DEF 14A: FAT Brands Inc. Seeks Stockholder Approval for Officer Exculpation and Director Elections at 2024 Annual Meeting

FAT Brands Inc. has scheduled its 2024 Annual Meeting of Stockholders for December 24, 2024, to vote on key proposals including the election of directors and an amendment to the company's charter to allow for officer exculpation.

Summary

• FAT Brands Inc. will hold its 2024 Annual Meeting of Stockholders on December 24, 2024, at its corporate offices in Beverly Hills, California.
• The meeting will include voting on the election of 14 director nominees, an amendment to the Certificate of Incorporation to allow for officer exculpation, an advisory vote on executive compensation, and the ratification of the appointment of Macias Gini & O'Connell, LLP as the company's independent auditor.
• The record date for determining stockholders eligible to vote is November 21, 2024.
• Stockholders can vote by mail, internet, email, or in person at the meeting.
• The company had 15,914,340 shares of Class A Common Stock and 1,270,805 shares of Class B Common Stock outstanding as of the record date.
• Class A stockholders have one vote per share, while Class B stockholders have 2,000 votes per share.
• A majority of the voting power of the outstanding shares is required to approve the amendment to the Certificate of Incorporation.
• The company is seeking to extend exculpation and limitations of liability to officers, similar to existing protections for directors.
• The company's independent auditor for the fiscal year ending December 29, 2024, is Macias Gini & O'Connell, LLP.
• The company's previous auditor, Baker Tilly US, LLP, did not seek re-election.

Sentiment

Score: 5

Explanation: The document is a standard proxy statement, which is neutral in tone. While there are some positive aspects, such as the proposed officer exculpation, there are also negative aspects, such as the indictment of the former CEO and the company's status as a controlled company. Overall, the sentiment is neutral.

Positives

• The proposed amendment to the Certificate of Incorporation aims to attract and retain qualified officers by limiting their liability.
• The company is seeking to align officer liability protection with that of directors.
• The company has a diverse board with seven independent directors.
• The company has adopted a clawback policy for incentive-based compensation for Section 16 officers.
• The company has a code of ethics that applies to directors, officers, and employees.

Negatives

• Andrew Wiederhorn, the company's founder and former CEO, was indicted on federal charges, including tax evasion and wire fraud.
• The company is a controlled company, which means it is not required to have a majority of independent directors or a compensation committee.
• The company's previous auditor, Baker Tilly US, LLP, declined to stand for re-election.
• Several directors and officers filed late Form 3 and Form 4 reports.

Risks

• The indictment of Andrew Wiederhorn could negatively impact the company's reputation and financial performance.
• The company's status as a controlled company could lead to conflicts of interest and reduced oversight.
• The company's reliance on related-party transactions could create potential risks.
• The company's financial performance could be impacted by the ongoing litigation and governmental investigations.

Future Outlook

The company is seeking to maintain provisions of the Certificate of Incorporation in keeping with the governing statutes contained in the DGCL and to attract and retain key officers.

Management Comments

• The Board of Directors believes it is important to provide protection from certain liabilities and expenses that may discourage prospective or current directors from accepting or continuing membership on corporate boards and prospective or current officers from serving corporations.
• The Board of Directors believes that the Company and its stockholders are best served by the current leadership structure because it is valuable to have on the Board the breadth of experience and depth of knowledge of our founder/Chairman and senior operations team, balanced by our independent directors, who are led by our lead independent director, and our fully independent Audit Committee.

Industry Context

The proposed amendment to allow for officer exculpation is in line with a trend among Delaware corporations to limit officer liability, and the company is seeking to remain competitive in attracting and retaining talent.

Comparison to Industry Standards

• Many Delaware companies have already adopted exculpation clauses limiting the personal liability of officers in their certificates of incorporation, and FAT Brands is following this trend.
• The company's board structure, with a mix of independent and non-independent directors, is common for controlled companies.
• The company's compensation practices, including cash and stock-based incentives, are typical for public companies in the restaurant and hospitality industry.
• The company's use of a clawback policy is in line with recent regulatory requirements for listed companies.

Management Changes

Corporate Governance

Legal Proceedings

• Andrew Wiederhorn was indicted on federal charges, alleging that he caused FAT Brands Inc. and an affiliate to distribute $47 million to him for his personal use and benefit, mischaracterized these distributions as loans, and failed to disclose the disbursements as reportable compensation.
• The indictment also alleges that Mr. Wiederhorn failed to pay personal income taxes in the amount of $7.7 million.
• Mr. Wiederhorn was also charged in a separate indictment for illegally possessing a firearm and ammunition after being convicted of a felony.

Related Party Transactions

• Andrew Wiederhorn received $5,338,638 in gross cash compensation from the company in 2024 through October 31, 2024.
• The company will pay an hourly fee of $1,850 to Fog Cutter Consulting Corp., a company affiliated with Andrew Wiederhorn, for consulting services.
• RREMC Restaurants, LLC, owned by director John C. Metz, paid the company approximately $1,626,981 in royalties and marketing fees since the beginning of the 2022 fiscal year through October 31, 2024.
• The company paid a consulting fee of $160,000 to John C. Metz in January 2022 in connection with the acquisition of Native Grill & Wings.
• Thayer Wiederhorn, Taylor Wiederhorn, Mason Wiederhorn, Donald Berchtold, and Jacob Berchtold all received compensation from the company and are related to each other.

Stakeholder Impact

• Shareholders will vote on key proposals that could impact the company's governance and financial performance.
• Employees may be affected by changes in executive compensation and leadership.
• Customers and suppliers may be indirectly affected by the company's financial performance and strategic decisions.
• Creditors may be impacted by the company's financial health and ability to repay debts.

Next Steps

• Stockholders will vote on the proposals at the Annual Meeting on December 24, 2024.
• The company will file the Certificate Amendment with the Secretary of State of the State of Delaware if approved by stockholders.
• The company will continue to monitor and address any risks and challenges identified in the document.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Board of Directors, Officer Exculpation, Director Election, Independent Auditor, Executive Compensation, Corporate Governance, Related Party Transactions, Stockholder Vote