and
policies described in this Proxy Statement.
At the Company’s 2013 annual shareholders’ meeting, the shareholders were asked to cast an advisory vote on how frequently
the Company should seek an advisory “say-on-pay” vote. In particular, the Company asked whether the “say-on-pay” vote should
occur every three years, every two years, or every one year. As stated in the proxy statement for the Company’s 2013 annual
shareholders’ meeting, the Company’s Board recommended that shareholders vote for an annual “say-on-pay” vote to best enable the
Board and the Compensation Committee to understand and incorporate the views of the Company’s shareholders in structuring the
Company’s executive compensation programs. At the 2013 annual shareholders’ meeting, the option of an annual “say-on-pay” vote
received the highest number of votes cast by shareholders. Consistent with this desire for an annual “say-on-pay” vote, the Company
is asking shareholders to indicate their support at the Annual Meeting for the compensation of our named executive officers as
described in this Proxy Statement by casting an advisory vote “FOR” the following resolution:
“RESOLVED, that the shareholders approve the compensation of the “named executive officers” of Famous Dave’s of
America, Inc., as disclosed in the section entitled “Executive Compensation” in the Proxy Statement for the Famous
Dave’s of America, Inc. 2018 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the
Securities and Exchange Commission.”
The compensation of the Company’s named executive officers is disclosed in the section entitled “Executive Compensation”
below.
Vote Required
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at
the Annual Meeting will be required to approve, on an advisory basis, the compensation of our named executive officers as described
herein. Because the vote is advisory, it will not be binding on the Company, the Board or the Compensation Committee. Nevertheless,
the views expressed by our shareholders, whether through this vote or otherwise, are important to us and, accordingly, the Board and
the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive
compensation arrangements.
The Board recommends that you vote FOR the proposal to approve the compensation of the Company’s named executive
officers, as described in this Proxy Statement.
PROPOSAL No. 4 – Amendment to the Company’s 2015 Equity Incentive Plan
The Company maintains the Famous Dave’s of America, Inc. 2015 Equity Incentive Plan (as amended to date, the “2015
Plan”), pursuant to which 700,000 shares of the Company’s common stock are currently reserved for issuance in the form of incentive
grants, as described below. The purpose of the 2015 Plan is to increase shareholder value and to advance the interests of the Company
by furnishing a variety of economic incentives designed to attract, retain and motivate employees (including officers), consultants and
directors of the Company.
The Company’s Board of Directors has approved a proposed amendment to the 2015 Plan that would increase the number of
shares reserved for issuance thereunder by 300,000 shares. 350,000 shares of the Company’s common stock were initially approved
for issuance under the 2015 Plan at the Company’s annual meeting in May 2015. An additional 350,000 shares were approved at a
special meeting of shareholders held on November 16, 2015. All incentives granted since initial approval of the 2015 Plan have taken
the form of non-qualified stock options and shares of the Company’s common stock. As of the Record Date, there are no additional
shares available for issuance pursuant to the 2015 Plan. We are therefore proposing to increase the maximum number of shares of
common stock approved for issuance under the 2015 Plan to 1,000,000 in accordance with the proposed amendment.
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Shareholders are often interested in the potential for equity dilution resulting from grants of equity incentives (performance
shares, stock options, restricted stock, etc.) under a company’s equity compensation plans. The percentage amount by which current
shareholders’ equity interests may be diluted as a result of such grants is commonly referred to as the “overhang.” The overhang is
calculated by dividing (i) the total number of incentives granted and available for grant under equity compensation plans, by (ii) the
total shares outstanding assuming the exercise of all outstanding incentives and the grant and exercise of all available incentives. If the
proposed amendment to the 2015 Plan is adopted by the Company’s shareholders, the overhang for all of the Company’s equity
compensation plans would be approximately 11.0%, based on the total shares outstanding as of the Record Date and incentives
granted and available for grant under equity compensation plans as of the Record Date but giving effect to the proposed amendment.
Shareholders are also interested in the rate at which the Company grants equity compensation, referred to as the “burn rate.” The
Company’s three-year average annual burn rate, for the 2015-2017 fiscal year period, was 1.7%, net of forfeitures.
The Board recommends that you vote FOR the proposal increase the number of shares available for grant pursuant to the
2015 Plan, as described below.
Description of the 2015 Plan
The material features of the 2015 Plan are outlined below. This summary is qualified in its entirety by reference to the
complete text of the 2015 Plan. A copy of the amended 2015 Plan has also been included within this proxy statement. Shareholders are
urged to read the actual text of the 2015 Plan in its entirety.
Eligibility. Our employees, directors and consultants are eligible to participate in the 2015 Plan.
Administration. The 2015 Plan is administered by our Board of Directors, which may in turn delegate authority to administer
the 2015 Plan to a committee. Our Board of Directors has delegated authority to administer the 2015 Plan to the compensation
committee, but may, at any time, revest in itself some or all of the power previously delegated to this committee. Our compensation
committee may make grants of cash and equity awards under the 2015 Plan to facilitate compliance with Section 162(m) of the Code.
The Board of Directors and the compensation committee are each considered to be a plan administrator for purposes of this proposal.
Subject to the terms of the 2015 Plan, the plan administrator may determine the recipients, numbers and types of awards to be
granted, and the terms and conditions of the awards, including the period of their exercisability and vesting. Subject to the limitations
set forth below, the plan administrator also determines the fair market value applicable to a stock award and the exercise price of stock
options and stock appreciation rights granted under the 2015 Plan.
The plan administrator may also delegate to one or more of our directors or officers the authority to designate employees who
are not officers to be recipients of certain stock awards and the number of shares subject to such stock awards, provided that the Board
of Directors must specify the total number of shares of our common stock that may be subject to the stock awards granted by such
officer, and such officer may not grant a stock award to himself or herself.
Shares Available for Awards. Currently, the aggregate number of shares of our common stock reserved for issuance under
the 2015 Plan may not exceed 700,000 shares. If this proposal is approved, the aggregate number of shares of our common stock
reserved for issuance under the 2015 Plan will not exceed 1,000,000 shares.
If a stock option or SAR granted under the 2015 Plan expires or is terminated or canceled unexercised as to any shares of
common stock, such shares shall be added back to the 2015 Plan share reserve and shall be available again for issuance under the 2015
Plan. If the full number of shares subject to a performance based-stock award (other than a stock option or SAR) is not issued by
reason of failure to achieve maximum performance goals, the number of shares not issued shall be added back to the 2015 Plan share
reserve and shall be available again for issuance under the 2015 Plan. If shares of common stock are issued as performance shares,
restricted stock or pursuant to another stock award and thereafter are forfeited or reacquired by the Company because of the failure to
meet a contingency or condition required to vest such shares in the participant, then the shares that are forfeited or repurchased shall
be added back to the 2015 Plan share reserve and shall be available again for issuance under the 2015 Plan. Shares withheld or
deducted from an Incentive in satisfaction of tax withholding obligations on an incentive or as consideration for the exercise or
purchase price of an Incentive will not be added back to the Plan share reserve and will not again become available for issuance under
the Plan.
Types of Awards. Incentives under the Plan may be granted in any one or a combination of the following forms: incentive
stock options and non-statutory stock options, stock appreciation rights, or SARs; stock awards, restricted stock awards and restricted
stock unit awards, performance share and performance cash awards, and other forms of incentives valued in whole or in part by
reference to, or otherwise based on, our common stock, including the appreciation in value thereof.
9
Stock Options. Non-qualified and incentive stock options may be granted to eligible participants to purchase shares of
common stock from the Company. The 2015 Plan confers on the Board of Directors the discretion, with respect to any such stock
option, to determine the term of each option, the time or times during its term when the option becomes exercisable and the number
and purchase price of the shares subject to the option, provided that the purchase price shall be not less than the fair market value of
the common stock subject to the option on the date of grant.
Stock Appreciation Rights. A stock appreciation right, or SAR, is a right to receive, without payment to the Company, a
number of shares, cash or any combination thereof, the amount of which is equal to the aggregate amount of the appreciation in the
shares of common stock as to which the SAR is exercised. For this purpose, the “appreciation” in the shares consists of the amount by
which the fair market value of the shares of common stock on the exercise date exceeds (a) in the case of an SAR related to a stock
option, the purchase price of the shares under the option or (b) in the case of an SAR granted alone, without reference to a related
stock option, an amount determined by the Committee at the time of grant. The Board of Directors has the discretion to determine the
number of shares as to which a SAR will relate as well as the duration and exercisability of an SAR.
Stock Awards. Stock awards consist of the transfer by the Company to an eligible participant of shares of common stock,
without payment, as additional compensation for services to the Company. The number of shares transferred pursuant to any stock
award is determined by the Board of Directors.
Restricted Stock and Restricted Stock Units. Restricted stock consists of the sale or transfer by the Company to an eligible
participant of one or more shares of common stock that are subject to restrictions on their sale or other transfer by the participant
which restrictions will lapse after a period of time not less than three years as determined by the Board of Directors. The price at
which restricted stock will be sold will be determined by the Board of Directors, and it may vary from time to time and among
participants and may be less than the fair market value of the shares at the date of sale. Subject to these restrictions and the other
requirements of the 2015 Plan, a participant receiving restricted stock shall have all of the rights of a shareholder as to those shares.
The 2015 Plan also permit grants of restricted stock units, which are units that evidence the right to receive shares of common stock at
a future date, subject to restrictions that may be imposed by the Board of Directors.
Performance Awards. The 2015 Plan allows us to grant cash and stock-based performance. Performance awards may be
granted, vest or be exercised based upon the attainment during a specified period of time of specified performance goals. The length of
any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what
degree such performance goals have been attained will be determined by the Board of Directors and/or the compensation committee or
the Board of Directors; provided, however, that any performance period must be at least one year in length.
In granting a performance award, the Board of Directors will set a period of time, or a performance period, over which the
attainment of one or more goals, or performance goals, will be measured. The Board of Directors will establish the performance goals,
based upon one or more criteria, which we refer to as performance criteria, enumerated in the 2015 Plan and described below.
Performance goals under the 2015 Plan will be based on any one or more of the following performance criteria: (i) earnings
(including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest,
taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity or average stockholder’s equity; (vi) return on
assets, investment, or capital employed; (vii) stock price; (viii) margin (including gross margin); (ix) income (before or after taxes);
(x) operating income; (xi) operating income after taxes; (xii) pre-tax profit; (xiii) operating cash flow; (xiv) sales or revenue targets;
(xv) increases in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement in or attainment of working
capital levels; (xviii) economic value added (or an equivalent metric); (xix) market share; (xx) cash flow; (xxi) cash flow per share;
(xxii) share price performance; (xxiii) debt reduction; (xxiv) implementation or completion of projects or processes; (xxv) customer
satisfaction; (xxvi) stockholders’ equity; (xxvii) capital expenditures; (xxviii) debt levels; (xxix) operating profit or net operating
profit; (xxx) workforce diversity; (xxxi) growth of net income or operating income; (xxxii) billings; and (xxxiii) other measures of
performance selected by the Board of Directors. Performance goals may be based on a company-wide basis, with respect to one or
more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or
more comparable companies or the performance of one or more relevant indices.
Award Limits. Under the 2015 Plan, a maximum of 350,000 shares of our common stock may be granted to any one
participant during any one calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is
determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of our common
stock on the date of grant. In addition, the maximum amount covered by performance awards that may be granted to any one
participant in any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during a performance
period of the performance goals described below) is 350,000 shares of our common stock in the case of performance share awards and
$2,000,000 in the case of performance cash awards. If a performance share award is in the form of an option, it will count only against
the performance stock award limit. If a performance share award could be paid out in cash, it will count only against the performance
stock award limit.
10
Limitation of Director Awards. Under the 2015 Plan, no director who is not also an employee of the Company or its
affiliates may be granted incentives denominated in shares that exceed in the aggregate $500,000 in value in any calendar year, except
to the extent that the incentive is awarded pursuant to an election by the directors to receive such incentive in lieu of all or a portion of
annual and committee retainers and meeting fees.
Repricing; Cancellation and Re-Grant of Stock Awards. Except in connection with certain capitalization adjustments,
neither the Board of Directors nor any committee will have the authority to reduce the exercise, purchase or strike price of any
outstanding options or SAR under the 2015 Plan, or cancel any outstanding options or SARs that have an exercise price or strike price
greater than the current fair market value of our common stock in exchange for cash or other incentives under the 2015 Plan, unless
the shareholders of the Company have approved such an action within twelve months prior to such an event.
Changes to Capital Structure. In the event of certain capitalization adjustments, the Board of Directors will appropriately
adjust: (i) the class(es) and maximum number of securities subject to the 2015 Plan; (ii) the class(es) and maximum number of
securities that may be issued pursuant to the exercise of ISOs; (iii) the class(es) and maximum number of securities that may be
awarded to any person; and (iv) the class(es) and number of securities and price per share of stock subject to outstanding stock awards.
Corporate Transactions. In the event of a corporate transaction (as defined in the 2015 Plan and described below), the Board
of Directors may have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent
upon the closing or consummation of such transaction), unless otherwise provided in the stock award agreement or other written
agreement with the participant or unless otherwise provided by the Board of Directors at the time of grant:
•
•
•
•
•
•
arrange for the surviving or acquiring corporation (or its parent company) to assume or continue the award or to
substitute a similar stock award for the award (including an award to acquire the same consideration paid to our
stockholders pursuant to the corporate transaction);
arrange for the assignment of any reacquisition or repurchase rights held by us with respect to the stock award to the
surviving or acquiring corporation (or its parent company);
accelerate the vesting, in whole or in part, (and, if applicable, the exercisability) of the stock award and provide for
its termination prior to the effective time of the corporate transaction;
arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by us with respect to the
award;
cancel or arrange for the cancellation of the stock award, to the extent not vested or exercised prior to the effective
time of the corporate transaction, in exchange for such cash consideration, if any, as the Board of Directors may
consider appropriate; and
cancel or arrange for the cancellation of the stock award, to the extent not vested or not exercised prior to the
effective time of the corporate transaction, in exchange for a payment, in such form as may be determined by the
Board of Directors, equal to the excess, if any, of (i) the value of the property the participant would have received
upon the exercise of the stock award immediately prior to the effective time of the corporate transaction, over (ii)
any exercise price payable in connection with such exercise.
The Board of Directors is not obligated to treat all stock awards or portions of stock awards in the same manner. The Board
of Directors may take different actions with respect to the vested and unvested portions of a stock award.
For purposes of the 2015 Plan, a corporate transaction will be deemed to occur in the event of the consummation of (i) a sale
or other disposition of all or substantially all of our consolidated assets, (ii) a sale or other disposition of more than 90% of our
outstanding securities, (iii) a merger, consolidation or similar transaction following which we are not the surviving corporation, or (iv)
a merger, consolidation or similar transaction following which we are the surviving corporation but the shares of our common stock
outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction.
11
Change in Control. In the event of a change in control (as defined in the 2015 Plan), the Board of Directors or a comparable
committee of any corporation assuming the obligations of the Company under the 2015 Plan may, but shall not be obligated to, elect
in its discretion to declare that the restriction period of all restricted stock and restricted stock units has been eliminated, that all
outstanding stock options and SARs shall accelerate and become exercisable in full but that all outstanding stock options and SARs,
whether or not exercisable prior to such acceleration, must be exercised within the period of time set forth in a notice to participant or
they will terminate, and that all performance shares granted to participants are deemed earned at 100% of target levels and shall be
paid.
Plan Amendments and Termination. Our Board of Directors may amend, modify, suspend, discontinue or terminate the
2015 Plan at any time as it deems necessary or advisable; provided, however, any amendment or modification that (a) increases the
total number of shares available for issuance pursuant to incentives granted under the 2015 Plan, (b) deletes or limits the prohibition of
re-pricing incentives, or (c) requires the approval of the Company’s shareholders pursuant to any applicable law, regulation or
securities exchange rule or listing requirement, shall be subject to approval by the Company’s shareholders. In general, however, no
amendment, modification, suspension, discontinuance or termination of the 2015 Plan shall impair a participant’s rights under an
outstanding incentive without his or her written consent.
Transferability of Incentives. Incentives granted under the 2015 Plan may not be transferred, pledged or assigned by the
holder thereof (except, in the event of the holder’s death, by will or the laws of descent and distribution to the limited extent provided
in the 2015 Plan or the incentive, or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder). However, stock options may be transferred by the holder thereof to such
holder’s spouse, children, grandchildren or parents (collectively, the “Family Members”), to trusts for the benefit of Family Members,
to partnerships or limited liability companies in which Family Members are the only partners or shareholders, or to entities exempt
from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. During a participant’s
lifetime, a stock option may be exercised only by him or her, by his or her guardian or legal representative or by the transferees
permitted by the preceding sentence.
Clawback Policy. Awards granted under the 2015 Plan will be subject to recoupment in accordance with any clawback policy
that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our
securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-
Frank Act, or other applicable law. In addition, the Board of Directors may impose other clawback, recovery or recoupment provisions
in an award agreement as the Board of Directors determines necessary or appropriate, including a reacquisition right in respect of
previously acquired shares of our common stock or other cash or property upon the occurrence of cause.
U.S. Federal Income Tax Consequences
The information set forth below is a summary only and does not purport to be complete. The information is based upon
current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any
recipient may depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal,
state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award.
The 2015 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends
on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m) of the Code and
the satisfaction of our tax reporting obligations.
Nonstatutory Stock Options. Generally, there is no taxation upon the grant of a nonstatutory stock option if the stock option is
granted with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, an optionholder
will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over the
exercise price. If the optionholder is employed by us or one of our affiliates, that income will be subject to withholding taxes. The
optionholder’s tax basis in those shares will be equal to their fair market value on the date of exercise of the stock option, and the
optionholder’s capital gain holding period for those shares will begin on that date.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the optionholder.
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1,000,000 on the amount of compensation that
the Company may deduct in any one year with respect to certain of its most highly paid executive officers.
12
Incentive Stock Options. The 2015 Plan provides for the grant of stock options that qualify as “incentive stock options,” as
defined in Section 422 of the Code, or an ISO. Under the Code, an optionholder generally is not subject to ordinary income tax upon
the grant or exercise of an ISO. If the optionholder holds a share received on exercise of an ISO for more than two years from the date
the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required
holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s
tax basis in that share will be long-term capital gain or loss.
If, however, an optionholder disposes of a share acquired on exercise of an ISO before the end of the required holding period,
which is referred to as a disqualifying disposition, the optionholder generally will recognize ordinary income in the year of the
disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the
exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the stock
option, the amount of ordinary income recognized by the optionholder will not exceed the gain, if any, realized on the sale. If the
amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option,
that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on
exercise of an ISO exceeds the exercise price of that stock option generally will be an adjustment included in the optionholder’s
alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying
disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum tax
purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of
an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax
purposes in the year the stock option is exercised.
We are not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a share
acquired on exercise of an ISO after the required holding period. If there is a disqualifying disposition of a share, however, we are
allowed a deduction in an amount equal to the ordinary income includible in income by the optionholder, subject to Section 162(m) of
the Code and provided that amount constitutes an ordinary and necessary business expense for us and is reasonable in amount, and
either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
Restricted Stock Awards. Generally, the recipient of a restricted stock award will recognize ordinary income at the time the
stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in
exchange for the stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a
period of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes
vested, at which time the recipient will recognize ordinary income equal to the excess, if any, of the fair market value of the stock on
the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election
with the Internal Revenue Service, within 30 days following his or her receipt of the stock award, to recognize ordinary income, as of
the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is
granted over any amount paid by the recipient for the stock.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock
awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the
stock becomes vested.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of
the stock award.
Restricted Stock Unit Awards. Generally, the recipient of a restricted stock unit structured to conform to the requirements of
Section 409A of the Code or an exception to Section 409A of the Code will recognize ordinary income at the time the stock is
delivered equal to the excess, if any, of the fair market value of the shares of our common stock received over any amount paid by the
recipient in exchange for the shares of our common stock. To conform to the requirements of Section 409A of the Code, the shares of
our common stock subject to a restricted stock unit award may generally only be delivered upon one of the following events: a fixed
calendar date (or dates), separation from service, death, disability or a change in control. If delivery occurs on another date, unless the
restricted stock units otherwise comply with or qualify for an exception to the requirements of Section 409A of the Code, in addition
to the tax treatment described above, the recipient will owe an additional 20% federal tax and interest on any taxes owed.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from restricted
stock units will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered.
13
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of
the restricted stock unit award.
Stock Appreciation Rights. We may grant under the 2015 Plan stock appreciation rights separate from any other award or in
tandem with other awards under the 2015 Plan. Where the stock appreciation rights are granted with a strike price equal to the fair
market value of the underlying stock on the grant date, the recipient will recognize ordinary income equal to the fair market value of
the stock or cash received upon such exercise. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the
Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary
income realized by the recipient of the stock appreciation right.
Awards Under the Amended Plan
No awards will be made under the 2015 Plan from the proposed increase in authorized shares until after such increase has
been approved by our shareholders. Because all awards under the 2015 Plan are within the discretion of the Compensation Committee
of our Board of Directors, neither the number nor types of future 2015 Plan awards to be received by or allocated to particular
participants or groups of participants is presently determinable.
The following table sets forth certain information as of December 31, 2017, with respect to the 2005 Plan and the 2015 Plan
and does not reflect the proposed amendment to add 300,000 shares to the 2015 Plan:
Plan Category
Equity compensation plans approved by shareholders:
2005 Stock Incentive Plan
2015 Stock Incentive Plan
TOTAL
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options
Warrants and Rights
(A)
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
(B)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (A))
(C)
2,700
535,812
538,512
$
$
28.53
6.40
6.60
—
—
—
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action at the Annual Meeting other than the four proposals
described above. Although the Board of Directors knows of no other matters to be presented at the Annual Meeting, all proxies
returned to the Company will be voted on any such matter in accordance with the judgment of the proxy holders.
EXECUTIVE OFFICERS OF THE COMPANY
Name
Jeffery Crivello
Paul M. Malazita
Geovannie Concepcion
Age
39
31
32
Position
Chief Executive Officer, Director
Interim Chief Financial Officer
Chief Operating Officer
Jeffery Crivello – See biographical information set forth under Proposal No. 1 – Election of Directors.
14
Paul M. Malazita currently has served as our Interim Chief Financial Officer since March 2018. Prior to that, Mr. Malazita
served as our Director of Accounting and Corporate Controller from October 2017 to March 2018 and, prior to that, he served as
Senior Manager of Corporate Accounting from March 2017 to October 2017. Prior to joining our Company, from July 2016 to
February 2017, Mr. Malazita served as the Manager of Financial Reporting at Digiliti Money, Inc., a provider of SaaS financial
solutions, where he had primary responsibility for SEC financial reporting. From September 2014 to July 2016, Mr. Malazita served in
various capacities at AR Global Investments, LLC, a sponsor of real estate investment trusts, from September 2014 to July 2016,
where he had primary responsibility for SEC financial reporting and technical accounting. From July 2009 to September 2014, Mr.
Malazita served in various capacities at Baker Tilly Virchow Krause, LLP (formerly ParenteBeard LLC), a public accounting firm.
Mr. Malazita graduated from St. Joseph’s University in Philadelphia, Pennsylvania with a B.S. in Accounting and is a Certified Public
Accountant.
Geovannie Concepcion has served as our Chief Operating Officer since November 2017. Mr. Concepcion has been a member
of the Famous Dave’s management team since April 2016 where he has primary responsibility for executing on the company’s store
optimization and refranchising efforts. In addition, Mr. Concepcion has led the company’s national efforts with third party delivery
providers and online ordering. Before joining Famous Dave’s, Mr. Concepcion served in various capacities with Greenwich,
Connecticut-based Wexford Capital LP, a registered investment advisor, in both the Private Equity Group and Global Macro Hedge
Funds from June 2009 until April 2016. Mr. Concepcion graduated from DePaul University with a B.S. in Accounting.
EXECUTIVE COMPENSATION
The following summary compensation table reflects cash and non-cash compensation for the 2016 and 2017 fiscal years
awarded to or earned by (i) each individual serving as the principal executive officer of the Company during the 2017 fiscal year
ended December 31, 2017 (including Mr. Malazita, who became our Interim Chief Financial Officer on March 6, 2018); (ii) the other
two highest paid individuals who served as executive officers of the Company at the end of such fiscal year; and (iii) the other
individual who would have qualified as one of the two highest paid executive officers but for the fact that he was not serving as an
executive officer as of the end of the fiscal year (the “named executive officers”).
Summary Compensation Table
Name and Principal Position
Year
Salary ($)
Bonus ($)
Stock Awards
($)
Option Awards
($)(7)
All Other
Compensation ($)
Total ($)
Jeffery Crivello(1)
Chief Executive Officer
Paul M. Malazita(2)
Interim Chief Financial Officer
Dexter A. Newman(3)
Former Chief Financial Officer
Michael W. Lister(4)
Former Chief Executive Officer
Douglas Renegar(5)
Former Senior Vice President of
Franchise Operations
Geovannie Concepcion(6)
Chief Operating Officer
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
$
27,884
—
$
— $
—
85,000
—
$
156,008
—
$
— $
—
268,892
—
107,631
—
270,000
192,115
274,239
62,308
180,769
41,538
180,000
126,692
25,000
—
—
98,654
—
18,750
—
—
42,500
65,077
—
—
—
—
—
—
—
—
—
—
14,887
—
—
156,088
—
100,527
—
50,263
—
114,808
—
—
—
—
176,700
10,099
147,518
—
270,000
446,857
450,939
191,684
100,000
280,769
—
—
—
91,801
222,500
306,577
___________________________
(1) Mr. Crivello was appointed the Company’s Chief Executive Officer effective November 14, 2017. On that same date, Mr. Crivello
was granted a ten-year option to purchase 90,000 shares of the Company’s common stock at an exercise price of $3.90. The options
vest monthly over two years. Mr. Crivello earned stock awards calculated in accordance with his employment agreement, described
below.
(2) Mr. Malazita became the Company’s Interim Chief Financial Officer effective March 6, 2018. During fiscal 2017, Mr. Malazita
was granted a ten-year option to purchase 10,000 shares of the Company’s common stock at an exercise price of $3.90. The options
vest monthly over four years.
(3) Mr. Newman was the Company’s Chief Financial Officer from April 11, 2016 to March 5, 2018. On the effective date of his
employment, Mr. Newman was granted a ten-year option to purchase 70,000 shares of the Company’s common stock at an exercise
price of $5.67. The options vested monthly over through his termination date.
15
(4) Mr. Lister was the Company’s Chief Executive Officer from October 11, 2016 to November 13, 2017. On October 11, 2016, Mr.
Lister was granted a five-year option to purchase 70,000 shares of the Company’s common stock at an exercise price of $5.67. The
options vested monthly through Mr. Lister’s termination date. Upon termination, Mr. Lister became entitled to severance payments
totaling $150,000 (reflected in all other compensation) to be paid in accordance with the Company’s standard payroll calendar over
six months. Rent cost for Mr. Lister’s apartment of $26,700 is also reflected in all other compensation.
(5) Mr. Renegar was the Company’s Senior Vice President of Franchise Operations from October 11, 2016 to November 17, 2017. On
October 11, 2016, Mr. Renegar was granted a five-year option to purchase 35,000 shares of the Company’s common stock at an
exercise price of $5.67. The options vested monthly through Mr. Renegar’s termination date. Upon termination, Mr. Renegar
became entitled to severance payments totaling $100,000 (reflected in all other compensation) to be paid in accordance with the
Company’s standard payroll calendar over six months.
(6) Mr. Concepcion has been with the Company since April 13, 2016 and was appointed as the Company’s Chief Operating Officer
effective November 14, 2017. On April 13, 2016, Mr. Concepcion was granted a ten-year option to purchase 50,000 shares of the
Company’s common stock at an exercise price of $5.82. The options vest monthly over four years. Mr. Concepcion’s bonus for
2017 was calculated in accordance with his employment agreement described below.
(7) Amounts shown reflect the grant date fair value of stock option awards granted for the respective year pursuant to the Company’s
equity incentive plans, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification
Topic 718.
Outstanding Equity Awards at Fiscal Year End
As of December 31, 2017, the Company’s named executive officers had outstanding the following stock options:
Option Awards
Number of
Securities
Underlying
Unexercised Options
(# Exercisable)
Number of
Securities
Underlying
Unexercised Options
(# Unexercisable)
Option Exercise Price
($)
Option Expiration
Date
3,750
416
29,160
18,958
9,479
20,820
$
86,250
9,584
40,840
—
—
29,180
3.90
3.90
5.67
5.25
5.25
5.82
11/14/2027
10/2/2027
6/3/2018
5/11/2018
5/11/2018
4/13/2026
Name
Jeffery Crivello
Paul Malazita
Dexter A. Newman
Michael W. Lister
Douglas Renegar
Geovannie Concepcion
16
Employment Agreements
Employment Agreement with Jeffery Crivello
On November 13, 2017, the Company entered into an employment agreement with Jeffery Crivello. Mr. Crivello’s
employment with the Company is governed by a three-year employment agreement. Under the employment agreement, Mr. Crivello is
entitled to receive an annual base salary of $250,000 and is eligible for annual bonus compensation in the form of shares of the
Company’s common stock, which amount shall be determined based on the 30-day volume weighted average price (“VWAP”) of the
Company’s common stock meeting or exceeding the following established targets:
Stock Price
Shares Granted
$
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
5,000
10,000
10,000
12,500
12,500
15,000
15,000
20,000
20,000
25,000
25,000
Any common stock awarded pursuant to a bonus award shall be granted pursuant to and governed by the terms of the 2015
Plan. If there are no shares of common stock available pursuant to the terms of the 2015 Plan, Mr. Crivello shall be paid cash equal to
the value of the number of shares of common stock he is otherwise entitled to receive.
Pursuant to the employment agreement, on November 14, 2017, the Company granted to Mr. Crivello a 90,000 share non-
qualified stock option under the Plan that will vest in equal monthly installments over two years and has an exercise price of $3.90 per
share.
Mr. Crivello may participate in the Company’s benefit plans that are currently and hereafter maintained and for which he is
eligible, including, without, limitation, group medical, 401(k), life insurance and other benefit plans. Mr. Crivello is also entitled to be
reimbursed for reasonable travel and other expenses.
Pursuant to the employment agreement, Mr. Crivello agreed to customary non-competition and non-solicitation provisions,
including a covenant that, in the event Mr. Crivello’s relationship with PW Partners conflicts with or is inconsistent with his
obligations to the Company, Mr. Crivello’s primary duty shall be to the Company and to the extent that a conflict arises, he shall
promptly notify the Board of such conflict.
Employment Agreement with Paul M. Malazita
On February 12, 2018, the Company entered into an employment agreement with Paul M. Malazita pursuant to which he
became the Company’s Interim Chief Financial Officer, commencing March 6, 2018. Under the employment agreement, which is for
an indefinite term, Mr. Malazita is entitled to receive an annual base salary of $165,000 and is eligible for annual bonus compensation,
at the discretion of the Board, of 30% of his base salary. Also as of March 6, 2018, Mr. Malazita was granted a four-year, 20,000 share
non-qualified stock option that will vest in equal monthly installments over four years and has an exercise price of $7.05. Mr. Malazita
will also be entitled to participate in the Company’s benefit plans that are currently and hereafter maintained by the Company and for
which he is eligible, including, without limitation, group medical, 401(k) life insurance and other benefit plans.
Mr. Malazita has agreed not to compete with the Company during the term of his employment and for a period of twelve
months thereafter. Mr. Malazita has also agreed not to solicit employees of the Company during the employment term and for 12 months
thereafter.
17
Under the employment agreement, if Mr. Malazita’s employment is terminated by the Company for any reason other than
cause, death or disability, or if Mr. Malazita resigns for good reason so long as he has signed and has not revoked a release agreement,
he will be entitled to receive severance comprised of continuing payments of his base salary for a three month period following the
termination date. To the extent not exempt from rules governing deferred compensation under Section 409A of the Internal Revenue
Code of 1986, severance payments to Mr. Malazita are intended to comply with Section 409A and are subject to corresponding
requirements regarding the timing of such payments.
Employment Agreement with Dexter A. Newman
On April 7, 2016, the Company entered into a written employment agreement with Mr. Newman to be effective as of April
11, 2016. Under the employment agreement, Mr. Newman was entitled to receive an annual base salary of $270,000 and was eligible
for annual bonus compensation in the discretion of the board of directors based upon his achievement of milestones to be determined
by the board of directors prior to the commencement of each fiscal year. The targeted amount was expected to be 50% of Mr.
Newman’s base salary. Mr. Newman was able to participate in the Company’s benefit plans, including, without limitation, group
medical, 401(k), life insurance and other benefit plans.
Pursuant to the employment agreement, on April 11, 2016, the Company granted to Mr. Newman a ten-year, 70,000 share
non-qualified stock option that vested in monthly installments through his termination date. The stock option has an exercise price of
$5.67 per share. Mr. Newman has agreed not to compete with the Company during the term of his employment and for a period of 12
months thereafter. Mr. Newman has also agreed not to solicit the Company’s employees during the employment term and for 18
months thereafter.
Employment Agreement with Michael W. Lister
Mr. Lister’s employment was governed by an employment agreement entered into on October 11, 2016, which had a four
year term. Under the employment agreement, Mr. Lister was entitled to receive an annual base salary of $300,000 and was eligible for
annual bonus compensation in the discretion of the board of directors in amounts expected to be 50% of his base salary.
Pursuant to the employment agreement, on October 11, 2016, we also granted to Mr. Lister a five-year, 70,000 share non-
qualified stock option under the Company’s 2015 Equity Incentive Plan that was to vest in equal monthly installments over the
employment term and had an exercise price of $5.25.
Mr. Lister was able to participate in our benefit plans, including, without, limitation, group medical, 401(k), life insurance
and other benefit plans. Pursuant to his employment agreement, Mr. Lister agreed to customary non-competition and non-solicitation
provisions; provided, however, that Mr. Lister will not be restricted from owning or operating Company franchise locations or any
single location restaurants.
Employment Agreement with Douglas Renegar
Mr. Renegar’s employment was governed by an employment agreement entered into on October 11, 2016, which had a four
year term. Under the employment agreement, Mr. Renegar was entitled to receive an annual base salary of $200,000 and was eligible
for annual bonus compensation in the discretion of the board of directors.
Pursuant to the employment agreement, on October 11, 2016, the Company also granted to Mr. Renegar a five-year, 35,000
share non-qualified stock option under the Company’s 2015 Equity Incentive Plan that was to vest in equal monthly installments over
the employment term and had an exercise price of $5.25.
Mr. Renegar was able to participate in the Company’s benefit plans, including, without, limitation, group medical, 401(k),
life insurance and other benefit plans. Pursuant to his employment agreement, Mr. Renegar agreed to customary non-competition and
non-solicitation provisions; provided, however, that Mr. Renegar will not be restricted from owning or operating Company franchise
locations or any single location restaurants.
Employment Agreement with Geovannie Concepcion
Mr. Concepcion’s employment with the Company is governed by an employment agreement entered into on April 8, 2016,
for an indefinite term. Mr. Concepcion is entitled to receive an annual base salary of $180,000 and is eligible for a bonus payable in
cash the first time during his employment term that the VWAP over a 30 day period is equal to or exceeds the VWAP Target set forth
on the first column in the table below.
18
Stock Price
Cash Bonus
$
$
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
12,500
30,000
35,000
50,000
56,250
75,000
82,500
120,000
130,000
175,000
187,500
Pursuant to the employment agreement, on April 11, 2016, we granted Mr. Concepcion a ten-year, 50,000 share non-
qualified stock option that will vest in monthly installments over four years. The stock option has an exercise price of $5.82 per share.
Mr. Concepcion has agreed not to compete with the Company during the term of his employment and for a period of 12
months thereafter. Mr. Concepcion has also agreed not to solicit the Company’s employees during the employment term and for 18
months thereafter.
Under the employment agreement, if Mr. Concepcion’s employment is terminated by the Company for any reason other than
Cause (including any termination by the Company following a “Change in Control” (as defined in the employment agreement)), death
or disability, or if Mr. Concepcion resigns for Good Reason, so long as he has signed and has not revoked a release agreement, he will
be entitled to receive severance comprised of continuing payments of his base salary for a period of six months following the
termination date.
Description of Additional Compensation Plans and Practices
Deferred Compensation Plan
The Company maintains a Non-Qualified Deferred Compensation Plan in which employees who are at the “director” level
and above are eligible to participate. Participants must complete a deferral election each year and submit it to the Company, prior to
the beginning of the fiscal year for which the compensation pertains, indicating the level of compensation (salary, bonus and
commissions) they wish to have deferred for the coming year. This deferral election is irrevocable except to the extent permitted by
the plan’s administrator, and the applicable regulations promulgated by the Internal Revenue Service. For fiscal 2016 and 2017, the
Company matched 25.0% of the first 4.0% contributed by participants and paid declared interest rates of 6.0% on balances
contributed.
Deferral periods are defined as the earlier of termination of employment or not less than three calendar years following the
end of the applicable plan year. Extensions of the deferral period for a minimum of five years are allowed, provided the election is
made at least one year before the first payment affected by the change. Payments can be in a lump sum or in equal payments over a
two-, five- or ten-year period, plus interest from the commencement date.
The plan assets are kept in an unsecured account that has no trust fund. In the event of bankruptcy, any future payments
would have no greater rights than that of an unsecured general creditor of the Company and they confer no legal rights for interest or
claim on any assets of the Company. Benefits provided by the deferred compensation plan are not insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”), because the
pension insurance provisions of ERISA do not apply to the Deferred Compensation Plan.
Other Benefits
The Company provides additional benefit plans to employees, including the named executive officers, such as medical, dental,
life insurance and disability coverage, flex benefit accounts, 401(k) plan, and an employee assistance program. The Company also
provides vacation and other paid holidays to employees, including the named executive officers, which are comparable to those
provided at other companies of comparable size.
19
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1,000,000 on the amount of compensation
that the Company may deduct in any one year with respect to certain of its most highly paid executive officers. The exception to the
$1,000,000 limitation for performance-based compensation meeting certain requirements has been repealed, effective for tax years
beginning after December 31, 2017. The Company has generally not paid compensation in excess of $1,000,000 to any single
executive officer in the past. Incentive compensation, including equity incentive awards, has not generally been structured to meet all
of such requirements, and, as such, may not be fully deductible.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Board of Directors
The size of our Board of Directors is set at eight by the shareholders. We currently have seven members serving as directors,
with one vacancy. The following directors, constituting a majority of the Board, are “independent directors” as such term is defined in
Rule 5605(a)(2) of the NASDAQ Stock Market’s Marketplace Rules: Joseph M. Jacobs, Eric S. Hirschhorn, Charles W. Mooty,
Richard A. Shapiro and Bryan L. Wolff. The Board of Directors held five formal meetings during fiscal 2017.
The Company’s Board of Directors does not currently have a Chair or a lead independent director. Under the Company’s
bylaws, when there is not a Chair appointed, the Chief Executive Officer presides at board meetings. The Board of Directors currently
believes that the typical duties of a chair will be shared among the members of the Board and the Chief Executive Officer.
Board of Directors Role in Risk Oversight
The Audit Committee of the Board of Directors has been delegated the responsibility for risk oversight. In overseeing the
Company’s risk management, the Audit Committee adheres to a detailed committee responsibilities calendar that addresses various
risk-related matters. These matters include but are not limited to:
• meeting with management and the Company’s independent registered public accountant in separate executive sessions;
•
•
•
•
•
•
interacting with management and the internal audit function;
considering and reviewing with the Company’s independent registered public accountant the Company’s assessment
and any related attestation (including related reports) on internal control over financial reporting, the adequacy of such
controls and recommendations for improvements;
inquiring of the Company’s finance and accounting function managers and the Company’s independent registered
public accountant about significant risks or exposures, and any significant accounts that require management judgment;
reviewing the Company’s policies for risk assessment and risk management, and assessing steps taken or to be taken to
control such risk;
assessing the oversight and management of the information risks, including those related to Company Information
Technology projects; and
overseeing the Company’s investment policies
Committees of the Board of Directors
The Company has a standing Audit Committee, Compensation Committee and Corporate Governance and Nominating
Committee. During fiscal 2017, each member of the Board of Directors attended at least 75% of the Board meetings and meetings of
committees to which they belong during the period in which such member served as a director. Although the Company has no formal
policy regarding directors’ attendance at the Company’s annual shareholders meetings, the Company encourages such attendance by
members of the Board of Directors. All but one of the Company’s seven directors serving on the Board of Directors at the time of the
Company’s most recent annual shareholders’ meeting, held May 2, 2017, were in attendance at that meeting.
20
Below is a summary of the Company’s board committee structure and current committee membership information. If elected to
the board at the Annual Meeting, it is expected that Mr. Haeg will be appointed to the Audit Committee, Compensation Committee
and Corporate Governance and Nominating Committee of the board and Mr. Welch, will be appointed to the Audit Committee and
Compensation Committee of the board.
Director
Audit Committee
Compensation Committee
Corporate Governance
and Nominating
Committee
Jeffery Crivello
Anand D. Gala
Eric S. Hirschhorn
Joseph M. Jacobs
Charles W. Mooty
Richard A. Shapiro
Bryan L. Wolff(1)
Member
Member
Chairman
Chairman
Member
Member
Member
Member
Member
Chairman
Audit Committee of the Board of Directors
The Company has established a three-member Audit Committee within the Board of Directors that currently consists of
Chairman Bryan L. Wolff, Eric S. Hirschhorn and Charles W. Mooty. The Audit Committee operates under a written charter adopted
by the Board of Directors, a copy of which is available at the Company’s website at www.famousdaves.com. The charter reflects the
Audit Committee’s increased responsibilities as a result of the Sarbanes-Oxley Act of 2002, as well as the NASDAQ Stock Market
corporate governance standards. As set forth in the charter, the primary responsibilities of the Audit Committee include: (i) serving as
an independent and objective party to monitor the Company’s financial reporting process and internal control system; (ii) reviewing
and appraising the audit performed by the Company’s independent registered public accounting firm; and (iii) providing an open
avenue of communication among the independent registered public accounting firm, financial and senior management and the Board
of Directors. The charter also requires that the Audit Committee review and pre-approve the performance of all audit and non-audit
accounting services to be performed by the Company’s independent registered public accounting firm, as well as tax work performed
by the Company’s tax firm, other than certain de minimis exceptions permitted by Section 202 of the Sarbanes-Oxley Act of 2002.
The Board of Directors has determined that at least one member of the Audit Committee, Bryan L. Wolff, qualifies as an “audit
committee financial expert” as that term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Exchange
Act of 1934, as amended. In addition, each member of the Audit Committee is an “independent director,” as such term is defined in
Rule 5605(a)(2) of the NASDAQ Stock Market’s Marketplace Rules, and meets the criteria for independence set forth in Rule 10A-
3(b)(1) under the Securities Exchange Act of 1934, as amended. The Board of Directors has also determined that each of the Audit
Committee members is able to read and understand fundamental financial statements and that at least one member of the Audit
Committee has past employment experience in finance or accounting. The Audit Committee held five formal meetings during fiscal
2017.
Report of the Audit Committee
The Company’s management has primary responsibility for the Company’s internal controls and preparing the Company’s
consolidated financial statements. The Company’s independent registered public accounting firm, Grant Thornton LLP, is responsible
for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the
Public Company Accounting Oversight Board. The primary function of the Audit Committee is to assist the Board of Directors in its
oversight of the Company’s financial reporting, internal controls, and audit functions.
The Audit Committee has reviewed the Company’s audited consolidated financial statements for the last fiscal year and
discussed them with management.
The Audit Committee has discussed with the Company’s independent registered public accounting firm the matters required to
be discussed by Auditing Standard No. 1301, as amended, Communications with Audit Committees, as adopted by the Public
Company Accounting Oversight Board.
21
The Audit Committee has received and reviewed the written disclosures and the letter from the independent registered public
accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding such firm’s
communications with the Audit Committee concerning independence, and has discussed with the independent accountants their
independence.
The Audit Committee, based on the review and discussions described above, has recommended to the Board of Directors that
the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2017 for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
BRYAN L. WOLFF, Chairman
ERIC S. HIRSCHHORN
CHARLES W. MOOTY
Compensation Committee of the Board of Directors
The Company has established a Compensation Committee within the Board of Directors that currently consists of Chairman
Eric S. Hirschhorn, Charles W. Mooty, Richard A. Shapiro and Bryan L. Wolff. The Compensation Committee operates under a
written charter adopted by the Board of Directors, a copy of which is available at the Company’s website at www.famousdaves.com.
The Compensation Committee reviews the Company’s remuneration policies and practices, makes recommendations to the full Board
in connection with all compensation matters affecting the Company and administers the Company’s incentive compensation plans.
The Compensation Committee of the Board of Directors has direct oversight and responsibility for the Company’s executive
compensation policies and programs. The Compensation Committee has the authority to obtain advice and assistance from internal or
external legal, accounting or other advisors, and has the authority to retain, terminate and approve the fees payable to any external
compensation consultant to assist in the evaluation of director, and senior executive compensation. The Compensation Committee
assesses the independence of any compensation consultant that it elects to engage.
Compensation Philosophy
Our executive compensation philosophy has been based on adopting compensation programs driven by short and long-term
financial performance metrics designed to ensure management is incented to increase shareholder value over time. The Company’s
executive compensation policies and programs are designed to provide:
•
•
•
•
•
a means for the Company to attract, motivate, reward and retain qualified executives in a competitive environment;
competitive levels of compensation that integrate with the Company’s annual objectives and long-term goals;
incentives that promote sustained short- and long-term financial growth and return in order to increase intrinsic value
per share;
a reward system for extraordinary performance that recognizes individual initiative and achievements; and
a means to optimize performance without encouraging unreasonable risks or incentivizing behavior that would be
reasonably likely to result in a material adverse effect on the Company.
The Compensation Committee believes that the total compensation program for executives should consist of the following
elements, each determined by individual and corporate performance:
• Base salary compensation; and
•
Incentive compensation, both in the form of annual cash bonus and long-term stock-based incentive awards.
In addition to the compensation program elements listed above, we have established a Non-Qualified Deferred Compensation
Plan in which our executives are entitled to participate. The Compensation Committee believes that the availability of this plan adds to
the attractiveness of the Company’s overall compensation program and positively impacts the Company’s ability to hire and retain
qualified executives.
22
Compensation Procedures
Our Compensation Committee approves, on an annual basis, the competitiveness of our overall executive compensation
programs, including the appropriate mix between cash and non-cash compensation as well as annual and long-term incentives. As set
forth in its written charter, our Compensation Committee has access to resources it deems appropriate to accomplish its
responsibilities, including the sole authority to retain (with funding provided by the Company) legal counsel and experts in the field of
executive compensation after taking into consideration the independence related factors required under applicable NASDAQ listing
standards. The Compensation Committee has the sole authority to retain and to terminate such advisors, and to approve the fees and
other retention terms. During fiscal 2017, the Compensation Committee primarily relied upon internal Company resources to generate
information on which to benchmark the Company’s compensation practices.
Generally, our Chief Executive Officer has provided input to our Compensation Committee regarding executive
compensation and participated in the ultimate determination of compensation for the Company’s other executives. However, our Chief
Executive Officer does not have direct involvement in the determination of his own compensation, the determination and structure of
which is the sole responsibility of the Compensation Committee.
The Compensation Committee held four meetings during fiscal 2017.
Corporate Governance and Nominating Committee of the Board of Directors
The Company has established a Corporate Governance and Nominating Committee within the Board of Directors that
consists of Chairman Bryan L. Wolff, Charles W. Mooty and Richard A. Shapiro. Messrs. Wolff, Mooty and Shapiro satisfy the
independence requirements of the NASDAQ Stock Marketplace Rules. The Corporate Governance and Nominating Committee
operates under a written charter adopted by the Board of Directors, a copy of which is available at the Company’s website at
www.famousdaves.com. The primary role of the Corporate Governance and Nominating Committee is to consider and make
recommendations to the full Board of Directors concerning the appropriate size, function and needs of the Board, including
establishing criteria for Board membership and considering, recruiting and recommending candidates (including those recommended
by shareholders) to fill new Board positions. The Corporate Governance and Nominating Committee also considers and advises the
full Board on matters of corporate governance and monitors and recommends the functions of, and membership on, the various
committees of the Board.
The Corporate Governance and Nominating Committee (or a subcommittee thereof) recruits and considers director
candidates and presents all qualified candidates to the full Board for consideration. Qualified candidates will be considered without
regard to race, color, religion, sex, ancestry, national origin, disability, marital or veteran status, or any other legally protected status.
In identifying and evaluating potential candidates to be nominees for directors, the Corporate Governance and Nominating
Committee has the flexibility to consider such factors as it deems appropriate under relevant circumstances. These factors may include
education, general business and industry experience, ability to act on behalf of shareholders and build long term shareholder value,
potential concerns regarding independence or conflicts of interest and other factors relevant in evaluating Board nominees. The
Corporate Governance and Nominating Committee believes that a Board comprised of directors with diverse skills and experiences
relevant to the Company’s industry will result in efficient and competent oversight of the Company’s various core competencies,
which include restaurant operations, franchise operations, real estate, marketing and financial and accounting. As such, the Corporate
Governance and Nominating Committee considers the interplay of a director candidate’s experience with that of other members of the
Board of Directors.
If the Corporate Governance and Nominating Committee approves a candidate for further review following an initial
screening, the Corporate Governance and Nominating Committee will establish an interview process for the candidate. Generally, the
candidate will meet with at least a majority of the members of the Corporate Governance and Nominating Committee, along with the
Company’s Chief Executive Officer. Contemporaneously with the interview process, the Corporate Governance and Nominating
Committee will conduct a comprehensive conflicts-of-interest assessment of the candidate. The Corporate Governance and
Nominating Committee will consider reports of the interviews and the conflicts-of-interest assessment to determine whether to
recommend the candidate to the full Board of Directors. The Corporate Governance and Nominating Committee will also take into
consideration the candidate’s personal attributes, including, without limitation, personal integrity, loyalty to the Company and concern
for its success and welfare, willingness to apply sound and independent business judgment, awareness of a director’s vital part in the
Company’s good corporate citizenship and image, time available for meetings and consultation on Company matters and willingness
to assume broad, fiduciary responsibility.
23
The Corporate Governance and Nominating Committee will consider recommendations by shareholders of candidates for
election to the Board of Directors. Any shareholder who wishes that the Corporate Governance and Nominating Committee consider a
candidate must follow the procedures set forth in our Bylaws. Under our Bylaws, if a shareholder plans to nominate a person as a
director at a meeting, the shareholder is required to place a proposed director’s name in nomination by written request delivered to or
mailed and received at our principal executive offices not less than 60 nor more than 120 calendar days prior to the first anniversary of
the date on which we first mailed proxy materials for the preceding year’s annual meeting. For our 2019 annual shareholders’ meeting,
notices must be delivered to or mailed and received not prior to November 30, 2018 and not later than January 29, 2019. If the date of
our 2019 annual meeting is advanced more than 30 calendar days prior to or delayed by more than 30 calendar days after the
anniversary of the Annual Meeting, timely notice by a shareholder may be delivered to or mailed and received at our principal
executive offices not later than the close of business on the 10th calendar day following the earlier of the date that we mail notice to
our shareholders that the 2019 annual shareholders’ meeting will be held or the date on which we issue a press release, filed a periodic
report with the Securities and Exchange Commission or otherwise publicly disseminated notice that the 2019 annual shareholders’
meeting will be held. To enable the Corporate Governance and Nominating Committee to evaluate the candidate’s qualifications,
shareholder recommendations must include the following information:
• As to each person the shareholder proposes to nominate for election or reelection as a director:
o the name, age, business address and residence address of such individual;
o the class, series and number of any shares of our stock that are beneficially owned or owned of record by
such individual;
o the date such shares were acquired and the investment intent of such acquisition;
o all other information relating to such individual that is required to be disclosed in solicitations of proxies
for election of directors in an election contest (even if an election contest is not involved), or is otherwise
required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities
Exchange Act of 1934, as amended, and the rules thereunder (the “Exchange Act”) (including such
individual’s written consent to being named in the proxy statement as a nominee and to serving as a
director if elected);
o all information with respect to such individual that would be required to be set forth in a shareholder’s
notice pursuant to Section 4.3 of our Bylaws if such proposed individual were a Nominating Person (as
such term is defined in our Bylaws and summarized below); and
o a description of all direct and indirect compensation and other material monetary agreements, arrangements
and understandings during the past three years, and any other material relationships, between or among the
proposed nominee, his or her respective affiliates and associates and any other persons with whom the
proposed nominee (or any of his or her respective affiliates and associates) is “Acting in Concert” (as such
term is defined in our Bylaws), on the one hand, and any Nominating Person, on the other hand;
• As to each “Nominating Person” (which our Bylaws define as the nominating shareholder, the beneficial owner(s),
if different, on whose behalf the notice of proposed nomination is made, any affiliate or associate of such
shareholder or beneficial owner(s), and any other person with whom such shareholder or beneficial owner (or any of
their respective affiliates or associates) is Acting in Concert):
o the class, series and number of all shares of our stock which are, directly or indirectly, owned of record or
beneficially owned by such Nominating Persons;
o the full notional amount of any Synthetic Equity Position (as such term is defined in our Bylaws);
o any Short Interests (as such term is defined in our Bylaws); and
o any Performance-Related Fees (as such term is defined in our Bylaws);
•
The name and address of such Nominating Person, as they appear on our stock ledger;
24
•
To the extent known by the nominating shareholder or any other Nominating Person, the name and address of any
other shareholder supporting the nominee for election or reelection as a director or the proposal of other business on
the date of such shareholder’s notice; and
• Any other information relating to such Nominating Person that would be required to be disclosed in a proxy
statement or other filing required to be made in connection with solicitations of proxies or consents by such
Nominating Person in support of the nominees proposed to be nominated for election or reelection as a director at
the meeting pursuant to Section 14(a) of the Exchange Act.
The above description is only a summary of the procedures required to be followed by shareholders who wish nominate a
proposed director candidate for election to our Board. Please refer to our Bylaws for a complete description of such procedures.
The Corporate Governance and Nominating Committee held two meetings during fiscal 2017.
Corporate Governance, Ethics and Business Conduct
The Company’s Board of Directors firmly believes that the commitment to sound corporate governance practices is essential to
obtaining and retaining the trust of investors, team members, guests and suppliers. The Company’s corporate governance practices
reflect the requirements of applicable securities laws, including the Sarbanes-Oxley Act of 2002, the NASDAQ Stock Market listing
requirements and the Company’s own vision of good governance practices.
The Company is committed to conducting business lawfully and ethically. All of its employees, including its Chief Executive
Officer and other executives are required to act at all times with honesty and integrity. The Company’s Code of Ethics and Business
Conduct covers areas of professional conduct, including workplace behavior, conflicts of interest, fair dealing with competitors, guests
and vendors, the protection of Company assets, trading in Company securities and confidentiality, among others. The Code of Ethics
and Business Conduct requires strict adherence to all laws and regulations applicable to our business and also describes the means by
which any employee can provide an anonymous report of an actual or apparent violation of our Code of Ethics and Business Conduct.
In addition to the Code of Ethics and Business Conduct, the Company has adopted a separate Code of Ethics specifically applicable to
the Company’s Chief Executive Officer, Chief Financial Officer, and Key Financial and Accounting Management.
The full text of the Famous Dave’s of America, Inc. Code of Ethics and Business Conduct and the Code of Ethics specifically
applicable to the Company’s Chief Executive Officer, Chief Financial Officer and Key Financial and Accounting Management are
each available online at www.famousdaves.com (click on Investors, Corporate Governance, Code of Ethics and Business Conduct
Policy, or Code of Ethics specific to CEO, CFO, and Key Financial & Accounting Management, as applicable).
Ability of Shareholders to Communicate with the Company’s Board of Directors
The Company’s Board of Directors has established several means for shareholders and others to communicate with the
Company’s Board of Directors. If a shareholder has a concern regarding the Company’s financial statements, accounting practices or
internal controls, the concern should be submitted in writing to the chairman of the Company’s Audit Committee in care of the
Company’s Secretary at the Company’s headquarters address. If the concern relates to the Company’s governance practices, business
ethics or corporate conduct, the concern should be submitted in writing to the chairman of the Corporate Governance and Nominating
Committee in care of the Company’s Secretary at the Company’s headquarters address. If a shareholder wishes to provide input with
respect to the Company’s executive compensation policies and programs, input should be submitted in writing to the chairman of the
Company’s Compensation Committee in care of the Company’s Secretary at the Company’s headquarters address or by email address
to compensationcommittee@famousdaves.com. If a shareholder is unsure as to which category the concern relates, the shareholder
may communicate it to any one of the independent directors in care of the Company’s Secretary at the Company’s headquarters
address. All shareholder communications sent in care of the Company’s Secretary will be forwarded promptly to the applicable
director(s).
Policies and Procedures for the Consideration and Determination of Director Compensation
Each year, the Corporate Governance and Nominating Committee reviews the Board’s compensation in relation to other
companies nationwide and recommends any changes in Board compensation to the full Board of Directors for approval. As needed,
the Compensation Committee will also review and make recommendations to the Board. The Compensation Committee also approves
any grants of equity incentives to directors under the Company’s equity incentive plans.
25
Director Compensation
During fiscal 2017, certain of our directors received cash payments in the amount of $15,000 per quarter for their services as
our director. Upon appointment, our independent directors are generally granted an option to purchase 20,000 shares of our common
stock, which vests annually over a five year period.The following table sets forth information concerning director compensation
earned during the fiscal year ended January 1, 2017:
Fees Earned or Paid
in Cash
$
60,000
Option Awards ($)(1)
$
Name
Anand D. Gala(2)
Eric S. Hirschhorn(2)
Joseph M. Jacobs
Charles W. Mooty(2)(3)
Richard A. Shapiro
Bryan L. Wolff(2)
_______________
(1) Amounts shown reflect the grant date fair value of stock option awards granted during fiscal 2017, computed in accordance with
Financial Accounting Standards Board Accounting Standards Codification Topic 718. See Note 9 “Stock-Based Compensation”
to the accompanying notes to the consolidated financial statements.
Total ($)
39,635
15,000
41,865
81,667
60,000
—
—
—
—
—
—
$
123,532
60,000
60,000
54,635
—
—
(2) Each of Messrs. Gala, Hirschhorn, Mooty and Wolff hold options to purchase 20,000 shares of our common stock.
(3) Mr. Mooty received additional compensation during the time that he served as the chairman of our board of directors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company has one class of voting securities outstanding, Common Stock, $0.01 par value, of which 7,467,241 shares were
outstanding as of the close of business on the Record Date. Each share of Common Stock is entitled to one vote on all matters put to a
vote of shareholders. Shares beneficially owned below include shares that each owner below has the right to acquire in the Company’s
ongoing rights offering.
26
The following table sets forth certain information regarding beneficial ownership of the Company’s Common Stock as of the
Record Date by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each director or director nominee, (iii) each named executive officer identified in the Summary Compensation Table, and
(iv) all named executive officers and directors as a group. Unless otherwise indicated, the address of each of the following persons is
12701 Whitewater Drive, Suite 190, Minnetonka, Minnesota 55343, and each such person has sole voting and investment power with
respect to the shares of Common Stock set forth opposite each of their respective names. The shares beneficially owned include the
right to purchase certain shares in the Company’s Rights Offering, which offering expires on April 10, 2018.
Name and Address of Beneficial Owner
Executive Officers:
Jeffery Crivello (Chief Executive Officer)(1)
Michael W. Lister (Former Chief Executive Officer)(2)
Paul M. Malazita (Interim Chief Financial Officer)(3)
Dexter A. Newman (Former Chief Financial Officer)(4)
Geovannie Concepcion (Chief Operating Officer)(5)
Douglas Renegar (Former Senior Vice President of Franchise Operations)(6)
Non-Employee Directors:
Anand D. Gala
Eric S. Hirschhorn
Joseph M. Jacobs(7)
Charles W. Mooty
Richard A. Shapiro
Bryan L. Wolff
All Directors and Executive Officers as a group (12 people)
Other 5% Beneficial Owners
Wexford Capital LP(8)
411 West Putnam Avenue, Suite 125, Greenwich, CT 06830
Bandera Master Fund L.P.(9)
Broad Street, Suite 1820, New York, NY 10004
Patrick Walsh(10)
1325 Avenue of the Americas, New York, NY 10019
David Kanen(11)
5850 Coral Ridge Drive, Suite 309, Coral Springs, Florida 33076
Raging Capital Management, LLC(12)
Ten Princeton Avenue, P.O. Box 228, Rocky Hill, NJ 08553
Blue Clay Capital Management, LLC(13)
800 Nicollet Mall, Ste. 2870, Minneapolis, MN 55402
FS Special Opportunities I, L.P.(14)
3033 Excelsior Boulevard, Suite 560, Minneapolis, MN 55416
Shares Beneficially
Owned
Percentage of Total
39,348
18,958
2,288
8,854
20,820
3,229
8,000
—
1,616,933
105,131
12,132
13,370
1,849,063
1,616,933
1,316,668
916,525
644,416
567,463
521,123
507,350
*
*
*
*
*
*
*
*
20.9%
1.4%
*
*
23.6%
20.9%
17.1%
12.0%
8.5%
7.5%
6.9%
6.7%
_____________________
* Less than 1%
(1)
(2)
(3)
(4)
(5)
Includes 13,098 shares that Mr. Crivello has the right to acquire within 60 days.
Includes 18,958 shares that Mr. Lister has the right to acquire within 60 days.
Includes 2,288 shares that Mr. Malazita has the right to acquire within 60 days.
Includes 1,553 shares that Mr. Newman has the right to acquire within 60 days.
Includes 20,820 shares that Mr. Concepcion has the right to acquire within 60 days.
Includes 567 shares that Mr. Renegar has the right to acquire within 60 days.
(6)
(7) Represents 1,616,933 shares held or can be acquired within 60 days by Debello Investors LLC, Wexford Focused Investors LLC,
and Wexford Spectrum Investors LLC (collectively, the “Purchasing Entities”). Mr. Jacobs disclaims beneficial ownership of the
shares held by the Purchasing Entities except to the extent of his actual pecuniary interest therein. See footnote 8 below.
27
(8) Based upon joint statements on Schedule 13D filed with the SEC on March 19, 2018. Includes 29,785 shares that are directly owned
by Debello Investors LLC (“DI”), 61,973 shares that are directly owned by Wexford Focused Investors LLC (“WFI”), and 1,240,953
shares that are directly owned by Wexford Spectrum Investors LLC (“WSI”, and together with DI and WFI, the “Purchasing
Entities”). Wexford Capital LP (“Wexford Capital”) may, by reason of its status as manager of the Purchasing Entities, be deemed
to own beneficially the securities of which the Purchasing Entities possess beneficial ownership. Wexford GP LLC (“Wexford GP”)
may, as the General Partner of Wexford Capital, be deemed to own beneficially the securities of which the Purchasing Entities
possess beneficial ownership. Each of Charles E. Davidson (“Davidson”) and Joseph M. Jacobs (“Jacobs”) may, by reason of his
status as a controlling person of Wexford GP, be deemed to own beneficially the securities of which the Purchasing Entities possess
beneficial ownership. Each of Wexford Capital, Wexford GP, Davidson and Jacobs shares the power to vote and to dispose of the
securities beneficially owned by the Purchasing Entities. Each of Wexford Capital, Wexford GP, Davidson and Jacobs disclaims
beneficial ownership of the securities owned by the Purchasing Entities and the joint statements on Schedule 13D are not an
admission that they are the beneficial owners of such securities except, in the case of Davidson and Jacobs, to the extent of their
personal ownership interests in any of the members of the Purchasing Entities.
(9) Based upon a statement on Schedule 13D/A filed with the SEC on June 16, 2017. Bandera Partners LLC (“Bandera Partners”) is
the investment manager of Bandera Master Fund L.P. (“Bandera Master Fund”). Bandera Master Fund has granted to Bandera
Partners the sole and exclusive authority to vote and dispose of the shares held directly by Bandera Master Fund. Each of Gregory
Bylinsky and Jefferson Gramm are Managing Partners, Managing Directors and Portfolio Managers of Bandera Partners. By virtue
of these relationships, each of Bandera Partners and Messrs. Bylinsky and Gramm may be deemed to beneficially own the shares
owned directly by Bandera Master Fund.
(10) Based on a joint schedule 13 D/A, filed February 2, 2018. Includes 249,675 shares owned by PW Partners Atlas Fund LP, 52,575
shares owned by Mr. Walsh directly and 35,000 shares owned by PW Partners Atlas Fund II, LP. Also includes 418,169 shares that
PW Partners, LLC has shared voting power.
(11) Based upon a joint statement on Schedule 13 G/A filed with the SEC on March 16, 2018 by Philotimo Fund LP (“Philotimo”),
Kanen Wealth Management, LLC (“KWM”) and David L. Kanen. KWM is the general partner of Philotimo and Mr. Kanen is the
managing member of KWM. By virtue of these relationships KWM may be deemed to beneficially own the securities which these
entities possess.
(12) Based upon a statement on Schedule 13D/A filed with the SEC on February 14, 2018. Raging Capital Management, LLC (“Raging
Capital”) is the investment manager of Raging Capital Master Fund, Ltd., a Cayman Islands exempted company (“Raging Master”)
in whose name the shares are held. William C. Martin is the Chairman, Chief Investment Officer and Managing Member of Raging
Capital. Raging Master has delegated to Raging Capital the sole authority to vote and dispose of the securities held by Raging
Master pursuant to an investment management agreement (“IMA”). The IMA may be terminated by any party thereto effective at
the close of business on the last day of any fiscal quarter by giving the other party not less than 61 days’ written notice. As a result,
each of Raging Capital and William C. Martin may be deemed to beneficially own the shares held by Raging Master. Each of
Raging Capital and William C. Martin disclaims beneficial ownership of the securities owned by Raging Capital and the joint
statements on Schedule 13G are not an admission that they are the beneficial owners of such securities.
(13) Based upon a statement on Schedule 13D/A filed with the SEC on December 28, 2015. Blue Clay Capital Management, LLC (“Blue
Clay Capital”) is the investment manager for certain private funds (together, the “Funds”). Each of Gary Kohler and Brian Durst,
through their roles at Blue Clay Capital, exercises investment discretion over the Funds and has shared power to vote and dispose
of these shares.
(14) Based upon a joint statement on Schedule 13D filed with the SEC on November 20, 2017 by FS Special Opportunities I, L.P.,
Farnam Street Capital, Inc., Raymond E. Cabillot and Peter O. Haeg. The reporting persons may be deemed to beneficially own the
securities which these entities possess.
Based on information provided to the Company by its directors, director nominees and executive officers, no director, director
nominee or named executive officer holds shares beneficially owned by him or her in a margin account as collateral for a margin loan,
and no shares beneficially owned by the Company’s directors and named executive officers have been pledged as collateral for a loan.
CERTAIN TRANSACTIONS
In accordance with the Company’s Audit Committee charter, the Company’s Audit Committee is responsible for reviewing
policies and procedures with respect to related party transactions required to be disclosed pursuant to Item 404(a) of the Securities and
Exchange Commission’s Regulation S-K (including transactions between the Company and its officers and directors, or affiliates of
such officers or directors), and approving the terms and conditions of such related party transactions.
Anand D. Gala currently serves as a director of the Company and has been nominated for re-election at the Annual Meeting.
Mr. Gala is the Founder, President and Chief Executive Officer of Gala Holdings International, a diversified holding company that
conducts consulting, restaurant development and management operations. As a Company franchisee, Gala Holdings International paid
approximately $1.9 million in franchise royalties and contributions to the Company’s system-wide marketing fund for the Company’s
2017 fiscal year.
28
Michael Lister served as the Chief Executive Officer and Chief Operating Officer of the Company from October 2016 to
November 2017. Doug Renegar served as the Senior Vice President of Franchise Operations of the Company from October 2016 to
November 2017. Messrs. Lister and Renegar manage Famous Five Dining, a corporation that owns four franchised Famous Dave’s
restaurants. Messrs. Lister and Renegar paid approximately $493,000 in franchise royalties and contributions to the Company’s
system-wide marketing fund for the Company’s 2017 fiscal year.
On November 10, 2017, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) by and between
the Company and PW Partners, LLC (“PW Partners”). Pursuant to the Purchase Agreement, the Company sold to PW Partners on
behalf of its designated client, FS Special Opportunities I, L.P. (the “Purchaser’s Designee”), 418,169 shares of our common stock
(the “Private Placement”). The Purchase Agreement provides further that PW Partners has assigned its rights under the Purchase
Agreement to the Purchaser’s Designee; provided, however, that PW Partners retains its obligations under the Purchase Agreement.
On January 29, 2018, the Company entered into a Standby Purchase Agreement (the “Standby Purchase Agreement”) with PW
Partners, in connection with the previously announced proposed non-transferable rights offering (the “Rights Offering”). The Standby
Purchase Agreement provides that PW Partners will (a) exercise its non-transferable rights to subscribe for and purchase its pro rata
amount of newly-issued shares of the Company’s common stock, at a price per share, which the Company’s board of directors has set
at $3.50 per share (the “Subscription Price”), and (b) purchase in a private placement separate from the Rights Offering, at the
Subscription Price and subject to the terms and conditions of the Standby Purchase Agreement, any shares of the Company’s common
stock that are not subscribed for in the Rights Offering pursuant to the Company’s stockholders’ exercise of their rights.
Notwithstanding the foregoing, the Standby Purchase Agreement also provides that PW Partners will not purchase shares of the
Company’s common stock in an amount that would result in the Standby Purchaser beneficially owning 20% or more of the
outstanding common stock after such purchase.
PW Partners is affiliated with PW Capital Management, LLC (“PW Capital”). Pursuant to the Purchase Agreement, Jeffery
Crivello, the Chief Financial Officer of PW Capital, became the Chief Executive Officer of the Company, effective November 14,
2017.
On December 8, 2017, as a part of settlement of a legal dispute and distressed situation, the Company approved the transfer of
seven franchise restaurants in Utah and Washington (the “Transferred Restaurants”) to an entity (the “Acquirer”) controlled by
Charles Davidson.
The previous franchisee of these seven restaurants experienced financial difficulties for more than one year and, at the time of
the sale to the Acquirer, was more than one year in arrears with royalty, miscellaneous and national advertising fund payments that
totaled approximately $1.4 million. The previous franchisee engaged a broker who marketed the franchise for several months, which
resulted in two potential buyers, one of whom dropped out of the process. These stores were severely neglected, and this was
determined to be the best path to economic recovery.
In connection with settling the dispute with the previous franchisee, the Company collected $350,000 in cash from the previous
franchisee. Pursuant to the settlement, the Company wrote off accounts receivable of approximately $1.0 million.
As part of the transaction, the Company agreed to certain concessions in order to facilitate the transfer of the Transferred
Restaurants to the Acquirer and to incentivize the Acquirer to invest the funds necessary to improve the operations of the Transferred
Restaurants and to provide innovation to the Famous Dave’s concept. The economic concessions consisted of the following:
• A $500,000 repairs and maintenance credit (the “R&M Credit”), payable through a 50% reduction in required
•
royalty payments until the credit is exhausted;
Royalty relief, in addition to the R&M Credit, of 2.0% in months one through 12 for an effective royalty rate of
3.0% and 1.0% in months 13 through 24 for an effective royalty rate of 4.0%, and a full royalty of 5.0% to be paid
thereafter (“Royalty Relief”);
• Development rights in the states of Utah and Washington in exchange for a commitment to open three restaurants
before May 1, 2027; and,
• Waiver of initial and future franchise fees and area development fees.
In addition to these economic concessions, the Company modified its standard franchise agreement to eliminate or limit
certain obligations of Acquirer as a franchisee, including:
• Waiver of reacquisition fees for two additional ten-year terms;
• Acquirer will spend 1.0% of net sales on local marketing, as opposed to the standard 1.5%.
29
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers and directors, and persons
who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in
ownership of such securities with the Securities and Exchange Commission and NASDAQ. Officers, directors and greater than ten
percent shareholders are required by Securities and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on review of the copies of Forms 3 and 4 and amendments thereto furnished to the
Company during the fiscal year ended December 31, 2017 and Forms 5 and amendments thereto furnished to the Company with
respect to such fiscal year, or written representations that no Forms 5 were required, the Company believes that all of its officers,
directors and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements during the
fiscal year ended December 31, 2017.
PROPOSALS OF SHAREHOLDERS
Proposals by shareholders (other than director nominations) that are submitted for inclusion in our proxy statement for our 2019
annual shareholders’ meeting must follow the procedures set forth in Rule 14a-8 under the Securities Exchange Act of 1934 and our
Bylaws. To be timely under Rule 14a-8, a shareholder proposal must be received by our Corporate Secretary at Famous Dave’s of
America, Inc., 12701 Whitewater Drive, Suite 190, Minnetonka, Minnesota, 55343, by November 30, 2018.
Under our Bylaws, if a shareholder does not submit a proposal for inclusion in our proxy statement but does wish to propose an
item of business to be considered at an annual shareholders’ meeting (other than director nominations), that shareholder must deliver
notice of the proposal at our principal executive offices not less than 60 nor more than 120 calendar days prior to the first anniversary
of the date on which we first mailed proxy materials for the preceding year’s annual meeting. For our 2019 annual shareholders’
meeting, notices must be received not prior to November 30, 2018 and not later than January 29, 2019.
If a shareholder plans to nominate a person as a director at an annual shareholders’ meeting, our Bylaws require that the
shareholder place a proposed director’s name in nomination by written request delivered to or mailed and received at our principal
executive offices not less than 60 nor more than 120 calendar days prior to the first anniversary of the date on which we first mailed
proxy materials for the preceding year’s annual meeting. For our 2018 annual shareholders’ meeting, notices must be delivered to or
mailed and received not prior to November 30, 2018 and not later than January 29, 2019.
If the date of our 2019 annual shareholders’ meeting is advanced more than 30 calendar days prior to or delayed by more than
30 calendar days after the anniversary of the Annual Meeting, timely notice of shareholder proposals and shareholder nominations for
directors may be delivered to or mailed and received at our principal executive offices not later than the close of business on the 10th
calendar day following the earlier of the date that we mail notice to our shareholders that the 2019 annual shareholders’ meeting will
be held or the date on which we issue a press release, filed a periodic report with the Securities and Exchange Commission or
otherwise publicly disseminated notice that the 2019 annual shareholders’ meeting will be held.
Notices of shareholder proposals and shareholder nominations for directors must comply with the informational and other
requirements set forth in our Bylaws as well as applicable statutes and regulations. Due to the complexity of the respective rights of
the shareholders and the Company in this area, any shareholder desiring to propose actions or nominate directors is advised to consult
with his or her legal counsel with respect to such rights. The Company suggests that any such proposal be submitted by certified mail
return receipt requested.
HOUSEHOLDING
The SEC permits a procedure called “householding” for the delivery of proxy information to shareholders. Under this
procedure, certain shareholders who share the same last name and address and do not participate in electronic delivery will receive
only one copy of the proxy materials unless one or more of such shareholders notifies us that they would like to receive individual
copies. Shareholders who participate in householding will continue to receive separate proxy cards. The Company initiated
householding to reduce printing costs and postage fees.
The Company will promptly deliver, upon written or oral request, a separate copy of the proxy statement and annual report in a
separate envelope, as applicable, to a shareholder at a shared address to which a single copy of these documents was delivered. If you
prefer to receive separate copies of the proxy materials in a separate envelope either now or in the future, please contact Broadridge
Financial Solutions, Inc. at (800) 542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood,
New York 11717.
If you are currently receiving separate copies and wish to receive only one copy of future proxy materials for your household, in
one envelope, please contact Broadridge at the above phone number or address.
30
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the Proxy, Proxy Statement, Annual Report and other
material which may be sent to the shareholders in connection with this solicitation. Brokerage houses and other custodians, nominees
and fiduciaries may be requested to forward soliciting material to the beneficial owners of stock, in which case they may be
reimbursed by the Company for their expenses in doing so. Proxies may be solicited personally, by telephone, by telegram or by
special letter.
The Board of Directors does not intend to present to the meeting any other matter not referred to above and does not presently
know of any matters that may be presented to the meeting by others. However, if other matters come before the meeting, it is the
intent of the persons named in the enclosed proxy to vote the proxy in accordance with their best judgment.
By Order of the Board of Directors
/s/ Jeffery Crivello
Jeffery Crivello
Chief Executive Officer
31
EXHIBIT A
FAMOUS DAVE’S OF AMERICA, INC.
AMENDED AND RESTATED 2015 EQUITY INCENTIVE PLAN
1. General.
(As Amended March 29, 2018)
1.1 Purpose. The purpose of the 2015 Equity Incentive Plan (the “Plan”) of Famous Dave’s of America, Inc. (the
“Company”) is to increase stockholder value and to advance the interests of the Company by furnishing a variety of
economic incentives (“Incentives”) designed to attract, retain and motivate Employees, certain key consultants and directors
of the Company. Incentives may consist of opportunities to purchase or receive shares of Common Stock, $0.01 par value
per share, of the Company (“Common Stock”) on terms determined under this Plan.
1.2 Eligible Participants. Employees, Directors and Consultants are eligible to receive Incentives. Participants may
be designated individually or by groups or categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries and any performance objectives relating to such officers must
be approved by the Committee. Participation by others and any performance objectives relating to others may be approved
by groups or categories (for example, by pay grade) and authority to designate participants who are not officers and to set
or modify such targets may be delegated.
1.3 Types of Incentives. Incentives under the Plan may be granted in any one or a combination of the following
forms: (a) Incentive Stock Options and non-statutory stock options (Section 4); (b) stock appreciation rights (“SARs”)
(Section 5); (c) stock awards, restricted stock awards and restricted stock unit awards (Section 6); (d) performance awards
(Section 7), and (e) other forms of Incentives valued in whole or in part by reference to, or otherwise based on, Common
Stock, including the appreciation in value thereof (with the Board having sole and complete authority to determine the
persons to whom and the time or times at which such other forms of Incentives will be granted, the number of shares of
Common Stock (or the cash equivalent thereof) to be granted and all other terms and conditions of such other Incentives.
Subject to the specific limitations provided in this Plan, payment of Incentives may also be in the form of cash, Common
Stock or combinations thereof as the Board shall determine, and with such other restrictions as it may impose.
1.4 Status of Prior Plan. The Plan is intended as a new equity incentive plan that is separate from the Company’s
2005 Stock Incentive Plan (the “Prior Plan”). Following the Effective Date, no additional Incentives may be granted under
the Prior Plan. Any shares of Common Stock that are set aside under the Prior Plan’s share reserve but which are not subject
to any outstanding Incentives under the Prior Plan as of 12:01 a.m. Central Standard Time on the Effective Date (the “Prior
Plan’s Available Reserve”) will cease to be available for use under the Prior Plan at such time and will be added to this
Plan’s Share Reserve (as further described in Section 3.1) and be then immediately available for issuance pursuant to
Incentives. In addition, from and after 12:01 a.m. Central Standard Time on the Effective Date, all outstanding Incentives
granted under the Prior Plan will remain subject to the terms of the Prior Plan. All Incentives granted on or after 12:01 a.m.
Central Standard Time on the Effective Date of this Plan will be subject to the terms of this Plan.
32
2. Administration.
2.1 Administration by the Board. The Plan shall be administered by the board of directors of the Company (the
“Board”). The Board may delegate administration of the Plan to a stock option or compensation committee of the Board to
whom authority has been delegated by the Board, in accordance with Section 2.3 (a “Committee”).
2.2 Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions
of the Plan:
(a)
To determine: (i) who will be granted Incentives; (ii) when and how each Incentive will be granted;
(iii) what type of Incentive will be granted; (iv) the provisions of each Incentive (which need not be identical),
including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the
Incentive; (v) the number of shares of Common Stock subject to, or the cash value of, an Incentive; and (vi) the Fair
Market Value applicable to an Incentive.
(b)
To construe and interpret the Plan and Incentives granted under it, and to establish, amend and
revoke rules and regulations for administration of the Plan and Incentives. The Board, in the exercise of these
powers, may correct any defect, omission or inconsistency in the Plan or in any written agreement (an “Incentive
Agreement”) between the Company and a person to whom an Incentive is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Incentive (a “Participant”), in a manner and to the extent it
will deem necessary or expedient to make the Plan or Incentive fully effective.
(c)
(d)
To settle all controversies regarding the Plan and Incentives granted under it.
To accelerate, in whole or in part, the time at which an Incentive may be exercised or vest (or at
which cash or shares of Common Stock may be issued).
(e)
To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an
Incentive Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under
his or her then-outstanding Incentive without his or her written consent except as provided in subsection (viii)
below.
(f)
To submit the Plan and any amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Internal
Revenue Code of 1986, as amended (including the regulations promulgated thereunder, the “Code”) regarding the
exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to
“covered employees” (within the meaning of Section 162(m)(3) under the Code), (B) Section 422 of the Code
regarding incentive stock options, or (C) Rule 16b-3 of the Securities Exchange Act of 1934 (including the
regulations promulgated thereunder, the “Exchange Act”) (“Rule 16b-3”).
(g)
To approve forms of Incentive Agreements for use under the Plan and to amend the terms of any
one or more Incentives, including, but not limited to, amendments to provide terms more favorable to the Participant
than previously provided in the Incentive Agreement, subject to any specified limits in the Plan that are not subject
to Board discretion; provided, however, that a Participant’s rights under any Incentive will not be impaired by any
such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant
consents in writing. Notwithstanding the foregoing, (A) a Participant’s rights will not be deemed to have been
impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a
whole, does not materially impair the Participant’s rights, and (B) subject to the limitations of applicable law, if
any, the Board may amend the terms of any one or more Incentives without the affected Participant’s consent: (1)
to maintain the qualified status of the Incentive as an Incentive Stock Option under Section 422 of the Code; (2) to
change the terms of an Incentive Stock Option, if such change results in impairment of the Incentive solely because
it impairs the qualified status of the Incentive as an Incentive Stock Option under Section 422 of the Code; (3) to
clarify the manner of exemption from, or to bring the Incentive into compliance with, Section 409A; or (4) to
comply with other applicable laws or securities exchange rule or listing requirements.
33
(h)
Generally, to exercise such powers and to perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan
or Incentives.
(i)
To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in
the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States
(provided that Board approval will not be necessary for immaterial modifications to the Plan or any Incentive
Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).
2.3 Delegation to Committee.
(a)
General. The Board may delegate some or all of the administration of the Plan to a Committee or
Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with
the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the
Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers
the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee
or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with
the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Committee
may, at any time, abolish the subcommittee and/or re-vest in the Committee any powers delegated to the
subcommittee. The Board may retain the authority to concurrently administer the Plan with the Committee and
may, at any time, revest in the Board some or all of the powers previously delegated.
(b)
Section 162(m) and Rule 16b-3 Compliance. The Committee shall consist of not less than two (2)
Directors. During any time period in which the Company has a class of equity securities registered under Section
12 of the Exchange Act, each such Committee member or, if applicable, each member of a subcommittee to which
power to administer the Company’s equity incentive plans and compensation under Section 162(m) under the Code,
has been delegated, shall be an “outside director” within the meaning of Section 162(m) under the Code and a “non-
employee director” within the meaning of Rule 16b-3.
2.4 Delegation to an Officer. The Board may delegate to one (1) or more Directors or officers of the Company
(within the meaning of Section 16 of the Exchange Act, “Officers”), subject to such terms, conditions and limitation as the
Board may establish in its discretion, the authority to grant Incentives; provided, however, that the Board shall not delegate
such authority (i) with respect to grants of Incentives to be made to Officers or (ii) in such a manner as would cause the Plan
not to comply with the requirements of Section 162(m) under the Code, applicable exchange rules or applicable corporate
law.
2.5 Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good
faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
2.6 Cancellation and Re-Grant of Incentives. Except in connection with a Capitalization Adjustment, neither the
Board nor any Committee will have the authority to: (a) reduce the exercise, purchase or strike price of any outstanding
Options or SAR under the Plan; or (b) cancel any outstanding Options or SARs that have an exercise price or strike price
greater than the current Fair Market Value of the Common Stock in exchange for cash or other Incentives under the Plan,
unless the shareholders of the Company have approved such an action within twelve (12) months prior to such an event.
3. Shares Subject to the Plan.
3.1. Number of Shares. Subject to adjustment in connection with a Capitalization Adjustment, the number of shares
of Common Stock which may be issued under the Plan shall not exceed 1,000,000 shares of Common Stock. Shares of
Common Stock that are issued under the Plan or are subject to outstanding Incentives will be applied to reduce the maximum
number of shares of Common Stock remaining available for issuance under the Plan. For purposes of clarification, the
award of any Incentives payable only in cash will not reduce the number of shares of Common Stock remaining and
available to be issued under the Plan. Shares may be issued in connection with a merger or acquisition as permitted by
NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company
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Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance
under the Plan.
3.2. Share Counting.
(a)
To the extent that cash in lieu of shares of Common Stock is delivered upon the exercise of a SAR
pursuant to Section 5.4, the Company shall be deemed, for purposes of applying the limitation on the number of
shares, to have issued the greater of the number of shares of Common Stock which it was entitled to issue upon
such exercise or on the exercise of any related option.
(b)
In the event that a stock option or SAR granted hereunder expires or is terminated or canceled
unexercised as to any shares of Common Stock, such shares shall be added back to the Plan share reserve and shall
be available again for issuance pursuant to Incentives granted under the Plan.
(c)
To the extent that the full number of shares subject to a performance share award other performance
based-stock award (other than a stock option or SAR) is not issued by reason of failure to achieve maximum
performance goals, the number of shares not issued shall be added back to the Plan share reserve and shall be
available again for issuance pursuant to Incentives granted under the Plan.
(d)
In the event that shares of Common Stock are issued as performance shares, restricted stock or
pursuant to another stock award and thereafter are forfeited or reacquired by the Company because of the failure to
meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or
repurchased shall be added back to the Plan share reserve and shall be available again for issuance pursuant to
Incentives granted under the Plan.
(e)
Shares withheld or deducted from an Incentive in satisfaction of tax withholding obligations on an
Incentive or as consideration for the exercise or purchase price of an Incentive shall not be added back to the Plan
share reserve and shall not again become available for issuance under the Plan.
3.3 Incentive Stock Option Limit. Subject to Section 9.1 relating to Capitalization Adjustments, the aggregate
maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options will
be 350,000 shares of Common Stock.
3.4 Section 162(m) Limitations. Subject to Section 9.1 relating to Capitalization Adjustments, at such time as the
Company may be subject to the applicable provisions of Section 162(m) of the Code, the following limitations shall apply:
(a)
A maximum of 350,000 shares of Common Stock subject to stock options, SARs and Other Stock
Awards whose value is determined by reference to an increase over an exercise or strike price of at least one hundred
percent (100%) of the Fair Market Value on the date any such Incentive is granted may be granted to any Participant
during any calendar year. Notwithstanding the foregoing, if any additional Options, SARs or Other Stock Awards
whose value is determined by reference to an increase over an exercise or strike price of at least one hundred percent
(100%) of the Fair Market Value on the date the Stock Award are granted to any Participant during any calendar
year, compensation attributable to the exercise of such additional Incentive will not satisfy the requirements to be
considered “qualified performance-based compensation” under Section 162(m) of the Code unless such additional
Incentive is approved by the Company’s shareholders.
(b)
A maximum of 350,000 performance shares may be granted to any one Participant during any one
calendar year (whether the grant, vesting or exercise is contingent upon the attainment during the Performance
Period of the Performance Goals).
(c)
A maximum of $2,000,000 may be granted as a performance cash awards to any one Participant
during any one calendar year.
3.5 Limitation on Awards Granted to Non-Employee Directors. No Director who is not also an Employee may be
granted any Incentive or Incentives denominated in shares that exceed in the aggregate $500,000 in value (such value
35
computed as of the date of grant in accordance with applicable financial accounting rules) in any calendar year. The
foregoing limit shall not apply to any Incentive made pursuant to any election by the Directors to receive an Incentive in
lieu of all or a portion of annual and committee retainers and meeting fees.
3.6 Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued Common Stock.
4. Stock Options. A stock option is a right to purchase shares of Common Stock from the Company. Each stock
option granted under this Plan shall be subject to the following terms and conditions:
4.1 Price. The option price per share shall be determined by the Board, subject to adjustment under Section 9.1;
provided that option price shall be not less than the Fair Market Value of the Common Stock subject to the option on the
date of grant.
4.2. Number. The number of shares of Common Stock subject to the option shall be determined by the Board,
subject to adjustment in connection with a Capitalization Adjustment. The number of shares of Common Stock subject to
a stock option shall be reduced in the same proportion that the holder thereof exercises a SAR if any SAR is granted in
conjunction with or related to the stock option.
4.3. Duration and Time for Exercise. Subject to earlier termination as provided in Section 10.2, the term of each
stock option shall be determined by the Committee but shall not exceed ten years and one day from the date of grant. Each
stock option shall become exercisable at such time or times during its term as shall be determined by the Board at the time
of grant, but shall not become exercisable more quickly than ratably over three years unless the Board determines in its
discretion that a faster schedule is warranted.
4.4. Manner of Exercise. A stock option may be exercised, in whole or in part, by giving written notice to the
Company, specifying the number of shares of Common Stock to be purchased and accompanied by the full purchase price
for such shares. The option price shall be payable (a) in United States dollars upon exercise of the option and may be paid
by cash, uncertified or certified check or bank draft; (b) at the discretion of the Board, by delivery of shares of Common
Stock in payment of all or any part of the option price, which shares shall be valued for this purpose at the Fair Market
Value on the date such option is exercised; (c) at the discretion of the Committee, by instructing the Company to withhold
from the shares of Common Stock issuable upon exercise of the stock option shares of Common Stock in payment of all or
any part of the exercise price and/or any related withholding tax obligations, which shares shall be valued for this purpose
at the Fair Market Value or in such other manner as may be authorized from time to time by the Board, or (d) in any other
form of legal consideration that may be acceptable to the Board or is specified in the applicable Incentive Agreement. The
shares of Common Stock delivered by the participant pursuant to Section 4.4(b) must have been held by the participant for
a period of not less than six months prior to the exercise of the option, unless otherwise determined by the Board. Prior to
the issuance of shares of Common Stock upon the exercise of a stock option, a participant shall have no rights as a
shareholder.
4.5
Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional
provisions shall apply to the grant Incentive Stock Options:
(a)
To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any
calendar year (under all plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000)
(or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock
Options, the options or portions thereof that exceed such limit (according to the order in which they were granted)
or otherwise do not comply with such rules will be treated as non-statutory stock options, notwithstanding any
contrary provision of the applicable Incentive Agreement(s).
(b)
Any Incentive Stock Option authorized under the Plan shall contain such other provisions as the
Board shall deem advisable, but shall in all events be consistent with and contain all provisions required in order to
qualify the options as Incentive Stock Options.
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(c)
All Incentive Stock Options must be granted within ten years from the earlier of the date on which
this Plan was adopted by Board of Directors or the date this Plan was approved by the shareholders.
(d)
Unless sooner exercised, all Incentive Stock Options shall expire no later than 10 years after the
date of grant.
(e)
The option price for Incentive Stock Options shall be not less than the Fair Market Value of the
Common Stock subject to the option on the date of grant.
(f)
If Incentive Stock Options are granted to any participant who, at the time such option is granted,
would own (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation, (i) the
option price for such Incentive Stock Options shall be not less than 110% of the Fair Market Value of the Common
Stock subject to the option on the date of grant and (ii) such Incentive Stock Options shall expire no later than five
years after the date of grant.
5. Stock Appreciation Rights. A SAR is a right to receive, without payment to the Company, a number of shares of
Common Stock, cash or any combination thereof, the amount of which is determined pursuant to the formula set forth in
Section 5.4. A SAR may be granted (a) with respect to any stock option granted under this Plan, either concurrently with
the grant of such stock option or at such later time as determined by the Board (as to all or any portion of the shares of
Common Stock subject to the stock option), or (b) alone, without reference to any related stock option. Each SAR under
this Plan shall be subject to the following terms and conditions:
5.1. Number. Each SAR granted to any participant shall relate to such number of shares of Common Stock as shall
be determined by the Board, subject to adjustment in connection with a Capitalization Adjustment. In the case of a SAR
granted with respect to a stock option, the number of shares of Common Stock to which the SAR pertains shall be reduced
in the same proportion that the holder of the option exercises the related stock option.
5.2. Duration. Subject to earlier termination as provided in Section 10.2, the term of each SAR shall be determined
by the Board but shall not exceed ten years and one day from the date of grant. Unless otherwise provided by the Board,
each SAR shall become exercisable at such time or times, to such extent and upon such conditions as the stock option, if
any, to which it relates is exercisable.
5.3. Exercise. A SAR may be exercised, in whole or in part, by giving written notice to the Company, specifying
the number of SARs which the holder wishes to exercise. Upon receipt of such written notice, the Company shall, within
90 days thereafter, deliver to the exercising holder certificates for the shares of Common Stock or cash or both, as determined
by the Committee, to which the holder is entitled pursuant to Section 5.4.
5.4. Payment. Subject to the right of the Board to deliver cash in lieu of shares of Common Stock (which, as it
pertains to Officers and Directors, shall comply with all requirements of the Exchange Act), the number of shares of
Common Stock which shall be issuable upon the exercise of a SAR shall be determined by dividing:
(a)
the number of shares of Common Stock as to which the SAR is exercised multiplied by the amount
of the appreciation in such shares (for this purpose, the “appreciation” shall be the amount by which the Fair Market
Value of the shares of Common Stock subject to the SAR on the exercise date exceeds (1) in the case of a SAR
related to a stock option, the purchase price of the shares of Common Stock under the stock option or (2) in the case
of a SAR granted alone, without reference to a related stock option, an amount which shall be determined by the
Board at the time of grant, subject to adjustment under Section 10.6); by
(b)
the Fair Market Value of a share of Common Stock on the exercise date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR, the Board may elect to pay the holder of the SAR
cash equal to the Fair Market Value on the exercise date of any or all of the shares which would otherwise be issuable. No
fractional shares of Common Stock shall be issued upon the exercise of a SAR; instead, the holder of the SAR shall be
37
entitled to receive a cash adjustment equal to the same fraction of the Fair Market Value of a share of Common Stock on
the exercise date or to purchase the portion necessary to make a whole share at its Fair Market Value on the date of exercise.
6. Stock Awards, Restricted Stock and Restricted Stock Units. A stock award consists of the transfer by the
Company to a participant of shares of Common Stock, without other payment therefor, as additional compensation for
services to the Company. Restricted stock consists of shares of Common Stock which are sold or transferred by the Company
to a participant at a price determined by the Committee (which price shall be at least equal to the minimum price required
by applicable law for the issuance of a share of Common Stock) and subject to restrictions on their sale or other transfer by
the participant. Restricted stock units evidence the right to receive shares of Common Stock at a future date. The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted stock shall be subject to the following terms
and conditions:
6.1. Number of Shares. The number of shares to be transferred or sold by the Company to a participant pursuant to
a stock award or as restricted stock, or the number of shares that may be issued pursuant to a restricted stock unit, shall be
determined by the Board.
6.2. Sale Price. The Board shall determine the price, if any, at which shares of restricted stock shall be sold to a
participant, which may vary from time to time and among Participants and which may be below the Fair Market Value of
such shares of Common Stock at the date of sale.
6.3. Restrictions. All shares of restricted stock transferred or sold hereunder, and all restricted stock units granted
hereunder, shall be subject to such restrictions as the Board may determine, which restrictions shall lapse over a period not
less than three years from the date of grant, including, without limitation any or all of the following:
(a)
a prohibition against either the sale, transfer, pledge or other encumbrance of the shares of restricted
stock, or the delivery of shares pursuant to restricted stock units, such prohibition to lapse at such time or times as
the Committee shall determine (whether in annual or more frequent installments, at the time of the death, disability
or retirement of the holder of such shares, or otherwise);
(b)
a requirement that the holder of shares of restricted stock or restricted stock units forfeit, or (in the
case of shares sold to a participant) resell back to the Company at his or her cost, any right to all or a part of such
shares or units in the event of termination of his or her employment or consulting engagement during any period in
which such shares or units are subject to restrictions; and
(c)
such other conditions or restrictions as the Board may deem advisable.
6.4. Escrow. In order to enforce the restrictions imposed by the Board pursuant to Section 6.3, the Participant
receiving restricted stock or restricted stock units, as applicable, shall enter into an Incentive Agreement with the Company
setting forth the conditions of the grant. Shares of restricted stock shall be registered in the name of the Participant and
deposited, together with a stock power endorsed in blank, with the Company. Each such certificate shall bear a legend in
substantially the following form:
The transferability of this certificate and the shares of Common Stock represented by it are subject to the
terms and conditions (including conditions of forfeiture) contained in the 2015 Equity Incentive Plan of
Famous Dave’s of America, Inc. (the “Company”), and an agreement entered into between the registered
owner and the Company. A copy of the Plan and the agreement is on file in the office of the secretary of
the Company.
6.5. Issuance and Delivery of Shares. Subject to Section 10.6, at the end of any time period during which the shares
of restricted stock are subject to forfeiture and restrictions on transfer, such shares will be delivered free of all restrictions
to the participant or to the participant’s legal representative, beneficiary or heir. In the case of restricted stock units, no
shares shall be issued at the time such restricted stock units are granted. Subject to Section 10.6, upon the lapse or waiver
of restrictions applicable to restricted stock units, or at a later time specified in the agreement governing the grant of
restricted stock units, any shares derived from the restricted stock units shall be issued and delivered to the holder of the
restricted stock units.
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6.6. Shareholder. Subject to the terms and conditions of the Plan, each Participant receiving restricted stock shall
have all the rights of a shareholder with respect to shares of stock during any period in which such shares are subject to
forfeiture and restrictions on transfer, including without limitation, the right to vote such shares. Dividends paid in cash or
property other than Common Stock with respect to shares of restricted stock shall be paid to the participant currently. Any
holder of restricted stock units shall not be, and shall not have rights and privileges of, a shareholder with respect to any
shares that may be derived from the restricted stock units unless and until such shares have been issued.
7. Performance Awards.
7.1 Performance Shares. A performance share is an Incentive (covering a number of shares not in excess of that set
forth in Section 3.4(b) above) that is payable contingent upon the attainment during a Performance Period of certain
Performance Goals. The length of any Performance Period, the Performance Goals to be achieved during the Performance
Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively
determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole
discretion; provided, however, that any Performance Period shall be at least one year in length. The grant of performance
shares to a Participant shall not create any rights in such Participant as a shareholder of the Company, until the payment of
shares of Common Stock with respect to an Incentive. No adjustment shall be made in performance shares granted on
account of cash dividends which may be paid or other rights which may be issued to the holders of Common Stock prior to
the end of any period for which performance objectives were established. In addition, to the extent permitted by applicable
law and the applicable Incentive Agreement, the Board may determine that cash may be used in payment of performance
shares.
7.2 Performance Cash Awards. A performance cash award is a cash award (for a dollar value not in excess of that
set forth in Section 3.4(c) above) that is payable contingent upon the attainment during a Performance Period of certain
Performance Goals. At the time of grant of a performance cash award, the length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such
Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance
with Section 162(m) of the Code, the Board), in its sole discretion; provided, however, that any Performance Period shall
be at least one year in length. The Board may specify the form of payment of performance cash awards, which may be cash
or other property, or may provide for a Participant to have the option for his or her performance cash award, or such portion
thereof as the Board may specify, to be paid in whole or in part in cash or other property.
7.3 Board Discretion. The Board retains the discretion to at any time reduce or eliminate the compensation or
economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance
Criteria it selects to use for a Performance Period.
7.4 Section 162(m) Compliance. Unless otherwise permitted in compliance with the requirements of Section 162(m)
of the Code with respect to an Incentive intended to qualify as “performance-based compensation” thereunder, the
Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under,
the Incentive no later than the earlier of (A) the date ninety (90) days after the commencement of the applicable Performance
Period, and (B) the date on which twenty-five percent (25%) of the Performance Period has elapsed, and in any event at a
time when the achievement of the applicable Performance Goals remains substantially uncertain. Prior to the payment of
any compensation under an Incentive intended to qualify as “performance-based compensation” under Section 162(m) of
the Code, the Committee will certify the extent to which any Performance Goals and any other material terms under such
Award have been satisfied (other than in cases where such relate solely to the increase in the value of the Common Stock).
Notwithstanding satisfaction of any completion of any Performance Goals, options, cash or other benefits granted, issued,
retainable and/or vested under an Incentive on account of satisfaction of such Performance Goals may be reduced by the
Committee on the basis of such further considerations as the Committee, in its sole discretion, will determine.
8. Covenants of the Company.
8.1 Availability of Shares. The Company will keep available at all times the number of shares of Common Stock
reasonably required to satisfy then-outstanding Incentives.
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8.2. Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan such authority as may be required to grant Incentives and to issue and sell shares of
Common Stock upon exercise of the Incentives; provided, however, that this undertaking will not require the Company to
register under the Securities Act of 1933 (including the regulations promulgated thereunder, the “Securities Act”) the Plan,
any Incentive or any Common Stock issued or issuable pursuant to any such Incentive. If, after reasonable efforts and at a
reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel
for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be
relieved from any liability for failure to issue and sell Common Stock upon exercise of such Incentives unless and until such
authority is obtained. A Participant will not be eligible for the grant of an Incentive or the subsequent issuance of cash or
Common Stock pursuant to the Incentive if such grant or issuance would be in violation of any applicable securities law.
8.3 No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to
advise such holder as to the time or manner of exercising any Incentive. Furthermore, the Company will have no duty or
obligation to warn or otherwise advise such holder of a pending termination or expiration of an Incentive or a possible
period in which the Incentive may not be exercised. The Company has no duty or obligation to minimize the tax
consequences of an Incentive to the holder of such Incentive.
9. Adjustments upon Changes in Common Stock; Other Corporate Events.
9.1 Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and
proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a) and
the shares of Common Stock issuable pursuant to any Incentive, the exercise price of any stock option or SAR, the
performance goals for any Incentive, and other provisions of this Plan and outstanding Incentives, in order to reflect the
change in the Common Stock and to provide Plan participants with the same relative rights before and after such adjustment.
The Board will make such adjustments, and its determination will be final, binding and conclusive.
9.2 Dissolution or Liquidation. Except as otherwise provided in the Incentive Agreement, in the event of a
dissolution or liquidation of the Company, all outstanding Incentives (other than Incentives consisting of vested and
outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will
terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject
to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company;
provided, however, that the Board may, in its sole discretion, cause some or all Incentives to become fully vested, exercisable
and/or no longer subject to repurchase or forfeiture (to the extent such Incentives have not previously expired or terminated)
before the dissolution or liquidation is completed but contingent on its completion.
9.3 Corporate Transaction. The following provisions will apply to Incentives in the event of a Corporate Transaction
unless otherwise provided in the instrument evidencing the Incentive or any other written agreement between the Company
or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of an Incentive.
In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board may take one or
more of the following actions with respect to Incentives, contingent upon the closing or consummation of the Corporate
Transaction:
(a)
arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company) to assume or continue the Incentive or to substitute a similar stock award for the
Incentive (including, but not limited to, an award to acquire the same consideration paid to the shareholders of the
Company pursuant to the Corporate Transaction);
(b)
arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect
of Common Stock issued pursuant to the Incentives to the surviving corporation or acquiring corporation (or the
surviving or acquiring corporation’s parent company);
(c)
accelerate the vesting, in whole or in part, of the Incentive (and, if applicable, the time at which the
Incentive may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board
determines (or, if the Board does not determine such a date, to the date that is five (5) days prior to the effective
40
date of the Corporate Transaction), with such Incentive terminating if not exercised (if applicable) at or prior to the
effective time of the Corporate Transaction; provided, however, that the Board may require Participants to complete
and deliver to the Company a notice of exercise before the effective date of a Corporate Transaction, which exercise
is contingent upon the effectiveness of such Corporate Transaction;
(d)
arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the
Company with respect to the Incentive;
(e)
cancel or arrange for the cancellation of the Incentive, to the extent not vested or not exercised prior
to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in
its sole discretion, may consider appropriate; and
(f)
make a payment, in such form as may be determined by the Board equal to the excess, if any, of
(A) the value of the property the Participant would have received upon the exercise of the Incentive immediately
prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in
connection with such exercise. For clarity, this payment may be zero ($0) if the value of the property is equal to or
less than the exercise price. Payments under this provision may be delayed to the same extent that payment of
consideration to the holders of the Company’s Common Stock in connection with the Corporate Transaction is
delayed as a result of escrows, earn outs, holdbacks or any other contingencies.
The Board need not take the same action or actions with respect to all Incentives or portions thereof or with respect
to all Participants. The Board may take different actions with respect to the vested and unvested portions of an Incentive
prior to the earlier of (i) the effective time of the Corporate Transaction and (ii) the effectiveness of such action(s) with
respect to the Incentives.
9.4. Change in Control. In the event of a Change in Control (as defined in Section 11.3), the Board or a comparable
committee of any corporation assuming the obligations of the Company hereunder may, but shall not be obligated to, elect
in its discretion to declare that the restriction period of all restricted stock and restricted stock units has been eliminated,
that all outstanding stock options and SARs shall accelerate and become exercisable in full but that all outstanding Stock
Options and SARs, whether or not exercisable prior to such acceleration, must be exercised within the period of time set
forth in a notice to Participant or they will terminate, and that all performance shares granted to Participants are deemed
earned at 100% of target levels and shall be paid. In connection with any declaration pursuant to this Section 9.4, the Board
may, but shall not be obligated to, cause a cash payment to be made to each Plan participant who holds a stock option or
SAR that is terminated in an amount equal to the product obtained by multiplying (x) the amount (if any) by which the
Transaction Proceeds Per Share (as defined in Section 11.14) exceeds the exercise price per share covered by such stock
option times (y) the number of shares of Common Stock covered by such stock option or SAR.
The Board may restrict the rights of Plan participants or the applicability of this Section 9.4 to the extent necessary
to comply with Section 16(b) of the Exchange Act, the Code or any other applicable law or regulation. The grant of an
Incentive pursuant to the Plan shall not limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.
10. General.
10.1. Effective Date. The Plan will become effective the Effective Date. Unless approved by the shareholders within
one year after the date of the Plan’s adoption by the Board of Directors, the Plan shall not be effective for any purpose.
10.2. Duration.
(a)
The Board may suspend or terminate the Plan at any time. No Incentive Stock Option will be
granted after the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the
date the Plan is approved by the shareholders of the Company. No Incentives may be granted under the Plan while
the Plan is suspended or after it is terminated.
41
(b)
Suspension or termination of the Plan will not impair rights and obligations under any Incentive
granted while the Plan is in effect except with the written consent of the affected Participant or as otherwise
permitted in the Plan.
10.3 Corporate Action Constituting Grant of Incentives. Corporate action constituting a grant by the Company of
an Incentive to any Participant will be deemed completed as of the date of such corporate action, unless otherwise
determined by the Board, regardless of when the Incentive Agreement, instrument, certificate, or letter evidencing the
Incentive is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records
(e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g.,
exercise price, vesting schedule or number of shares) that are inconsistent with those in the Incentive Agreement as a result
of a clerical error in the papering of the Incentive Agreement, the corporate records will control and the Participant will
have no legally binding right to the incorrect term in the Incentive Agreement.
10.4. Non-transferability of Incentives. No stock option, SAR, restricted stock, restricted stock unit or performance
award may be transferred, pledged or assigned by the holder thereof (except, in the event of the holder’s death, by will or
the laws of descent and distribution to the limited extent provided in the Plan or the Incentive, or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder), and the Company shall not be required to recognize any attempted assignment of such rights by any participant.
Notwithstanding the preceding sentence, stock options may be transferred by the holder thereof to Employee’s spouse,
children, grandchildren or parents (collectively, the “Family Members”), to trusts for the benefit of Family Members, to
partnerships or limited liability companies in which Family Members are the only partners or shareholders, or to entities
exempt from federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
During a participant’s lifetime, a stock option may be exercised only by him or her, by his or her guardian or legal
representative or by the transferees permitted by the preceding sentence.
10.5. Effect of Termination or Death. In the event that a Participant ceases to be an Employee Director, or Consultant
for any reason, including death or disability, any Incentives may be exercised (or payments or shares may be delivered
thereunder) or shall expire at such times as may be determined by the Board and, if applicable, set forth in the Incentive
Agreement.
10.6. Investment Assurances; Additional Condition. Notwithstanding anything in this Plan to the contrary, the
Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Incentive, (i) to
give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable
and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Incentive; and (ii) to give written assurances satisfactory to
the Company stating that the Participant is acquiring Common Stock subject to the Incentive for the Participant’s own
account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares
upon the exercise or acquisition of Common Stock under the Incentive has been registered under a then currently effective
registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to,
legends restricting the transfer of the Common Stock. If at any time the Company further determines, in its sole discretion,
that the listing, registration or qualification (or any updating of any such document) of any Incentive or the shares of
Common Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or
blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition
of, or in connection with the award of any Incentive, the issuance of shares of Common Stock pursuant thereto, or the
removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such shares of Common Stock
shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part, unless such listing,
42
registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to
the Company.
10.7. Incentive Plans and Agreements. Except in the case of stock awards, the terms of each Incentive shall be stated
in a plan or agreement approved by the Board. The Board may also determine to enter into agreements with holders of
options to reclassify or convert certain outstanding options, within the terms of the Plan, as Incentive Stock Options or as
non-statutory stock options and in order to eliminate SARs with respect to all or part of such options and any other
previously issued options.
10.8. Withholding. Unless prohibited by the terms of an Incentive Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding obligation relating to an Incentive by any of the following
means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or
by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Incentive;
provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax
required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Incentive as a
liability for financial accounting purposes); (iii) withholding cash from an Incentive settled in cash; (iv) withholding
payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the
Incentive Agreement. If a Participant desires and the Board permits, Participant the Participant may satisfy its obligation to
pay to the Company the amount required to be withheld by electing (the “Election”) to have the Company withhold from
the distribution shares of Common Stock having a value up to the minimum amount of withholding taxes required to be
collected on the transaction. The value of the shares to be withheld shall be based on the Fair Market Value of the Common
Stock on the date that the amount of tax to be withheld shall be determined (“Tax Date”). Each Election must be made prior
to the Tax Date. The Board may disapprove of any Election, may suspend or terminate the right to make Elections, or may
provide with respect to any Incentive that the right to make Elections shall not apply to such Incentive. An Election is
irrevocable.
10.9. No Continued Employment, Engagement or Right to Corporate Assets. Nothing in the Plan, any Incentive
Agreement or any other instrument executed thereunder or in connection with any Incentive granted pursuant thereto will
confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time
the Incentive was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the
Affiliate is incorporated, as the case may be. Nothing contained in the Plan shall be construed as giving an Employee, a
consultant, such persons’ beneficiaries or any other person any equity or interests of any kind in the assets of the Company
or creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person.
10.10. Change in Time Commitment. In the event a Participant’s regular level of time commitment in the
performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if
the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a
part-time Employee) after the date of grant of any Incentive to the Participant, the Board has the right in its sole discretion
to (i) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Incentive that
is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination
with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction,
the Participant will have no right with respect to any portion of the Incentive that is so reduced or extended.
10.11 Electronic Delivery. Any reference herein to a “written” agreement or document will include any agreement
or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the
Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
10.12. Deferral Permitted. To the extent permitted by applicable law, the Board, in its sole discretion, may determine
that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of
43
any Incentive may be deferred and may establish programs and procedures for deferral elections to be made by Participants.
Deferrals by Participants will be made in accordance with Section 409A.
10.13. Amendment of the Plan. The Board may amend, modify, suspend, discontinue or terminate the Plan or any
portion of the Plan at any time as it deems necessary or advisable; provided, however, any amendment or modification that
(a) increases the total number of shares available for issuance pursuant to Incentives granted under the Plan (except as
contemplated by the provisions of Section 9.1 relating to Capitalization Adjustments), (b) deletes or limits the provision of
Section 2.6 (Cancellation and Re-Grant of Incentives), or (c) requires the approval of the Company’s shareholders pursuant
to any applicable law, regulation or securities exchange rule or listing requirement, shall be subject to approval by the
Company’s shareholders. Except as provided in the Plan (including Section 2.2(g)) or an Incentive Agreement, no
amendment, modification, suspension, discontinuance or termination of the Plan shall impair a Participant’s rights under
an outstanding Incentive without his or her written consent, provided that such consent shall not be required with respect
to any Plan amendment, modification or other such action if the Board determines in its sole discretion that such
amendment, modification or other such action is not reasonably likely to significantly reduce or diminish the benefits
provided to the Participant under such Incentive.
10.14. Code Section 409A Provisions. Unless otherwise expressly provided for in an Incentive Agreement, the Plan
and Incentive Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the
Incentives granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with
Section 409A of the Code. If the Board determines that any Incentive granted hereunder is not exempt from and is therefore
subject to Section 409A of the Code, the Incentive Agreement evidencing such Incentive will incorporate the terms and
conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code and to the extent an Incentive
Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Incentive
Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Incentive Agreement specifically provides
otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Incentive that constitutes
“deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the
Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section
409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six (6)
months following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death,
unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts
so deferred will be paid in a lump sum on the day after such six (6) month period elapses, with the balance paid thereafter
on the original schedule.
10.15. Clawback/Recovery. All Incentives granted under the Plan will be subject to recoupment in accordance with
any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities
exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall
Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other
clawback, recovery or recoupment provisions in an Incentive Agreement as the Board determines necessary or appropriate.
No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good
reason” or “constructive termination” (or similar term) under any agreement with the Company.
11. Additional Definitions.
11.1 Affiliate. “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as
such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or
“subsidiary” status is determined within the foregoing definition.
11.2 Capitalization Adjustment. A “Capitalization Adjustment” means any change that is made in, or other events
that occur with respect to, the Common Stock subject to the Plan or subject to any Incentive after the Effective Date without
the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, stock split, reverse stock split, combination of shares, exchange of shares, change in
corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting
44
Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing,
the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
11.3. Change in Control. A “Change in Control” means any of the following:
(a)
Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 50% or more of either (A) the then-outstanding shares of Common Stock of the Company (the “Outstanding
Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that, for purposes of this Section 11.3, the following acquisitions shall not constitute a Change
in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company
or (iv) any acquisition pursuant to a transaction that complies with Sections 11.3(b)(1), 11.3(b)(2) and 11.3(b)(3);
(b) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar
transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its
subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all
or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock (or, for a
non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as
the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity
that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-
outstanding shares of common stock of the corporation resulting from such Business Combination or the combined
voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership
existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors (or,
for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
(c)
Company.
Approval by the shareholders of the Company of a complete liquidation or dissolution of the
Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control
will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the
domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual
written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition
with respect to Incentives subject to such agreement; provided, however, that if no definition of Change in Control
or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply;
provided, further, that no Change in Control shall be deemed to occur upon announcement or commencement of a
tender offer or upon a potential takeover or upon shareholder approval of a merger or other transaction, in each case
without a requirement that the Change in Control actually occur. If required for compliance with Section 409A of
the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change
in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the
assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any
45
alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend
the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of
the Code, and the regulations thereunder.
11.4. Corporate Transaction. “Corporate Transaction” means the consummation, in a single transaction or in a series
of related transactions, of any one or more of the following events:
(a)
a sale or other disposition of all or substantially all, as determined by the Board, in its sole
discretion, of the consolidated assets of the Company and its Subsidiaries;
(b)
Company;
a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the
(c)
a merger, consolidation or similar transaction following which the Company is not the surviving
corporation; or
(d)
a merger, consolidation or similar transaction following which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into
other property, whether in the form of securities, cash or otherwise.
To the extent required for compliance with Section 409A of the Code, in no event will an event be deemed a
Corporate Transaction if such transaction is not also a “change in the ownership or effective control of” the Company or “a
change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation
Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
11.5 Employee. “Employee” means any person employed by the Company or an Affiliate. However, service solely
as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes
of the Plan.
11.6 Consultant. “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the
board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment
of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding
the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the
Securities Act of 1933 is available to register either the offer or the sale of the Company’s securities to such person.
11.7 Director. “Director” means a member of the Board.
11.8 Effective Date. “Effective Date” means the effective date of this Plan document, which is the date of the annual
meeting of shareholders of the Company held in 2015 provided this Plan is approved by the Company’s shareholders at
such meeting.
11.9 Fair Market Value. “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:
(a)
If the Common Stock is listed on any established stock exchange or traded on any established
market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the
closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems
reliable.
(b)
Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock
on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date
for which such quotation exists.
46
(c)
In the absence of such markets for the Common Stock, the Fair Market Value will be determined
by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
11.10 Incentive Stock Option. “Incentive Stock Option” means a stock option that is intended to be, and qualifies
as, an “incentive stock option” within the meaning of Section 422 of the Code.
11.11 Performance Criteria. “Performance Criteria” means the one or more criteria that the Board will select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that will be used to
establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board:
(i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings
before interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity or average
stockholder’s equity; (vi) return on assets, investment, or capital employed; (vii) stock price; (viii) margin (including gross
margin); (ix) income (before or after taxes); (x) operating income; (xi) operating income after taxes; (xii) pre-tax profit;
(xiii) operating cash flow; (xiv) sales or revenue targets; (xv) increases in revenue or product revenue; (xvi) expenses and
cost reduction goals; (xvii) improvement in or attainment of working capital levels; (xiii) economic value added (or an
equivalent metric); (xix) market share; (xx) cash flow; (xxi) cash flow per share; (xxii) share price performance; (xxiii) debt
reduction; (xxiv) implementation or completion of projects or processes; (xxv) customer satisfaction; (xxvi) stockholders’
equity; (xxvii) capital expenditures; (xxiii) debt levels; (xxix) operating profit or net operating profit; (xxx) workforce
diversity; (xxxi) growth of net income or operating income; (xxxii) billings; and (xxxiii) to the extent that an Incentive is
not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board.
11.12 Performance Goals. “Performance Goals” means, for a Performance Period, the one or more goals established
by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a
Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either
absolute terms or relative to the performance of one or more comparable companies or the performance of one or more
relevant indices.
11.13 Performance Period. “Performance Period” means the period of time selected by the Board over which the
attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and
the payment of an Incentive. Performance Periods may be of varying and overlapping duration, at the sole discretion of the
Board.
11.14 Transaction Proceeds Per Share. “Transaction Proceeds Per Share” in connection with a Change in Control
shall mean the cash plus the Fair Market Value of the non-cash consideration to be received per share by the shareholders
of the Company upon the occurrence of the transaction.
47
VOTE BY INTERNET - www.proxyvote.com
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before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain
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FAMOUS DAVE’S OF AMERICA, INC.
12701 WHITEWATER DRIVE
SUITE 190
MINNETONKA, MN 55343
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
VOTE BY PHONE - 1-800-690-6903
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meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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PROXY CARD
IS VALID ONLY WHEN SIGNED AND DATED.
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
For
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For All
Except
To withhold authority to vote for any individual
nominee(s), mark “For All Except” and write
the number(s) of the nominee(s) on the line
below.
☐
☐
☐
The Board of Directors recommends you vote
FOR the following:
1. Election of Directors
Nominees
01 Anand D. Gala 02 Joseph M. Jacobs 03 Peter O. Haeg 04 Richard A. Shapiro 05 Jeffery Crivello
06 Bryan Wolff 07 Richard Welch
The Board of Directors recommends you vote FOR proposals 2. and 3.
2. To ratify the appointment of Grant Thornton LLP, independent registered public accounting firm, as independent auditors of
the Company for Fiscal 2018.
3. To approve, on an advisory basis, the Company’s executive compensation.
4. To approve an amendment to the Company’s 2015 Equity Incentive Plan to increase the number of Shares of Common Stock
reserved for issuance from 700,000 shares to 1,000,000 shares.
For Against
Abstain
☐
☐
☐
☐
☐
☐
☐
☐
☐
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FAMOUS DAVE’S OF AMERICA, INC.
Annual Meeting of Shareholders
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) Jeffery Crivello and Paul M. Malazita or either of them, as
proxies, each with the power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common
Stock of FAMOUS DAVE’S OF AMERICA, INC. (the “Company”), that the shareholder(s) is/are
entitled to vote at the Annual Meeting of Shareholders to be held at 3:00 p.m., Central Time, on
May 15, 2018, at the offices of Gray Plant Mooty, 500 IDS Center, 80 South Eighth Street,
Minneapolis, MN 55402, and any adjournment or postponement thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR
EACH PROPOSAL. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING,
THE PERSON(S) NAMED IN THIS PROXY WILL VOTE IN THEIR DISCRETION.
Continued and to be signed on reverse side
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2017
Commission File No. 0-21625
FAMOUS DAVE’S of AMERICA, INC.
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of
incorporation or organization)
41-1782300
(I.R.S. Employer
Identification No.)
12701 Whitewater Drive, Suite 190
Minnetonka, MN 55343
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code (952) 294-1300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Name of each exchange on which registered
The Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer
Non- Accelerated Filer
Emerging Growth Company
(Do not check if a smaller reporting company)
Accelerated Filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of common stock held by non-affiliates of the registrant was approximately $15.8 million as of June 30, 2017, (the last business
day of the registrant’s most recently completed second quarter), assuming solely for the purpose of this calculation that all directors, officers, and more than
10% shareholders of the registrant are affiliates. The determination of affiliate status for this purpose is not necessarily conclusive for any other purpose. As of
February 20, 2018, 7,391,315 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
SIGNATURES
Page
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2
Certain statements contained in this Annual Report on Form 10-K include “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are based on
information currently available to us as of the date of this Annual Report, and we assume no obligation to update any
forward-looking statements except as otherwise required by applicable law. Forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future
results, performance or achievements expressed or implied by such forward-looking statements. Such factors may
include, among others, those factors listed in Item 1A of and elsewhere in this Annual Report and our other filings with
the Securities and Exchange Commission. The following discussion should be read in conjunction with our financial
statements and related footnotes appearing elsewhere in this Annual Report.
PART I
ITEM 1. BUSINESS
Summary of Business Results and Plans
Famous Dave’s of America, Inc. (“Famous Dave’s”, the “Company,” “we,” “us” or “our”) was incorporated as
a Minnesota corporation in March 1994 and opened its first restaurant in Minneapolis, Minnesota in June 1995. The
following table summarizes the changes in the number of Company-owned and franchise-operated restaurants for the
fiscal years ended December 31, 2017 and January 1, 2017:
Company-owned restaurants:
Beginning of period
New
Refranchised
Closed
End of period
% of system
Franchise-operated restaurants:
Beginning of period
New
Refranchised
Closed
End of period
% of system
System end of period total
Year Ended
Year Ended
December 31, 2017 January 1, 2017
37
—
(8)
(13)
16
11 %
139
2
8
(15)
134
89 %
150
44
—
(7)
—
37
21 %
135
4
7
(7)
139
79 %
176
As of December 31, 2017, Famous Dave’s restaurants operated in 32 states, the Commonwealth of Puerto Rico,
Canada, and the United Arab Emirates. An additional 61 franchise restaurants were committed to be developed through
signed area development agreements at December 31, 2017. Throughout fiscal 2017, we closed 13 underperforming
Company-owned restaurants and our franchisees closed an additional 15 restaurants.
During the fourth quarter of fiscal 2017, we refranchised eight Company-owned restaurants located at
Columbia, Maryland, Frederick, Maryland, Laurel, Maryland, Waldorf, Maryland, Alexandria, Virginia, Chantilly,
Virginia, Oakton, Virginia and Woodbridge, Virginia. During the first quarter of fiscal 2016, we refranchised seven
Company-owned restaurants in the Chicago area located at Addison, Algonquin, Bolingbrook, Evergreen Park, North
Riverside, Orland Park and Oswego, Illinois. As a result of these transactions, we have classified the operating results of
these restaurants as discontinued operations for all years reported and have excluded them from the results of continuing
operations.
3
In fiscal 2017, we rolled out several initiatives aimed at increasing sales and traffic and reducing costs in our
restaurants and support center. We revitalized our beverage menu and rolled out delivery programs via third-party
delivery services. The beverage menu has been implemented at all of our Company-owned restaurants that serve alcohol
and most of our franchise operated restaurants that serve alcohol. The delivery program is in various stages of
implementation within our participating system-wide restaurants that are served by delivery service providers. As it
relates to costs in our restaurants, we implemented programs aimed at reducing food waste and optimizing labor through
the use of technology and training. We are also working to simplify our back of house operations to drive efficiencies in
our restaurants. Additionally, in fiscal 2017, we took certain steps to realign our general and administrative expense
structure. See Item 7. Management’s Discussion and Analysis for more information.
In fiscal 2018, as well as continuing to execute on the actions that we took in fiscal 2017, we intend to revitalize
and streamline the core Famous Dave’s concept, and develop and test new BBQ concepts with attractive unit economics.
We also expect to continue to leverage technology to increase operational efficiencies, facilitate more frequent training,
and utilize consumer data to expand our base of loyal guests (“Guests”).
Throughout this Annual Report on Form 10-K, we refer to certain metrics of our franchise-operated restaurants;
however, franchise-operated restaurants are not owned by us and therefore are not included in our consolidated results of
operations and financial position. We believe that disclosure of certain information related to franchise-operated
restaurants provides useful information to investors as the performance of franchise-operated restaurants directly impacts
royalty and other revenues that we receive from our franchisees and has an impact on the perceived success and value of
the Famous Dave’s brand.
Financial Information about Segments
Since its inception, our revenue, operating income and assets have been attributable to the single industry
segment of the foodservice industry. Our revenue and operating results for each of the last two fiscal years, and our
assets for each of the last two fiscal years, are disclosed in Item 8. Financial Statements and Supplementary Data to this
Annual Report on Form 10-K.
Narrative Description of Business
Famous Dave’s restaurants, a majority of which offer full table service, feature wood-smoked and off-the-grill
entrée favorites that fit into the broadly defined barbeque category. We seek to differentiate ourselves by providing high-
quality food in distinctive and comfortable environments with signature décor and signage. As of December 31, 2017, 11
of our Company-owned restaurants were full-service and five were counter-service. Generally, our prototypical design
includes a designated bar, a signature exterior smokestack, a separate entrance for our To Go business and a patio (where
available). We have designs that can be adapted to fit various location sizes and desired service styles such as full-
service or counter-service.
In fiscal 2017, our franchisees opened two restaurants in Abu Dhabi, United Arab Emirates and Green Bay,
Wisconsin. In fiscal 2016, four franchise openings were a mixture of conversions of existing full-service casual dining
restaurants to our concept as well as new construction, including two restaurants opened in the United Arab Emirates. In
Fiscal 2018, we may look to incentivize our franchisees to open additional restaurants, either traditional Famous Dave’s
restaurants or our to-be-announced new concept. We offer conversion packages that provide our franchisees with the
flexibility to convert existing restaurants as well as existing retail footprints into a Famous Dave’s restaurant. Due to the
flexibility and scalability of our concept, we believe that there are a variety of development opportunities available now
and in the future.
4
We pride ourselves on the following:
High Quality Food – Each restaurant features a distinctive selection of authentic hickory-smoked and off-the-
grill barbecue favorites, such as flame-grilled St. Louis-style and baby back ribs, Texas beef brisket, Georgia chopped
pork, country-roasted chicken, and signature sandwiches and salads. Also, enticing side items, such as corn bread, potato
salad, coleslaw and Wilbur BeansTM, accompany the broad entrée selection. Homemade desserts, including Famous
Dave’s Bread Pudding and Hot Fudge Kahlua Brownies, are another specialty. To complement our entrée and appetizer
items and to suit different customer tastes, we offer six regional barbeque sauces: Rich & Sassy®, Texas PitTM, Georgia
MustardTM, Devil’s Spit®, Sweet and ZestyTM and Wilbur’s RevengeTM. These sauces, in addition to a variety of
seasonings, rubs, marinades, and other items are also distributed in retail grocery stores throughout the country under
licensing agreements.
We believe that high quality food, a menu that is over 85% “scratch cooking” and the fact that we smoke our
meats daily at each of our restaurants are principal points of differentiation between us and other casual dining
competitors and are a significant contributing factor to repeat business. We also feel that our focus on barbecue being a
noun, a verb and a culture allows for product innovation without diluting our brand. As a noun, barbeque refers to the art
of the smoke and sauce. As a verb, barbeque refers to the act of grilling. As a culture, barbeque refers to the competitive
spirit. As a result, we see few geographic impediments to scaling our concept and brand.
Focus on Guest Experience – We believe that a renewed focus on enhancing our Guests’ experience and
listening to their feedback is an essential pillar of the Company. In fiscal 2018, we will continue to test and further
enhance our Guests’ experience by focusing on hospitality, food execution and training. We believe a positive Guest
experience, combined with our high-quality food, makes Famous Dave’s appealing to families, children, teenagers and
adults of all ages and socio-economic and demographic backgrounds.
Distinctive Environment - Décor and Music – Our original décor theme was a nostalgic roadhouse shack
(“Original Shack”), as defined by the abundant use of rustic antiques and items of Americana. This format was used for
both full-service and counter-service restaurant formats. In late 1997, we introduced the “Lodge” format which featured
décor reminiscent of a comfortable “Northwoods” hunting lodge with a full-service dining room and small bar. In
addition, we developed a larger “Blues Club” format that featured authentic Chicago Blues Club décor and live music
seven nights a week. We have evolved our format to that of a full-service concept with several “prototypical” designs
that incorporate the best attributes of the past restaurants while providing a consistent brand image.
Operating Strategy
We believe that our ability to achieve sustainable profitable growth is dependent upon us delivering high-
quality experiences in terms of both food and hospitality to every Guest, every day, and to enhance brand awareness in
our markets. Key elements of our strategy include the following:
Operational Excellence – During fiscal 2017, we continued to focus on operational excellence and integrity,
and on creating a consistently enjoyable Guest experience, both in terms of food and hospitality, across our system. We
define operational excellence as also meaning an unyielding commitment to superior service for our Guests during every
visit. In our restaurants, we strive to emphasize value and speed of service by employing a streamlined operating system
based on a focused menu and simplified food preparation techniques while remaining true to authentic barbeque.
Operational excellence is also an uncompromising attention to the details of our recipes, preparation and cooking
procedures, handling procedures, rotation, sanitation, cleanliness and safety.
Our menu focuses on a number of popular smoked, barbequed, grilled meats, entrée items and delicious side
dishes which are prepared using easy-to-operate kitchen equipment and processes that use proprietary seasonings, sauces
and mixes. This streamlined food preparation system helps manage the cost of operation by requiring fewer staff,
lowering training costs, and eliminating the need for highly compensated chefs. Additionally, barbeque has the ability to
be batch cooked and held, which enables our award winning food to get to our Guests quickly, whether in the restaurant,
at their homes, or at a catering event. In order to enhance our appeal, expand our audience, increase frequency, and
feature our cravable products, we have assembled a research and development product pipeline designed to generate
new, delicious and exciting menu items that allow us to regularly update our menu.
5
Human Resources and Training/Development - A key ingredient to our success lies with our ability to hire,
train, engage and retain employees at all levels of our organization. We place a great deal of importance on creating an
exceptional working environment for all of our employees. Through our Human Resource and Training/Development
resources, tools and programs, we continually enhance and support superior performance within our restaurants and
Support Center. Our foundational guiding principle is doing the right thing for the organization and our Guests while
ensuring we have the right people in the right roles with the right resources and tools.
We are a performance-based organization, committed to recognizing and rewarding performance at all levels of
the organization. Our performance management process includes performance calibration at the organizational level as a
means of providing measurable, comparative employee evaluations relative to peer contribution, taking into account
specific core competencies and goals. It is designed to provide a complete picture of performance that is consistent
across the organization. We offer a total rewards program that is benchmarked closely against the industry and includes
health and welfare coverage, 401(k) and non-qualified deferred compensation with a company match, base pay and
incentive pay programs developed to sustain our market competitive position. Our Human Resource and Training
organization focuses on the selection and retention of talent through programs in overall workforce planning,
performance management, development, safety and risk reduction, and continued enhancements in our organizational
structures for all positions in the business.
In the Training and Development arena, we offer a variety of ongoing on-the-job and classroom training
programs for the operations teams (hourly employees, Restaurant Managers, and Multi-Unit Managers) in an effort to
create defined career paths. Our Management Trainee program provides new restaurant managers a foundational based
training for restaurant operations, including ServSafe Food and Alcohol Certification, and several learning sessions
focused on the basic behaviors and skills of a Famous Dave’s Manager. We also offer a Famous Dave’s Leadership
Series program which provides a library of workshop offerings focused on building and strengthening core skills in the
areas of communication, teamwork, coaching, change management and performance management. In addition, we have
incorporated e-learning training tasks, skills and processes on-demand.
Restaurant Operations
Our ability to manage multiple restaurants in geographically diverse locations is central to our overall success.
In each market, we place specific emphasis on the position of General Manager, and seek talented individuals that bring
a diverse set of skills, knowledge, and experience to the Company. We strive to maintain quality and consistency in each
of our restaurants through the careful training and supervision of employees and the establishment of, and adherence to,
high standards relating to performance, food and beverage preparation, and maintenance of facilities.
All Managers must complete an eight-week training program, during which they are instructed in areas such as
food quality and preparation, customer service, hospitality, and employee relations. We have prepared operations
manuals relating to food and beverage quality and service standards. New employees participate in training under the
close supervision of our Management. We have a Director of Company Operations who is responsible for overseeing all
Company-owned restaurants. This individual works closely with the General Managers to support day-to-day restaurant
operations. In addition, the Director of Company Operations assists in the professional development of our General
Managers and is also instrumental in driving our vision of operational integrity and contributing to the improvement of
results achieved at our restaurants, including building sales, developing personnel and growing profits. The Director of
Company Operations reports directly to our Chief Operating Officer.
Off-Premise Occasions - Focus on Convenience
In addition to our lively and entertaining dine-in experience, we provide our Guests with maximum
convenience by offering an expedient take-out service along with catering and delivery. We believe that Famous Dave’s
entrées and side dishes are viewed by Guests as traditional American "picnic foods" that maintain their quality and travel
particularly well, making them an attractive choice to replace a home-cooked meal. Also, the high quality, fair prices and
avoidance of preparation time make take-out of our product particularly attractive. Our off-premise sales provide us with
revenue opportunities beyond our in-house seating capacity and we continue to seek ways to leverage these segments of
our business. We see catering and delivery as a tremendous opportunity for new consumers to sample our product who
would not otherwise have had the opportunity to visit our restaurants. Each restaurant has a dedicated vehicle to support
our catering initiatives and many restaurants are served by multiple third-party delivery providers.
6
Our restaurants have been designed specifically to accommodate a significant level of To Go sales, including a
separate To Go entrance with prominent and distinct signage, and for added convenience, we separately staff the To Go
counter. To further enhance To Go sales, we offer our Guest the ability to order online to improve convenience. We
believe our focus on To Go enables Famous Dave’s to capture a greater portion of the “take-out” market by allowing
consumers to “trade within our brand,” when dining in is not always an option. We pursue efforts to increase awareness
of To Go in all Company-owned and franchise-operated restaurants by featuring signage and merchandising both inside
and outside the restaurants.
Guest Satisfaction – We believe that we achieve a significant level of repeat business by providing high-quality
food, efficient friendly service, and warm caring hospitality in an entertaining environment at moderate prices. We strive
to maintain quality and consistency in each of our restaurants through the purposeful hiring, training and supervision of
personnel and the establishment of, and adherence to, high standards of performance, food preparation and facility
maintenance. We have also built family-friendly strategies into each restaurant’s food, service and design by providing
children’s menus, smaller-sized entrees at reduced prices and changing tables in restrooms.
Value Proposition and Guest Frequency – We offer high quality food and a distinctive atmosphere at
competitive prices to encourage frequent patronage. Lunch and dinner entrees range from $6.99 to $26.99, resulting in a
per person dine-in and To Go average of $14.99 during fiscal 2017. During fiscal 2017, per person average tickets for
lunch averaged $13.01 and per person average ticket for dinner averaged $16.98. We intend to use value priced
offerings, new product introductions, and the convenience of connecting with Guests on their own terms, to drive new
and infrequent Guests into our restaurants for additional meal occasions.
Marketing, Promotion and Sales
We believe that by specializing in unique and distinctive smoked meats, poultry & fish, our menu specialty
helps set the brand apart from the rest of the crowded field in casual dining. To further develop the advertising and
promotional materials and programs designed to create brand awareness and increase the reach of the brand, we have a
system-wide marketing fund. All Company-owned restaurants, and those franchise-operated restaurants with agreements
signed after December 17, 2003 are generally required to contribute 1.0% of net sales to this fund, which substantially
funds the marketing and digital teams. In fiscal 2017, the Marketing Ad Fund contribution for contributing franchisees
was 1.0% of net sales and will continue to be so in fiscal 2018.
The marketing team, working with outside agencies and other resources, is responsible for the advertising,
promotion, creative development, and branding for Famous Dave’s. Franchise-operated restaurants place the advertising
and marketing programs in their local markets based on contractual requirements. Famous Dave’s uses industry standard
marketing efforts that include brand and graphic design, broadcast media, digital, online & social media platforms,
public relations and out-of-home vehicles.
The strategic focus for marketing and promotion is to ensure that Famous Dave’s is recognized as the category–
defining brand in BBQ, to create and sustain attractive differentiation in consumer’s mind, and to continue to strengthen
the brand’s positioning and consistency. To help drive top-line sales, we have implemented a Guest research driven
innovation process to create our rolling 12-month marketing calendar with specific strategic goals. Additionally, a
number of new initiatives were planned around enhancing the menu, the Guest experience, events marketing and social
media.
In 2017, we highlighted value and affordability in our menu along with promoting additional value offerings
through limited time offer’s and day of the week offerings such as “Smokin’ Deals.” We also continued to promote our
To Go and Catering offering while rolling out delivery on a large-scale basis. This has allowed us to connect with Guests
on their terms and offer unique and often compelling sources of growth, and each occasion is growing at a different rate.
Leveraging this occasions matrix, we are uniquely poised to offer more immediate relevancy and sales opportunities by
solving the Guest’s daily dinner dilemma and address these differences in our marketing, including menu, promotional
outreach, pricing, and new product news.
7
Location Strategy
We believe that the barbeque segment of the casual dining niche of the restaurant industry continues to offer
strong growth opportunities, and we see few impediments to our growth on a geographical basis. Our geographical
concentration, as of December 31, 2017, was 43% Midwest, 5% Middle Atlantic, 9% South, 30% West, 8% Northeast
and 5% International.
We prepare an overall market development strategy for each market. The creation of this market strategy starts
with identifying trade areas that align demographically with the target Guest profile. The identified trade areas are then
assessed for viability and vitality and prioritized as initial, second tier, or future development. Since markets are
dynamic, the market strategy includes a continual and ongoing assessment of all existing restaurant locations. If
financially feasible, a restaurant may be relocated as the retail or residential focus in a trade area shifts.
As part of our development strategy, we have engaged design firms to redesign and reimage the traditional full-
service prototype. These firms have assisted in developing plans for future service style models such as an updated
counter-service, line-service and hybrid flex-service models. The future service-style models will allow us to access new
markets or strategically locate restaurants in existing markets where a full-service restaurant is unlikely to be financially
viable. The surrounding trade area will determine which service style is appropriate. Site selection will focus on newly
developed green-field retail developments or existing retail projects being re-developed. Conversion opportunities will
be considered on a case by case basis. We intend to finance company restaurant development through the use of cash on
hand, cash flow generated from operations, through availability on our revolving line of credit and a rights offering that
we expect to commence subsequent to the filing of this Annual Report on Form 10-K.
We expect to continue to grow our franchise program. Our goal is to continue to improve the economics of our
current restaurant prototypes, while providing more cost-effective development options for our franchisees. Our
franchise system is a significant part of our brand’s success. As such, another one of our goals is to be a valued
franchisor; to enhance communication and recognition of best practices throughout the system and to continue to expand
our franchisee network here and outside of the United States.
Purchasing
To provide the freshest ingredients and in order to maximize operational efficiencies for our food products, we
strive to obtain consistent quality items at competitive prices from reliable sources, including identifying secondary
suppliers for many of our key products. Additionally, our secondary suppliers help us assure supply chain integrity and
better logistics. Finally, to reduce freight costs, we continually aim to optimize our distribution networks, where the
products are shipped directly to the restaurants through our foodservice distributors. Each restaurant’s management team
determines the daily quantities of food items needed and orders such quantities to be delivered to their restaurant.
Approximately 85% of our food and non-alcoholic beverage purchases are on contract, with the majority being
proteins. Pork represents approximately 32% of our total purchases, while beef, which includes hamburger and brisket,
is approximately 13%, chicken is approximately 13%, and seafood is approximately 2%.
Our purchasing team is also responsible for managing the procurement of non-food items for our restaurants,
including restaurant equipment, small wares and restaurant supplies. Also, they contract many of our restaurants repair
and maintenance services along with managing our utility costs.
Information Technology
We recognize the importance of leveraging information and technology to support and extend our competitive
position in the restaurant industry. We continue to invest in capabilities that provide secure and efficient operations,
maximize the Guest experience, and provide the ability to analyze data that describes our operations.
8
We have implemented a suite of restaurant and general headquarter systems which support operations by
providing transactional functions (ordering, card processing, etc.) and reporting at both the unit and support center level.
Interfaces between Point-of-Sale (POS), labor management, inventory management, menu management, key suppliers,
and employee screening/hiring and financial systems all contribute to the following operator and corporate visibility:
• Average Guest check broken down by location, by server, by day part, and by revenue center;
• Daily reports of revenue and labor (both current and forecasted);
• Monthly reporting of detailed revenue and expenses; and
•
Ideal vs. actual usage variance reporting for critical restaurant-level materials.
Trademarks
Our Company has registered various trademarks, makes use of various unregistered marks, and intends to
vigorously defend these marks. “Famous Dave’s” and the Famous Dave’s logo are registered trademarks of Famous
Dave’s of America, Inc. The Company highly values its trademarks, trade names and service marks and will defend
against any improper use of its marks to the fullest extent allowable by law.
Franchise Program
We are revising our franchise disclosure document and expect to be authorized to offer and sell franchises in all
states by the end of the first quarter. Our growth and success depends in part upon our ability to attract, contract with and
retain qualified franchisees. It also depends upon the ability of those franchisees to successfully operate their restaurants
with our standards of quality and promote and develop Famous Dave’s brand awareness.
Although we have established criteria to evaluate prospective franchisees, and our franchise agreements include
certain operating standards, each franchisee operates his/her restaurants independently. Various laws limit our ability to
influence the day-to-day operation of our franchise restaurants. We cannot assure you that franchisees will be able to
successfully operate Famous Dave’s restaurants in a manner consistent with our standards for operational excellence,
service and food quality.
9
As of December 31, 2017, we had 32 ownership groups with franchise operated restaurants in the following
locations:
United States
Arizona
California
Colorado
Delaware
Florida
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Michigan
Minnesota
Missouri
Montana
Nebraska
Nevada
New Jersey
North Dakota
Oregon
Ohio
Pennsylvania
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
Wisconsin
United States Total
International
The Commonwealth of Puerto Rico
Canada
United Arab Emirates
International total
Total franchise-operated restaurants
10
6
14
6
2
3
2
8
3
3
2
2
1
4
7
4
2
4
4
5
1
3
2
3
3
2
4
3
3
4
6
10
126
4
1
3
8
134
Our Franchise Operations Department is led by our Chief Operating Officer, who guides the efforts of five
Franchise Business Consultants. The Franchise Business Consultants have the responsibility of supporting our
franchisees throughout the system and play a critical role for us as well as for our franchise community. The Franchise
Business Consultants manage the relationship between us and our franchisees and provides an understanding of the
roles, responsibilities, differences, and accountabilities of that relationship. They are active participants towards
enhancing performance, as they partner in strategic and operations planning sessions with our franchise partners and
review the individual strategies and tactics for obtaining superior performance for the franchisee. They ensure
compliance with obligations under our area development and franchise agreements. Franchisees are encouraged to utilize
all available assistance from the Franchise Business Consultants and the Support Center but are not required to do so.
We have a comprehensive operations scorecard and training tool that helps us measure the operational
effectiveness of our Company-owned and franchise-operated restaurants. This scorecard is used to evaluate, monitor and
improve operations in areas such as Guest satisfaction, health and safety standards, community involvement, and local
store marketing effectiveness, among other operating metrics. Also, we generally provide support as it relates to all
aspects of franchise operations including, but not limited to, store openings and operating performance. Finally, we
solicit feedback from our franchise system by having an active dialogue with all franchisees throughout the year.
The franchisee’s investment depends primarily upon restaurant size. This investment includes the area
development fee, initial franchise fee, real estate and leasehold improvements, fixtures and equipment, POS systems,
business licenses, deposits, initial food inventory, small wares, décor and training fees as well as working capital. In
fiscal 2017, certain of our franchisees were required to contribute 1.0% of net sales to a marketing fund dedicated to
providing digital and creative services. Currently, franchisees are required to spend approximately 1.5% of their net sales
annually on local marketing activities.
Seasonality
Our restaurants typically generate higher revenue in the second and third quarters of our fiscal year as a result
of seasonal traffic increases and high catering sales experienced during the summer months, and lower revenue in the
first and fourth quarters of our fiscal year, due to possible adverse weather which can disrupt Guest and team member
transportation to our restaurants.
Government Regulation
Our Company is subject to extensive state and local government regulation by various governmental agencies,
including state and local licensing, zoning, land use, construction and environmental regulations and various regulations
relating to the sale of food and alcoholic beverages, sanitation, disposal of refuse and waste products, public health,
safety and fire standards. Our restaurants are subject to periodic inspections by governmental agencies to ensure
conformity with such regulations. Any difficulty or failure to obtain required licensing or other regulatory approvals
could delay or prevent the opening of a new restaurant, and the suspension of, or inability to renew a license, could
interrupt operations at an existing restaurant, any of which would adversely affect our operations. Restaurant operating
costs are also affected by other government actions that are beyond our control, including increases in minimum hourly
wage requirements, worker’s compensation insurance rates, health care insurance costs, property and casualty insurance,
and unemployment and other taxes. We are also subject to "dram-shop" statutes, which generally provide a person
injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person.
As a franchisor, we are subject to federal regulation and certain state laws that govern the offer and sale of
franchises. Many state franchise laws impose substantive requirements on franchise agreements, including limitations on
non-competition provisions and the termination or non-renewal of a franchise. Bills have been introduced in Congress
from time to time that would provide for federal regulation of substantive aspects of the franchisor-franchisee
relationship. As proposed, such legislation would limit, among other things, the duration and scope of non-competition
provisions, the ability of a franchisor to terminate or refuse to renew a franchise, and the ability of a franchisor to
designate sources of supply.
11
The 1990 Federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public
accommodations and employment. We could be required to incur costs to modify our restaurants in order to provide
service to, or make reasonable accommodations for, disabled persons. Our restaurants are currently designed to be
accessible to the disabled, and we believe we are in substantial compliance with all current applicable regulations
relating to this Act.
Team Members
As of December 31, 2017, we employed approximately 722 team members of which approximately 95 were
salaried full-time employees. None of our team members are covered by a collective bargaining agreement. We believe
that we have good relationships with our team members.
ITEM 1A. RISK FACTORS
We make written and oral statements from time to time, including statements contained in this Annual Report
on Form 10-K regarding our business and prospects, such as projections of future performance, statements of
management’s plans and objectives, forecasts of market trends and other matters that are forward-looking statements
within the meaning of Sections 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Statements containing the words or phrases “will likely result,” “anticipates,” “are expected to,” “will
continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “intends,” “target,” “goal,” “plans,”
“objective,” “should” or similar expressions identify forward-looking statements which may appear in documents,
reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by our
officers or other representatives to analysts, shareholders, investors, news organizations, and others, and discussions with
our management and other Company representatives. For such statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Our future results, including results related to forward-looking statements, involve a number of risks and
uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved.
Any forward-looking statements made by us or on our behalf speak only as of the date on which such statement is made.
Our forward-looking statements are based upon our management’s current estimates and projections of future results or
trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements
are reasonable, we may not achieve these plans or objectives. In addition, forward-looking statements may reflect
assumptions that are sometimes based upon estimates, data, communications and other information from suppliers,
government agencies and other sources that may be subject to revision. Except as otherwise required by applicable law,
we do not undertake any obligation to update or keep current either (i) any forward-looking statements to reflect events
or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results
to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time
to time in any forward-looking statement which may be made by us or on our behalf.
In addition to other matters identified or described by us from time to time in filings with the SEC, including
the risks described below and elsewhere in this Annual Report on Form 10-K, there are several important factors that
could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or
results that are reflected from time to time in any forward-looking statement that may be made by us or on our behalf.
12
Challenging economic conditions may have a negative effect on our business and financial results.
The restaurant industry is affected by macro-economic factors, including changes in national, regional, and
local economic conditions, employment levels and consumer spending patterns. Challenging economic conditions may
negatively impact consumer spending and thus cause a decline in our financial results. For example, international,
domestic and regional economic conditions, consumer income levels, financial market volatility, social unrest,
governmental, political and budget matters and a slow or stagnant pace of economic growth generally may have a
negative effect on consumer confidence and discretionary spending. In recent years, we believe these factors and
conditions have affected consumer traffic and comparable restaurant sales for us and throughout our industry and may
continue to result in a challenging sales environment in the casual dining sector. A decline in economic conditions or
negative developments with respect to any of the other factors mentioned above, generally or in particular markets in
which we or our franchisees operate, and our Guests’ reactions to these trends could result in increased pressure with
respect to our pricing, traffic levels, commodity and other costs and the continuation of our innovation and productivity
initiatives, which could negatively impact our business and results of operations. These factors could also cause us or our
franchisees to, among other things, reduce the number and frequency of new restaurant openings, impair the assets of or
close restaurants as well as delay remodeling of existing restaurant locations. Further, poor economic conditions may
force nearby businesses to shut down, which could cause our restaurant locations to be less attractive.
A failure to maintain continued compliance with the financial covenants of our credit facility may result in
termination of the credit facility and may have a material adverse effect on our ability to accomplish our business
objectives.
On December 2, 2016, we and certain of our affiliates entered into a credit arrangement with Venture Bank
providing for three separate loans with aggregate borrowings of $11.0 million (the "Credit Facility"). We are subject to
various financial and non-financial covenants under the Credit Facility, including a minimum debt-service coverage
ratio. As of December 31, 2017, we were in compliance with all of our covenants; however, there can be no assurance
that we will be able to comply with all of our financial and non-financial covenants in the future. A failure to comply
with these covenants could cause us to be in default of our agreements and Venture Bank would be within its rights to
accelerate the maturity dates of any amounts owed on our existing loans. If we were unable to repay outstanding
amounts, either using current cash reserves, a replacement facility or another source of capital, our lender would have the
right to foreclose on our real estate and personal property, which serves as collateral for the loans. Replacement
financing may be unavailable to us on similar terms or at all. Termination of our existing loans without adequate
replacement, either through a similar facility or other sources of capital, would have a material and adverse impact on
our ability to continue our business operations.
Our future revenue, operating income, and cash flows are dependent on consumer preference and our ability to
successfully execute our plan.
Our Company's future revenue and operating income will depend upon various factors, including continued and
additional market acceptance of the Famous Dave's brand, the quality of our restaurant operations, our ability to grow
our brand, our ability to successfully expand into new and existing markets, our ability to successfully execute our
franchise program, our ability to raise additional financing as needed, discretionary consumer spending, the overall
success of the venues where Famous Dave's restaurants are or will be located, economic conditions affecting disposable
consumer income, general economic conditions and the continued popularity of the Famous Dave's concept. An adverse
change in any or all of these conditions would have a negative effect on our operations and the market value of our
Common Stock.
We may choose not to open any more Company-owned restaurants and anticipate that most future restaurant
growth will be through our franchisees. There is no guarantee that any of these franchise-operated restaurants will open
when planned, or at all, due to many factors that may affect the development and construction of our restaurants,
including landlord delays, weather interference, unforeseen engineering problems, environmental problems, construction
or zoning problems, local government regulations, modifications in design to the size and scope of the project, and other
unanticipated increases in costs, any of which could give rise to delays and cost overruns. There can be no assurance that
we will successfully implement our growth plan for our Company-owned and franchise-operated restaurants. In addition,
we also face all of the risks, expenses and difficulties frequently encountered in the development of an expanding
business.
13
Competition may reduce our revenue, operating income, and cash flows.
Competition in the restaurant industry is intense. The restaurant industry is affected by changes in consumer
preferences, as well as by national, regional and local economic conditions, including real estate and demographic
trends, traffic patterns, the cost and availability of qualified labor and product availability. Discretionary spending
priorities, traffic patterns, tourist travel, weather conditions and the type, number and location of competing restaurants,
among other factors, will also directly affect the performance of our restaurants. Changes in any of these factors in the
markets where we currently operate our restaurants could adversely affect the results of our operations.
Increased competition by existing or future competitors may reduce our sales. Our restaurants compete with
moderately-priced restaurants primarily on the basis of quality of food and service, atmosphere, location and value. In
addition to existing barbeque restaurants, we face competition from steakhouses and other restaurants featuring protein-
rich foods. We also compete with other restaurants and retail establishments for quality sites.
Many of our competitors have substantially greater financial, marketing and other resources than we do.
Regional and national restaurant companies continue to expand their operations into our current and anticipated market
areas. We believe our ability to compete effectively depends on our ongoing ability to promote our brand and offer high
quality food and hospitality in a distinctive and comfortable environment. If we are unable to respond, or unable to
respond in a timely manner, to the various competitive factors affecting the restaurant industry, our revenue, operating
income and cash flows, as well as our growth plans, could be adversely affected.
Our failure to execute our franchise program may negatively impact our revenue, operating income and cash flows.
Our growth and success depends in part upon increasing the number of our franchised restaurants through
execution of area development and franchise agreements with new and existing franchisees in new and existing markets.
We are also pursuing a strategic "re-franchising" initiative to transition our Company-owned restaurants into franchised
locations. Our ability to successfully franchise additional restaurants and re-franchise existing Company-owned
restaurants will depend on various factors, including our ability to attract, contract with and retain quality franchisees,
the availability of suitable sites, the negotiation of acceptable leases or purchase terms for new locations, the negotiation
of acceptable terms for the re-franchising of existing Company-owned restaurants, permitting and regulatory
compliance, the ability to meet construction schedules, the financial and other capabilities of our franchisees, our ability
to manage this anticipated expansion and general economic and business conditions. Additionally, certain of our long-
term debt is subject to various financial covenants and secured by the land and real estate of restaurant locations that we
own, and we will likely have to obtain approval from our lender and refinance this long-term debt. We may also be
subject to additional impairment charges, lease termination and other charges, and increased financial statement
disclosure requirements. Many of the foregoing factors are beyond the control of the Company or our franchisees and
there can be no assurance that we will be able to successfully carry out our franchising and refranchising strategy on
terms acceptable to our management and Board, or at all.
Our growth and success also depend upon the ability of our franchisees to operate their restaurants successfully
to our standards and promote the Famous Dave's brand. Although we have established criteria to evaluate prospective
franchisees, and our franchise agreements include certain operating standards, each franchisee operates its restaurant
independently. Various laws limit our ability to influence the day-to-day operation of our franchise restaurants. We
cannot assure you that our franchisees will be able to successfully operate Famous Dave's restaurants in a manner
consistent with our concepts and standards, which could reduce their sales and, correspondingly, our franchise royalties,
and could adversely affect our revenue, operating income and cash flows, and our ability to leverage the Famous Dave's
brand. In addition, there can be no assurance that our franchisees will have access to financial resources necessary to
open the restaurants required by their respective area development agreements, which would negatively impact our
growth plans.
14
We may not be successful in maintaining or expanding our international footprint.
Our current franchise program includes four restaurants in the Commonwealth of Puerto Rico, one restaurant in
Manitoba, Canada, and three restaurants in the United Arab Emirates. Because there are a very limited number of
international restaurants, we may not be completely aware of the development efforts involved and barriers to entry into
new foreign markets. As a result, we may incur more expenses than originally anticipated and there is a risk that we may
not be successful in expanding internationally. If we are successful in maintaining or expanding our international
footprint, our future results could be materially adversely affected by a variety of uncontrollable and changing factors
affecting international operations including, among others, regulatory, social, political or economic conditions in a
specific country or region, trade protection measures and other regulatory requirements, government spending patterns
and changes in the laws and policies. Furthermore, by maintaining or expanding our international footprint, our brand
value could be harmed by factors outside of our control, including, among other things, difficulties in achieving the
consistency of product quality and service compared to our U.S. restaurants and an inability to obtain adequate and
reliable supplies of ingredients and products.
The restaurant industry is subject to extensive government regulation that could negatively impact our business.
The restaurant industry is subject to extensive federal, state, and local government regulation by various
government agencies, including state and local licensing, zoning, land use, construction and environmental regulations
and various regulations relating to the preparation and sale of food and alcoholic beverages, sanitation, disposal of refuse
and waste products, public health, safety and fire standards, adjustments to tip credits, increases to minimum wage
requirements, workers' compensation and citizenship requirements. Due to the fact that we offer and sell franchises, we
are also subject to federal regulation and certain state laws which govern the offer and sale of franchises. Many state
franchise laws impose substantive requirements on franchise agreements, including limitations on non-competition
provisions and termination or non-renewal of a franchise. We may also be subject in certain states to "dram-shop"
statutes, which provide a person injured by an intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person. In addition, our operating results would be adversely
affected in the event we fail to maintain our food and liquor licenses.
Any change in the current status of such regulations, including an increase in team member benefits costs, any
and all insurance rates, or other costs associated with team members, could substantially increase our compliance and
labor costs. Because we pay many of our restaurant-level team members rates based on either the federal or the state
minimum wage, increases in the minimum wage would lead to increased labor costs. In 2014, the general counsel's
office of the National Labor Relations Board issued complaints naming the McDonald's Corporation as a joint employer
of workers at its franchisees for alleged violations of the Fair Labor Standards Act. There can be no assurance that other
franchisors will not receive similar complaints in the future which may result in legal proceedings based on the actions
of its franchisees. Enactment and enforcement of various federal, state and local laws, rules and regulations on
immigration and labor organizations may adversely impact the availability and costs of labor for our restaurants in a
particular area or across the United States. Other labor shortages or increased team member turnover could also increase
labor costs. Furthermore, restaurant operating costs are affected by increases in unemployment tax rates and similar costs
over which we have no control.
The Affordable Care Act requires restaurant companies such as ours to disclose calorie information on their
menus beginning in May 2018. We do not expect to incur any material costs from compliance with this provision, but
there is a risk that consumers' dining preferences may be impacted by such menu labeling. If we elect to alter our recipes
in response to such a change in dining preferences, doing so could increase our costs and/or change the flavor profile of
our menu offerings which could have an adverse impact on our results of operations.
U.S. federal income tax reform could adversely affect us
On December 22, 2017, President Donald Trump signed into law sweeping tax reform, which overhauls
individual, business and international taxes including, but not limited to:
•
•
•
Reducing the corporate federal statutory tax rate to 21%
Limiting net interest expense deductions to 30% of adjusted taxable income
Limiting the net operating loss deduction to 80% of taxable income
15
The reduction in tax rate caused the valuation of our net deferred tax asset to decrease, as a result of which we
recognized deferred tax expense of $1.8 million. If we fail to generate significant taxable income, we may not be able to
fully deduct the interest expense on our debt, which could result in us having to pay increased federal income taxes. We
have also generated substantial taxable losses in the past and may continue to do so in the future. Although the treatment
of tax losses generated before December 31, 2017 has not changed, tax losses generated in fiscal 2018 and beyond will
only be able to offset 80% of taxable income, although the losses may be carried forward indefinitely. This could cause
us to have to pay federal income taxes despite generating a loss for federal income tax purposes in the future. We
continue to work with our tax advisors to determine the full impact that the new tax bill will have on our Company.
Staff Accounting Bulletin 118 outlines the approach that companies may take if essential information related to
the new tax law is not available in reasonable detail by the time the financial statements are filed. We believe that we
have reflected all of the material impacts of the New Tax Law in our consolidated financial statements as of the year
ended December 31, 2017 and that there are no open items; however, our estimates will be finalized throughout fiscal
2018 as we complete our income tax returns for the fiscal year ended December 31, 2017.
We have a material weakness in our internal control over financial reporting.
Our management has identified a material weakness in our internal control over financial reporting and as a
result concluded that our disclosure controls and procedures were not effective as of December 31, 2017. Specifically,
management concluded that we did not maintain effective controls surrounding the preparation of our income tax
provision and the use of Excel spreadsheets. While the material weakness did not result in any material or immaterial
misstatements to our previously filed financial statements, the control deficiency could increase the likelihood of
inaccuracies in our financial statements. Although management is in the process of developing and implementing a plan
to remediate the deficiency in internal control, there is no assurance that the plan will remediate the material weakness or
ensure that our internal controls over financial reporting will be effective in the future which could have a material
adverse effect on our business, including, among other things, our ability to access the capital markets and our ability to
provide accurate financial information.
We are subject to the risks associated with the food services industry, including the risk that incidents of food-borne
illnesses or food tampering could damage our reputation and reduce our restaurant sales.
Our industry is susceptible to the risk of food-borne illnesses. As with any restaurant operation, we cannot
guarantee that our internal controls and training will be fully effective in preventing all food-borne illnesses.
Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness
incidents could be caused by third-party food suppliers and distributors outside of our control and/or multiple locations
being affected rather than a single restaurant. New illnesses resistant to any precautions may develop in the future, or
diseases with long incubation periods could arise that could give rise to claims or allegations on a retroactive basis.
Reports in the media or on social media of one or more instances of food-borne illness in one of our Company-owned
restaurants, one of our franchise-operated restaurants or in one of our competitor's restaurants could negatively affect our
restaurant sales, force the closure of some of our restaurants and conceivably have a national impact if highly publicized.
This risk exists even if it were later determined that the illness had been wrongly attributed to the restaurant.
Furthermore, other illnesses could adversely affect the supply of some of our food products and significantly increase
our costs. A decrease in customer traffic as a result of these health concerns or negative publicity could materially harm
our business, results of operations and financial condition.
16
Our ability to exploit our brand depends on our ability to protect our intellectual property, and if any third parties
make unauthorized use of our intellectual property, our competitive position and business could suffer.
We believe that our trademarks and other intellectual proprietary rights are important to our success and our
competitive position. Accordingly, we have registered various trademarks and make use of various unregistered marks.
However, the actions we have taken or may take in the future to establish and protect our trademarks and other
intellectual proprietary rights may be inadequate to prevent others from imitating our products and concept or claiming
violations of their trademarks and proprietary rights by us. Although we intend to defend against any improper use of our
marks to the fullest extent allowable by law, litigation related to such defense, regardless of the merit or resolution, may
be costly and time consuming and divert the efforts and attention of our management.
Our financial performance is affected by our ability to contract with reliable suppliers and food service distributors at
competitive prices.
In order to maximize operating efficiencies, we have entered into arrangements with food manufacturers and
distributors pursuant to which we obtain approximately 85% of the products used by the Company, including, but not
limited to, pork, poultry, beef and seafood. Although we may be able to obtain competitive products and prices from
alternative suppliers, an interruption in the supply of products delivered by our food suppliers could adversely affect our
operations in the short term. Due to the rising market price environment, our food costs may increase without the desire
and/or ability to pass that price increase to our customers.
Although we do contract for utilities in all available states, the costs of these energy-related items will fluctuate
due to factors that may not be predictable, such as the economy, current political/international relations and weather
conditions. Because we cannot control these types of factors, there is a risk that prices of energy/utility items will
increase beyond our current projections and adversely affect our operations.
We could be adversely impacted if our information technology and computer systems do not perform properly or if we
fail to protect our customers’ credit card information or our employees’ personal data.
We rely heavily on information technology to conduct our business, and any material failure or interruption of
service could adversely affect our operations. Furthermore, we accept credit and debit card payments in our restaurants.
Recently, retailers have experienced actual or potential security breaches in which credit and debit card information may
have been compromised, including several highly-publicized incidents. Although we take it very seriously and expend
resources to ensure that our information technology operates securely and effectively, any security breaches could result
in disruptions to operations or unauthorized disclosure of confidential information. If our customers' consumer data or
our team members' personal data are compromised, our operations could be adversely affected, our reputation could be
harmed, and we could be subjected to litigation or the imposition of penalties and other remedial costs. In addition, as a
franchisor, we are subject to additional reputation risk associated with data breaches that could occur at one of our
franchise locations that could potentially harm the Famous Dave's brand reputation.
Failure to achieve our projected cost savings from our efficiency initiatives could adversely affect our results of
operations and eliminate potential funding for growth opportunities.
In recent years, we have identified strategies and taken steps to reduce operating costs and free up resources to
reinvest in our business. These strategies include supply chain efficiencies, reducing food waste, implementing labor
scheduling tools and various information systems projects. We continue to evaluate and implement further cost-saving
initiatives. However, the ability to reduce our operating costs through these initiatives is subject to risks and
uncertainties, such as our ability to obtain improved supply pricing and the reliability of any new suppliers or
technology, and we cannot assure you that these activities, or any other activities that we may undertake in the future,
will achieve the desired cost savings and efficiencies. Failure to achieve such desired savings could adversely affect our
results of operations and financial condition and curtail investment in growth opportunities.
17
We may be unable to reduce our general and administrative expenses to the previously announced intended levels.
We recently announced our goal to reduce our general and administrative expenses to $8 million in 2018. While
we believe that this goal is achievable, there can be no assurance that we will be able to reduce our general and
administrative expenses to this level within our intended time frame or at all. The bonus compensation of our Chief
Executive Officer and Chief Operating Officer is tied to our share price, such that increases in our share price entitle
them to grants of shares of our common stock or cash. These grants of our common stock are fully vested upon issuance,
which will result in an immediate general and administrative expense charge when granted. While we cannot predict the
future price of our shares, a significant increase in the price will result in our recognition of significant additional
compensation expense.
Litigation could have a material adverse impact on our business and our financial performance.
We are subject to lawsuits, administrative proceedings and claims that arise in the regular course of business.
These matters typically involve claims by consumers, employees and others regarding issues such as food borne illness,
food safety, premises liability, "dram shop" statute liability, compliance with wage and hour requirements, work-related
injuries, promotional advertising, discrimination, harassment, disability and other operational issues common to the
foodservice industry, as well as contract disputes and intellectual property infringement matters. Significant legal fees
and costs in complex class action litigation or an adverse judgment or settlement that is not insured or is in excess of
insurance coverage could have a material adverse effect on our financial position and results of operations.
Significant adverse weather conditions and other disasters or unforeseen events could negatively impact our results of
operations.
Adverse weather conditions and natural disasters and other unforeseen events, such as winter storms, severe
temperatures, thunderstorms, floods, hurricanes and earthquakes, terror attacks, war and widespread/pandemic illness,
and the effects of such events on economic conditions and consumer spending patterns, could negatively impact our
results of operations. Temporary and prolonged restaurant closures may occur and consumer traffic may decline due to
the actual or perceived effects from these events. For example, Hurricane Harvey and Hurricane Irma forced several of
our franchise-operated restaurants to close for an extended period of time. Severe winter weather conditions have also
impacted our customer traffic and results of operations in the past.
We evaluate restaurant sites and long-lived assets for impairment and expenses recognized as a result of any
impairment would negatively affect our financial condition and consolidated results of operations.
During fiscal 2017, we recognized aggregate losses of $10.3 million in continuing and discontinued operations
related to losses on the sales of restaurants, asset impairment, estimated lease termination and other closing costs. As we
continue to execute on our re-franchising initiative, we expect to incur additional impairment charges.
We evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and
used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash flows
expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss is
measured by the amount by which the carrying amount of the restaurant site exceeds its fair value. Fair value is
estimated based on the best information available including estimated future cash flows, expected growth rates in
comparable restaurant sales, remaining lease terms, discount rate and other factors. If these estimates change in the
future, we may be required to take additional impairment charges for the related assets, which would negatively affect
our financial condition and consolidated results of operations. Considerable management judgment is necessary to
estimate future cash flows. Accordingly, actual results could vary significantly from such estimates.
18
Minnesota law and our Articles protect our directors from certain types of lawsuits, which could make it difficult for
us to recover damages from them in the event of a lawsuit.
Minnesota law provides that our directors will not be liable to our Company or to our shareholders for monetary
damages for all but certain types of conduct as directors. Our Articles require us to indemnify our directors and officers
against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The
exculpation provisions may have the effect of preventing shareholders from recovering damages against our directors
caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our
Company to use its assets to defend our directors and officers against claims, including claims arising out of their
negligence, poor judgment, or other circumstances.
Pursuant to its authority to designate and issue shares of our stock as it deems appropriate, our board of directors
may assign rights and privileges to currently undesignated shares which could adversely affect the rights of existing
shareholders.
Our authorized capital consists of 100,000,000 shares of capital stock. Our Board of Directors, without any
action by the shareholders, may designate and issue shares in such classes or series (including classes or series of
preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including
dividends, liquidation and voting rights. The rights of holders of preferred stock and other classes of common stock that
may be issued could be superior to the rights granted to the current holders of our common stock. Our Board’s ability to
designate and issue such undesignated shares could impede or deter an unsolicited tender offer or takeover proposal.
Further, the issuance of additional shares having preferential rights could adversely affect the voting power and other
rights of holders of common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
19
ITEM 2. PROPERTIES
We believe that our properties will be suitable for our needs and adequate for operations for the foreseeable
future. The following table sets forth certain information about our existing Company-owned restaurant locations, as of
December 31, 2017:
Location
1 Roseville, MN (3)
2 Calhoun Square (Minneapolis, MN)
3 Maple Grove, MN
4 Highland Park (St. Paul, MN)(3)
5 Apple Valley, MN(3)
6 Forest Lake, MN(3)
7 Minnetonka, MN
8 Plymouth, MN(3)
9 West Des Moines, IA
10 Woodbury, MN
11 Coon Rapids, MN
12 Brick, NJ
13 Mays Landing, NJ
14 Westbury, NY
15 Mountainside, NJ
16 Metuchen, NJ
Date
Square Interior Owned or
Leased Opened/Acquired
Seats
105 Leased
June 1996
380 Leased September 1996
146 Leased(1)
April 1997
June 1997
125 Leased
90 Leased(1)
July 1997
100 Leased
October 1997
140 Owned(2) December 1997
49 Owned(2) December 1997
150 Leased
April 1998
180 Owned(2) October 1998
160 Owned(2) December 2006
March 2010
181 Leased
March 2010
237 Leased
March 2010
276 Leased
March 2010
253 Leased
March 2010
176 Leased
Footage
4,800
10,500
6,100
5,200
3,800
4,500
5,500
2,100
5,700
5,900
6,300
5,200
6,400
6,400
8,800
6,200
All seat count and square footage amounts are approximate.
(1) Restaurant is collateral in a financing lease.
(2) Restaurant land and building are owned by the Company.
(3) Counter service restaurant
Our Minnesota executive offices are currently located in approximately 7,000 square feet in Minnetonka,
Minnesota. Our executive office lease expires in November 2018. During 2015, our 8,400-square foot office in
Lombard, IL was closed and sublet to another tenant. This office lease expires in October 2022.
ITEM 3. LEGAL PROCEEDINGS
The information contained in Note 8 “Commitments and Contingencies” of the notes to the accompanying
consolidated financial statements included in this Annual Report on Form 10-K is incorporated by reference into this
Item 3. Except as set forth therein, as of the end of the period covered by this Annual Report on Form 10-K, we are not a
party to any material pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock has traded on the Nasdaq Stock Market since July 24, 1997 under the symbol DAVE.
Currently, our common stock trades on the Nasdaq Global Market.
20
The following table summarizes the high and low closing prices per share of our common stock for the periods
indicated, as reported on the Nasdaq Global Market.
2017
2016
Period
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Holders
Low
$ 3.90
High
$ 6.15
High
$ 7.05
Low
$ 5.01
$ 4.50 $ 3.50 $ 6.14 $ 4.75
$ 4.99
$ 7.30 $ 3.55 $ 5.53 $ 4.42
$ 6.73
$ 4.65
$ 3.40
As of February 20, 2018, we had approximately 336 shareholders of record and approximately 3,606 beneficial
shareholders.
Dividends
Our Board of Directors has not declared any dividends on our common stock since our inception, and does not
intend to pay out any cash dividends on our common stock in the foreseeable future. We presently intend to retain all
earnings, if any, to provide for growth, reduce our debt levels, and repurchase our common stock. The payment of cash
dividends in the future, if any, will be at the discretion of the Board of Directors and will depend upon such factors as
earnings levels, capital requirements, loan agreement restrictions, our financial condition and other factors deemed relevant
by our Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K is hereby incorporated by reference to Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Performance Graph
Not applicable to smaller reporting companies.
Purchases of Equity Securities by the Issuer
None
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to smaller reporting companies.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Famous Dave’s of America, Inc. was incorporated as a Minnesota corporation in March 1994 and opened its
first restaurant in Minneapolis in June 1995. As of December 31, 2017, there were 150 Famous Dave’s restaurants
operating in 32 states, the Commonwealth of Puerto Rico, Canada and the United Arab Emirates, including 16
Company-owned and 134 franchise-operated restaurants. An additional 61 restaurants were committed to be developed
through signed area development agreements as of December 31, 2017.
21
Fiscal Year
Our fiscal year ends on the Sunday nearest to December 31st of each year. Our fiscal year is generally 52
weeks; however, it periodically consists of 53 weeks. The fiscal years ended December 31, 2017 (fiscal 2017) and
January 1, 2017 (fiscal 2016) consisted of 52 weeks. Fiscal 2018, which ends on December 30, 2018, will consist of 52
weeks.
Basis of Presentation
The financial results presented and discussed herein reflect our results and the results of our wholly-owned and
majority-owned consolidated subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made to prior year amounts to conform to the current year’s
presentation.
Application of Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition and results of operations is based upon our
financial statements, which have been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management to make estimates and judgments that
affect the reported amount of assets, liabilities and expenses, and related disclosures. On an on-going basis, management
evaluates its estimates and judgments. By their nature, these estimates and judgments are subject to an inherent degree of
uncertainty. Management bases its estimates and judgments on historical experience, observance of trends in the
industry, information provided by customers and other outside sources and on various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from
these estimates under different assumptions or conditions. Our management believes the following critical accounting
policies reflect its more significant judgments and estimates used in the preparation of our consolidated financial
statements. Our Company’s significant accounting policies are described in Note 1 to the consolidated financial
statements included herein.
We have discussed the development and selection of the following critical accounting policies with the Audit
Committee of our Board of Directors and the Audit Committee has reviewed our disclosures relating to such policies in
this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Recognition of Franchise-Related Revenue
Beginning in fiscal 2018, we will be required to adopt ASC 606 – Revenue from Contracts with Customers. See
Note 1 “Nature of Business and Significant Accounting Policies” the notes to the accompanying financial statements for
more information.
Initial franchise fee revenue is recognized when we have performed substantially all of our obligations as
franchisor. Franchise royalties are recognized when earned.
Our franchise-related revenue is comprised of three separate and distinct earnings processes: area development
fees, initial franchise fees and continuing royalty payments. Currently, our area development fee for domestic growth
consists of a one-time, non-refundable payment of approximately $10,000 per restaurant in consideration for the services
we perform in preparation of executing each area development agreement. For our foreign area development agreements
the one time, non-refundable payment is negotiated on a per development basis and is determined based on the costs
incurred to sell that development agreement. Substantially all of these services, which include, but are not limited to, a
review of the potential franchisee’s current operations, conducting market and trade area analysis, a meeting with
Famous Dave’s Executive Team, and performing a potential franchise background investigation, are completed prior to
our execution of the area development agreement and receipt of the corresponding area development fee. As a result, we
recognize this fee in full upon receipt. We recognize a portion of any franchise fees received upon signing of the
agreement if we have incurred expenses. The remaining non-refundable fee is included in deferred franchise fees and is
recognized as revenue when we have performed substantially all of our obligations, which generally occurs upon the
franchise entering into a lease agreement for the restaurant(s). Finally, franchisees are also required to pay us a monthly
royalty equal to a percentage of their net sales.
22
Costs and Expenses
Restaurant costs and expenses include food and beverage costs; labor and benefits costs; operating expenses,
which include occupancy costs, repair and maintenance costs, supplies, advertising and promotion; and restaurant
depreciation and amortization. Certain of these costs and expenses are variable and will increase or decrease with sales
volume. The primary fixed costs are restaurant management salaries and occupancy costs. Our experience is that when a
new restaurant opens, it incurs higher than normal levels of labor and food costs until operations stabilize, usually during
the first three to six months of operations. As restaurant management and staff gain experience following a restaurant’s
opening, labor scheduling, food cost management and operating expense control typically improve to levels similar to
those at our more established restaurants.
General and Administrative Expenses
General and administrative expenses include all corporate and administrative functions, other than marketing
and digital services. Salaries and benefits, legal fees, accounting fees, professional consulting fees, travel, rent and
general insurance are major items in this category. Additionally, we record expense for Managers-in-Training (“MITs”)
in this category. We also provide franchise services for which the revenue is included in other revenue and the expenses
are included in general and administrative expenses.
Asset Impairment and Estimated Lease Termination and Other Closing Costs
We evaluate restaurant sites and long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and
used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash flows
expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired, the loss is
measured by the amount by which the carrying amount of the restaurant site exceeds its fair value. Fair value is
estimated based on the best information available including estimated future cash flows, expected growth rates in
comparable restaurant sales, remaining lease terms, discount rate and other factors. If these assumptions change in the
future, we may be required to take additional impairment charges for the related assets. Considerable management
judgment is necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such
estimates. Restaurant sites that are operating, but have been previously impaired, are reported at the lower of their
carrying amount or fair value less estimated costs to sell.
Lease Accounting
We recognize lease expense for our operating leases over the entire lease term including lease renewal options
where the renewal is reasonably assured and the build-out period takes place prior to the restaurant opening or lease
commencement date. We account for construction allowances by recording a receivable when its collectability is
considered probable, depreciating the leasehold improvements over the lesser of their useful lives or the full term of the
lease, including renewal options and build-out periods, amortizing the construction allowance as a credit to rent expense
over the full term of the lease, including renewal options and build-out periods, and relieving the receivable once the
cash is obtained from the landlord for the construction allowance. We record rent expense during the build-out period
and classify this expense in pre-opening expenses in our consolidated statements of operations.
Liquor licenses
We own transferable liquor licenses in jurisdictions with a limited number of authorized liquor licenses. These
licenses were capitalized as indefinite-lived intangible assets and are included in intangible assets, net in our
consolidated balance sheets as of December 31, 2017 and January 1, 2017. We review annually these liquor licenses for
impairment. Additionally, the costs of obtaining non-transferable liquor licenses that are directly issued by local
government agencies for nominal fees are expensed as incurred. Annual liquor license renewal fees are recognized in
expense over the renewal term.
23
Accounts receivable, net
We provide an allowance for uncollectible accounts on accounts receivable based on historical losses and
existing economic conditions, when relevant. We provide for a general bad debt reserve for franchise receivables due to
increases in days sales outstanding. This general reserve is based on the aging of receivables meeting specified criteria
and is adjusted each quarter based on past due receivable balances. Additionally, we have periodically established a
specific reserve on certain receivables as necessary on a case-by-case basis. Any changes to the reserve are recorded in
general and administrative expenses. Accounts receivable balances written off have not exceeded allowances provided.
We believe all accounts receivable in excess of the allowance are fully collectible. If accounts receivable in excess of
provided allowances are determined uncollectible, they are charged to expense in the period that determination is made.
In assessing recoverability of these receivables, we make judgments regarding the financial condition of the franchisees
based primarily on past and current payment trends, as well as other variables, including annual financial information,
which the franchisees are required to submit to us.
Stock-based compensation
We recognize compensation expense for share-based awards granted to team members based on their fair
values at the time of grant over the requisite service period. Additionally, our board members receive share-based awards
for their board service. The incentive compensation of our chief executive officer provides for grants of unrestricted,
freely tradable shares of our common stock. These expense for these grants is recorded when earned by our chief
executive officer. Our pre-tax compensation expense for stock options and other incentive awards is included in general
and administrative expenses in our consolidated statements of operations.
Income Taxes
We provide for income taxes based on our estimate of federal and state income tax liabilities. These estimates
include, among other items, effective rates for state and local income taxes, allowable tax credits for items such as taxes
paid on reported tip income, estimates related to depreciation and amortization expense allowable for tax purposes, and
the tax deductibility of certain other items. Our estimates are based on the information available to us at the time that we
prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-
end. Income tax returns are subject to audit by federal, state, and local governments, generally years after the tax returns
are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. Accounting
for uncertain tax positions requires significant judgment including estimating the amount, timing, and likelihood of
ultimate settlement. Although the Company believes that its estimates are reasonable, actual results could differ from
these estimates. Additionally, uncertain positions may be re-measured as warranted by changes in facts or law.
Results of Operations – Fiscal Year 2017 Compared to Fiscal Year 2016
The following table presents items in our consolidated statements of operations as
sales or total revenue, as indicated, for the periods presented:
The following table presents items in our consolidated statements of operations as a percentage of net restaurant
Food and beverage costs(1)
Labor and benefits costs(1)
Operating expenses(1)
Restaurant level operating margin(1)(3)
Depreciation and amortization expenses (2)
General and administrative(2)
Loss from continuing operations(2)
Year Ended
December 31,
2017
January 1,
2017
30.2 %
36.1 %
30.0 %
3.6 %
4.3 %
22.7 %
(10.5)%
31.0 %
35.6 %
31.8 %
1.6 %
3.7 %
21.6 %
(7.2)%
(1) As a percentage of restaurant sales, net
(2) As a percentage of total revenue
(3) Restaurant level cash operating margin is equal to restaurant sales, net, less food and beverage costs, labor and
benefit costs, and operating expenses.
24
Total Revenue
Our components of and changes in revenue consisted of the following for the fiscal years ended December 31,
2017 and January 1, 2017:
(dollars in thousands)
Revenue:
Restaurant sales, net
Franchise royalty revenue
Licensing and other revenue
Total revenue
Year Ended
December 31, January 1,
2017
2017
$ Change
% Change
$ 48,874
14,767
954
$ 64,595
$ 58,956
16,665
1,003
$ 76,624
$ (10,082)
(1,898)
(49)
$ (12,029)
(17.1)%
(11.4)%
(4.9)%
(15.7)%
The decline in year-over-year restaurant sales, net for the year ended December 31, 2017 as compared to the
year ended January 1, 2017 was primarily a result of the closure of 13 Company-owned restaurants. The impact of these
closures was partially offset by a 2.4% increase in same-store sales during the year ended December 31, 2017. On a
weighted basis, for the year ended December 31, 2017, Dine-In sales decreased by 0.6%, while To Go and Catering sales
increased 2.6% and 0.4%, respectively, highlighting the success of our initiatives in these areas. As a percentage of
Dine-In sales, our adult beverage sales at Company-owned restaurants was approximately 12.0% and 11.4%,
respectively, during the fiscal years ended December 31, 2017 and January 1, 2017, an increase of 5.3%.
We have been making significant investments in programs aimed at increasing To-Go, Catering and Adult
Beverage sales at Famous Dave’s restaurants. For example, during the first half of fiscal 2017, we designed and
implemented a signature beverage program aimed at increasing liquor sales at our Company-owned stores, which have
higher margins than beer and wine. We have been training our franchise groups on the signature beverage throughout
fiscal 2017 and expect to train the remainder of participating franchisees during the first quarter of fiscal 2018. We have
also expanded the online ordering program in certain franchise-operated restaurants, and will continue to assist
participating franchisees with implementation during early 2018. We have rolled out delivery programs with various
third-party services, which we believe, along with online ordering, will augment our To Go sales in the future. We
believe that these innovations will provide additional avenues for our franchisees to grow their respective businesses.
The decline in year-over-year franchise-related revenue was primarily a result of the net closure of 13 franchise-
operated restaurants and a 2.3% decrease in same-store sales during the year ended December 31, 2017. Initial franchise
fee revenue also declined from $290,000 in fiscal 2016 to $35,000 in fiscal 2017. These decreases were partially offset
by the refranchising of eight Company-owned restaurants during the fourth quarter of fiscal 2017.
25
Average Weekly Net Sales and Operating Weeks
The following table shows Company-owned and franchise-operated average weekly net sales for the periods
presented:
Average Weekly Net Sales (AWS):
Franchise-Operated(1)
Company-Owned
Full-Service
Counter-Service
Operating Weeks:
Franchise-Operated
Company-Owned
Year Ended
December 31, 2017 January 1, 2017
$
$
47,192
44,330
45,865
36,846
6,993
1,527
47,909
42,365
43,348
36,073
7,203
1,924
(1) AWS for franchise-operated restaurants are not our revenues and are not included in our consolidated financial
statements. We believe that disclosure of average weekly net sales and operating weeks for franchise-operated
restaurants provides useful information to investors because historical performance and trends of Famous Dave’s
franchisees relate directly to trends in franchise royalty revenues that we receive from such franchisees and have an
impact on the perceived success and value of the Famous Dave’s brand. It also provides a comparison against which
management and investors can analyze the extent to which Company-owned restaurants are realizing their revenue
potential.
Food and Beverage Costs
Our food and beverage costs consisted of the following for fiscal years ended December 31, 2017 and January
1, 2017:
(dollars in thousands)
Food and beverage costs
Year Ended
December 31, January 1,
2017
$ 14,782
2017
$ 18,299
$ Change
$ (3,517)
% Change
(19.2)%
Food and beverage costs for the fiscal years ended December 31, 2017 and January 1, 2017 represented
approximately 30.2% and 31.0% of net restaurant sales, respectively. This year-over-year decrease, as a percentage of
net restaurant sales, primarily resulted from internal initiatives aimed at reducing food waste.
Labor and Benefits Costs
Our labor and benefits costs consisted of the following for the fiscal years ended December 31, 2017 and
January 1, 2017.
(dollars in thousands)
Labor and benefits costs
Year Ended
December 31, January 1,
2017
$ 17,653
2017
$ 21,008
$ Change
$ (3,355)
% Change
(16.0)%
Labor and benefits costs for the fiscal years ended December 31, 2017 and January 1, 2017 were approximately
36.1% and 35.6% of net restaurant sales, respectively. Labor and benefit costs increased year-over-year, as a percentage
of net restaurant sales, due to increased management labor, wage rate inflation and benefit costs.
26
Operating Expenses
Our operating expenses consisted of the following for the fiscal years ended December 31, 2017 and January 1,
2017:
(dollars in thousands)
Operating expenses
Year Ended
December 31, January 1,
2017
$ 14,658
2017
$ 18,729
$ Change
$ (4,071)
% Change
(21.7)%
Operating expenses for the fiscal years ended December 31, 2017 and January 1, 2017 were approximately
30.0% and 31.8% of net restaurant sales, respectively. Operating expenses, as a percentage of net sales, were favorable
to the prior year due to reduced occupancy costs and advertising.
Depreciation and Amortization
Depreciation and amortization expense for the fiscal years ended December 31, 2017 and January 1, 2017 was
approximately $2.8 million and $2.9 million, respectively, representing approximately 4.3% and 3.7% of total revenues,
respectively. The increase during the year ended December 31, 2017 is primarily a result of shortening the useful life of
certain of our restaurants that have been slated for closure significantly before the end of their previous useful lives. We
incur elevated depreciation expense on these restaurants until they are fully depreciated or ultimately closed and the
assets had been disposed.
General and Administrative Expenses
Our general and administrative expenses consisted of the following for the fiscal years ended December 31,
2017 and January 1, 2017:
(dollars in thousands)
General and administrative expenses
Year Ended
December 31, January 1,
2017
$ 14,634
2016
$ 16,569
$ Change
$ (1,935)
% Change
(11.7)%
The decrease in general and administrative expenses was primarily related to the continued optimization of our
general and administrative expense structure, reduced costs incurred for the corporate office, third party services and
professional fees. As a percentage of revenue, general and administrative expenses increased due to sales deleverage.
On November 13, 2017, we announced that we intended to take certain steps, over a 90-day period, to reduce
our annual general and administrative expenses to $8.0 million. As of December 31, 2017, we have made significant
progress towards this goal and intend to continue to optimize our general and administrative expense structure during the
first half of the first quarter of fiscal 2018.
27
Asset Impairment, Estimated Lease Termination and Other Closing Costs
The following is a summary of the asset impairment, estimated lease termination and other closing costs we
incurred for the periods presented:
(dollars in thousands)
Restaurant Optimization
Asset impairments, net
Lease termination charges and related costs
Restaurant closure expenses
Software
Asset impairment, estimated lease termination and other closing costs
Year Ended
December 31, 2017 January 1, 2017
$
$
3,154
3,403
259
—
6,816
$
$
4,426
—
206
156
4,788
During the fiscal years ended December 31, 2017 and January 1, 2017, we embarked upon a restaurant
optimization and refranchising initiative, which resulted in the ultimate closure of 13 underperforming Company-owned
restaurants. These charges represented the write-offs of the net assets of closed restaurants, lease termination charges
incurred with the early termination of leases as well as ongoing costs incurred related to closed restaurants. During the
fiscal year ended January 1, 2017 we also incurred impairment charges related to the abandonment of a software-
implementation project.
Total Other Expense
Total other expense for the fiscal years ended December 31, 2017 and January 1, 2017 included of interest
expense of $661,000 and $886,000, respectively. We also incurred approximately $82,000 in other taxes not included in
our income tax provision for the year ended December 31, 2017. These expenses were partially offset by interest income
of approximately $22,000 and $2,000, respectively during the fiscal years ended December 31, 2017 and January 1,
2017. The decrease in interest expense was primarily related to a lower average outstanding debt balance partially offset
by a higher interest rate on our current debt.
Income Tax Benefit
Income tax benefit included in continuing operations for the year ended December 31, 2017 and January 1,
2017 was $858,000 and $2.3 million, respectively, representing an effective tax rate of 11.5% and 35.6%, respectively.
The decrease in our effective tax rate was primarily a result of tax reform signed into law in late 2017, which resulted in
us revaluing our deferred tax assets and liabilities at a lower income tax rate, which offset the benefit of our net loss from
continuing operations.
(Loss) income from discontinued operations, net of taxes
During the year ended December 31, 2017, we sold eight restaurants in the Mid-Atlantic region to a franchisee.
During the year ended January 1, 2017, we sold seven restaurants in the Chicago area to a franchisee. These 15
restaurants are reflected as discontinued operations throughout our consolidated financial statements. During the year
ended December 31, 2017, we realized a loss of $1.5 million related to discontinued operations, net of taxes and during
the year ended January 1, 2017, we realized income of approximately $1.7 million related to discontinued operations, net
of taxes.
Basic and Diluted Net Income (Loss) Per Common Share
Our basic and diluted net loss per common share for the year ended December 31, 2017 was ($1.16) per share,
of which ($0.95) per share related to continuing operations and ($0.21) per share related to discontinued operations. Our
basic and diluted net loss per share for the year ended January 1, 2017 was ($0.35) per share, of which we realized a loss
of ($0.59) per share related to continuing operations and income of $0.24 per share related to discontinued operations.
For the years ended December 31, 2017 and January 1, 2017, we had approximately 7,015,000 and 6,950,000 weighted-
average shares outstanding, respectively.
28
Financial Condition, Liquidity and Capital Resources
Our balance of unrestricted cash and cash equivalents was approximately $8.8 million and $4.5 million as of
December 31, 2017 and January 1, 2017, respectively. We expect to utilize cash on hand and cash received from our
forthcoming rights offering to reinvest in our brand and the evolution of our Company and to repay debt.
Our current ratio, which measures our immediate short-term liquidity, was 1.62 as of December 31, 2017,
compared with 1.47 as of January 1, 2017. The current ratio is computed by dividing total current assets by total current
liabilities. The increase in our current ratio was primarily due to decreases in our net current liabilities and a slight
increase in current assets.
Net cash provided by continuing operating activities for the year ended December 31, 2017 was approximately
$1.9 million, which reflects a net loss from continuing operations of approximately $6.7 million, increased by non-cash
charges of approximately $7.2 million primarily related to depreciation and amortization, asset impairment, estimated
lease termination charges and reserves for bad debts. Changes in operating assets and liabilities for the year ended
December 31, 2017 primarily included net cash inflows related to prepaid income taxes and income taxes receivable of
$1.5 million, prepaid expenses and other current assets of $473,000, inventories of $467,000 and other assets of
$312,000. These cash inflows were partially offset by outflows related to a decrease in accounts payable of $946,000 and
other current liabilities of $567,000. Cash flows provided by operating activities related to discontinued operations were
$1.4 million.
Net cash used by continuing operating activities for the year ended January 1, 2017 was approximately $2.4
million which reflects a net loss of approximately $4.1 million increased by non-cash charges of $5.6 million primarily
related to depreciation, amortization and asset impairment and estimated lease termination charges. Changes in operating
assets and liabilities primarily included a net cash outflow related to an increase in prepaid income taxes and income
taxes receivable of $1.9 million, other assets of $673,000, restricted cash of $627,000 and accounts receivable, net of
$538,000. Cash flows provided by operating activities related to discontinued operations was $2.8 million.
Net cash used by continuing investing activities for the year ended December 31, 2017 was $378,000 related to
purchases of property, equipment and leasehold improvements. Net cash provided by discontinued investing activities
was $1.6 million. Net cash provided by continuing investing activities for the year ended January 1, 2017 was
approximately $421,000, which resulted from proceeds from the sale of assets of $1.1 million partially offset by
purchases of property, equipment and leasehold improvements of $647,000. Net cash provided by discontinued investing
activities was $1.0 million.
Net cash used for financing activities was approximately $89,000, which primarily consisted of debt
repayments of $1.5 million partially offset by proceeds from issuance of common stock of $1.5 million. Net cash used
for financing activities during the year ended January 1, 2017 was $2.7 million, which was primarily related to the
refinancing of our long-term debt obligations and overall reducing our debt outstanding.
We are subject to various financial and non-financial covenants on our long-term debt, including a debt-service
coverage ratio. As of December 31, 2017, we were in compliance with all of our covenants.
Contractual Obligations
The following is a summary of our contractual obligations as of December 31, 2017:
(in thousands)
Long Term Debt
Financing Leases
Operating Lease Obligations
Total
Total
$ 9,096
1,712
11,488
$ 22,296
2018
$ 940
480
1,892
$ 3,312
2019
$ 981
1,232
1,702
$ 3,915
2020
$ 1,023
—
1,587
$ 2,610
29
2021
$ 1,069
1,575
$ 2,644
—
2022
$ 1,116
—
1,308
$ 2,424
Thereafter
$ 3,967
—
3,424
$ 7,391
Off-Balance Sheet Arrangements
Our Company does not have any off-balance sheet arrangements (as such term is defined in Item 303 of
regulation S-K) that are reasonably likely to have a current or future effect on our financial condition or changes in
financial condition, operating results, or liquidity.
Income Taxes
As of December 31, 2017, we had cumulative state net operating loss carry-forwards for tax reporting purposes
of approximately $53.9 million and federal net operating loss carry-forwards for tax reporting purposes of $11.8 million
which, if not used, will begin to expire in fiscal 2018 and 2037, respectively.
Recent Accounting Guidance
Recent accounting guidance not yet adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers. The FASB issued ASU No. 2016-08, “Revenue from
Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” in March
2016, ASU 2016-10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and
Licensing” in April 2016, ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815):
Rescission of SEC Guidance Because of Accounting Standards Updates 2014‑09 and 2014‑16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting” in May 2016 and ASU 2016-12, “Revenue from Contracts with
Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” in May 2016. These new standards
provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition
guidance. In July 2015, the FASB deferred the effective date of ASU 2014-09 until annual and interim periods beginning
on or after December 15, 2017. It will replace most existing revenue recognition guidance under U.S. GAAP when it
becomes effective. It permits the use of either a full retrospective or modified retrospective transition method and early
adoption is permitted. We plan to adopt this standard as of the effective date utilizing the modified retrospective
transition method. See Note 1 “Nature of Business and Significant Accounting Policies” to the accompanying notes to
consolidated financial statements.
In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842), which supersedes the existing guidance
for lease accounting, Leases (Topic 840). ASU 2016‑02 requires lessees to recognize a lease liability and a right-of-use
asset for all leases. Lessor accounting remains largely unchanged. The amendments in this ASU are effective for fiscal
years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for
all entities. ASU 2016‑02 requires a modified retrospective approach for all leases existing at, or entered into after the
date of initial adoption, with an option to elect to use certain transition relief. We expect to adopt this new standard as of
the effective date and are currently evaluating the impact of this new standard on its consolidated financial statements,
but expect that it will have a material impact because of our significant leasing activity.
In May 2017, the FASB issued ASU 2017-05, Compensation – Stock Compensation (Topic 718), to provide
clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718 to a
change to the terms or conditions of a share-based payment award. The updated standard clarifies when an entity should
account for the effects of a modification. The amendments in this ASU are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company does not
believe that adoption of the new standard will have a material impact on its consolidated financial statements.
Inflation
The primary inflationary factors affecting our operations include food, beverage, and labor costs. In addition,
our leases require us to pay taxes, maintenance, repairs and utilities and these costs are subject to inflationary increases.
In some cases, some of our lease commitments are tied to consumer price index (CPI) increases. We are also subject to
interest rate changes based on market conditions.
We believe that increasing inflation rates have contributed to some price instability. There is no assurance,
however, that inflation rates will continue at their current levels or decrease.
30
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Famous Dave’s of America, Inc. are included herein, beginning on
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period
covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
as of such date our disclosure controls and procedures were not effective because of the material weakness in internal
control over financial reporting described below.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Our
management assessed the effectiveness of our internal control over financial reporting as December 31, 2017. In making
this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Our management has concluded
that, as of December 31, 2017, our internal control over financial reporting was not effective based on these criteria due
to a material weakness, as a result of an audit adjustment identified during the review of our income tax provision, which
was the result of a spreadsheet error.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,
within Famous Dave’s of America have been detected.
We are in the process of improving our internal controls to remediate the material weakness identified above
and intend to utilize specialized software for the preparation of our tax provision in the future, instead of Microsoft
Excel. We also intend to add additional steps to the management review control that failed to detect the error in our
income tax provision for the year ended December 31, 2017.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our most recently-completed
fiscal quarter ended December 31, 2017 that have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.
31
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE
REGISTRANT
Management
The table below sets forth the name, age and position of each of our current directors and executive officers.
Name
Position
Jeffery Crivello
Dexter A. Newman
Geovannie Concepcion
Paul M. Malazita
Anand D. Gala
Eric S. Hirschhorn
Joseph M. Jacobs
Charles W. Mooty
Richard A. Shapiro
Bryan L. Wolff
__________________
(1) Mr. Crivello began serving as a director as a result of Patrick Walsh’s resignation and become Chief Executive
Chief Executive Officer, Director(1)
Chief Financial Officer(2)
Chief Operating Officer
Director of Accounting and Corporate Controller(2)
Director
Director
Director
Director
Director
Director
Age
39
38
32
31
44
36
65
57
47
39
Officer pursuant to the terms of the Stock Purchase Agreement between the Company and PW Partners, LLC, dated
November 10, 2017.
(2) Mr. Newman has resigned as Chief Financial Officer effective March 5, 2018 and Mr. Malazita will become Interim
Chief Financial Officer effective March 6, 2018.
The biographies of each of the above-identified individuals are set forth below:
Jeffery Crivello has been our chief executive officer since November 2017 and director since August 2017.
Since January 2015, Mr. Crivello served as the Chief Financial Officer of PW Partners Capital Management, LLC, a
hedge fund manager with a consumer focus, where he had primary responsibility for operations and accounting. PW
Partners has had board of directors’ representation with Famous Dave’s of America, Inc. since 2013, BJ’s Restaurants,
Inc. since 2014, Del Taco Holdings, Inc. since 2015, and Town Sports International Holdings, Inc. since 2015. Since
2001, Mr. Crivello has served as President of TREW Capital Management, Inc., a consulting and investment firm where
he had primary responsibility for operations. From 2012 to 2015, Mr. Crivello served as a Managing Member of Maize
Capital Group, LLC, a commodity investment firm. He graduated from the University of Wisconsin-Whitewater with a
B.S. degree in finance.
Dexter A. Newman has served as our Chief Financial Officer since April 2016. From November 2015 until
March 2016, he was an independent business consultant. From November 2013 until October 2015, Mr. Newman served
as Vice President and a Division Chief Financial Officer at Bloomin’ Brands, a casual dining company with more than
1,400 restaurants in 49 states and 21 countries and territories, where he had primary responsibility for overseeing the
operations, investment, and other financial decisions of the company’s Bonefish Grill business. He was formerly
Bloomin’ Brands Vice President and Treasurer, and Head of Risk Management from October 2012 through October
2013 where he had primary responsibility for capital markets, financial risks management, cash management, and
insurance. From February 2002 to August 2012 he was employed in numerous roles with Best Buy Co., Inc., a consumer
electronics retailer, most recently serving as Senior Director and Chief Financial Officer of Best Buy’s Private Brands
and Global Sourcing Group, and previously serving as Senior Director and Deputy Treasurer. Prior to his role within
Treasury at Best Buy, Mr. Newman worked as Director, Strategy Development and Operations for Best Buy
International and held numerous other roles within the company’s finance function. Mr. Newman holds an MBA from
the University of St Thomas, Opus College of Business and a BA in management from St John’s University.
32
Geovannie Concepcion has served as our Chief Operating Officer since November 2017. Mr. Concepcion has
been a member of the Famous Dave’s management team since April 2016 where he has primary responsibility for
executing on the company’s store optimization and refranchising efforts. In addition, Mr. Concepcion has led the
company’s national efforts with third party delivery providers and online ordering. Before joining Famous Dave’s, Mr.
Concepcion served in various capacities with Greenwich, Connecticut-based Wexford Capital LP, a registered
investment advisor, in both the Private Equity Group and Global Macro Hedge Funds from June 2009 until April 2016.
Mr. Concepcion graduated from DePaul University with a B.S. in Accounting.
Paul M. Malazita currently serves as our Director of Accounting and Corporate Controller since October 2017
and, prior to that, he served as Senior Manager of Corporate Accounting from March 2017 to October 2017. Prior to
joining our Company, from July 2016 to February 2017, Mr. Malazita served as the Manager of Financial Reporting at
Digiliti Money, Inc., a provider of SaaS financial solutions, where he had primary responsibility for SEC financial
reporting. From September 2014 to July 2016, Mr. Malazita served in various capacities at AR Global Investments,
LLC, a sponsor of real estate investment trusts, from September 2014 to July 2016, where he had primary responsibility
for SEC financial reporting and technical accounting. From July 2009 to September 2014, Mr. Malazita served in
various capacities at Baker Tilly Virchow Krause, LLP (formerly ParenteBeard LLC), a public accounting firm. Mr.
Malazita graduated from St. Joseph’s University in Philadelphia, Pennsylvania with a B.S. in Accounting and is a
Certified Public Accountant.
Anand D. Gala has been a director of our Company since July 2015. Mr. Gala is the Founder, President and
Chief Executive Officer of Gala Holdings International, a diversified holding company that conducts consulting,
restaurant development and management operations. Current portfolio brands under Gala Holdings International
ownership and operation include Famous Dave’s and Fresh Griller. Since 2007, Mr. Gala has also been Founder and
Managing Partner of Gala Development Partners, LLC, a firm focused on the acquisition, development and management
of commercial real estate comprising retail and office properties. From February 1998 until May 2014, Mr. Gala served
as Founder, President and Chief Executive Officer of Golden West Restaurants, Inc., a franchise developer of
Applebee’s restaurants throughout California. From 2000 until 2010, Mr. Gala served as Founder, President and Chief
Executive Officer of Gala AZ Holdings, a developer of Del Taco restaurants in Arizona. Mr. Gala graduated from the
University of Southern California with a B. S. in Biology.
Eric S. Hirschhorn has been a director since May 2017. Since January 2018, he has served as the Chief
Marketing Officer of Fridababy, LLC, a baby products company. Mr. Hirschhorn has served as a director of Four
Corners Property Trust since September 2017. Mr. Hirschhorn served in various capacities at Restaurant Brands
International through March 2017. Most recently, he served as the Head of Burger King Canada. From June 2013 to
May 2016, Mr. Hirschhorn served as Burger King’s Chief Marketing Officer for North America and, prior to that role,
he served as Vice President of Market Intelligence and Global Innovation for Burger King. Mr. Hirschhorn first joined
Burger King in November 2010. Prior to joining Burger King, Mr. Hirschhorn served as General Counsel of 3G Capital
from 2008 to 2010, an investment firm based in New York where he served as key counsel in the acquisition of Burger
King. Immediately upon graduating from law school, he was hired as an associate in the Technology, Media &
Communications department at Thelen Reid Brown Raysman Steiner. Mr. Hirschhorn received his J.D. from the
Benjamin N. Cardozo School of Law and his B.A from the University of Pennsylvania.
Joseph M. Jacobs has been a director since July 2015 and served as Chairman of the Board from July 2015 to
February 2017. Mr. Jacobs co-founded Wexford Capital LP, a registered investment advisor, in 1994 and serves as its
President. Mr. Jacobs has primary responsibility for overseeing the activities of Wexford Capital LP’s private equity
funds. He has also served on the boards and creditors’ committees of a number of public and private companies in which
Wexford has held investments. From 1982 to 1994, Mr. Jacobs was employed by Bear Stearns & Co., Inc., where he
attained the position of Senior Managing Director. While at Bear Stearns, Mr. Jacobs was active in bankruptcies and
restructurings and was responsible for all real estate investment banking activities, including debt and equity financing of
real estate on both a private and public basis, real estate investment, and advisory services. From 1979 to 1982, he was
employed as a commercial lending officer at Citibank, N.A. Mr. Jacobs holds an MBA from Harvard Business School
and a BS in economics from the Wharton School of the University of Pennsylvania.
33
Charles W. Mooty has been a director since December 2016 and served as Chairman of the Board from
February 2017 to October 2017. Mr. Mooty currently serves as the President and Chief Executive Officer of Jostens,
Inc., a position he has held since January 2014. Prior to his work at Jostens, Inc., from June 2012 to December 2013, Mr.
Mooty was employed at Fairview Health Services as the Interim President and Chief Executive Officer, as well as
Chairman of the Board of Trustees until December 2016. Mr. Mooty has also served as the President and Chief
Executive Officer of the Faribault Woolen Mill, starting in May 2011. For twenty-one years, Mr. Mooty was employed
by International Dairy Queen, where he held many different positions; among them, the position of President and Chief
Executive Officer, as well as Chairman of the Board.
Richard A. Shapiro has been a director since July 2015. Mr. Shapiro joined Wexford Capital LP, a registered
investment advisor, in 2011 and became a Partner in 2014. Mr. Shapiro serves as Portfolio Manager and Co-Head of
Equities and is a member of the hedge fund investment committee. From 2007 to 2011, Mr. Shapiro was a Managing
Director and Portfolio Manager at Millennium Management, managing a long-short portfolio. From 2004 to 2006, Mr.
Shapiro was Managing Director and Portfolio Manager in the equities division of Amaranth Advisors. From 1997 to
1999 and 2001 to 2004, Mr. Shapiro also gained investment experience at Putnam Investments, 1 to 1 Venture Partners
and Lee Munder Capital. Mr. Shapiro holds an MBA from Georgetown University and a BS in Business Administration
from the University of California.
Bryan L. Wolff has been a director since July 2015. Since March 2017, he has served as a Managing Director at
Anthos Capital Management, a Santa Monica-based growth equity firm. From August 2015 to March 2017, he served as
Chief Financial Officer of Thrive Market, Inc., a healthy and organic food ecommerce company. From September 2014
to August 2015, he served as Chief Financial Officer of DogVacay, Inc. (sold to Rover), an online service connecting pet
owners with sitters across the U.S. and Canada. From January 2012 until August 2014, Mr. Wolff served as Chief
Financial Officer of Bonobos, Inc. (sold to Walmart), a men’s fashion and accessories retailer. From March 2010
through December 2011, Mr. Wolff was an Analyst at Luxor Capital, LP. Mr. Wolff previously had roles at both
AllianceBernstein and McKinsey & Co. Mr. Wolff earned a Masters of Business Administration from Stanford’s
Graduate School of Business, and a Bachelor's of Engineering in Computer Science from Princeton University.
Committees of the Board of Directors
We have a standing Audit Committee, Compensation Committee and Corporate Governance and Nominating
Committee. Below is a summary of our board committee structure and current committee membership information:
Director
Audit Committee
Compensation
Committee
Corporate Governance
and Nominating
Committee
Jeffery Crivello
Anand D. Gala
Eric S. Hirschhorn
Joseph M. Jacobs
Charles W. Mooty
Richard A. Shapiro
Bryan L. Wolff(1)
__________________________
(1) Financial expert
Member
Member
Chairman
Chairman
Member
Member
Member
Member
Member
Chairman
34
Audit Committee
The Audit Committee operates under a written charter adopted by the board of directors, a copy of which is
available at our website at www.famousdaves.com. The charter reflects the Audit Committee’s increased responsibilities
as a result of the Sarbanes-Oxley Act of 2002, as well as the Nasdaq Stock Market corporate governance standards. As
set forth in the charter, the primary responsibilities of the Audit Committee include: (i) serving as an independent and
objective party to monitor the Company’s financial reporting process and internal control system; (ii) reviewing and
appraising the audit performed by the Company’s independent registered public accounting firm; and (iii) providing an
open avenue of communication among the independent registered public accounting firm, financial and senior
management and the board of directors. The charter also requires that the Audit Committee review and pre-approve the
performance of all audit and non-audit accounting services to be performed by the Company’s independent registered
public accounting firm, as well as tax work performed by the Company’s tax firm, other than certain de minimis
exceptions permitted by Section 202 of the Sarbanes-Oxley Act of 2002.
The board of directors has determined that at least one member of the Audit Committee, Bryan L. Wolff,
qualifies as an “audit committee financial expert” as that term is defined in Item 407(d)(5) of Regulation S-K
promulgated under the Securities Exchange Act of 1934, as amended. In addition, each member of the Audit Committee
is an “independent director,” as such term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market’s Marketplace
Rules, and meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934,
as amended. The board of directors has also determined that each of the Audit Committee members is able to read and
understand fundamental financial statements and that at least one member of the Audit Committee has past employment
experience in finance or accounting.
Compensation Committee
The Compensation Committee operates under a written charter adopted by the board of directors, a copy of
which is available at our website at www.famousdaves.com. The Compensation Committee reviews our remuneration
policies and practices, makes recommendations to the full board of directors in connection with all compensation matters
affecting the Company and administers our incentive compensation plans. The Compensation Committee of the board of
directors has direct oversight and responsibility for our executive compensation policies and programs. The
Compensation Committee has the authority to obtain advice and assistance from internal or external legal, accounting or
other advisors, and has the authority to retain, terminate and approve the fees payable to any external compensation
consultant to assist in the evaluation of director, and senior executive compensation. The Compensation Committee
assesses the independence of any compensation consultant that it elects to engage.
Nominating and Corporate Governance Committee
The Corporate Governance and Nominating Committee operates under a written charter adopted by the board
of directors, a copy of which is available at our website at www.famousdaves.com. The primary role of the Corporate
Governance and Nominating Committee is to consider and make recommendations to the full board of directors
concerning the appropriate size, function and needs of the board of directors, including establishing criteria for
membership and considering, recruiting and recommending candidates (including those recommended by shareholders)
to fill new board positions. The Corporate Governance and Nominating Committee also considers and advises the full
board of directors on matters of corporate governance and monitors and recommends the functions of, and membership
on, the various committees of the board of directors.
Code of Ethics
We have adopted a Code of Ethics specifically applicable to our CEO, CFO and Key Financial & Accounting
Management. In addition, there is a more general Code of Ethics applicable to all team members. Both of these Codes of
Ethics are available on our website at www.famousdaves.com and copies are available free of charge to anyone
requesting them.
35
Section 16(a) Beneficial Owner Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and
persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and
changes in ownership of such securities with the Securities and Exchange Commission and Nasdaq. Officers, directors
and greater than ten percent shareholders are required by Securities and Exchange Commission regulations to furnish us
with copies of all Section 16(a) forms they file. Based solely on review of the copies of Forms 3 and 4 and amendments
thereto furnished to the Company during the fiscal year ended December 31, 2017 and Forms 5 and amendments thereto
furnished to the Company with respect to such fiscal year, or written representations that no Forms 5 were required, we
believe that all of our officers, directors and greater than ten percent beneficial owners complied with all applicable
Section 16(a) filing requirements during the fiscal year ended December 31, 2017.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table reflects cash and non-cash compensation for the 2016 and 2017 fiscal
years awarded to or earned by (i) each individual serving as the principal executive officer of the Company during the
2017 fiscal year ended December 31, 2017; (ii) the other two highest paid individuals who served as executive officers at
the end of such fiscal year; and (iii) the other individual who would have qualified as one of the two highest paid executive
officers but for the fact that he was not serving as an executive officer as of the end of the fiscal year (the “named executive
officers”).
Name and Principal Position
Year
Salary ($) Bonus ($)
Stock
Awards ($)
Option
Awards ($)(6)
All Other
Compensation ($)
Total ($)
Jeffery Crivello(1)
Chief Executive Officer
2017
2016
$
27,884
—
$
— $
—
85,000
—
$
156,008
—
$
— $
—
268,892
—
Dexter A. Newman(2)
Chief Financial Officer
Michael W. Lister(3)
Former Chief Executive Officer
2017
2016
2017
2016
270,000
192,115
274,239
62,308
Douglas Renegar(4)
2017
180,769
Former Senior Vice President of
Franchise Operations
2016
41,538
—
98,654
—
18,750
—
—
Geovannie Concepcion(5)
Chief Operating Officer
2017
2016
180,000
126,692
42,500
65,077
_________________________
—
—
—
—
—
—
—
—
—
156,088
—
100,527
—
—
176,700
10,099
270,000
446,857
450,939
191,684
—
100,000
280,769
50,263
—
114,808
—
—
—
91,801
222,500
306,577
(1) Mr. Crivello was appointed our Chief Executive Officer effective November 14, 2017. On that same date, Mr. Crivello
was granted a ten-year option to purchase 90,000 shares of our common stock at an exercise price of $3.90. The
options vest monthly over two years. Mr. Crivello earned stock awards calculated in accordance with his employment
agreement, described below.
(2) Mr. Newman became our Chief Financial Officer effective April 11, 2016. On that same date, Mr. Newman was
granted a ten-year option to purchase 70,000 shares of our common stock at an exercise price of $5.67. The options
vest monthly over four years.
(3) Mr. Lister was our Chief Executive Officer from October 11, 2016 to November 13, 2017. On October 11, 2016, Mr.
Lister was granted a five-year option to purchase 70,000 shares of our common stock at an exercise price of $5.67.
The options vested monthly through Mr. Lister’s termination date. Upon termination, Mr. Lister became entitled to
severance payments totaling $150,000 (reflected in all other compensation) to be paid in accordance with our standard
payroll calendar over six months. Rent cost for Mr. Lister’s apartment of $26,700 is also reflected in all other
compensation.
36
(4) Mr. Renegar was our Senior Vice President of Franchise Operations from October 11, 2016 to November 17, 2017.
On October 11, 2016, Mr. Renegar was granted a five-year option to purchase 35,000 shares of our common stock at
an exercise price of $5.67. The options vested monthly through Mr. Renegar’s termination date. Upon termination,
Mr. Renegar became entitled to severance payments totaling $100,000 (reflected in all other compensation) to be paid
in accordance with our standard payroll calendar over six months.
(5) Mr. Concepcion has been with our Company since April 13, 2016 and was appointed as our Chief Operating Officer
effective November 14, 2017. On April 13, 2016, Mr. Concepcion was granted a ten-year option to purchase 50,000
shares of our common stock at an exercise price of $5.82. The options vest monthly over four years. Mr. Concepcion’s
bonus for 2017 was calculated in accordance with his employment agreement described below.
(6) Amounts shown reflect the grant date fair value of stock option awards granted for the respective year pursuant to our
equity incentive plans, computed in accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718. See Note 9 “Stock-Based Compensation” to the accompanying consolidated financial
statements.
Outstanding Equity Awards at Fiscal Year End
As of December 31, 2017, our named executive officers had outstanding the following stock options:
Option Awards
Number of
Securities
Underlying
Unexercised
Options (#
Exercisable)
Number of
Securities
Underlying
Unexercised
Options (#
Unexercisable)
86,250
40,840
—
—
29,180
Name
Jeffery Crivello
Dexter A. Newman
Michael W. Lister
Douglas Renegar
Geovannie Concepcion
_________________
(1) Mr. Crivello’s options are vesting monthly over a two-year term.
(2) Mr. Newman’s options are vesting monthly over a four-year term.
3,750
29,160
18,958
9,479
20,820
Option Exercise
Price ($)
Option Expiration
Date
$
3.90
5.67
5.25
5.25
5.82
11/14/2027
4/11/2026
5/11/2018
5/11/2018
4/13/2026
Employment and Change-In-Control Agreements
Employment Agreement with Jeffery Crivello
On November 13, 2017, we entered into an employment agreement with Jeffery Crivello. Mr. Crivello’s
employment with us is governed by a three-year employment agreement. Under the employment agreement, Mr.
Crivello is entitled to receive an annual base salary of $250,000 and is eligible for annual bonus compensation in the
form of shares of our common stock, which amount shall be determined based on the 30-day volume weighted average
price (“VWAP”) of our common stock meeting or exceeding the following established targets:
$
Stock Price
Shares Granted
5,000
10,000
10,000
12,500
12,500
15,000
15,000
20,000
20,000
25,000
25,000
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
37
Any Common Stock awarded pursuant to a bonus award shall be granted pursuant to and governed by the terms
of the 2015 Plan. If there are no shares of common stock available pursuant to the terms of the 2015 Plan, Mr. Crivello
shall be paid cash equal to the value of the number of shares of common stock he is otherwise entitled to receive.
Pursuant to the employment agreement, on November 14, 2017, we granted to Mr. Crivello a 90,000 share non-
qualified stock option under the Plan that will vest in equal monthly installments over two years and has an exercise
price of $3.90 per share.
Mr. Crivello may participate in our benefit plans that are currently and hereafter maintained and for which he is
eligible, including, without, limitation, group medical, 401(k), life insurance and other benefit plans. Mr. Crivello is also
entitled to be reimbursed for reasonable travel and other expenses.
Pursuant to the employment agreement, Mr. Crivello agreed to customary non-competition and non-solicitation
provisions, including a covenant that, in the event Mr. Crivello’s relationship with PW Partners conflicts with or is
inconsistent with his obligations to the Company, Mr. Crivello’s primary duty shall be to the Company and to the extent
that a conflict arises, he shall promptly notify the Board of such conflict.
Employment Agreement with Dexter A. Newman
On April 7, 2016, we entered into a written employment agreement with Mr. Newman to be effective as of
April 11, 2016. Under the employment agreement, Mr. Newman is entitled to receive an annual base salary of $270,000
and is eligible for annual bonus compensation in the discretion of the board of directors based upon his achievement of
milestones to be determined by the board of directors prior to the commencement of each fiscal year. The targeted
amount is expected to be 50% of Mr. Newman’s base salary. Mr. Newman may participate in our benefit plans that are
currently and hereafter maintained by us and for which he is eligible, including, without limitation, group medical,
401(k), life insurance and other benefit plans.
Pursuant to the employment agreement, on April 11, 2016, we granted Mr. Newman a ten-year, 70,000 share
non-qualified stock option that will vest in monthly installments over four years. The stock option has an exercise price
of $5.67 per share.
Mr. Newman has agreed not to compete with us during the term of his employment and for a period of 12
months thereafter. Mr. Newman has also agreed not to solicit our employees during the employment term and for 18
months thereafter.
Under the employment agreement, if Mr. Newman’s employment is terminated by us for any reason other than
Cause (including any termination by the Company following a “Change in Control” (as defined in the employment
agreement)), death or disability, or if Mr. Newman resigns for Good Reason, so long as he has signed and has not
revoked a release agreement, he will be entitled to receive severance comprised of continuing payments of his base
salary for a period of 12 months following the termination date.
Employment Agreement with Michael W. Lister
Mr. Lister’s employment was governed by an employment agreement entered into on October 11, 2016, which
had a four year term. Under the employment agreement, Mr. Lister was entitled to receive an annual base salary of
$300,000 and was eligible for annual bonus compensation in the discretion of the board of directors in amounts expected
to be 50% of his base salary.
Pursuant to the employment agreement, on October 11, 2016, we also granted to Mr. Lister a five-year, 70,000
share non-qualified stock option under the Company’s 2015 Equity Incentive Plan that was to vest in equal monthly
installments over the employment term and had an exercise price of $5.25.
Mr. Lister was able to participate in our benefit plans, including, without, limitation, group medical, 401(k), life
insurance and other benefit plans. Pursuant to his employment agreement, Mr. Lister agreed to customary non-
competition and non-solicitation provisions; provided, however, that Mr. Lister will not be restricted from owning or
operating Company franchise locations or any single location restaurants.
38
Employment Agreement with Douglas Renegar
Mr. Renegar’s employment was governed by an employment agreement entered into on October 11, 2016,
which had a four year term. Under the employment agreement, Mr. Renegar was entitled to receive an annual base salary
of $200,000 and was eligible for annual bonus compensation in the discretion of the board of directors.
Pursuant to the employment agreement, on October 11, 2016, we also granted to Mr. Renegar a five-year,
35,000 share non-qualified stock option under the Company’s 2015 Equity Incentive Plan that was to vest in equal
monthly installments over the employment term and had an exercise price of $5.25.
Mr. Renegar was able to participate in our benefit plans, including, without, limitation, group medical, 401(k),
life insurance and other benefit plans. Pursuant to his employment agreement, Mr. Renegar agreed to customary non-
competition and non-solicitation provisions; provided, however, that Mr. Renegar will not be restricted from owning or
operating Company franchise locations or any single location restaurants.
Employment Agreement with Geovannie Concepcion
Mr. Concepcion’s employment with us is governed by an employment agreement entered into on April 8, 2016,
for an indefinite term. Mr. Concepcion is entitled to receive an annual base salary of $180,000 and is eligible for a bonus
payable in cash the first time during his employment term that the VWAP over a 30 day period is equal to or exceeds the
VWAP Target set forth on the first column in the table below.
Stock Price
Cash Bonus
$
$
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
12,500
30,000
35,000
50,000
56,250
75,000
82,500
120,000
130,000
175,000
187,500
Pursuant to the employment agreement, on April 11, 2016, we granted Mr. Concepcion a ten-year, 50,000 share
non-qualified stock option that will vest in monthly installments over four years. The stock option has an exercise price
of $5.82 per share.
Mr. Concepcion has agreed not to compete with us during the term of his employment and for a period of 12
months thereafter. Mr. Concepcion has also agreed not to solicit our employees during the employment term and for 18
months thereafter.
Under the employment agreement, if Mr. Concepcion’s employment is terminated by us for any reason other
than Cause (including any termination by the Company following a “Change in Control” (as defined in the employment
agreement)), death or disability, or if Mr. Concepcion resigns for Good Reason, so long as he has signed and has not
revoked a release agreement, he will be entitled to receive severance comprised of continuing payments of his base
salary for a period of six months following the termination date.
39
Deferred Compensation Plan
We maintain a Non-Qualified Deferred Compensation Plan in which employees who are at the “director” level
and above are eligible to participate. Participants must complete a deferral election each year and submit it to us, prior to
the beginning of the fiscal year for which the compensation pertains, indicating the level of compensation (salary, bonus
and commissions) they wish to have deferred for the coming year. This deferral election is irrevocable except to the
extent permitted by the plan’s administrator, and the applicable regulations promulgated by the Internal Revenue
Service. For fiscal 2015 and 2016, the Company matched 25.0% of the first 4.0% contributed by participants and paid
declared interest rates of 6.0% on balances contributed during fiscal 2016 and 2017.
Deferral periods are defined as the earlier of termination of employment or not less than three calendar years
following the end of the applicable plan year. Extensions of the deferral period for a minimum of five years are allowed,
provided the election is made at least one year before the first payment affected by the change. Payments can be in a
lump sum or in equal payments over a two-, five- or ten-year period, plus interest from the commencement date.
The plan assets are kept in an unsecured account that has no trust fund. In the event of bankruptcy, any future
payments would have no greater rights than that of an unsecured general creditor of the Company and they confer no
legal rights for interest or claim on any assets of the Company. Benefits provided by the deferred compensation plan are
not insured by the Pension Benefit Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 (“ERISA”), because the pension insurance provisions of ERISA do not apply to the Deferred
Compensation Plan.
Compensation of Directors
During fiscal 2017, certain of our directors received cash payments in the amount of $15,000 per quarter for
their services as our director. Upon appointment, our independent directors are generally granted an option to purchase
20,000 shares of our common stock, which vests annually over a five year period.
The following table sets forth information regarding compensation of our directors during the year ended
December 31, 2017:
Fees Earned or Paid
in Cash
$
Name
Anand D. Gala(2)
Eric S. Hirschhorn(2)
Joseph M. Jacobs
Charles W. Mooty(2)(3)
Richard A. Shapiro
Bryan L. Wolff(2)
_______________
(1) Amounts shown reflect the grant date fair value of stock option awards granted during fiscal 2017, computed in
Option Awards ($)(1)
$
—
39,635
—
41,865
—
—
60,000
15,000
—
81,667
—
60,000
Total ($)
60,000
54,635
—
123,532
—
60,000
$
accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. See Note 9
“Stock-Based Compensation” to the accompanying notes to the consolidated financial statements.
(2) Each of Messrs. Gala, Hirschhorn, Mooty and Wolff hold options to purchase 20,000 shares of our common stock.
(3) Mr. Mooty received additional compensation during the time that he served as the chairman of our board of
directors.
40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Securities Authorized for Issuance under Equity Compensation Plans
Effective May 5, 2015, we adopted a 2015 Equity Plan (the “2015 Plan”), pursuant to which we may grant
stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock
units and other stock and cash awards to eligible participants. We also maintain an Amended and Restated 2005 Stock
Incentive Plan (the “2005 Plan”). The 2005 Plan prohibits the granting of incentives after May 12, 2015, the tenth
anniversary of the date such Plan was approved by the Company’s shareholders. Nonetheless, the 2005 Stock Incentive
Plan will remain in effect until all outstanding incentives granted thereunder have either been satisfied or terminated.
Together, the 2015 Plan and 2005 Plan are referred to herein as the “Plans.”
The purpose of the 2015 Plan is to increase shareholder value and to advance the interests of the Company by
furnishing a variety of economic incentives designed to attract, retain and motivate team members (including officers),
certain key consultants and directors of the Company. The Plans have each been approved by the Company’s
shareholders. The following table sets forth certain information as of December 31, 2017, with respect to the 2005 Plan
and the 2015 Plan.
Equity compensation plans approved by shareholders:
Plan Category
2005 Stock Incentive Plan
2015 Stock Incentive Plan
TOTAL
Number of Securities
Weighted-
Remaining Available for
Average
Number of Securities Exercise Price Future Issuance Under
to be Issued Upon of Outstanding Equity Compensation
Exercise of
Options,
Outstanding Options Warrants and
Warrants and Rights
(A)
Rights
(B)
Plans (Excluding
Securities Reflected in
Column (A))
(C)
2,700
535,812
538,512
$
$
28.53
6.40
6.60
—
—
—
We have one class of voting securities outstanding, Common Stock, $0.01 par value, of which 7,391,315 shares
were outstanding as of the close of business on February 20, 2018. Each share of Common Stock is entitled to one vote
on all matters put to a vote of shareholders.
The following table sets forth certain information regarding beneficial ownership of our common stock as of the
February 20, 2018 by (i) each person known by us to be the beneficial owner of more than 5% of our outstanding
common stock, (ii) each of our directors director, (iii) each named executive officer and (iv) all executive officers and
directors as a group.
41
Unless otherwise indicated, the address of each of the following persons is 12701 Whitewater Drive, Suite 190,
Minnetonka, Minnesota 55343, and each such person has sole voting and investment power with respect to the shares of
common stock set forth opposite each of their respective names.
Name and Address of Beneficial Owner
Executive Officers:
Jeffery Crivello (Chief Executive Officer)(1)
Michael W. Lister (Former Chief Executive Officer)(2)
Dexter A. Newman (Chief Financial Officer)(3)
Geovannie Concepcion (Chief Operating Officer)(4)
Douglas Renegar (Former Senior Vice President of Franchise
Operations)(5)
Non-Employee Directors:
Anand D. Gala
Eric S. Hirschhorn
Joseph M. Jacobs(6)
Charles W. Mooty
Richard A. Shapiro
Bryan L. Wolff
All Directors and Executive Officers as a group (11 people)
Other 5% Beneficial Owners
Wexford Capital LP(7)
411 West Putnam Avenue, Suite 125, Greenwich, CT 06830
Bandera Master Fund L.P.(8)
Broad Street, Suite 1820, New York, NY 10004
Patrick Walsh(9)
1325 Avenue of the Americas, New York, NY 10019
David Kanen(10)
5850 Coral Ridge Drive, Suite 309, Coral Springs, Florida 33076
Raging Capital Management, LLC(11)
Ten Princeton Avenue, P.O. Box 228, Rocky Hill, NJ 08553
Blue Clay Capital Management, LLC(12)
800 Nicollet Mall, Ste. 2870, Minneapolis, MN 55402
FS Special Opportunities I, L.P.(13)
3033 Excelsior Boulevard, Suite 560, Minneapolis, MN 55416
Shares Beneficially
Owned
Percentage of Total
33,750
18,958
35,476
20,820
9,479
8,000
—
1,332,711
87,355
10,000
11,020
1,567,569
1,332,711
1,085,225
755,419
482,624
467,715
429,521
418,169
*
*
*
*
*
*
*
18.0%
1.2%
*
*
20.9%
18.0%
14.7%
10.2%
6.5%
6.3%
5.8%
5.7%
_____________________
* Less than 1%
(1)
(2)
(3)
(4)
Includes 18,750 shares that Mr. Crivello has the right to acquire within 60 days.
Includes 18,958 shares that Mr. Lister has the right to acquire within 60 days.
Includes 32,076 shares that Mr. Newman has the right to acquire within 60 days.
Includes 20,820 shares that Mr. Concepcion has the right to acquire within 60 days.
Includes 9,479 shares that Mr. Renegar has the right to acquire within 60 days.
(5)
(6) Represents 1,332,711 shares held by Debello Investors LLC, Wexford Focused Investors LLC, and Wexford Spectrum
Investors LLC (collectively, the “Purchasing Entities”). Mr. Jacobs disclaims beneficial ownership of the shares held
by the Purchasing Entities except to the extent of his actual pecuniary interest therein. See footnote 7 below.
42
(7) Based upon joint statements on Schedule 13D filed with the SEC on June 22, 2015. Includes 29,785 shares that are
directly owned by Debello Investors LLC (“DI”), 61,973 shares that are directly owned by Wexford Focused Investors
LLC (“WFI”), and 1,240,953 shares that are directly owned by Wexford Spectrum Investors LLC (“WSI”, and
together with DI and WFI, the “Purchasing Entities”). Wexford Capital LP (“Wexford Capital”) may, by reason of its
status as manager of the Purchasing Entities, be deemed to own beneficially the securities of which the Purchasing
Entities possess beneficial ownership. Wexford GP LLC (“Wexford GP”) may, as the General Partner of Wexford
Capital, be deemed to own beneficially the securities of which the Purchasing Entities possess beneficial ownership.
Each of Charles E. Davidson (“Davidson”) and Joseph M. Jacobs (“Jacobs”) may, by reason of his status as a
controlling person of Wexford GP, be deemed to own beneficially the securities of which the Purchasing Entities
possess beneficial ownership. Each of Wexford Capital, Wexford GP, Davidson and Jacobs shares the power to vote
and to dispose of the securities beneficially owned by the Purchasing Entities. Each of Wexford Capital, Wexford GP,
Davidson and Jacobs disclaims beneficial ownership of the securities owned by the Purchasing Entities and the joint
statements on Schedule 13D are not an admission that they are the beneficial owners of such securities except, in the
case of Davidson and Jacobs, to the extent of their personal ownership interests in any of the members of the
Purchasing Entities.
(8) Based upon a statement on Schedule 13D/A filed with the SEC on June 16, 2017. Bandera Partners LLC (“Bandera
Partners”) is the investment manager of Bandera Master Fund L.P. (“Bandera Master Fund”). Bandera Master Fund
has granted to Bandera Partners the sole and exclusive authority to vote and dispose of the shares held directly by
Bandera Master Fund. Each of Gregory Bylinsky and Jefferson Gramm are Managing Partners, Managing Directors
and Portfolio Managers of Bandera Partners. By virtue of these relationships, each of Bandera Partners and Messrs.
Bylinsky and Gramm may be deemed to beneficially own the shares owned directly by Bandera Master Fund.
(9) Based on a joint schedule 13 D/A, filed February 2, 2018. Includes 249,675 shares owned by PW Partners Atlas Fund
LP, 52,575 shares owned by Mr. Walsh directly and 35,000 shares owned by PW Partners Atlas Fund II, LP. Also
includes 418,169 shares that PW Partners, LLC has shared voting power.
(10) Based upon a joint statement on Schedule 13 G filed with the SEC on February 14, 2018 by Philotimo Fund LP
(“Philotimo”), Kanen Wealth Management, LLC (“KWM”) and David L. Kanen. KWM is the general partner of
Philotimo and Mr. Kanen is the managing member of KWM. By virtue of these relationships KWM may be deemed
to beneficially own the securities which these entities possess.
(11) Based upon a statement on Schedule 13D/A filed with the SEC on February 14, 2018. Raging Capital Management,
LLC (“Raging Capital”) is the investment manager of Raging Capital Master Fund, Ltd., a Cayman Islands exempted
company (“Raging Master”) in whose name the shares are held. William C. Martin is the Chairman, Chief Investment
Officer and Managing Member of Raging Capital. Raging Master has delegated to Raging Capital the sole authority
to vote and dispose of the securities held by Raging Master pursuant to an investment management agreement
(“IMA”). The IMA may be terminated by any party thereto effective at the close of business on the last day of any
fiscal quarter by giving the other party not less than 61 days’ written notice. As a result, each of Raging Capital and
William C. Martin may be deemed to beneficially own the shares held by Raging Master. Each of Raging Capital and
William C. Martin disclaims beneficial ownership of the securities owned by Raging Capital and the joint statements
on Schedule 13G are not an admission that they are the beneficial owners of such securities.
(12) Based upon a statement on Schedule 13D/A filed with the SEC on December 28, 2015. Blue Clay Capital
Management, LLC (“Blue Clay Capital”) is the investment manager for certain private funds (together, the “Funds”).
Each of Gary Kohler and Brian Durst, through their roles at Blue Clay Capital, exercises investment discretion over
the Funds and has shared power to vote and dispose of these shares.
(13) Based upon a joint statement on Schedule 13D filed with the SEC on November 20, 2017 by FS Special Opportunities
I, L.P., Farnam Street Capital, Inc., Raymond E. Cabillot and Peter O. Haeg. The reporting persons may be deemed
to beneficially own the securities which these entities possess.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by Item 404(a) of Regulation S-K is hereby incorporated by reference to Note 16 –
Related Party Transactions to the accompanying consolidated financial statements. The information required by Item
407(a) of Regulation S-K is hereby incorporated by reference to Item 10. Directors, Executive Officers and Corporate
Governance to this Annual Report on Form 10-K.
43
Our Audit Committee is responsible for reviewing policies and procedures with respect to related party
transactions required to be disclosed pursuant to Item 404(a) of the Securities and Exchange Commission’s Regulation
S-K (including transactions between the Company and its officers and directors, or affiliates of such officers or
directors), and approving the terms and conditions of such related party transactions. The following directors,
constituting a majority of the board, are “independent directors” as such term is defined in Rule 5605(a)(2) of the
Nasdaq Stock Market’s Marketplace Rules: Eric S. Hirschhorn, Joseph M. Jacobs, Charles W. Mooty, Richard A.
Shapiro, and Bryan L. Wolff.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
We have selected and appointed Grant Thornton LLP (“Grant Thornton”) as our independent registered public
accounting firm to audit our consolidated financial statements for the fiscal year ended December 31, 2017. Our Audit
Committee charter requires that the Audit Committee pre-approve all services provided by our independent registered
public accounting firm. All engagements of our independent registered public accounting firm for the fiscal years ended
December 31, 2017 and January 1, 2017 were pre-approved by the Audit Committee. Grant Thornton billed us a total of
$395,985 and $381,143 for the years ended December 31, 2017 and January 1, 2017, respectively.
Audit Fees – Audit fees billed by Grant Thornton were $375,705 and $361,643 for the audits of our 2017 and 2016
financial statements during the years ended December 31, 2017 and January 1, 2017, respectively.
Audit Related Fees – Audit-related fees billed by Grant Thornton were $20,280 and $19,500 for the audits of our 2016
and 2015 401(k) financial statements during the years ended December 31, 2017 and January 1, 2017, respectively.
Tax Fees – There were no tax fees billed by Grant Thornton during the years ended December 31, 2017 and January 1,
2017.
All Other Fees –There were no other fees billed by Grant Thornton during the years ended December 31, 2017 and
January 1, 2017.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as part of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets – December 31, 2017 and January 1, 2017
Consolidated Statements of Operations – Fiscal Years ended December 31, 2017 and January 1, 2017
Consolidated Statements of Shareholders’ Equity – Fiscal Years ended December 31, 2017 and January 1,
2017
Consolidated Statements of Cash Flows – Fiscal Years ended December 31, 2017 and January 1, 2017
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II. Schedule of Valuation and Qualifying Accounts
Exhibits:
F-1
F-2
F-3
F-4
F-5
F-7
F-32
F-32
See "exhibit index" on the page following the consolidated financial statements and related footnotes and the
signature page to this Annual Report on Form 10-K.
ITEM 16.
FORM 10-K SUMMARY
Not applicable.
44
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Famous Dave’s of America, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Famous Dave’s of America, Inc. (a Minnesota
corporation) and subsidiaries (the “Company”) as of December 31, 2017 and January 1, 2017, the related consolidated
statements of operations, shareholders’ equity, and cash flows for the years then ended, and the related notes and
schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2017 and January 1, 2017 and the results
of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted
in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Grant Thornton LLP
We have served as the Company’s auditor since 2002.
Minneapolis, Minnesota
March 5, 2018
F-1
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Current assets:
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance for doubtful accounts of $592,000 and
$271,000, respectively
Inventories
Prepaid income taxes and income taxes receivable
Prepaid expenses and other current assets
Assets held for sale
Total current assets
Property, equipment and leasehold improvements, net
Other assets:
Intangible assets, net
Deferred tax asset
Other assets
December 31, 2017 January 1, 2017
4,450
$
1,714
8,836
1,590
$
3,768
633
689
793
475
16,784
11,442
1,840
5,823
1,018
$
36,907 $
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and financing lease obligations
Accounts payable
Accrued compensation and benefits
Other current liabilities
Total current liabilities
$
Long-term liabilities:
Long-term debt, less current portion
Financing lease obligation, less current portion
Other liabilities
Total liabilities
Shareholders’ equity:
Common stock, $.01 par value, 100,000 shares authorized, 7,376 and 6,958 shares
issued and outstanding at December 31, 2017 and January 1, 2017, respectively
Additional paid-in capital
Retained earnings
Total shareholders’ equity
$
See accompanying notes to consolidated financial statements.
$
1,307
4,365
1,545
3,118
10,335
7,932
1,196
3,963
23,426
70
1,460
11,951
13,481
36,907 $
F-2
5,257
1,499
2,168
1,326
1
16,415
25,912
2,602
4,633
1,383
50,945
1,371
5,311
1,321
3,140
11,143
8,849
2,280
8,705
30,977
66
—
19,902
19,968
50,945
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended
December 31, 2017
January 1, 2017
Revenue:
Restaurant sales, net
Franchise royalty revenue
Franchise fee revenue
Licensing and other revenue
Total revenue
Costs and expenses:
Food and beverage costs
Labor and benefits costs
Operating expenses
Depreciation and amortization
General and administrative expenses
Asset impairment, estimated lease termination and other closing costs
Net loss (gain) on disposal of property
Total costs and expenses
Loss from operations
Other income (expense):
Interest expense
Interest income
Other expense, net
Total other expense
Loss before income taxes
Income tax benefit
Net loss from continuing operations
Net (loss) income from discontinued operations, net of tax
Net loss
(Loss) income per common share:
Basic net loss per share - continuing operations
Basic net (loss) income per share - discontinued operations
Basic net loss per share
Diluted net loss per share - continuing operations
Diluted net (loss) income per share - discontinued operations
Diluted net loss per share
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
$
$
$
$
$
$
$
48,874
14,732
35
954
64,595
14,782
17,653
14,658
2,785
14,634
6,816
70
71,398
58,956
16,375
290
1,003
76,624
18,299
21,008
18,729
2,873
16,569
4,788
(149)
82,117
(6,803)
(5,493)
(661)
22
(82)
(721)
(886)
2
—
(884)
(7,524)
(6,377)
858
2,272
(6,666)
(1,457)
(8,123) $
(4,105)
1,674
(2,431)
(0.95) $
(0.21)
(1.16) $
(0.95) $
(0.21)
(1.16) $
7,015
7,015
(0.59)
0.24
(0.35)
(0.59)
0.24
(0.35)
6,950
6,950
See accompanying notes to consolidated financial statements.
F-3
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Balance - January 3, 2016
Exercise of stock options
Stock-based compensation
Deferred compensation
Net loss
Balance - January 1, 2017
Issuance of common stock
Tax benefit for equity awards issued
Stock-based compensation
Net loss
Balance - December 31, 2017
Additional
Paid-in
Capital
Common Stock
$
$
Shares
6,958
—
—
—
—
6,958 $
418
—
—
—
7,376
Amount
66
—
—
—
—
66 $
4
—
—
—
70
$
Retained
Earnings
(1)
312
27
(2,431)
Total
— $ 21,995
$ 22,061
—
(1)
—
312
—
27
(2,431)
—
— $ 19,902 $ 19,968
1,464
—
(55)
(55)
227
227
(8,123)
(8,123)
$ 13,481
$ 11,951
1,460
—
—
—
$ 1,460
See accompanying notes to consolidated financial statements.
F-4
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
December 31, 2017
January 1, 2017
$
(6,666)
$
(4,105)
Cash flows from operating activities:
Net loss from continuing operations
Adjustments to reconcile net loss to cash flows provided by operations:
Depreciation and amortization
Asset impairment and estimated lease termination and other closing costs
Net loss (gain) on disposal of property
Amortization of deferred financing costs
Amortization of lease interest assets
Deferred income taxes
Deferred rent
Bad debts expense
Stock-based compensation
Changes in operating assets and liabilities:
Restricted cash
Accounts receivable, net
Inventories
Prepaid income taxes and income taxes receivable
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued compensation and benefits
Other current liabilities
Other liabilities
Cash flows provided by (used for) continuing operating activities
Cash flows provided by discontinued operating activities
Cash flows provided by operating activities
Cash flows from investing activities:
Proceeds from the sale of assets
Purchases of property, equipment and leasehold improvements
Cash flows (used for) provided by continuing investing activities
Cash flows provided by discontinued investing activities
Cash flows provided by for investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Proceeds from line of credit
Payments for debt issuance costs
Payments on long-term debt and financing lease obligations
Proceeds from sale of common stock
Payments from exercise of stock options
Cash flows used for financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
F-5
2,785
4,012
70
36
37
(1,245)
48
1,172
313
124
141
467
1,479
473
312
(946)
(3)
(567)
(139)
1,903
1,350
3,253
—
(378)
(378)
1,600
1,222
—
—
(15)
(1,538)
1,464
—
(89)
4,386
4,450
8,836
$
2,873
1,956
(149)
115
45
(142)
583
24
339
(627)
(538)
564
(1,942)
125
(673)
(374)
(69)
(231)
(190)
(2,416)
2,760
344
1,068
(647)
421
1,039
1,460
103
1,855
(259)
(4,352)
—
(1)
(2,654)
(850)
5,300
4,450
Supplemental Disclosures
Cash paid for interest
Cash paid (refunds received) for income taxes, net
Non-cash investing and financing activities:
Change in deferred taxes, recognized in additional paid-in capital
Reclassification of additional paid-in capital to payroll taxes payable for
performance shares issued
Increase in accrued property and equipment purchases
Year Ended
December 31, 2017
January 1, 2017
$
$
617
(1,842)
$
55
$
—
14
975
398
—
215
10
See accompanying notes to consolidated financial statements.
F-6
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
We, Famous Dave’s of America, Inc. (“Famous Dave’s” or the “Company”), were incorporated in Minnesota
on March 14, 1994. We develop, own, operate and franchise restaurants under the name "Famous Dave’s.” As of
December 31, 2017, there were 150 Famous Dave’s restaurants operating in 32 states, the Commonwealth of Puerto
Rico, Canada, and the United Arab Emirates, including 16 Company-owned restaurants and 134 franchise-operated
restaurants. An additional 61 franchise restaurants were committed to be developed through signed area development
agreements as of December 31, 2017.
Seasonality
Our restaurants typically generate higher revenue in the second and third quarters of our fiscal year as a result
of seasonal traffic increases and high catering sales experienced during the summer months, and lower revenue in the
first and fourth quarters of our fiscal year, due to possible adverse weather which can disrupt customer and team member
transportation to our restaurants.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-
owned and majority-owned subsidiaries. All inter-company transactions and balances have been eliminated in
consolidation.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those
estimates.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation of
discontinued operations.
Financial instruments
Due to their short-term nature, the carrying value of our current financial assets and liabilities approximates
their fair value. The fair value of long-term debt approximates the carrying amount based upon our expected borrowing
rate for debt with similar remaining maturities and comparable risk.
F-7
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment reporting
We have Company-owned and franchise-operated restaurants in the United States, the Commonwealth of
Puerto Rico, Canada and the United Arab Emirates, and operate within the single industry segment of foodservice. We
make operating decisions on behalf of the Famous Dave’s brand which includes both Company-owned and franchise-
operated restaurants. In addition, all operating expenses are reported in total and are not allocated to franchising
operations for either external or internal reporting. As a result, we have concluded that we have a single reporting
segment.
Fiscal year
Our fiscal year ends on the Sunday nearest to December 31 of each year. Our fiscal year is generally 52 weeks;
however, it periodically consists of 53 weeks. The fiscal years ended December 31, 2017 (fiscal 2017) and January 1,
2017 (fiscal 2016) consisted of 52 weeks.
Cash and cash equivalents
Cash equivalents include all investments with original maturities of three months or less or which are readily
convertible into known amounts of cash and are not legally restricted. Accounts at each institution are insured by the
Federal Deposit Insurance Corporation up to $250,000, while the remaining balances are uninsured. As of December 31,
2017 and January 1, 2017, our uninsured cash and restricted cash balances were $9.0 million and $7.1 million,
respectively. There have been no losses of uninsured amounts.
Restricted cash and marketing fund
We have a system-wide Marketing Development Fund, to which Company-owned restaurants, in addition to the
majority of franchise-operated restaurants, contribute a percentage of net sales, currently 1.0%, for use in public relations
and marketing development efforts. The assets held by this fund are considered to be restricted. Accordingly, we reflect
the cash related to this fund within restricted cash and reflect the liability within accounts payable on our consolidated
balance sheets. We had approximately $1.3 million and $946,000 in this fund as of December 31, 2017 and January 1,
2017, respectively.
In conjunction with our credit agreements, we have deposited amounts for undrawn letters of credit in cash
collateral accounts. We had approximately $298,000 and $768,000 in restricted cash as of December 31, 2017 and
January 1, 2017, respectively, related to these undrawn letters of credit.
F-8
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounts receivable, net
We provide an allowance for uncollectible accounts on accounts receivable based on historical losses and
existing economic conditions, when relevant. We provide for a general bad debt reserve for franchise receivables due to
increases in days sales outstanding and deterioration in general economic market conditions. This general reserve is
based on the aging of receivables meeting specified criteria and is adjusted each quarter based on past due receivable
balances. Additionally, we have periodically established a specific reserve on certain receivables as necessary. In
assessing recoverability of these receivables, we make judgments regarding the financial condition of the franchisees
based primarily on past and current payment trends, as well as other variables, including annual financial information,
which our franchisees are required to submit to us. Any changes to the reserve are recorded in general and administrative
expenses. Accounts receivable are written off when they become uncollectible, and payments subsequently received on
such receivables are credited to the allowance for doubtful accounts. Accounts receivable balances written off have not
exceeded allowances provided and we believe all accounts receivable in excess of allowances provided are fully
collectible. If accounts receivable in excess of provided allowances are determined uncollectible, they are charged to
expense in the period that determination is made. As of December 31, 2017, we had a receivable from one franchisee in
the amount of $509,000, of which a portion is reserved in accordance with our standard policies.
Inventories
Inventories consist principally of small wares and supplies, food and beverages, and retail goods, and are recorded
at the lower of cost (first-in, first-out) or net realizable value.
Property, equipment and leasehold improvements, net
Property, equipment and leasehold improvements are stated at cost, net of accumulated depreciation. We
recognize depreciation expense utilizing the straight-line method once an asset has been placed into service. The following
table outlines the useful lives of our major classes of property, equipment and leasehold improvements:
Land
Buildings
Leasehold improvements
Furniture, fixtures, and equipment (excluding restaurant signage)
Restaurant signage
Decor
N/A
30 years
0 - 30 years
3 - 7 years
10 - 15 years
7 years
We capitalize labor costs associated with the implementation of significant information technology infrastructure
projects based on actual labor rates per person including benefits, for all time spent on the implementation of software and
are depreciated over 5 years. We capitalize construction overhead costs until the time a building is turned over to
operations, which is approximately two weeks prior to opening and depreciate these items over the same useful life as
leasehold improvements.
We evaluate restaurant sites and other long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of restaurant sites to
be held and used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net
cash flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant site is determined to be impaired,
the loss is measured as the amount by which the carrying amount of the restaurant site exceeds its fair value. Fair value is
estimated based on the best information available including estimated future cash flows, expected growth rates in
comparable restaurant sales, remaining lease terms and other factors.
F-9
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets
We have transferable liquor licenses in jurisdictions with a limited number of authorized liquor licenses. These
licenses were capitalized as indefinite-lived intangible assets and are included in intangible assets, net in our
consolidated balance sheets. We review annually the liquor licenses for impairment. The costs of obtaining non-
transferable liquor licenses that are directly issued by local government agencies for nominal fees are expensed as
incurred. Annual liquor license renewal fees are expensed over the renewal term.
We have lease interest assets that are reflected within intangible assets, net on our consolidated balance sheets.
The current and long-term portion of lease interest liabilities are reflected within the other current liabilities and other
liabilities line items on our consolidated balance sheets, respectively. Lease interest assets and liabilities are amortized to
rent expense over the term of the leases to which they relate.
Advertising
Advertising costs are charged to expense as incurred. Advertising costs were approximately $2.2 million and
$2.0 million for the years ended December 31, 2017 and January 1, 2017, respectively, and are included in operating
expenses for local store marketing in the consolidated statements of operations. Advertising costs incurred related to our
national advertising fund are netted with contributions from our Company-owned stores and certain of our franchisees.
Research and development costs
Research and development costs represent all expenses incurred in relation to the creation of new menu and
promotional offerings, recipe enhancements and documentation activities. Research and development costs were
approximately $382,000 and $510,000 for the years ended December 31, 2017 and January 1, 2017, respectively, and
are included in general and administrative expenses in the consolidated statements of operations.
Pre-opening expenses
All start-up and pre-opening costs are expensed as incurred. Pre-opening rent during the build-out period is
included in pre-opening expense. We did not incur any pre-opening expenses during the years ended December 31, 2017
and January 1, 2017.
Leases
We recognize rent expense on a straight-line basis for our operating leases over the entire lease term, including
lease renewal options and build-out periods where the renewal is reasonably assured and the build-out period takes place
prior to the restaurant opening or lease commencement date. Rent expense recorded during the build-out period is
reported as pre-opening expense. We account for construction allowances by recording a receivable when collectability
is considered to be probable, and relieve the receivable once the cash is obtained from the landlord for the construction
allowance. Construction allowances are amortized as a credit to rent expense over the full term of the lease, including
reasonably assured renewal options and build-out periods.
F-10
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Exit and disposal costs
Exit or disposal activities, including restaurant closures, include the cost of disposing of the assets and other
facility-related expenses from previously closed restaurants. These costs are generally expensed as incurred.
Additionally, at the date we cease using a property under an operating lease, we record a liability for the net present
value of any remaining lease obligations, net of estimated sublease income. Any subsequent adjustments to that liability
as a result of lease termination or changes in estimates of sublease income are recorded in the period incurred. Upon
disposal of the assets associated with a closed restaurant, any gain or loss is recorded in the same caption as the original
impairment within our consolidated statements of operations.
We recognize a liability for the fair value of a required asset retirement obligation (“ARO”) when such
obligation is incurred. Our AROs are primarily associated with leasehold improvements which, at the end of a lease, we
are contractually obligated to remove in order to comply with the lease agreement.
Costs incurred for restaurants that have been closed, after the date of their closure, are presented within the asset
impairment, estimated lease termination and other closing costs line item of our consolidated statements of operations.
Net (loss) income per common share
Basic net (loss) income per common share (“EPS”) is computed by dividing net (loss) income by the weighted
average number of common shares outstanding for the reporting period. Diluted EPS equals net (loss) income divided by
the sum of the weighted average number of shares of common stock outstanding plus all additional common stock
equivalents, such as stock options and restricted stock units, when dilutive.
The following table is a reconciliation of basic and diluted net (loss) income per common share:
(in thousands, except per share data)
Net (loss) income per share – basic:
Net loss from continuing operations
Net (loss) income from discontinued operations, net of tax
Net loss
Weighted average shares outstanding - basic
Basic net loss per share - continuing operations
Basic net (loss) income per share - discontinued operations
Basic net loss per share
Net (loss) income per share – diluted:
Net loss from continuing operations
Net (loss) income from discontinued operations, net of tax
Net loss
Weighted average shares outstanding - diluted
Diluted net loss per share - continuing operations
Diluted net (loss) income per share - discontinued operations
Diluted net loss per share
Year Ended
December 31, 2017
January 1, 2017
$
$
$
$
$
$
(6,666) $
(1,457)
(8,123)
7,015
(0.95) $
(0.21)
(1.16) $
(6,666) $
(1,457)
(8,123)
7,015
(0.95) $
(0.21)
(1.16) $
(4,105)
1,674
(2,431)
6,950
(0.59)
0.24
(0.35)
(4,105)
1,674
(2,431)
6,950
(0.59)
0.24
(0.35)
There were approximately 539,000 and 683,000 stock options as of December 31, 2017 and January 1, 2017,
respectively that were not included in the computation of diluted EPS because they were anti-dilutive.
F-11
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-based compensation
We recognize compensation cost for share-based awards granted to team members and board members based
on their fair values at the time of grant over the requisite service period. Stock options granted to non-employees are
marked to market as they vest. The bonus compensation of our Chief Executive Officer is issued in the form of
unrestricted, freely tradable shares of our common stock and is expensed in full when earned. Our pre-tax compensation
cost for stock options and other incentive awards is included in general and administrative expenses in our consolidated
statements of operations. See Note 9 “Stock-based compensation.”
Income Taxes
We provide for income taxes based on our estimate of federal and state income tax liabilities. These estimates
include, among other items, effective rates for state and local income taxes, allowable tax credits for items such as taxes
paid on reported tip income, estimates related to depreciation and amortization expense allowable for tax purposes, and
the tax deductibility of certain other items. Our estimates are based on the information available to us at the time that we
prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-
end. Income tax returns are subject to audit by federal, state, and local governments, generally years after the tax returns
are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws.
Revenue recognition
In fiscal 2018, we will be required to adopt ASC 606 – Revenue from Contracts with Customers, which will
materially impact the way that we recognize revenue. See “Recent Accounting Guidance Not Yet Adopted” below for
more information.
We record restaurant sales at the time food and beverages are served. We record sales of merchandise items at
the time items are delivered to the Guest. All sales taxes are excluded from revenue. We have detailed below our
revenue recognition policies for franchise and licensing agreements.
Initial franchise fee revenue is recognized when we have performed substantially all of our obligations as
franchisor. Franchise royalties are recognized when earned.
Our franchise-related revenue is comprised of three separate and distinct earnings processes: area development
fees, initial franchise fees and continuing royalty payments. Our area development fee for domestic growth consists of a
one-time, non-refundable payment in consideration for the services we perform in preparation of executing each area
development agreement. Area development fees are recognized in full upon receipt. We recognize a portion of franchise
fees as revenue when the agreement is signed, reflecting expenses incurred related to the sale. The remaining non-
refundable fee is included in deferred franchise fees and is recognized as revenue when we have performed substantially
all of our obligations, which generally occurs upon the franchise entering into a lease agreement for the restaurant.
Franchisees are also required to pay us a monthly royalty equal to a percentage of their net sales.
We have a licensing agreement for our retail products, the current term of which expires in April 2020 with
renewal options of five years, subject to the licensee’s attainment of identified minimum product sales levels. Licensing
revenue is recorded based on royalties earned by us in accordance with our agreement.
Periodically, we provide additional services, beyond the general franchise agreement, to our franchise
operations, such as new restaurant training, information technology setup and décor installation services. The cost of
these services is recognized upon completion and is billed to the respective franchisee and is generally payable on net
30-day terms.
F-12
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gift cards
We record a liability in the period in which a gift card is issued and proceeds are received. As gift cards are
redeemed, this liability is reduced and revenue is recognized. We recognize gift card breakage income as an offset to
operating expense based on a stratified breakage rate per year. This breakage rate is based on a percentage of sales when
the likelihood of the redemption of the gift card becomes remote. In fiscal 2018, we will be required to adopt ASC 606 –
Revenue from Contracts with Customers, which will change the method in which we recognize breakage income in the
future. See “Recent Accounting Guidance Not Yet Adopted” below for more information.
Recent Accounting Guidance
Recent accounting guidance not yet adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014‑09, Revenue from Contracts with Customers. The FASB issued ASU No. 2016‑08, “Revenue from
Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” in March
2016, ASU 2016‑10 “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and
Licensing” in April 2016, ASU 2016‑11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815):
Rescission of SEC Guidance Because of Accounting Standards Updates 2014‑09 and 2014‑16 Pursuant to Staff
Announcements at the March 3, 2016 EITF Meeting” in May 2016 and ASU 2016‑12, “Revenue from Contracts with
Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” in May 2016. These new standards
provide for a single, principles-based model for revenue recognition that replaces the existing revenue recognition
guidance. In July 2015, the FASB deferred the effective date of ASU 2014‑09 until annual and interim periods beginning
on or after December 15, 2017. It will replace most existing revenue recognition guidance under U.S. GAAP when it
becomes effective. It permits the use of either a full retrospective or modified retrospective transition method and early
adoption is permitted. We plan to adopt this standard as of the effective date utilizing the modified retrospective
transition method.
We have reviewed a representative sample of our franchise agreements as a basis for determining the impact of
the new standard on our consolidated financial statements. We have not yet finalized our conclusions; however, we
believe that the new guidance will not impact the timing of revenue recognition on franchise royalty revenues, restaurant
and merchandise sales or licensing and other revenue. The new guidance will require that we defer previously
recognized and future revenue related to franchise fees and area development fees. Franchise fees have historically been
recognized in full when a new restaurant opens, but under the new guidance, these fees will be amortized over the life of
the related franchise agreements and related extension periods, which generally range from 10-25 years. Area
development fees have historically been recognized in full upon execution of an area development agreement, but under
the new guidance, these fees will be recognized over the life of a future franchise agreement when each new restaurant
pursuant to an area development agreement opens or upon the expiration of such agreements. We expect to report these
revenues within the franchise fee revenue line item of our consolidated statements of operations. We expect to defer
revenues of $2.4 million related to franchise and area development agreements and recognize additional annual revenue
of approximately $224,000 on current franchise agreements. As we open new stores pursuant to area development
agreements, we will recognize additional revenue of approximately $1,000 per year per store.
Pursuant to the new guidance, the timing of revenue recognition related to gift card breakage will also be
impacted. Historically, we have recognized gift card breakage in full upon the sale of gift cards due to the Company’s
historical experience related to gift card sales, but under the new guidance, gift card breakage will be recognized ratably
as gift cards are redeemed. The Company will report revenue related to gift card breakage within the licensing and other
revenue line of its consolidated statements of operations. We do not expect to defer any previously recognized gift card
breakage due to materiality.
F-13
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The new revenue guidance will also impact the presentation of the Company’s consolidated statements of
operations as it relates to the Company’s system-wide Public Relations and Marketing Development Fund (the “NAF”).
Historically, the Company has netted revenues received pursuant to NAF billings with the related expenses, but under
the new guidance, revenues recognized related to the NAF will be presented gross as a separate line item within total
revenues, with the corresponding expense presented gross as a separate line item within operating expenses. The new
guidance will not impact the timing of revenue recognition as it relates to the NAF.
In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842), which supersedes the existing guidance
for lease accounting, Leases (Topic 840). ASU 2016‑02 requires lessees to recognize a lease liability and a right-of-use
asset for all leases. Lessor accounting remains largely unchanged. The amendments in this ASU are effective for fiscal
years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for
all entities. ASU 2016‑02 requires a modified retrospective approach for all leases existing at, or entered into after the
date of initial adoption, with an option to elect to use certain transition relief. The Company expects to adopt this new
standard as of the effective date and is currently evaluating the impact of this new standard on its consolidated financial
statements, but expects that it will have a material impact because of the Company’s significant leasing activity.
In May 2017, the FASB issued ASU 2017-05, Compensation – Stock Compensation (Topic 718), to provide
clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718 to a change
to the terms or conditions of a share-based payment award. The updated standard clarifies when an entity should account
for the effects of a modification. The amendments in this ASU are effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company does not believe that
adoption of the new standard will have a material impact on its consolidated financial statements.
(2) INVENTORIES
Inventories consisted approximately of the following at:
(in thousands)
Food and beverage
Other
Small wares and supplies
(3) INTANGIBLE ASSETS
$
December 31, 2017
324
58
251
633 $
January 1, 2017
711
$
58
730
1,499
$
The Company has intangible assets that consist of liquor licenses and lease interest assets. The liquor licenses are
indefinite-lived assets and are not subject to amortization. The lease interest assets are amortized to occupancy costs on a
straight-line basis over the remaining term of each respective lease.
A reconciliation of the Company’s intangible assets as of December 31, 2017 and January 1, 2017, respectively,
are presented in the table below:
(in thousands)
Lease interest assets, gross carrying amount
Lease interest assets, accumulated amortization
Lease interest assets, net carrying amount
Liquor licenses
Intangible assets, net
December 31, 2017
$
1,091
(286)
805
1,035
1,840
January 1, 2017
1,091
(249)
842
1,760
2,602
$
$
$
F-14
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides the projected future amortization of lease interest assets for the next five years, as
of December 31, 2017:
(in thousands)
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Thereafter
December 31, 2017
36
36
36
36
36
625
805
$
$
(4) PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS, NET
As of December 31, 2017, we had assets held for sale of $475,000 related to one of our stores’ liquor licenses.
During the year ended December 31, 2017, we entered into an agreement to sell the liquor license for a contract purchase
price of $575,000.
Property, equipment and leasehold improvements, net, consisted approximately of the following at:
$
$
December 31, 2017 January 1, 2017
50,851
35,609
1,553
181
(62,282)
25,912
26,234
19,884
764
187
(35,627)
11,442 $
$
$
December 31, 2017 January 1, 2017
1,448
$
810
330
454
79
16
3
3,140
1,000
668
1,165
242
26
—
17
3,118 $
$
(in thousands)
Land, buildings, and improvements
Furniture, fixtures, and equipment
Décor
Construction in progress
Accumulated depreciation and amortization
Property, equipment and leasehold improvements, net
(5) OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following at:
(in thousands)
Gift cards payable
Miscellaneous other current liabilities
Lease reserves, current
Sales tax payable
Accrued real estate tax
Deferred franchise fees
Accrued property and equipment purchases
Other current liabilities
F-15
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) OTHER LIABILITIES
Other liabilities consisted of the following at:
(in thousands)
Deferred rent
Miscellaneous other liabilities
Asset retirement obligations
Accrual for uncertain tax position
Long term lease reserve
Long term deferred compensation
Other liabilities
$
December 31, 2017 January 1, 2017
7,802
$
358
119
139
145
142
8,705
2,463
730
119
15
514
122
3,963
$
$
(7) LONG-TERM DEBT AND FINANCING LEASE OBLIGATIONS
Long-term debt
On December 2, 2016, we entered into two loan agreements (the “Loan Agreements”) with Venture Bank
(“Venture”) for a total initial principal amount of $10.0 million as well as a revolving line of credit (the “Line of Credit”)
for up to $1.0 million.
The first loan (the “Real Estate Loan”) was for a principal amount of $3.7 million and has a maturity date of
December 2, 2026. The Real Estate Loan is paid in monthly installments of principal and interest, with a balloon payment
at maturity. Interest is payable at a rate of 4.25% for the first five years and LIBOR plus 3.75% thereafter until maturity.
The loan may be prepaid, subject to prepayment premiums as outlined in the Loan Agreements.
The second loan (the “Term Loan”) was for a principal amount of $6.3 million and has a maturity date of
December 2, 2023. The Term Loan is paid in monthly installments of principal and interest with a balloon payment at
maturity. Interest is payable at a rate of LIBOR plus 3.25%. The Term Loan may be prepaid at any time without penalty.
The Line of Credit has a maturity date of December 2, 2019 provides for interest to be paid monthly on
outstanding balances with the principal amount due at maturity. Interest is payable at a rate of LIBOR plus 3.25% and the
Line of Credit may be prepaid at any time without penalty. There was no balance on the Line of Credit as of December
31, 2017 or January 1, 2017.
As of December 31, 2017 and January 1, 2017, the weighted average interest rate on our long-term debt was
4.27% and 4.00%, respectively. The notes pursuant to the Loan Agreements are secured by substantially all of our assets
and we are subject to various financial and non-financial covenants. As of December 31, 2017, we were in compliance
with all of our covenants. In the event of a default, Venture has the right to terminate its obligations under the Loan
Agreements and to accelerate the payment on any unpaid principal amounts then outstanding.
Long-term debt consisted of approximately the following as of the periods presented:
(in thousands)
Real Estate Loan
Term Loan
Less: deferred financing costs
Less: current portion of long-term debt
Long-term debt, less current portion
F-16
$
December 31, 2017 January 1, 2017
3,700
$
6,300
(234)
(917)
8,849
3,581
5,515
(224)
(940)
7,932
$
$
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum principal payments on long-term debt, as of December 31, 2017, were as follows:
(in thousands)
Fiscal Year
2018
2019
2020
2021
2022
Thereafter
Total
Financing Lease Obligation
$
$
940
981
1,023
1,069
1,116
3,967
9,096
On March 31, 1999, we completed a sale leaseback transaction for three properties which provides us with the
option to repurchase the properties at the end of the lease term. Because of our continuing involvement in the properties,
the transaction is being accounted for as a financing arrangement. In March 2017, we amended the lease agreement to
remove one of the properties from the arrangement. As of December 31, 2017, the weighted-average interest rate of our
financing lease obligations was approximately 7.78%.
Financing lease obligation consisted of approximately the following as of the periods presented:
(in thousands)
Financing lease obligation
Less: deferred financing costs
Less: current portion of financing lease obligation
Financing lease obligation, less current portion
$
1,576
December 31, 2017 January 1, 2017
2,757
$
(23)
(454)
2,280
(13)
(367)
1,196 $
$
Future minimum principal payments on financing lease obligations, as of December 31, 2017, were as follows:
(in thousands)
Fiscal Year
2018
2019
Total minimum payments
Less: amounts representing interest
Total financing lease payable
(8) COMMITMENTS AND CONTINGENCIES
Operating Leases
$
$
480
1,232
1,712
(136)
1,576
We lease our Company-owned restaurants and office facilities under non-cancelable operating leases with
remaining minimum terms ranging from one month to 14 years. Our lease agreements generally contain base rent
escalations that are either fixed pursuant to the lease agreement or based on the consumer price index. We are also
required to pay contingent rentals on certain of our leases in amounts between 5% and 8% of gross sales above a
minimum threshold.
F-17
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth certain information related to our rental activities as of the periods presented:
(in thousands)
Rent expense
Cash rental payments
Sublease income
Year Ended
December 31, 2017
January 1, 2017
$
$
2,950
3,024
(264)
4,282
3,737
(386)
Future minimum lease payments under non-cancelable operating leases, as of December 31, 2017, are as follows:
(in thousands)
Fiscal Year
2018
2019
2020
2021
2022
Thereafter
Total operating lease obligations
Sublease income
Total
Litigation
$
$
1,892
1,702
1,587
1,575
1,308
3,424
11,488
(1,230)
10,258
In the normal course of business, we are involved in a number of litigation matters that are incidental to the
operation of our business. These matters generally include, among other things, matters with regard to employment and
general business-related issues. We currently believe that the resolution of any of these pending matters will not have a
material adverse effect on our financial position or liquidity, but an adverse decision in one or more of these matters
could be material to our financial position or results of operations.
We filed a complaint on July 14, 2015, against a group of former franchisees in California seeking injunctive
relief and damages for: (1) Federal Trademark Infringement; (2) Federal Trademark Dilution; (3) Federal Unfair
Competition; (4) Federal Trade Dress Dilution; (5) Trademark Infringement under California Business and Professions
Code § 14200; (6) Trademark Dilution under California Business and Professions Code §14200; (7) Common Law
Trademark Infringement; (8) Unfair Competition under California Business and Professions Code § 17200; (9) False
Advertising; (10) Breach of Contract; (11) Breach of Implied Covenant of Good Faith and Fair Dealing; and (12)
Intentional Interference with Contract. The claims stem from the former franchisees’ breaches of their franchise
agreements, including the failure to pay franchise fees and their continued operation of five restaurants utilizing Famous
Dave’s intellectual property without authorization. After two defendants in the case, Kurt Schneiter and M Mart 1, filed
a demurrer to the Complaint, Famous Dave’s filed an Amended Complaint on October 9, 2015, reasserting the same
claims. The case is captioned Famous Dave’s of America, Inc., v. SR El Centro FD, Inc., et al., Case No. BC589329, and
is currently pending before the Honorable Elihu M. Berle in the Superior Court of Los Angeles. By court order, dated
June 6, 2016, Famous Dave’s successfully obtained a preliminary injunction, enjoining the former franchisee defendants
from using Famous Dave’s intellectual property, including its trademarks and restaurant system. The preliminary
injunction was the subject of an interlocutory appeal. The appeal was fully briefed and oral argument took place on
August 10, 2017. On October 23, 2017, the California Court of Appeal rendered its decision in the appeal in Famous
Dave’s favor, affirming and upholding in full the trial court’s preliminary injunction order. Famous Dave’s intends to
vigorously pursue all remaining claims in the trial court. Trial is set for November 5, 2018.
F-18
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On July 28, 2015, this group of former franchisees (the “Plaintiffs”) filed a complaint against Famous Dave’s in
the South Judicial District of the Superior Court of the County of Los Angeles. On March 10, 2016, Plaintiffs re-filed
this Complaint as a First Amended Cross-Complaint Famous Dave’s of America, Inc. v. SR El Centro, Inc., et al.,
Superior Court of the State of California, County of Los Angeles, Central Division, Case No. BC589329 alleging that
Famous Dave’s breached the Franchise Agreements for these restaurants by failing to provide certain marketing support
and access to customer contact data, vendors, internet reporting and support to Plaintiffs, and failing to provide
operations and preferred practices training to Plaintiffs’ designated representative. Plaintiffs further allege that such
conduct by Famous Dave’s is a breach of the covenant of good faith and fair dealing. Plaintiffs also allege that Famous
Dave’s aided and abetted John and Allan Gantes in breach of their fiduciary duty to Plaintiffs. Plaintiffs are seeking
compensatory damages in amount not less than $20 million, punitive damages, costs and attorneys’ fees. We have not
recognized a liability with respect to the Plaintiffs’ claim because we do not believe that it is probable that we will incur
a related material loss. Famous Dave’s intends to vigorously defend against these claims. Trial is set for November 5,
2018.
(9) STOCK-BASED COMPENSATION
Effective May 5, 2015, we adopted the 2015 Equity Plan (the “2015 Plan”), pursuant to which we may grant
stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock
units and other stock and cash awards to eligible participants. We also maintain an Amended and Restated 2005 Stock
Incentive Plan (the “2005 Plan”). The 2005 Plan prohibits the granting of options pursuant to the 2005 plan after
May 12, 2015, the tenth anniversary of the date the 2005 Plan was approved by the Company’s shareholders.
Nonetheless, the 2005 Plan will remain in effect until all outstanding incentives granted thereunder have either been
satisfied or terminated. As of December 31, 2017, there were no shares available for grant pursuant to the 2015 Plan.
Stock options granted to employees and directors generally vest over two to five years, in monthly or annual
installments, as outlined in each agreement. Options generally expire ten years from the date of grant. Compensation
expense equal to the grant date fair value of the options is recognized in general and administrative expense over the
applicable service period.
Stock options granted to certain non-employees either vest immediately or monthly over a period of two years.
Options generally expire ten years from the date of grant. Compensation expense is recognized in general and
administrative expense over the applicable service period, and is marked-to-market each period.
The incentive compensation of our Chief Executive Officer is tied to increases in our share price and calls for the
issuance of freely tradable shares of our common stock upon the achievement of certain milestones.
We utilize the Black-Scholes option pricing model when determining the compensation cost associated with stock
options issued using the following significant assumptions:
Stock price – Published trading market values of our common stock as of the date of grant.
•
Exercise price – The stated exercise price of the stock option.
•
Expected life – The simplified method as outlined in ASC 718.
•
Expected dividend – The rate of dividends that we expect to pay over the term of the stock option.
•
• Volatility – Our actual volatility over the most recent historical period equivalent to the expected life of
the option.
Risk-free interest rate – The daily United States Treasury yield curve rate.
•
F-19
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table outlines stock-based compensation expense, by award type, for the periods presented:
(in thousands)
Stock options
Shares of common stock
Restricted stock
Year Ended
December 31, 2017 January 1, 2017
311
$
—
28
339
218
85
10
313 $
$
$
The following is a roll-forward of our stock option activity for the periods presented:
Options outstanding at January 3, 2016
Granted
Exercised
Canceled, forfeited or expired
Options outstanding at January 1, 2017
Granted
Exercised
Canceled, forfeited or expired
Options outstanding at December 31, 2017
Options Exercisable at December 31, 2017
Number of
Options
(in thousands)
507
416
(6)
(231)
686
165
(3)
(309)
$
539
266 $
Weighted Average
Exercise Price
16.66
5.55
5.90
19.44
9.15
4.20
5.42
11.04
6.60
8.09
Weighted
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic Value
(in thousands)
—
—
4
—
1
—
5
—
598
187
5.3 $
5.7
6.6 $
4.2 $
The following table discloses the weighted-average values of significant assumptions that we made in valuing
option grants for the periods presented:
Year Ended
Weighted-average fair value of options granted during the period
Expected life (in years)
Expected dividend
Expected stock volatility
Risk-free interest rate
December 31, 2017
1.78
$
5.3
— $
$
43.47 %
2.0 %
January 1, 2017
$
1.97
5.2
—
39.98 %
1.2 %
As of December 31, 2017, the total compensation cost related to unvested stock option awards was approximately
$542,000, which is expected to be recognized over a period of approximately 2.58 years.
F-20
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) RETIREMENT SAVINGS PLANS
401(k) Plan
We have a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k) of the Internal
Revenue Code, which covers employees meeting certain eligibility requirements. The following table outlines certain
information about our 401(k) plan:
(dollars in thousands)
Employer contribution rate, percent of employee contributions
Employee contribution rate, maximum percentage of employee earnings
Employee contributions
Employer match
Discretionary contributions
Non-Qualified Deferred Compensation Plan
Year Ended
December 31, 2017
January 1, 2017
25.0 %
4.0 %
529
$
87 $
— $
25.0 %
4.0 %
338
54
—
$
$
$
We maintain a non-qualified deferred compensation plan, effective as of February 25, 2005 (the “DCP”) for
eligible participants, as defined in the DCP. The DCP allows participating employees to defer a portion of their
compensation (salary, bonus and commissions). The assets of the DCP are maintained in an unsecured account that has no
trust fund. In the event of bankruptcy, participants entitled to future payments under the DCP would have no greater rights
than that of an unsecured general creditor and the DCP confers no legal rights for interest or claim on any of our assets.
The benefits provided by the DCP are not, nor are they required to be, insured.
The following table outlines certain information about the DCP:
(dollars in thousands)
Employer contribution rate, percent of employee contributions
Employee contribution rate, maximum percentage of employee earnings
Declared interest rate
Employee contributions
Employer match and interest
Distributions
(11) DISCONTINUED OPERATIONS
Year Ended
December 31, 2017
January 1, 2017
25.0 %
4.0 %
6.0 %
41 $
7
$
43 $
25.0 %
4.0 %
6.0 %
64
35
368
$
$
$
On December 14, 2015, we entered into an agreement to sell seven Chicago-area restaurants (the “Chicago
Restaurants”) to Windy City Restaurant Holdings LLC and its affiliate. The transaction closed on March 1, 2016 and
resulted in our complete exit from the Chicago market.
F-21
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 1, 2017, we entered into agreements to sell eight restaurants in Maryland and Virginia (the “Mid-
Atlantic Restaurants”) to Commonwealth Blue Ribbon Restaurants LLC and Capital Blue Ribbon Restaurants LLC (the
“Mid-Atlantic Purchasers”). Pursuant to the first agreement (“Seven Restaurants Agreement”), the contract purchase price
was $2,350,000 and included a repairs and maintenance credit of $750,000, which must be exhausted within one year.
Also pursuant to the Seven Restaurants Agreement, we and the Mid-Atlantic Purchasers entered into a line of credit
agreement in the amount of $750,000 (the “LOC Agreement”) on which the Mid-Atlantic Purchasers can draw funds to
pay for necessary repairs and maintenance work. The LOC Agreement has a four year term with interest payable at a rate
of 4.25% per annum.
Pursuant to the second agreement (the “Frederick Agreement”) to effect the sale of our Frederick, Maryland
(“Frederick”) restaurant to Capital Blue Ribbon Restaurants, LLC, the contract purchase price for Frederick shall be an
amount equal to (i) 50% of the rent, fees, charges, taxes and other amounts payable to the landlord or another third party
pursuant to the lease agreement, plus (ii) 50% of that portion of Frederick’s EBITDA (as defined in the Frederick APA)
attributable to Frederick that exceeds $25,000 in any 12-month period and $37,500 in any 18-month period; however, the
Company has guaranteed the 12-month and 18-month EBITDA performance of Frederick. We expect to recognize a
liability and corresponding expense related to this guarantee based on the amount that we would owe to the Mid-Atlantic
Purchasers in the event that the restaurant was closed. As of December 31, 2017, we had reserved $21,000 related to this
guarantee.
The Mid-Atlantic Purchasers also purchased the inventory and petty cash on hand of the Mid-Atlantic Restaurants
as of the closing date. The transaction resulted in our complete exit from the Mid-Atlantic market.
The following table provides certain information from our consolidated statements of operations related to the
Chicago Restaurants and the Mid-Atlantic Restaurants:
$
Year Ended
December 31, 2017 January 1, 2017
24,920
$
(22,662)
(222)
(819)
1,217
1,170
2,387
(713)
1,674
18,831
(16,998)
(149)
(611)
1,073
(3,419)
(2,346)
889
(1,457)
$
$
(in thousands)
Restaurant sales, net
Cost of sales
General and administrative expenses
Depreciation and amortization
Operating income
Gain (loss) on disposal attributable to discontinued operations
Income (loss) attributable to discontinued operations, before tax
Income (loss) attributable to discontinued operations, tax effect
Income (loss) attributable to discontinued operations, net of tax
F-22
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides certain information from our consolidated balance sheets related to discontinued
operations:
(in thousands)
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Other assets
Property, equipment and leasehold improvements, net
Total assets
Accrued compensation and benefits (current)
Other current liabilities
Other liabilities (non-current)
Total liabilities
(12) INCOME TAXES
December 31, 2017
$
— $
—
—
—
—
—
— $
January 1, 2017
176
399
60
635
52
6,663
7,350
—
—
—
—
$
142
139
2,371
2,652
$
$
For financial reporting purposes, loss before income taxes consists of the following components for the periods
presented:
(in thousands)
United States
Foreign
Total
Year Ended
December 31, 2017
(7,807)
$
283
(7,524)
$
January 1, 2017
(6,699)
322
(6,377)
$
$
The following table summarizes the income tax (expense) benefit for the periods presented:
(in thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Year Ended
December 31, 2017 January 1, 2017
$
$
(418)
—
(69)
(487)
1,228
117
1,345
1,178
(85)
(99)
994
889
389
1,278
2,272
Total income tax benefit
$
858 $
F-23
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For financial reporting purposes, total income tax benefit (expense) includes the following components for the
periods presented:
(in thousands)
Continuing operations
Discontinued operations
Total income tax benefit
Year Ended
December 31, 2017 January 1, 2017
2,272
$
(713)
1,559
858
889
1,747
$
$
$
The impact of uncertain tax positions taken or expected to be taken on income tax returns must be recognized in
the financial statements at the largest amount that is more likely than not to be sustained upon audit by the relevant
taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more
likely than not of being sustained.
The following is a reconciliation of the beginning and ending amounts of gross unrecognized tax benefit for the
periods presented:
(in thousands)
Balance at January 3, 2016
Increases attributable to tax positions taken during prior periods
Audit settlements
Decreases due to lapses of statutes of limitations
Balance at January 1, 2017
Audit settlements
Decreases due to lapses of statutes of limitations
Balance at December 31, 2017
47
142
(41)
(33)
115
(89)
(13)
13
$
We recognized interest and penalties of approximately ($22,000) and $20,000, respectively during the years
ended December 31, 2017 and January 1, 2017. Substantially all of our unrecognized tax benefits, if recognized, would
impact our effective tax rate. As of December 31, 2017 and January 1, 2017, we had recorded a liability of
approximately $2,000 and $25,000, respectively related to accrued interest and penalties.
We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The preparation of
these income tax returns requires us to interpret and apply relevant federal and state income tax laws. It is common for
federal and state taxing authorities to periodically examine filed tax returns. During these examinations, it is possible for
taxing authorities to interpret facts or tax law differently than we do. As a result, we may be required to adjust tax
liabilities affecting our effective tax rate. Tax years 2014 and forward remain subject to federal examination. Tax years
2013 and forward remain subject to state examination. It is possible that the liability associated with the unrecognized
tax benefits will increase or decrease within the next 12 months. The expiration of statutes of limitations would decrease
our unrecognized tax benefits by approximately $14,000.
We have significant net deferred tax assets (“DTA”), which results from the net temporary timing differences
between amounts recorded within our consolidated financial statements in accordance with GAAP and such amounts
measured in accordance with the laws of various taxing jurisdictions and as reported in our tax returns. A DTA generally
represents future tax benefits to be received when temporary differences previously reported in our consolidated
financial statements become deductible for income tax purposes, when net operating loss carry forwards are applied
against future taxable income, or when tax credit carry forwards are utilized on our tax returns. As of December 31,
2017, the majority of our DTA resulted from net operating loss and tax credit carryforwards, which will not be realized
unless we generate taxable income in the future. We evaluate our net deferred tax asset on a quarterly basis to determine
whether current facts and circumstances indicate that the DTA may not be fully realizable and we provide for valuation
allowances on those portions of the DTA that we don’t expect to realize.
F-24
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant judgment is required in determining the realizability of our DTA. The assessment of whether
valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and
cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with
loss carry forwards not expiring unused and tax planning alternatives. In analyzing the need for valuation allowances, we
first considered our history of cumulative operating results for income tax purposes over the past three years in each of
the tax jurisdictions in which we operate, our financial performance in recent quarters, statutory carry forward periods
and tax planning alternatives. Finally, we considered both our near and long-term financial outlook. After considering all
available evidence both positive and negative, we concluded that recognition of valuation allowances for substantially all
of our DTA was not required.
The following is a summary of the components of our net deferred tax assets as of the periods presented:
(in thousands)
Deferred tax asset:
Deferred rent
Federal net operating loss carry-forwards
State net operating loss carry-forwards
Intangible property basis difference
Financing lease obligation
Tax credit carryover
Accrued expenses
Stock-based compensation
Deferred revenue
Lease reserve
Accrued and deferred compensation
Contribution carryover
Inventories
Total deferred tax asset
Deferred tax liability:
Property and equipment basis difference
Inventories
Prepaid expenses
Intangible property basis difference
Total deferred tax liability
Net deferred tax assets
Valuation allowance
Deferred tax asset
December 31, 2017
January 1, 2017
$
$
$
$
$
$
567
2,486
3,573
138
393
1,761
74
141
257
449
38
36
5
9,918 $
(1,060)
(60)
(139)
—
(1,259)
8,659
(2,836)
5,823
$
$
$
3,184
—
2,325
—
1,028
910
585
472
452
222
67
18
9
9,272
(1,671)
(295)
(269)
(56)
(2,291)
6,981
(2,348)
4,633
During the year ended December 31, 2017, the net change in our DTA valuation allowance was approximately
$488,000.
As of December 31, 2017, we had cumulative state net operating loss carry-forwards for tax reporting purposes
of approximately $53.9 million and federal net operating loss carry-forwards for tax reporting purposes of $11.8 million
which, if not used, will begin to expire in fiscal 2018 and 2037, respectively.
F-25
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation from our statutory tax rate to our effective tax rate for the periods presented:
Federal statutory tax rate
State taxes, net of valuation allowance and federal benefit
Federal rate change and impact on state benefit
Foreign taxes
Tax effect of permanent differences
Tax effect of general business credits
Tax effect of foreign tax credit
Uncertain tax positions
Stock-based compensation
Other
Effective tax rate
Year Ended
December 31, 2017 January 1, 2017
34.0 %
34.0 %
2.4
(24.1)
(0.9)
(2.0)
3.7
0.9
1.7
(4.4)
0.2
11.5 %
4.0
—
(1.6)
(4.5)
5.0
1.6
(2.1)
—
(0.8)
35.6 %
The substantial reduction in our future effective tax rate was primarily a result of recently signed into law Tax
Cuts and Jobs Act (the “New Tax Law”), which will reduce our statutory tax rate from 34.0% to 21.0%. This decrease in
future tax rate resulted in our recognition of approximately $1.8 million in deferred tax expense due to the revaluation of
our DTA. Staff Accounting Bulletin 118 outlines the approach that companies may take if essential information related
to the New Tax Law is not available in reasonable detail by the time the financial statements are filed. We believe that
we have reflected all of the material impacts of the New Tax Law in our consolidated financial statements as of
December 31, 2017 and that there are no open items; however, our estimates will be finalized throughout fiscal 2018 as
we complete our income tax returns for the fiscal year ended December 31, 2017.
(13) ASSET IMPAIRMENT, ESTIMATED LEASE TERMINATION AND OTHER CLOSING COSTS
Beginning in fiscal 2016, we initiated a restaurant optimization and refranchising initiative whereby we
reviewed our restaurant portfolio for locations that were slow to respond to several initiatives to improve operating
performance. We continued this initiative into fiscal 2017 and identified certain restaurants that were to be closed
significantly before the end of the previously estimated useful lives. As a result of the reassessment of the useful lives of
these restaurants, we recognized accelerated depreciation expense of approximately $870,000. We closed 13 restaurants
during the year ended December 31, 2017 in accordance with this restaurant optimization and refranchising initiative.
The following is a summary of asset impairment, estimated lease termination and other closing costs for the
periods presented:
(dollars in thousands)
Restaurant Optimization
Asset impairments, net
Lease termination charges and related costs
Restaurant closure expenses
Software
Asset impairment, estimated lease termination and other closing costs
Year Ended
December 31, 2017
January 1, 2017
$
$
3,154
3,403
259
—
6,816
$
$
4,426
—
206
156
4,788
F-26
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Below reflects the change in our reserve for lease termination costs for the periods presented:
(in thousands)
Year Ended December 31, 2017
Reserve for lease termination costs
Year Ended January 1, 2017
Reserve for lease termination costs
Deductions
Credits to
Costs and
Charged to Expenses
Additions
Balance at
Beginning of Costs and and Other
Period
Expenses
Accounts
Balance at
End of
Period
$
594
3,150
(1,945) $ 1,799
$
609
89
(104) $
594
These amounts were recorded in other current liabilities or other liabilities depending on when we expected the
amounts to be paid.
(14) FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement framework
establishes a three-tier hierarchy. The three levels, in order of priority, are as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement
date. Level 1 measurements are determined by observable inputs which include data sources and
market prices available and visible outside of the entity.
Level 2: Observable inputs other than quoted prices included within Level 1 for the asset or liability, either
directly or indirectly.
Level 3: Inputs that are used to estimate the fair value of the asset or liability. Level 3 measurements are
determined by unobservable inputs, which include data and analyses developed within the entity
to assess the fair value.
For assets and liabilities falling within Level 3 of the fair value hierarchy, a change in the input assumptions
used could result in a change in the estimated fair value of the asset or liability. Transfers in and out of levels will be
based on our judgment of the availability of unadjusted quoted prices in active markets, other observable inputs, and
non-observable inputs.
The carrying amounts of cash and cash equivalents reported in the consolidated balance sheets approximates
fair value based on current interest rates and short-term maturities. The carrying amount of accounts receivable
approximates fair value due to the short-term nature of accounts receivable. We believe that the carrying amount of long-
term debt approximates fair value due to the variable interest rates charged on long-term debt or as a result of the
proximity of the refinancing to the end of the fiscal year.
F-27
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table (in thousands) summarizes the assets held for sale and property and equipment, net,
measured at fair value in our consolidated balance sheet as of December 31, 2017 and January 1, 2017:
(in thousands)
Balance at December 31, 2017
Assets
Property and Equipment, net
Balance at January 1, 2017
Assets
Assets Held for Sale
Property and Equipment, net
Level 1
Level 2
Level 3
Total
$
— $
— $
828
$
828
$
$
— $
— $
$
1
1
— $ 1,742 $ 1,742
— $
Property and Equipment, net, is recorded at fair upon broker’s estimate of value or estimated discounted future
cash flows (Level 3). These assets have been adjusted to net realizable value based upon the decision to dispose of the
property. The Company completed its sale of assets held for sale recorded in Level 3 during fiscal 2016. The fair value
of amounts disclosed as property and equipment, net, reported in the table above within Level 3 changed during fiscal
2016 as a result of the Company’s impairment analysis surrounding certain of its property and equipment assets.
(15) VARIABLE INTEREST ENTITIES
A variable interest holder is considered to be the primary beneficiary of a variable interest entity (“VIE”) if it
has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has
the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to
the VIE. Once an entity is determined to be a VIE, the primary beneficiary is required to consolidate the entity. We have
an installment agreement with one of our franchisees as the result of refranchising our Lincoln, Nebraska restaurant. This
franchisee is a VIE; however, the owners of the franchise operations are the primary beneficiaries of the entities;
therefore, the franchise operations are not required to be consolidated in our consolidated financial statements.
On August 11, 2015, we consummated the sale of our Greenwood, Indiana restaurant. In conjunction with that
agreement, we entered into a lease assignment agreement with the purchaser and landlord, releasing us of our obligations
except in the event of default by the purchasers. As of December 31, 2017, the amount of the future lease payments for
which we would be liable in the event of a default are approximately $106,000. An accrual related to a future obligation
was not considered necessary as of December 31, 2017. This franchisee is a VIE; however, the owners of the franchise
operations are the primary beneficiaries of the entities; therefore, the franchise operations are not required to be
consolidated in our consolidated financial statements.
On March 1, 2016, we consummated the sale of our Chicago, Illinois-area restaurants. In conjunction with that
agreement, we entered into lease assignment agreements with the respective purchasers and two of the landlords,
releasing us from our obligations except in the event of default by the purchasers. In 2017, the franchisee closed the
restaurants and ceased to pay the lease payments. As of December 31, 2017, the remaining future minimum lease
payments for which we are responsible totaled $1.5 million and we had recorded lease reserves totaling $1.0 million. See
Note 13 “Asset Impairment, Estimated Lease Termination and Other Closing Costs.” This franchisee is a VIE; however,
the owners of the franchise operations are the primary beneficiaries of the entities; therefore, the franchise operations are
not required to be consolidated in our consolidated financial statements.
On November 1, 2017, we sold our Frederick, Maryland restaurant. Pursuant to the terms of the Frederick
Agreement, we remained the primary obligor of the lease. As of December 31, 2017, the amount of future lease
payments for which we would be liable in the event of a default are approximately $756,000. An accrual related to the
future lease obligation was not considered necessary as of December 31, 2017. See Note 11 “Discontinued Operations.”
F-28
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) RELATED PARTY TRANSACTIONS
Michael Lister served as our Chief Executive Officer and Chief Operating Officer from October 2016 to
November 2017. Doug Renegar served as our Senior Vice President of Franchise Operations from October 2016 to
November 2017. Messrs. Lister and Renegar manage Famous Five Dining, a corporation that owns four franchised
Famous Dave’s restaurants.
Anand D. Gala is a franchisee and currently serves as one of our directors. Mr. Gala is the Founder, President
and Chief Executive Officer of Gala Holdings International, a diversified holding company that conducts consulting,
restaurant development and management operations. Mr. Gala’s brother owns Altametrics, LLC, a software company to
which we paid approximately $127,000 during the year ended January 1, 2017. In December 2017, due to significant
negative cash flow and risk of restaurant closure, Mr. Gala requested and we approved a royalty abatement on two of his
restaurants for three years, beginning in fiscal 2018. These restaurants will have an effective royalty rate of 2.5% for
fiscal 2018, 3.5% for fiscal 2019, 4.0% for fiscal 2020 and return to 5.0% thereafter.
On November 10, 2017, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) by and
between us and PW Partners, LLC (“PW Partners”). Pursuant to the Purchase Agreement, we sold to PW Partners on
behalf of its designated client, FS Special Opportunities I, L.P. (the “Purchaser’s Designee”), 418,169 shares of our
common stock (the “Private Placement”). The Purchase Agreement provides further that PW Partners has assigned its
rights under the Purchase Agreement to the Purchaser’s Designee; provided, however, that PW Partners retains its
obligations under the Purchase Agreement.
On January 29, 2018, we entered into a Standby Purchase Agreement (the “Standby Purchase Agreement”) with
PW Partners, in connection with the previously announced proposed non-transferable rights offering (the “Rights
Offering”). The Standby Purchase Agreement provides that PW Partners will (a) exercise its non-transferable rights to
subscribe for and purchase its pro rata amount of newly-issued shares of our common stock, at a price per share, which
our board of directors has set at $3.50 per share (the “Subscription Price”), and (b) purchase in a private placement
separate from the Rights Offering, at the Subscription Price and subject to the terms and conditions of the Standby
Purchase Agreement, any shares of our common stock that are not subscribed for in the Rights Offering pursuant to our
stockholders’ exercise of their rights. Notwithstanding the foregoing, the Standby Purchase Agreement also provides that
PW Partners will not purchase shares of our common stock in an amount that would result in the Standby Purchaser
beneficially owning 20% or more of the outstanding common stock after such purchase.
PW Partners is affiliated with PW Capital Management, LLC (“PW Capital”). Pursuant to the Purchase
Agreement, Jeffery Crivello, the Chief Financial Officer of PW Capital, became our Chief Executive Officer, effective
November 14, 2017.
On December 8, 2017, as a part of settlement of a legal dispute and distressed situation, we approved the
transfer of seven franchise restaurants in Utah and Washington (the “Transferred Restaurants”) to an entity (the
“Acquirer”) controlled by Charles Davidson, who is the beneficial owner of 19.2% of the Company as a result of his
positions as the Co-founder, Chairman and Chief Investment Officer of Wexford Capital LP.
The previous franchisee of these seven restaurants experienced financial difficulties for more than one year and,
at the time of the sale to the Acquirer, was more than one year in arrears with royalty, miscellaneous and national
advertising fund payments that totaled approximately $1.4 million. The previous franchisee engaged a broker who
marketed the franchise for several months, which resulted in two potential buyers, one of whom dropped out of the
process. These stores were severely neglected, and this was determined to be the best path to economic recovery.
F-29
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with settling the dispute with the previous franchisee, the Company collected $350,000 in cash
from the previous franchisee. Pursuant to the settlement, we wrote off accounts receivable of approximately $1.0
million.
As part of the transaction, we agreed to certain concessions in order to facilitate the transfer of the Transferred
Restaurants to the Acquirer and to incentivize the Acquirer to invest the funds necessary to improve the operations of the
Transferred Restaurants and to provide innovation to the Famous Dave’s concept. The economic concessions consisted
of the following:
• A $500,000 repairs and maintenance credit (the “R&M Credit”), payable through a 50% reduction in
•
required royalty payments until the credit is exhausted;
Royalty relief, in addition to the R&M Credit, of 2.0% in months one through 12 for an effective
royalty rate of 3.0% and 1.0% in months 13 through 24 for an effective royalty rate of 4.0%, and a full
royalty of 5.0% to be paid thereafter (“Royalty Relief”);
• Development rights in the states of Utah and Washington in exchange for a commitment to open three
restaurants before May 1, 2027; and,
• Waiver of initial and future franchise fees and area development fees.
In addition to these economic concessions, we modified our standard franchise agreement to eliminate or limit
certain obligations of Acquirer as a franchisee, including:
• Waiver of reacquisition fees for two additional ten-year terms;
• Acquirer will spend 1.0% of net sales on local marketing, as opposed to the standard 1.5%.
The following table outlines amounts received from related parties during the years ended December 31, 2017
and January 1, 2017:
(in thousands)
Revenues and NAF contributions - Anand Gala
Revenues and NAF contributions - Michael Lister and Doug Renegar
Revenues and NAF contributions - Charles Davidson
Year Ended
December 31, 2017
January 1, 2017
$
$
1,935
493
54
2,135
500
—
The following table outlines accounts receivable, net from related parties as of December 31, 2017 and January
1, 2017:
(in thousands)
Accounts receivable, net - Anand Gala
Accounts receivable, net - Michael Lister and Doug Renegar
Accounts receivable, net - Charles Davidson
December 31, 2017
301
$
48
32
$
January 1, 2017
370
50
—
(17) SUBSEQUENT EVENTS
The Company evaluated for the occurrence of subsequent events through the issuance date of the Company’s
financial statements. No other recognized or non-recognized subsequent events occurred that require recognition or
disclosure in the consolidated financial statements except as noted below.
On January 30, 2018, we entered into a purchase and sale agreement to sell a vacant restaurant site in Glen
Allen, Virginia for $765,000. The restaurant site was previously written down to net realizable value during the year
ended December 31, 2017.
F-30
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Also on January 30, 2018, we completed the sale of the liquor license referenced in Note 4 “Property,
Equipment and Leasehold Improvements.
F-31
FAMOUS DAVE’S OF AMERICA, INC. AND SUBSIDIARIES
Financial Statement Schedule
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Additions Deductions
Credits to
Costs and
(in thousands)
Year ended January 1, 2017:
Allowance for doubtful accounts
Reserve for lease termination costs
Reserve for corporate severance
Year ended December 31, 2017:
Allowance for doubtful accounts
Reserve for lease termination costs
Reserve for corporate severance
Balance at Charged to Expenses Balance at
Beginning of Costs and and Other
Expenses Accounts
End of
Period
Period
$
246
609
20
$
87
89
170
(62) $
(104)
(190)
271
594
—
271 $ 1,599 $ (1,278) $
594
3,150
(1,945)
(441)
—
796
592
1,799
355
$
$
F-32
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: March 5, 2018
FAMOUS DAVE’S OF AMERICA, INC.
(“Registrant”)
By: /s/ Jeffery Crivello
Jeffery Crivello
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Dexter A. Newman
Dexter A. Newman
Chief Financial Officer and Secretary
(Principal Financial Officer and Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 5,
2018 by the following persons on behalf of the registrant, in the capacities indicated.
Signature
/s/ Jeffery Crivello
Jeffery Crivello
/s/ Anand D. Gala
Anand D. Gala
/s/ Eric S. Hirschhorn
Eric S. Hirschhorn
/s/ Joseph M. Jacobs
Joseph M. Jacobs
/s/ Charles W. Mooty
Charles W. Mooty
/s/ Richard A. Shapiro
Richard A. Shapiro
/s/ Bryan L. Wolff
Bryan L. Wolff
Title
Director
Director
Director
Director
Director
Director
Director
Exhibit No.
EXHIBITS
Description
3.1 Restated Articles of Incorporation, dated December 18, 2017, incorporated by reference to Exhibit 3.1 to
the Registration Statement on Form S 1 filed on December 29, 2017.
3.2 Second Amended and Restated Bylaws, as amended by Amendment Nos. 1 and 2, incorporated by
reference to Exhibit 3.3 to Form 10-K, filed March 18, 2016.
10.1 Trademark License Agreement between Famous Dave’s of America, Inc. and Grand Pines Resorts, Inc.,
incorporated by reference to Exhibit 10.11 to the Registration Statement on Form SB-2 (File
No. 333-10675) filed on August 23, 1996
10.2 Second Amended and Restated Non-Qualified Deferred Compensation Plan, dated January 1, 2008,
incorporated by reference to Exhibit 10.16 to Form 10-K filed March 14, 2008 †
10.3 Second Amended and Restated Credit Agreement by and between Wells Fargo Bank, National Association
and Famous Dave’s of America, Inc., dated March 4, 2010, incorporated by reference to Exhibit 10.2 to
Form 8-K filed March 9, 2010
10.4 Letter amendment dated February 1, 2011, to the Second Amendment to the Amended and Restated Credit
Agreement by and between Wells Fargo Bank, National Association and Famous Dave’s of America, Inc.,
incorporated by reference to Exhibit 10.11 to Form 10-K filed March 18, 2011
10.5 First Amendment to the Second Amended and Restated Credit Agreement by and between Wells Fargo
Bank, National Association and Famous Dave’s of America, Inc., dated July 5, 2011, incorporated by
reference to Exhibit 10.1 to Form 8-K filed July 5, 2011
10.6 Second Amendment to the Second Amended and Restated Credit Agreement by and between Wells Fargo
Bank, National Association and Famous Dave’s of America, Inc., dated November 1, 2012, incorporated by
reference to Exhibit 10.1 to Form 10-Q filed November 2, 2012
10.7 Third Amendment to the Second Amended and Restated Credit Agreement by and between Wells Fargo
Bank, National Association and Famous Dave’s of America, Inc., dated March 14, 2013, incorporated by
reference to Exhibit 10.11 to Form 10-K filed March 15, 2013
10.8 Fourth Amendment to the Second and Amended Restated Credit Agreement, incorporated by reference to
Exhibit 10.1 to Form 10-Q filed May 9, 2014
10.9 Third Amended and Restated Credit Agreement dated May 8, 2015 by and among Wells Fargo Bank,
National Association, Famous Dave’s of America, Inc. and certain subsidiaries of Famous Dave’s of
America, Inc., incorporated by reference to Exhibit 10.2 to Form 10-Q filed May 8, 2015
10.10 Forbearance Agreement dated as of November 5, 2015 by and among Famous Dave’s of America, Inc.,
D&D of Minnesota, Inc., Lake & Hennepin BBQ and Blues, Inc., Famous Dave’s Ribs, Inc., Famous
Dave’s Ribs-U, Inc., and Famous Dave’s Ribs of Maryland, Inc., each as borrowers, and Wells Fargo Bank,
National Association, as administrative agent and lender, incorporated by reference to Exhibit 10.4 to
Form 10-Q filed November 6, 2015
10.11 First Amendment to Forbearance Agreement dated as of December 2, 2015 by and among Famous Dave’s
of America, Inc., D&D of Minnesota, Inc., Lake & Hennepin BBQ and Blues, Inc., Famous Dave’s
Ribs, Inc., Famous Dave’s Ribs-U, Inc., and Famous Dave’s Ribs of Maryland, Inc., each as borrowers, and
Wells Fargo Bank, National Association, as administrative agent and lender, incorporated by reference to
Exhibit 10.1 to Form 8-K filed December 4, 2015
Exhibit No.
Description
10.12 First Amendment to Third Amended and Restated Credit Agreement dated as of December 11, 2015 by and
among Famous Dave’s of America, Inc., D&D of Minnesota, Inc., Lake & Hennepin BBQ and Blues, Inc.,
Famous Dave’s RIBS, Inc., Famous Dave’s RIBS-U, Inc., and Famous Dave’s Ribs of Maryland, Inc., each
as borrowers, and Wells Fargo Bank, National Association, as administrative agent and lender, incorporated
by reference to Exhibit 10.1 to Form 8-K filed December 11, 2015
10.13 Forbearance Agreement dated May 16, 2016 by and among Famous Dave’s of America, Inc., D&D of
Minnesota, Inc., Lake & Hennepin BBQ and Blues, Inc., Famous Dave’s Ribs, Inc., Famous Dave’s Ribs-
U, Inc., and Famous Dave’s Ribs of Maryland, Inc., each as borrowers, and Wells Fargo Bank, National
Association, as administrative agent and lender, incorporated by reference to Exhibit 10.1 to Form 10-Q
filed May 18, 2016
10.14 Waiver and Second Amendment to Third Amended and Restated Credit Agreement dated as of June 10,
2016 by and among Famous Dave’s of America, Inc., D&D of Minnesota, Inc., Lake & Hennepin BBQ and
Blues, Inc., Famous Dave’s RIBS, Inc., Famous Dave’s RIBS-U, Inc., and Famous Dave’s Ribs of
Maryland, Inc., each as borrowers, and Wells Fargo Bank, National Association, as administrative agent
and lender, incorporated by reference to Exhibit 10.1 to the Form 8-K filed June 10, 2016
10.15 Forbearance Agreement dated November 9, 2016 by and among Famous Dave’s of America, Inc., D&D of
Minnesota, Inc., Lake & Hennepin BBQ and Blues, Inc., Famous Dave’s Ribs, Inc., Famous Dave’s Ribs-
U, Inc., and Famous Dave’s Ribs of Maryland, Inc., each as borrowers, and Wells Fargo Bank, National
Association, as administrative agent and lender, incorporated by reference to Exhibit 10.1 to form 10-Q
filed November 16, 2016
10.16 Amended and Restated 2005 Stock Incentive Plan (as amended through January 21, 2013) incorporated by
reference to Exhibit 10.6 to Form 10-K filed March 15, 2013 †
10.17 Form of Director Restricted Stock Agreement Granted Under the Amended and Restated 2005 Stock
Incentive Plan, incorporated by reference to Exhibit 10.4 to Form 10-K filed March 13, 2015 †
10.18 Famous Dave’s of America, Inc. 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to
Form 10-Q filed May 8, 2015 †
10.19 Amendment No. 1 to 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to Form 8-K
filed July 31, 2015 †
10.20 Amendment No. 2 to 2015 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to Form 10-Q
filed November 6, 2015 †
10.21 Form 2013 – 2015 Performance Share Agreement, incorporated by reference to Exhibit 10.1 to Form 8-K
filed January 8, 2013 †
Schedule of Grants under Form of 2013 – 2015 Performance Share Agreement, incorporated by reference to
Exhibit 10.2 to Form 8-K filed January 8, 2013 †
10.22 Employment Letter dated May 19, 2014 between Famous Dave’s of America, Inc. and Richard A.
Pawlowski, incorporated by reference to Exhibit 10.22 to Form 10-K filed March 13, 2015 †
10.23 Stock Option Agreement dated June 2, 2014 between Famous Dave’s of America, Inc. and Richard A.
Pawlowski, incorporated by reference to Exhibit 10.23 to Form 10-K filed March 13, 2015 †
Exhibit No.
Description
10.24 Employment Agreement entered into on August 3, 2015 between Famous Dave’s of America, Inc. and
Abelardo Ruiz, incorporated by reference to Exhibit 10.l to Form 8-K filed August 7, 2015 †
10.25 Severance Agreement dated August 17, 2015 between Famous Dave’s of America, Inc. and Richard A.
Pawlowski, incorporated by reference to Exhibit 10.l to Form 8-K filed August 21, 2015 †
10.26 Stock Option Agreement dated August 31, 2015 between Famous Dave’s of America, Inc. and Abelardo
Ruiz, incorporated by reference to Exhibit 10.29 to Form 10-K filed March 18, 2016 †
10.27 Form of Indemnification Agreement between Famous Dave’s of America, Inc. and each of its directors and
officers, incorporated by reference to Exhibit 10.2 to Form 10-Q filed November 6, 2015
10.28 Schedule of directors and officers subject to Indemnification Agreements in the form of Exhibit 10.30,
incorporated by reference to Exhibit 10.3 to Form 10-Q filed November 6, 2015
10.29 Employment Agreement dated effective January 1, 2016 between Famous Dave’s of America, Inc. and
Adam J. Wright, incorporated by reference to Exhibit 10.1 to Form 8-K filed January 4, 2016 †
10.30 Stock Option Agreement dated January 1, 2016 between Famous Dave’s of America, Inc. and Adam J.
Wright, incorporated by reference to Exhibit 10.33 to Form 10-K filed March 18, 2016 †
10.31 Stock Option Agreement dated February 12, 2016 between Famous Dave’s of America, Inc. and Alfredo V.
Martel, incorporated by reference to Exhibit 10.34 to Form 10-K filed March 18, 2016 †
10.32 Employment Agreement dated effective April 11, 2016 between Famous Dave’s of America, Inc. and
Dexter Newman, incorporated by reference to Exhibit 10.1 to Form 8-K filed April 13, 2016 †
10.33 Stock Option Agreement dated April 11, 2016 between Famous Dave’s of America, Inc. and Dexter
Newman, incorporated by reference to Exhibit 10.2 to Form 8-K filed April 13, 2016 †
10.34 Employment Agreement dated October 11, 2016 between Famous Dave’s of America, Inc. and Michael
Lister, incorporated by reference to Exhibit 10.1 to Form 8-K filed October 17, 2016 †
10.35 Employment Agreement dated October 11, 2016 between Famous Dave’s of America and Doug Renegar,
incorporated by reference to Exhibit 10.2 to form 10-Q filed November 16, 2016 †
10.36 Loan Agreement dated December 2, 2016 among Famous Dave’s of America, Inc., Minwood Partners, Inc.
and Venture Bank, incorporated by reference to Exhibit 10.1 to form 8-K filed December 8, 2016
10.37 Promissory Note (Note 1) dated December 2, 2016 in principal amount of $3,700,000 from Famous Dave’s
of America, Inc. and Minwood Partners, Inc. to Venture Bank, incorporated by reference to Exhibit 10.2 to
form 8-K filed December 8, 2016
10.38 Mortgage and Security Agreement and Fixture Financing Statement dated December 2, 2016 by Famous
Dave’s of America, Inc. and Minwood Partners, Inc. to Venture Bank (Loan 1), incorporated by reference
to Exhibit 10.3 to form 8-K filed December 8, 2016
10.39 Loan Agreement dated December 2, 2016 among Famous Dave’s of America, Inc., D&D of
Minnesota, Inc., Famous Dave’s Ribs of Maryland, Inc., Famous Dave’s Ribs, Inc., Famous Dave’s Ribs-
U, Inc., Lake & Hennepin BBQ & Blues, Inc. and Venture Bank, incorporated by reference to Exhibit 10.4
to form 8-K filed December 8, 2016
Exhibit No.
Description
10.40 Promissory Note (Note 2) dated December 2, 2016 in principal amount of $6,300,000 from Famous Dave’s
of America, Inc., D&D of Minnesota, Inc., Famous Dave’s Ribs of Maryland, Inc., Famous Dave’s
Ribs, Inc., Famous Dave’s Ribs-U, Inc. and Lake & Hennepin BBQ & Blues, Inc. to Venture Bank,
incorporated by reference to Exhibit 10.5 to form 8-K filed December 8, 2016
10.41 Promissory Note (Note 3) dated December 2, 2016 in principal amount of $1,000,000 from Famous Dave’s
of America, Inc., D&D of Minnesota, Inc., Famous Dave’s Ribs of Maryland, Inc., Famous Dave’s
Ribs, Inc., Famous Dave’s Ribs-U, Inc. and Lake & Hennepin BBQ & Blues, Inc. to Venture Bank,
incorporated by reference to Exhibit 10.6 to form 8-K filed December 8, 2016
10.42 Mortgage and Security Agreement and Fixture Financing Statement dated December 2, 2016 by Famous
Dave’s of America, Inc. and Minwood Partners, Inc. to Venture Bank (Loan 2), incorporated by reference
to Exhibit 10.7 to form 8-K filed December 8, 2016
10.43 Security Agreement dated December 2, 2016 by Famous Dave’s of America, Inc., D&D of Minnesota, Inc.,
Famous Dave’s Ribs of Maryland, Inc., Famous Dave’s Ribs, Inc., Famous Dave’s Ribs-U, Inc. and Lake &
Hennepin BBQ & Blues, Inc. for the benefit of Venture Bank, incorporated by reference to Exhibit 10.8 to
form 8-K filed December 8, 2016
10.44 Pledge Agreement dated December 2, 2016 among Famous Dave’s of America, Inc., D&D of
Minnesota, Inc., Famous Dave’s Ribs of Maryland, Inc., Famous Dave’s Ribs, Inc., Famous Dave’s Ribs-
U, Inc., Lake & Hennepin BBQ & Blues, Inc. and Venture Bank, incorporated by reference to Exhibit 10.9
to form 8-K filed December 8, 2016
10.45 Stock Purchase Agreement dated November 10, 2017 between Famous Dave’s of America, Inc. and PW
Partners, LLC, incorporated by reference to Exhibit 10.1 to Form 8 K filed November 13, 2017
10.46 Registration Rights Agreement dated November 10, 2017 between Famous Dave’s of America, Inc. and
PW Partners, LLC, incorporated by reference to Exhibit 10.2 to Form 8 K filed November 13, 2017
10.47 Employment Agreement dated November 14, 2017 between Famous Dave’s of America, Inc. and Jeffery
Crivello, incorporated by reference to Exhibit 10.3 to Form 8 K filed November 13, 2017 †
10.48 Asset Purchase Agreement dated November 1, 2017 among Famous Dave’s Ribs of Maryland, Inc.,
Famous Dave’s Ribs, Inc., Commonwealth Blue Ribbon Restaurants, LLC and Capital Blue Ribbon
Restaurants, LLC, incorporated by reference to Exhibit 10.53 to the Registration Statement on Form S 1
filed on December 29, 2017
10.49 Asset Purchase Agreement (and supplemental letter agreement) dated November 1, 2017 between Famous
Dave’s Ribs of Maryland, Inc. and Capital Blue Ribbon Restaurants, LLC, incorporated by reference to
Exhibit 10.54 to the Registration Statement on Form S 1 filed on December 29, 2017
10.50 Amendment dated January 29, 2018 to Employment Agreement dated November 14, 2017 between Famous
Dave’s of America, Inc. and Jeffery Crivello, incorporated by reference to Exhibit 10.2 to Form 8 K filed
January 29, 2018 †
10.51 Employment Agreement dated April 13, 2016 between Famous Dave’s of America, Inc. and Geovannie
Concepcion, incorporated by reference to Exhibit 10.3 to Form 8 K filed January 29, 2018 †
10.52 Amendment dated January 29, 2018 to Employment Agreement dated April 13, 2016 between Famous
Dave’s of America, Inc. and Geovannie Concepcion, incorporated by reference to Exhibit 10.4 to Form 8 K
filed January 29, 2018 †
Exhibit No.
Description
10.53 Standby Purchase Agreement, between Famous Dave’s of America, Inc. and PW Partners, LLC, dated
January 29, 2018, incorporated by reference to Exhibit 10.1 to Form 8-K filed January 29, 2018
10.54* Employment Agreement dated February 12, 2018 between Famous Dave’s of America, Inc. and Paul M.
Malazita †
21.0* Subsidiaries of Famous Dave’s of America, Inc.
23.1* Consent of Grant Thornton LLP
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance Document
101.SCH* XBRL Schema Document
101.CAL* XBRL Calculation Linkbase Document
101.LAB* XBRL Label Linkbase Document
101.PRE* XBRL Presentation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
* Filed herewith
† Management compensatory plan