Shake Shack 2015 Annual Report Download

Download and view the complete annual report

Please find the complete 2015 Shake Shack annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 234

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220
  • 221
  • 222
  • 223
  • 224
  • 225
  • 226
  • 227
  • 228
  • 229
  • 230
  • 231
  • 232
  • 233
  • 234

SHAKE SHACK INC.
FORM 10-K
(Annual Report)
Filed 03/27/15 for the Period Ending 12/31/14
Address 24 UNION SQUARE EAST
5TH FLOOR
NEW YORK, NY 10003
Telephone (646) 747-7200
CIK 0001620533
Symbol SHAK
SIC Code 5810 - Eating And Drinking Places
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2015, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    SHAKE SHACK INC. FORM 10-K (Annual Report) Filed 03/27/15 for the Period Ending 12/31/14 Address Telephone CIK Symbol SIC Code Fiscal Year 24 UNION SQUARE EAST 5TH FLOOR NEW YORK, NY 10003 (646) 747-7200 0001620533 SHAK 5810 - Eating And Drinking Places 12/31 http://www.edgar-online.com © ...

  • Page 2
    ...24 Union Square East, 5th Floor, New York, New York (Address of principal executive offices) 10003 (Zip Code) (646) 747-7200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Class A Common Stock, par value $0.001...

  • Page 3
    ... Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements With...

  • Page 4
    ... expected financial outlook for fiscal year 2015, expected Shack openings, expected same-Shack sales growth and trends in the Company's operations. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives...

  • Page 5
    ... SSE Equity Owners. OVERVIEW OF SHAKE SHACK Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. Founded by Danny Meyer's Union Square Hospitality Group (" USHG "), Shake Shack was...

  • Page 6
    ... of the classic American burger stand, while providing our guests a menu of chef-inspired food and drinks. Our signature items are our all-natural, hormone and antibiotic-free burgers, hot dogs, crinkle-cut fries, shakes and frozen custard. We cook our burgers and spin our shakes to order and strive...

  • Page 7
    ...-cut fries topped with a proprietary blend of cheddar and American cheese sauce. We believe the tactile pleasure and emotional attachment that our guests have to the crispiness and ridges of our crinkle-cut fries is a nostalgic ode to the roadside burger stand of yesteryear. Hot Dogs Shake Shack...

  • Page 8
    ... friends as family members. From our first Shack at Madison Square Park, we wanted to invite dogs to be part of the community gathering experience and developed the "Woof" section on our menu. ShackBurger dog biscuits, peanut butter sauce and vanilla custard make up our signature Pooch-ini®, which...

  • Page 9
    ... offer playful items that surprise and delight our guests such as When Irish Fries Are Smiling on St. Patrick's Day, as well as Corn Dogs during Memorial Day, the 4th of July and Labor Day weekends. Since 2012, Shake Shack has held The Great American Shake Sale during the month of May to raise money...

  • Page 10
    ...size sliding puzzles with illustrated pieces that celebrate Chicago landmarks, while revealing the burgers, hot dogs and frozen custards that Shake Shack guests have enjoyed over the past decade. Design The original Shake Shack in Madison Square Park was designed by SITE Architecture and Design, led...

  • Page 11
    ... growth. We plan to continue to expand our business, drive Shack sales and enhance our competitive positioning by executing on the following strategies: Opening New Domestic Company-Operated Shacks This is where our greatest immediate opportunity for growth lies. We waited nearly five years to open...

  • Page 12
    ... retail and food operator for the development of up to 10 new Shacks in Japan over the next five years. We believe there are additional international markets that will embrace the Shake Shack concept. Given our position in New York and the success of our current licensed Shacks at home and abroad...

  • Page 13
    ...sales, product mix and average transaction size. Our back-office computer systems are designed to assist in the management of our domestic company-operated Shacks and provide real-time labor and food cost management tools. These tools provide the home office and operations management quick access to...

  • Page 14
    ... year. EMPLOYEES As of December 31, 2014 , we had approximately 1,680 employees, of whom approximately 1,450 are hourly team members, 160 are Shack-level managers and 70 are home office personnel. AVAILABLE INFORMATION Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports...

  • Page 15
    ... of achieving our growth strategies will be through opening and operating new Shacks on a profitable basis for the foreseeable future. We must identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current Shacks, demographics, traffic...

  • Page 16
    ... and/or raw materials for beef patties originate from the United States and the EU as well as Australia. In addition, our potato buns are exclusively from the United States, and other key items such as crinkle-cut fries and American cheese originate within the United States or the EU. While we...

  • Page 17
    ... under our arrangements with them, we could encounter supply shortages and incur higher costs. We have a limited number of suppliers for our major products, including beef patties, potato buns, custard, portobello mushrooms and cheese sauce. In fiscal 2014 , we purchased all of our (i) ground beef...

  • Page 18
    ...current domestic company-operated Shacks are located in Manhattan and other high revenue markets. As we expand, this percentage will decline and as a result we may not be able to maintain our current average unit volumes (" AUVs ") and Shack-level operating profit margins and our business, financial...

  • Page 19
    ... license agreement for our Madison Square Park Shack can be terminated by the New York City Commissioner of Parks for any reason on 25 days' written notice. Generally, our leases are net leases that require us to pay our share of the costs of real estate taxes, utilities, building operating expenses...

  • Page 20
    ... companies in our current markets become unionized, construction and build out costs for new Shacks in such markets could materially increase. Increased food commodity and energy costs could decrease our Shack-level operating profit margins or cause us to limit or otherwise modify our menu...

  • Page 21
    ... of operations. In addition, changes in federal or state workplace regulations could adversely affect our ability to meet our financial targets. Various federal and state labor laws govern our relationships with our employees and affect operating costs. These laws include employee classifications...

  • Page 22
    ..., and in-store messaging, which require less marketing spend as compared to traditional marketing programs. Currently, the amount of discounted promotions and advertising we do is nominal. As the number of Shacks increases, and as we expand into new markets, we expect to increase our investment in...

  • Page 23
    ...our business, financial condition and results of operations. We serve burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information...

  • Page 24
    ...of doing business internationally could lower our revenues, increase our costs, reduce our profits or disrupt our business. Twenty-seven of our 32 licensed Shacks as of December 31, 2014 are located outside the United States and we expect to continue to expand our licensed Shacks internationally. As...

  • Page 25
    ...not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms. Restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful...

  • Page 26
    ... sales are typically nominally higher during the summer months affecting the second and third quarters of the fiscal year. Our quarterly results have been and will continue to be affected by the timing of new Shack openings and their associated pre-opening costs. As a result of these factors, our...

  • Page 27
    ...Owner's continued ownership of LLC Interests or our Class A common stock after the IPO. The actual amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of LLC Interests, the...

  • Page 28
    ... on our operating results and financial condition. Shake Shack is controlled by the Continuing SSE Equity Owners, whose interests may differ from those of our public stockholders. The Continuing SSE Equity Owners control approximately 83.2% of the combined voting power of our common stock through...

  • Page 29
    ... change in control transactions, equity issuances and the hiring or termination of our Chief Executive Officer. On account of the Stockholders Agreement and the aggregate voting power of the Voting Group, we are considered a "controlled company" for the purposes of the New York Stock Exchange...

  • Page 30
    ... would result in less active trading or more volatility in the price of our Class A common stock. We will incur increased costs as a result of becoming a public company and in the administration of our organizational structure. As a public company, we will incur significant legal, accounting...

  • Page 31
    ..., New York, NY 10003. We lease our home office, which is approximately 10,500 square feet and all of our domestic company-operated Shacks. We do not own any real property, nor do we own or lease any property related to our licensed operations. The following table sets forth the number of company...

  • Page 32
    Table of Contents Item 3. Legal Proceedings We are involved in various claims and legal ... that none of these legal proceedings will have a material adverse effect on our consolidated financial position, results of operations or liquidity. Item 4. Mine Safety Disclosures. Not applicable. 31

  • Page 33
    ...we closed an initial public offering of our Class A common stock at price of $21.00 per share. Prior to that time, there was no public market for our stock. Our Class A common stock is traded on the New York Stock Exchange under the symbol "SHAK." Our Class B common stock is not listed nor traded on...

  • Page 34
    ... equal to the initial public offering price per share of Class A common stock. As sole managing member of SSE Holdings, we caused SSE Holdings to use the proceeds it received as follows: (i) to pay fees and expenses of approximately $6.2 million in connection with the IPO and the Organizational...

  • Page 35
    ...Shack sales Licensing revenue Shack-level operating expenses General and administrative expenses Pre-opening costs Operating income Net income Per share data 2 : Pro-forma earnings per unit-basic Pro-forma earnings per unit-diluted Selected balance sheet data: Cash and cash equivalents Total current...

  • Page 36
    ... to investors in the initial public offering or the 339,306 shares of Class A common stock issued to participants of our Unit Appreciation Rights Plan in settlement of their outstanding awards. See Note 13 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10...

  • Page 37
    ... "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. As of December 31, 2014, there were 63 Shacks worldwide, comprised of 31 domestic company-operated Shacks, 5 domestic licensed Shacks and 27 international...

  • Page 38
    ... Total revenue to be between $159 million and $163 million. Same-Shack sales growth in the low single digits. At least 10 new domestic company-operated Shacks to be opened throughout the year. At least five international licensed Shacks to be opened under the Company's current license agreements...

  • Page 39
    ... calculating same Shack sales growth, Shack sales for eight Shacks were included in the comparable Shack base. For fiscal 2013, AUVs for domestic company-operated Shacks decreased to $5.0 million as a result of opening more targetvolume Shacks during the year. Licensing Revenue Licensing revenue is...

  • Page 40
    ...offset by menu price increases and purchasing efficiencies of other items. Food and paper costs were $23.9 million for fiscal 2013 compared to $16.8 million for fiscal 2012, an increase of $7.1 million or 42.3%, primarily due to the opening of eight new domestic company-operated Shacks during fiscal...

  • Page 41
    ... an increase in the total number of new domestic company-operated Shacks opened in fiscal 2014, as well as an increase in the number of new domestic company-operated Shacks opened in new geographic markets during fiscal 2014 and planned openings in the first quarter of fiscal 2015. Pre-opening costs...

  • Page 42
    ... tax payable to the City of New York as well as other ...opening costs Loss on disposal of property and equipment Operating income Total revenue Less: Licensing revenue Shack sales [B] Shack-level operating profit margin [A / B] $ $ $ $ $ $ $ $ $ $ $ $ (1) We operate on a 52/53 week fiscal year...

  • Page 43
    ... current volatile economic environment and through future economic and industry cycles. We have continued to experience increases in Shack-level operating profit margin, Adjusted EBITDA, the number of domestic company-operated Shack openings, same-Shack sales growth and AUVs. However, the restaurant...

  • Page 44
    ...million compared to $11.7 million for fiscal 2012, an increase of $1.2 million, primarily driven by the opening of eight new domestic company-operated Shack during the fiscal year. Investing Activities For fiscal 2014, net cash used in investing activities was $28.5 million compared to $16.2 million...

  • Page 45
    ..., marketing-related contracts, software acquisition/license commitments and service contracts. The above table excludes long-term, exclusive contracts we enter into with certain vendors to supply us with food, beverages and paper goods, obligating us to purchase specified quantities. These volume...

  • Page 46
    ... exceeds the fair value of the asset. Shack-level assets are grouped together for the purpose of the impairment assessment. There were no impairment charges recorded during fiscal 2014, 2013 or 2012. Leases We currently lease all of our domestic company-operated Shacks and the home office. At the...

  • Page 47
    ...LABOR AND BENEFITS COSTS At our domestic company-operated Shacks, we have historically provided a starting wage that is above the minimum wage in place for that particular state. For instance, in Manhattan Shacks, we start our new employees at $10.00 per hour even though the minimum wage in New York...

  • Page 48
    ...related expenses will offset a proportionate share of any menu price increases at our domestic company-operated Shacks. Item 8. Financial Statements and Supplementary Data. INDEX TO FINANCIAL STATEMENTS Shake Shack Inc. Report of Independent Registered Public Accounting Firm Balance Sheets Notes to...

  • Page 49
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Management of Shake Shack Inc. We have audited the accompanying balance sheets of Shake Shack Inc. (the "Company") as of December 31, 2014 and September 23, 2014. These balance sheets are the ...

  • Page 50
    Table of Contents SHAKE SHACK INC. BALANCE SHEETS (dollar amounts in thousands, except share and per share amounts) December 31, 2014 September 23, 2014 ASSETS Liabilities Commitments and contingencies Stockholders' Equity Common stock, $0.01 par value - 100 shares authorized, none issued and ...

  • Page 51
    ... issue 100 shares of Common Stock, par value $0.01 per share, none of which had been issued or were outstanding. NOTE 4: SUBSEQUENT EVENTS Initial Public Offering As noted above, on February 4, 2015, we closed an IPO of 5,750,000 shares of our Class A common stock at a public offering price of $21...

  • Page 52
    ... stock with a par value of $0.001 per share; (ii) authorization of 35,000,000 shares of Class B common stock with a par value of $0.001 per share; (iii) authorization of 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Corporation's Board of Directors...

  • Page 53
    ... to our directors and certain employees under the Shake Shack Inc. 2015 Incentive Award Plan. The stock options were granted with an exercise price of $21.00 per share and vest equally over five years. Additionally, we issued 339,306 shares of Class A common stock in settlement of outstanding unit...

  • Page 54
    ... the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control...

  • Page 55
    ... income taxes, net Other assets TOTAL ASSETS LIABILITIES AND MEMBERS' EQUITY Current liabilities Short-term borrowings Accounts payable Accrued expenses Accrued wages and related liabilities Other current liabilities Total current liabilities Long-term debt Deferred rent Other long-term liabilities...

  • Page 56
    Table of Contents SSE HOLDINGS, LLC CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per unit amounts) Fiscal Year Ended December 31, 2014 December 25, 2013 December 26, 2012 Shack sales Licensing revenue TOTAL REVENUE Shack-level operating expenses: Food and paper costs Labor and related ...

  • Page 57
    Table of Contents SSE HOLDINGS, LLC CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (in thousands) MEMBERS' EQUITY, DECEMBER 28, 2011 Net income Equity-based compensation MEMBERS' EQUITY, DECEMBER 26, 2012 Net income Equity-based compensation MEMBERS' EQUITY, DECEMBER 25, 2013 Net income Equity-based ...

  • Page 58
    ...Non-cash interest expense Loss on disposal of property and equipment Equity-based compensation Deferred income taxes Changes in operating assets and liabilities: Accounts receivable Inventories Prepaid expenses and other current assets Other assets Accounts payable Accrued expenses Accrued wages and...

  • Page 59
    ..., hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. We own and operate Shake Shack restaurants (" Shacks ") in 10 states and the District of Columbia. As of December 31, 2014 , we had 31 company-operated Shacks in operation in the United States. We also have license arrangements...

  • Page 60
    Table of Contents SSE HOLDINGS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except unit, share, per unit and per share amounts) liabilities that are required to be recorded at fair value, we assume the highest and best use of the asset by market participants in ...

  • Page 61
    ... on a straight-line basis over the lease term as a reduction of occupancy costs and related expenses or pre-opening costs . Revenue Recognition Revenue consists of Shack sales and licensing revenues. Revenue from Shack sales are presented net of discounts and recognized when food and beverage...

  • Page 62
    ...Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for reporting periods beginning after December 15, 2015. We are currently evaluating the impact ASU 2015-02 will have on our consolidated financial statements. In January 2015, the FASB issued...

  • Page 63
    Table of Contents SSE HOLDINGS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except unit, share, per unit and per share... consisted of the following: December 31, 2014 December 25, 2013 Food Wine Beer Beverages Retail merchandise Inventories $ $ 354 28 33 42 72 529...

  • Page 64
    ...and is guaranteed by Union Square Hospitality Group, LLC (" USHG "). The Revolving Credit Facility contains a number of covenants that, ...license. Interest on the outstanding principal balance of this note will be due and payable on a monthly basis from the effective date at a rate of 5.0% per year...

  • Page 65
    Table of Contents SSE HOLDINGS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except unit, share, per unit and per share amounts) NOTE 8 : LEASES We lease the commercial space for all of our domestic company-operated Shacks, our home office space and certain ...

  • Page 66
    ... grant up to 31,303 unit appreciation rights (" UARs ") to employees. The UARs granted were subject to continued employment and were only exercisable upon a qualifying transaction, which was either a change of control or an initial public offering, each as defined in the Plan. Upon the occurrence of...

  • Page 67
    ... a weighted-average period of 3.6 years, or upon the occurrence of a change in control or an initial public offering. The 7,227 outstanding restricted Class B units equate to 158,251 LLC Interests with a weighted-average grant date fair value of $4.22. The Corporation's IPO constituted a transaction...

  • Page 68
    Table of Contents SSE HOLDINGS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except unit, share, per unit and per share...: 2014 Current income taxes: State and local Foreign Total current income taxes...assets: Deferred rent Deferred revenue Accrued expenses Other assets ...

  • Page 69
    ... dividing net income by the pro forma weighted-average number of units outstanding adjusted to give effect to potentially dilutive securities. Potentially dilutive securities include unvested restricted Class B units. The following table sets forth a reconciliation of the numerators and denominators...

  • Page 70
    Table of Contents SSE HOLDINGS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except unit, share, per unit and per share amounts) NOTE 15 : COMMITMENTS AND CONTINGENCIES Lease Commitments We are obligated under various operating leases for Shacks and our home office ...

  • Page 71
    ... First Quarter Selected financial data: Total revenue Operating income (loss) Net income (loss) Pro forma earnings (loss) per unit (1) : Basic Diluted Selected operating data: Same-Shack sales growth Number of Shacks at end of period Domestic company-operated Domestic licensed International licensed...

  • Page 72
    ... share amounts) 2013 First Quarter Selected financial data: Total revenue Operating income Net income Pro forma earnings per unit (1) : Basic Diluted Selected operating data: Same-Shack sales growth Number of Shacks at end of period Domestic company-operated Domestic licensed International licensed...

  • Page 73
    Table of Contents SSE HOLDINGS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except unit, share, per unit and per share amounts) Member Distributions On February 4, 2015, we paid the Additional Distribution to certain of the Original SSE Equity Owners in the amount ...

  • Page 74
    ... the effectiveness of our internal control over financial reporting for so long as we are an emerging growth company. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes to our internal control over financial reporting that occurred during the quarter ended December 31, 2014...

  • Page 75
    ... New York Times bestseller Setting the Table: The Transforming Power of Hospitality in Business . Mr. Meyer is currently a member of the board of directors of The Container Store Group, Inc. and Sotheby's, as well as the following not-for-profit organizations: Share Our Strength, Madison Square Park...

  • Page 76
    ... planning and leadership of complex organizations. Evan Guillemin has served on the Board of Directors of Shake Shack since its formation and on the board of directors of SSE Holdings since April 2013. Mr. Guillemin joined Select Equity Group in April 2004 as the firm's Chief Financial Officer...

  • Page 77
    ...our IPO, the United States securities laws require our directors, executive officers and greater than 10% shareholders to file reports of ownership and changes in ownership of our common stock on Forms 3, 4 and 5 with the SEC, with us and with the New York Stock Exchange. However, for the year ended...

  • Page 78
    ... upon its review of the Company's audited financial statements and the discussions noted above, the Audit Committee recommended to the Board of Directors that our audited consolidated financial statements for the fiscal year ended December 31, 2014 be included in the Company's Annual Report on Form...

  • Page 79
    ... 25, 2013. Non-Equity Stock Salary Name and Principal Position Year ($) Awards ($) Option Awards ($) Incentive Plan Compensation ($) All Other Compensation ($) Total ($) Randy Garutti Chief Executive Officer Jeff Uttz Chief Financial Officer Peggy Rubenzer Vice President, People Resources 2014...

  • Page 80
    ... an initial public offering. In connection with the IPO, Ms. Rubenzer received shares of Class A common stock in settlement of her outstanding unit appreciation rights. All obligations of SSE Holdings under the UAR Plan and awards thereunder were assigned from SSE Holdings to Shake Shack, effective...

  • Page 81
    ... and Mr. Uttz will serve as Chief Financial Officer of the Company and SSE Holdings. Further, Mr. Garutti will be appointed to our Board of Directors and will be proposed for re-election during his term of employment. Base Salary, Annual Bonus and Equity Compensation Pursuant to their employment...

  • Page 82
    ..., managing, and/or operating of (a) "better burger" restaurants, (b) "quick service" or "fast food" restaurants with an emphasis on hamburgers, or (c) "fast casual" restaurants. No severance payments or benefits described above shall be paid following the first date that Messrs. Garutti or Uttz, as...

  • Page 83
    ... a change in control or an initial public offering (including the IPO). In connection with IPO, the restricted Class B units became fully vested and were exchanged for LLC Interests. (3) There is no public market for our Class B units. Third-party financial institutions valued the Class B units in...

  • Page 84
    ... in our sole discretion. As of December 31, 2014, there were 22,554 UARs outstanding. The Company's initial public offering constitutes a qualified transaction under the Plan and 339,306 shares of Class A common stock were issued upon consummation of the IPO in settlement of the outstanding UARs. 83

  • Page 85
    ... officers and directors as a group. Each Continuing SSE Equity Owner is entitled to have their LLC Interests redeemed for Class A common stock on a one-for-one basis, or, at the option of Shake Shack, cash equal to the market value of the applicable number of shares of our Class A common stock...

  • Page 86
    ... or direct the disposition of, 4,358,370 shares. The address for Select Equity is Select Equity Group, L.P., 380 Lafayette Street New York, New York 10003. ACG Shack LLC is managed by Alliance Consumer Growth LLC, the investment manager for Alliance Consumer Growth Fund, LP. Each of Josh Goldin...

  • Page 87
    ...three domestic licensed Shacks located in sporting venues pursuant to a Master License Agreement (the " Master License Agreement "), which grants Union Square Events the exclusive right to open Shake Shack-branded limited menu concession stands in sports and entertainment venues in the United States...

  • Page 88
    ... will vary depending on the fair value, which may fluctuate over time, of the depreciable or amortizable assets of SSE Holdings at the time of each redemption or exchange; the price of shares of our Class A common stock at the time of redemptions or exchanges- the Basis Adjustments, as well as...

  • Page 89
    ... Holdings LLC Agreement recapitalizes the units currently held by the existing members of SSE Holdings into a new single class of common membership units, which we refer to as the " LLC Interests ." Each LLC Interest will entitle the holder to a pro rata share of the net profits and net losses and...

  • Page 90
    ...price for such shares in exchange for an equal number of LLC Interests. Maintenance of one-to-one ratio of shares of Class A common stock and LLC Interests owned by Shake Shack. Our amended and restated certificate of incorporation and the SSE Holdings LLC Agreement requires that (i) we at all times...

  • Page 91
    ... Chief Executive Officer or hiring a new Chief Executive Officer; any authorization or issuance of equity securities of Shake Shack or its subsidiaries other than (i) pursuant to any equity incentive plans or arrangements approved by our Board of Directors or (ii) upon an exchange of shares of Class...

  • Page 92
    ... the perception thereof). Our Board of Directors adopted a written policy on transactions with related persons that is in conformity with the requirements for issuers having publicly-held common stock that is listed on the New York Stock Exchange. Under the new policy any Related Person Transaction...

  • Page 93
    ... financial statements for fiscal years 2014, 2013 and 2012 included our Registration Statement on Form S-1 and Annual Report on Form 10-K. (2) Consists of fees billed for assurance and related services, primarily related to our initial public offering. (3) Consists of a software licensing...

  • Page 94
    ... documents are filed as part of this report: (1) Financial Statements Shake Shack Inc. Report of Independent Registered Public Accounting Firm Balance Sheets Notes to Balance Sheets SSE Holdings, LLC Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated...

  • Page 95
    ... Chief Financial Officer Date: March 27, 2015 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature /s/ Randy Garutti Randy Garutti...

  • Page 96
    ..., 2014, among Union Square Hospitality Group, LLC, Randall Garutti and SSE Holdings, LLC Assignment and Assumption Agreement, dated as of January 15, 2015, by and among SSE Holdings, LLC and Shake Shack Inc. Subsidiaries of Shake Shack Inc. Consent of Independent Registered Public Accounting Firm as...

  • Page 97
    Execution Version THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 28, 2015 among SSE HOLDINGS, LLC The Other Loan Parties Party Hereto The Lenders Party Hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent

  • Page 98
    TABLE OF CONTENTS Page ARTICLE I ... of Interest Increased Costs Break Funding Payments Taxes Payments Generally; Allocation of Proceeds; Sharing of Set-offs Mitigation... Governmental Approvals; No Conflicts No Material Adverse Change Properties Litigation and Environmental Matters SECTION 3.01...

  • Page 99
    SECTION 3.07. SECTION 3.08. SECTION 3.09. Compliance with Laws and Agreements Taxes ERISA i 50 50 50

  • Page 100
    TABLE OF CONTENTS (continued) Page SECTION 3.10. ... Effective Date SECTION 4.02. SECTION 4.03. Delayed Commitment Effective Date Each Credit Event AFFIRMATIVE COVENANTS ARTICLE V SECTION 5.01. Financial Statements and... Liens Fundamental Changes Investments, Loans, Advances, Guarantees and Acquisitions

  • Page 101
    SECTION 6.05. SECTION 6.06. SECTION 6.07. Asset Sales Sale and Leaseback Transactions Swap Agreements ii 65 66 67

  • Page 102
    TABLE OF CONTENTS (continued) Page SECTION 6.08. SECTION 6.09. SECTION 6.10. SECTION 6.11. SECTION 6.12. SECTION 6.13. Restricted Payments; Certain Payments of Indebtedness Transactions with Affiliates ...

  • Page 103
    SECTION 10.03. SECTION 10.04. SECTION 10.05. No Discharge or Diminishment of Loan Guaranty Defenses Waived Rights of Subrogation iii 89 90 90

  • Page 104
    TABLE OF CONTENTS (continued) Page Reinstatement; Stay of Acceleration Information Termination Taxes Maximum Liability Contribution Liability Cumulative Keepwell iv SECTION 10.06. SECTION 10.07. SECTION ...

  • Page 105
    ... Compliance Certificate Exhibit E-4 Form of U.S. Tax Compliance Certificate Revolving Commitment Schedule Properties Disclosed Matters Insurance Capitalization and Subsidiaries Affiliate Transactions Existing Indebtedness Existing Liens Existing Investments Existing Restrictions

  • Page 106
    THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 28, 2015 (this " Agreement "), among SSE HOLDINGS, LLC, the other...Agreement) to amend and restate the Existing Credit Agreement on the Effective Date in its entirety to read as set forth in this Agreement, and it has been agreed by the ...

  • Page 107
    ...Revolving Lenders (if the Initial Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon such Lender's share of the aggregate Revolving Credit Exposures at that time and (ii) on and after the Delayed Commitment Effective Date, if any, a percentage...

  • Page 108
    " Applicable Rate " means, for any day, with respect to any Revolving Loan or any LC Exposure, as the case may be, the applicable margin as of each immediately prior quarter-end based on the Funded Net Debt to EBITDA Ratio as set forth in the table below: Funded Net Debt to ≤ 1.00:1.00 EBITDA ...

  • Page 109
    ... banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term " Business Day " shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. " Capital...

  • Page 110
    ...any time: (a) any: (1) Person or Persons (other than a Permitted Holder), or (2) Persons (other than one or more Permitted Holders) constituting a "group" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any employee benefit plan of...

  • Page 111
    ... a "Change in Law", regardless of the date enacted, adopted, issued or implemented. " Chase " means JPMorgan Chase Bank, N.A., a national banking association, in its individual capacity, and its successors. " Code " means the Internal Revenue Code of 1986, as amended from time to time. " Collateral...

  • Page 112
    ...financially...Date " means the date after the Effective Date on which (a) the Administrative Agent receives (i) a request to increase the Initial...set forth in Sections 4.02 and 4.03 shall have been satisfied as of such date... laws of the United States or its territories... and closing fees)...profits or capital ...

  • Page 113
    ...is not a Loan Party or (B) third party holders of Equity Interests of the Loan Parties during such period; and (xii) the aggregate amount of costs and expenses actually incurred during such period by the Loan Parties in connection with the Shake Shack IPO, up to an aggregate amount not to exceed $10...

  • Page 114
    ... or other rights entitling the holder thereof to purchase or acquire any such equity interest. " ERISA " means the Employee Retirement Income Security Act of 1974, as amended from time to time. " ERISA Affiliate " means any trade or business (whether or not incorporated) that, together with any Loan...

  • Page 115
    ... to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) (a) by virtue of such Guarantor's failure...

  • Page 116
    ...Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. " Financial Officer " means the chief financial officer...

  • Page 117
    ... of paying taxes ...located. For purposes of this definition, the United...United States federal income tax purposes and (ii) wholly-owns the stock...Investments on such date to (b) EBITDA for the period of four consecutive fiscal quarters...United States of America as are in effect from time to time...

  • Page 118
    ... any Subsidiary that (a) did not, as of the last day of the fiscal quarter of the Borrower most recently ended for which financial statements are required to be delivered (whether or not such financial statements are actually delivered), have assets with a value in excess of $50,000, and (b) taken...

  • Page 119
    ...price of property or services (excluding accounts payable, trade... the fair market value of such property...time to time pursuant to Section 2.07. The initial amount of each Lender's Initial Revolving Commitment is set...costs under Swap Agreements in respect of interest rates to the extent such net costs...

  • Page 120
    ...date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. " IRS " means the United States Internal Revenue...ordinance, order or ...

  • Page 121
    ...offered to the lending office of the Administrative Agent in immediately available funds in the London Interbank Market for Eurodollars at approximately 11:00 a.m., London time, two (2) Business Days... Party, or any employee of any Loan Party...any and all times such reference becomes operative. " Loan ...

  • Page 122
    ... doubt, shall not include any Capital Expenditure in connection with the initial build-out of any restaurant or unit). " Material Adverse Effect " means a material adverse effect on (a) the business, assets, operations or condition, financial or otherwise, of the Borrower and the other Loan Parties...

  • Page 123
    ... or the next succeeding year (or years, as the case may be) and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer). " Non-Consenting Lender " has the meaning assigned to such term in Section 9.02(d). " Non-Paying Guarantor " has the...

  • Page 124
    ...set forth in Section 9.04(c)(i). " Participant Register " has the meaning set... than 30 days or are being...trade...from the value of the...located; (j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods...

  • Page 125
    ...or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank...

  • Page 126
    ... the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its offices located at 270 Park Avenue, New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective...

  • Page 127
    ...with respect to any Equity Interests in the Borrower...Date, if any, such Lender's Total Revolving Commitment then in effect. The initial amount of each Lender's applicable Revolving Commitment is set...division of The McGraw Hill Companies, Inc. " Secured Obligations...prior to the time that any transaction...

  • Page 128
    ... consolidated into the financial condition and financial operations of Shake Shack. " Shake Shack IPO " means an initial public offering of the class A common stock of Shake Shack. " Statutory Reserve Rate " means a fraction (expressed as a decimal), the numerator of which is the number one and the...

  • Page 129
    ... of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of...

  • Page 130
    ... USHG " means Union Square Hospitality Group, LLC, a New York limited liability company. " Withdrawal Liability " means liability to a Multiemployer Plan as a result... the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or...

  • Page 131
    ..., any change in GAAP occurring after the date hereof that would require operating leases to...set forth herein, each Lender agrees to make Revolving Loans to the Borrower from time to time...Initial Revolving Commitments of all Revolving Lenders or (ii) on and after the Delayed Commitment Effective Date...

  • Page 132
    ...later than 9:00 a.m., New York time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the ...Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected

  • Page 133
    ... General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance...9:00 am, New York time, at least three Business Days prior to the requested date of issuance, ... prior to the close of business on the earlier of (i) the date one year after the date of the issuance ...

  • Page 134
    ...New York time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that the Borrower may, subject to the conditions to borrowing set...Lender shall pay to ...

  • Page 135
    ... any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to ...account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section...

  • Page 136
    ... At the time any such replacement shall become effective, the Borrower shall pay all unpaid ...bear interest. Interest or profits, if any, on such investments shall accumulate in such account...on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York time, to the...

  • Page 137
    ...share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date... pays ... initial ... one month's duration...time...date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery...

  • Page 138
    ... the only Interest Period available to the Borrower a period of one month's duration). If any such Interest Election Request requests a Eurodollar Borrowing... Revolving Commitments shall terminate on the Maturity Date. (b) The Borrower may at any time terminate the Revolving Commitments upon (i) the ...

  • Page 139
    ...Initial Revolving Commitments may occur prior to the Delayed Commitment Effective Date...pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date...Lender from time to time hereunder. ...and each Lender's share thereof. (c) ...

  • Page 140
    ... the order of ...Financial Officer...changes of such ownership interest in connection with such Prepayment Event. (d) In the event, and on each occasion, that the Borrower is not in compliance with the Fixed Charge Coverage Ratio covenant set forth in Section 6.12 as of the last day of any fiscal quarter...

  • Page 141
    ...EBITDA Ratio covenant set forth in Section 6.13 as of the last day of any fiscal quarter, the Borrower may... than 10:00 a.m., New York time, three Business Days before the date of prepayment or (ii... all times that (i) (ii) the Revolving Commitment is $10,000,000 or less, shall accrue at an annual rate ...

  • Page 142
    ...first Business Day of each calendar month commencing on the first such date to occur after the Effective Date and (b) the Maturity Date. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed. (b) The Borrower agrees to pay...

  • Page 143
    ... day of the prior calendar month) shall be payable in arrears on each Interest Payment Date ... year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed... Borrowing. SECTION 2.13. Increased Costs . (a) If any Change in Law shall: (i) impose...

  • Page 144
    ...could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing...

  • Page 145
    ...Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day...from the date of such event to the last day of the then current Interest Period...in the eurodollar market. A certificate of any Lender setting forth any ... Withholding Agent shall timely pay the full amount ...

  • Page 146
    ... be paid within ten (10) days after the Administrative Agent delivers to ..., a copy of the return reporting such payment or other evidence of...Administrative Agent), at the time or times prescribed by applicable Law or... Agent shall be entitled to withhold United States federal income taxes at the ...

  • Page 147
    ... to backup withholding or information reporting requirements. (i) America: Without ...United States of any Foreign Lender shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such (A) Foreign Lender becomes a Lender under this Agreement (and from time to time...

  • Page 148
    ...be, were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471...the time or times prescribed by Law and at such time or times reasonably... additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund...

  • Page 149
    ... time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York...

  • Page 150
    ...time insufficient funds are received by and available to the Administrative Agent to pay... exercising any right of set-off or counterclaim or otherwise...cash at face value) participations in...payments shall be shared by the Lenders ... and the purchase price restored to the ... prior to the date on which any ...

  • Page 151
    ...day from and including the date such amount is distributed to it to but excluding the date...be made in such order as may be determined...another of its offices, branches or ...cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs...

  • Page 152
    ... Lenders, or increases or extends the... conditions set forth in Section 4.03 are satisfied at such time; and... (iv) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one Business Day... not be required to pay any fees to such ...

  • Page 153
    ... Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that ... the date hereof and for so long as such event shall continue or (b) the Issuing Bank has a good faith ...Agent shall determine may be necessary in order for such Lender to hold such Loans ...

  • Page 154
    ..., or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property necessary and material to the conduct of the business of the relevant Loan Parties as currently conducted, a correct and complete list of which, as of the date of this Agreement, is set forth on...

  • Page 155
    ... months...good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set...Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan...

  • Page 156
    ... Effective Date, as applicable, (i) the fair value of the assets of each Loan Party will exceed its debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the...

  • Page 157
    ... that could reasonably be expected to result in a Material Adverse Effect. The hours worked by and payments made to employees of the Loan Parties and the Subsidiaries thereof have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law...

  • Page 158
    ... certify the resolutions of its Board of Directors, members or other body authorizing the execution, delivery and performance of the Loan Documents to which it is a party, (B) identify by name and title and bear the signatures of the Financial Officers and any other officers of such Loan Party, as...

  • Page 159
    ...certificate, signed by the chief financial officer of the Borrower and each other Loan Party, on the initial Borrowing date (i) stating that no ...Date. (h) (i) Solvency . The Administrative Agent shall have received a solvency certificate from a Financial Officer. Shake Shack IPO . The Shake Shack IPO...

  • Page 160
    ...of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of national standing or otherwise reasonably acceptable to the Administrative Agent and certified by a Financial Officer of the Borrower to...

  • Page 161
    ..., the consolidating) balance sheet and related statements of operations, stockholders' equity and cash flows of Shake Shack and its Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures...

  • Page 162
    ... the effect of such change on the financial statements accompanying such certificate; (m) Annual Budget - within 90 days after the end of each fiscal year of the Borrower, a detailed annual budget for each of the twelve fiscal months of the fiscal year following such fiscal year then ended of the...

  • Page 163
    ...opening of any new store or restaurant...of a Financial Officer or other executive officer of the Borrower setting forth ...will cause each of its Subsidiaries to, pay or discharge all Taxes before the same ...to the conduct of its business in good working order and condition, ordinary wear and tear excepted...

  • Page 164
    ...pay fees and expenses related to the Transactions consummated on the Effective Date and the Delayed Commitment Effective Date, as applicable, and to be consummated under this Agreement and for working capital and general corporate purposes of the Loan Parties, including to finance new store openings...

  • Page 165
    ...acquired after the date of this ...set forth as Exhibit C hereto (the " Joinder Agreement "). Upon execution and delivery...located in the U.S. owned by any Loan Party. (h) Each Loan Party will cause to be subject at all times...Change in Law there is a reason to (i) believe that more than 65% of the Equity...

  • Page 166
    ...; (k) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and ...shall not exceed $6,000,000 at any time outstanding; (o) Indebtedness which represents an extension...principal amount or interest rate of such Indebtedness is not increased, and (ii) the terms of any such extension,...

  • Page 167
    ... of the average weighted maturity ...pay the deferred purchase price of goods or services or progress payments in connection with such goods...exchange rates or commodity prices and not for speculative purposes; (w) Indebtedness representing deferred compensation to officers, directors or employees...

  • Page 168
    ...or assign or sell any income or revenues (including accounts receivable) or rights in...any Loan Party existing on the date hereof and set forth in Schedule 6.02; provided... does not exceed the cost of acquiring, constructing or... outstanding at any time. SECTION 6.03. Fundamental Changes . (1) No Loan...

  • Page 169
    ... costs and similar purposes up to a maximum of $312,500 to any officer or employee and up to a maximum of $1,250,000 in the aggregate at any one time outstanding; (k) (l) investments in the form of Swap Agreements permitted by Section 6.07; investments in connection with any Permitted Equity...

  • Page 170
    ... in any Loan Party up to a maximum of $187,500 to any employee or officer and up to a maximum of $937,500 in the aggregate at any one time outstanding; (q) (r) (s) investments made to repurchase or retire Equity Interests of any Loan Party permitted under Section 6.08; advances of payroll to...

  • Page 171
    ... any other paragraph of this Section, provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this paragraph (i) shall not exceed $5,000,000 during any fiscal year of the Borrower; (p) sales, transfers and other dispositions of property...

  • Page 172
    ... and in accordance with the terms of, any management, director and/or employee equity or stock option or benefit plans, stock subscription agreements, the Organizational Document of any Loan Party, or any agreement between any employee, officer or director of any Loan Party and any Loan Party, (viii...

  • Page 173
    ...Shake Shack to the extent necessary to enable Shake Shack to (x) pay...Days prior to such Restricted Payment, a certificate of a Responsible Financial Officer...in the aggregate per fiscal year. SECTION 6.09. Transactions...and (ii) are at prices and on terms and ..., (c) any investment permitted by Sections...

  • Page 174
    ..., directors, officers or employees of the Borrower or its Subsidiaries in the ordinary course of business, (i) any issuances of securities or other payments, compensation awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock...

  • Page 175
    ...on the last day of each fiscal quarter (after giving effect to any Cure Payments pursuant to Section 7.02) to exceed 3.00:1. ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default . If any of the following events (" Events of Default ") shall occur: (n) the Borrower shall fail to pay (i) any...

  • Page 176
    ...to any grace or cure periods set forth in the terms of such...giving of notice, the lapse of time or both) the holder or holders...continue undismissed for 60 days or an order or decree approving or ordering any of the ...in writing its inability or fail generally to pay its debts as they become due; (x) ...

  • Page 177
    ... which judgments or orders, in any such case, are not stayed on appeal or otherwise being appropriately contested in good faith by proper...the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at...

  • Page 178
    ...or equity, including...day after the date of the delivery of (i) in the case of any fiscal quarter ending in June, the quarterly report in Section 5.01(b) and (ii) in the case of the fiscal quarter ending in December, the annual report...set forth in clause (a) of this Section 7.02 more than six (6) times...

  • Page 179
    ...at such date, and the applicable breach or default of such financial covenant that...of EBITDA for any applicable fiscal quarter pursuant to this Section, such ...number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set...

  • Page 180
    ...number...contents of any certificate, report or other document delivered...) the satisfaction of any condition set forth in Article IV or elsewhere...independent accountants and other experts selected by it, and shall ...may resign at any time by notifying the ...such appointment within 30 days after the retiring ...

  • Page 181
    ... time to time ...Reports; (d) it will keep all Reports confidential and strictly for its internal use, not share the Report...costs, expenses, and other amounts (including reasonable attorney fees) incurred by as the direct or indirect result of any third parties who might obtain all or part of any Report...

  • Page 182
    ... at: SSE Holdings, LLC 24 Union Square East, 6 th Floor New York, New York 10003 Attention: Ron Palmese ([email protected] Avenue 42st Floor New York, New York 10017 Attention: James McDonnell Telephone No: (212) 270-0810 (iii) if to any other Lender, to it at its address or facsimile number set...

  • Page 183
    ...such Default at the time. (r) Neither this ...shared, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class...

  • Page 184
    ...the property being sold or disposed of constitutes 100% of the Equity Interest of a Subsidiary, the Administrative Agent is authorized to release...Section 9.04, and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and ...

  • Page 185
    ...costs and expenses may be charged to the Borrower as Revolving Loans or to another deposit account at any time prior to the Maturity Date... (other than the allocated costs of internal counsel) for any Indemnitee,...of (i) the execution or delivery of the Loan Documents or...operated by the Borrower or 80

  • Page 186
    ...to pay to the Administrative Agent or the Issuing Bank, as the case may be, such Lender's Applicable Percentage (determined as of the time that...or claim under or by reason of this Agreement. (e) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more ...

  • Page 187
    ...time...to the Administrative Agent within seven (7) Business Days after having received notice thereof; provided further ...rights and obligations in respect of one Class of Revolving Commitments or Loans; the ...information (which may contain material non-public information about the Borrower, the Loan...

  • Page 188
    ...company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof; provided that, such company, investment... offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses ...

  • Page 189
    ...the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (xv) Upon its receipt...such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the ...address of each Participant and the principal 84

  • Page 190
    ...under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in... parties hereto and shall survive the execution and delivery of the Loan Documents and the making of ...any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue...

  • Page 191
    ...effective as delivery of a...time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time... New York State court sitting in New York, New York in...

  • Page 192
    ...Article and Section headings and the Table of Contents used herein are for... Affiliates' directors, officers, employees and agents... Equity Interests in any Loan Party, or (i) to the extent such Information (i) becomes publicly ...date hereof, such information is clearly identified at the time of delivery...

  • Page 193
    ...to any margin stock for the ... name and address of the ...from time to time may hold investments in,...result of the operation of this Section shall...increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date...

  • Page 194
    ...times thereafter, of the Secured Obligations plus all costs and expenses including, without limitation, all court costs and attorneys' and paralegals' fees (including allocated costs...of the Guaranteed Obligations, by operation of law or otherwise; (ii) any change in the corporate existence, structure...

  • Page 195
    ...that would otherwise operate as a discharge of any other Guarantor as a matter of law or equity (other than ...herein, as well as any requirement that at any time any action be taken by any Person against any ...a surety under any state law and shall not raise any such law as a defense to its obligations ...

  • Page 196
    ...Loan Guaranty. If acceleration of the time for payment of any of the ... duty to advise any Guarantor of information known to it regarding those circumstances or risks....or committed to prior to the fifth day after receipt of the notice, and... sum payable shall be increased as necessary so that after...

  • Page 197
    ...time to time exceed the Maximum Liability of each Guarantor without impairing this Loan Guaranty or affecting the rights and remedies of the Lenders hereunder, provided that, nothing in this sentence shall be construed to increase... (including such Paying Guarantor) as of such date (without giving ...

  • Page 198
    ... constitute, a "keepwell, support, or other agreement" for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act. [Remainder of page intentionally left blank] 1

  • Page 199
    ...delivered this Agreement as of the date first above written. SSE HOLDINGS, LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer CUSTARD'S FIRST STAND, LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK 18TH STREET NW WASHINGTON D.C. LLC By: /s/ Jeff Uttz...

  • Page 200
    ...Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK ENTERPRISES, LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK ENTERPRISES INTERNATIONAL, LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK FULTON STREET BROOKLYN LLC By: /s/ Jeff...

  • Page 201
    ... SHACK SANSOM STREET PHILADELPHIA LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK WESTBURY LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SSE IP, LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK DOMESTIC LICENSING...

  • Page 202
    ...By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK BOCA RATON LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK 800 F STREET LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK KING OF PRUSSIA LLC By: /s/ Jeff Uttz...

  • Page 203
    ... Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK HARVARD SQUARE BOSTON LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK MIDDLE EAST LLC By: /s/ Jeff Uttz Name: Jeff Uttz Title: Chief Financial Officer SHAKE SHACK RUSSIA LLC By: /s/ Jeff Uttz Name...

  • Page 204
    JPMORGAN CHASE BANK, N.A. , individually as a Lender and as Administrative Agent and Issuing Bank By: /s/ James J. McDonnell Name: James J. McDonnell Title: Authorized Signer Third Amended and Restated Credit Agreement

  • Page 205
    SCHEDULE 2.01 Revolving Commitment Schedule Lender JPMorgan Chase Bank, N.A. Initial Revolving Commitment $20,000,000 Total Revolving Commitment $50,000,000 Total $20,000,000 $50,000,000 Third Amended and Restated Credit Agreement

  • Page 206
    ... " Assignment and Assumption ") is dated as of the Effective Date set forth below and is entered into by...as a Lender) against any Person, whether known or unknown, arising under or in connection ... other claims at law or in equity related to the rights and obligations ... Select as applicable. Exhibit A

  • Page 207
    ... DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more Credit Contacts to whom all syndicate-level information (which may contain material non-public...

  • Page 208
    By: Title: Exhibit A

  • Page 209
    [Consented to and] 4 Accepted: JPMORGAN CHASE BANK, N.A., as Administrative Agent By Title: [Consented to:] 5 SSE HOLDINGS, LLC By Title: 4 5 To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement. To be added only if the consent of the ...

  • Page 210
    ...to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by ...based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking ...

  • Page 211
    ... of a signature page of this Assignment and Assumption by facsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York. Exhibit A

  • Page 212
    ... the application thereof that has occurred since the date of the audited financial statements referred to in Section 5.01 of the Agreement; 4. I hereby certify that no Loan Party has changed (i) its name, (ii) its chief executive office, (iii) principal place of business, (iv) the type of entity it...

  • Page 213
    The foregoing certifications, together with the computations set forth in Schedule I and Schedule II hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of _____. By Name: Title: Exhibit B

  • Page 214
    SCHEDULE I Compliance as of with Provisions of and of the Agreement Exhibit B

  • Page 215
    ...time to time, the " Credit Agreement "). All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement. The New...as if it had executed the Credit Agreement. The New Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all...

  • Page 216
    ... STATE OF NEW YORK. IN WITNESS WHEREOF, the New Subsidiary has caused this Agreement to be duly executed by its authorized officer, and the Administrative Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written...

  • Page 217
    EXHIBIT D FORM OF OPINION [To be provided] Exhibit D

  • Page 218
    ...dated as of January 28, 2015 (as amended, restated, modified or supplemented from time to time... a U.S. trade or business.... certificate changes, the...times furnished each of the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year...

  • Page 219
    IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the _____ day of _____, 20__. [ NAME OF FOREIGN LENDER ] By: _____ Name: Title: Exhibit E-2-1

  • Page 220
    ..., dated as of January 28, 2015 (as amended, restated, modified or supplemented from time to time, ...of its partner's/member's 6. conduct of a U.S. trade or business. The undersigned has furnished the Borrower ...the information provided on this certificate changes, the undersigned shall promptly so ...

  • Page 221
    and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments. [ Signature Page Follows ] Exhibit E-2-2

  • Page 222
    IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the _____ day of _____, 20__. [ NAME OF FOREIGN LENDER ] By: _____ Name: Title: Exhibit E-2-3

  • Page 223
    ...'s conduct of a U.S. trade or business. The undersigned has...changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year...

  • Page 224
    IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the _____ day of _____, 20__. [ NAME OF FOREIGN PARTICIPANT ] By: _____ Name : Title: Exhibit E-3-2

  • Page 225
    ... Credit Agreement, dated as of January 28, 2015 (as amended, restated, modified or supplemented from time to time, the " ...to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code...changes, the undersigned shall Exhibit E-3-1

  • Page 226
    ...(2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments. [ Signature Page Follows...

  • Page 227
    Exhibit E-4-2

  • Page 228
    IN WITNESS WHEREOF, the undersigned has duly executed this certificate on the _____ day of _____, 20__. [ NAME OF FOREIGN PARTICIPANT ] By: _____ Name: Title: Exhibit E-4-3

  • Page 229
    ...LLC Shake Shack Enterprises, LLC Shake Shack Enterprises International, LLC SSE IP, LLC Shake Shack Domestic Licensing LLC Shake Shack Texas Management Company LLC Shake Shack Texas Holding Company LLC Shake Shack Texas Beverage Company LLC State of Incorporation Delaware New York New York Delaware...

  • Page 230
    ... the 2015 Incentive Award Plan and Unit Appreciation Plan of Shake Shack Inc. of our report dated March 27, 2015, with respect to the balance sheet of Shake Shack Inc., included in this Annual Report (Form 10-K) for the period ended December 31, 2014. /s/ Ernst & Young LLP New York, New York March...

  • Page 231
    ... Plan of SSE Holdings, LLC and Subsidiaries of our report dated March 27, 2015, with respect to the consolidated financial statements of SSE Holdings, LLC and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2014. /s/ Ernst & Young LLP New York, New York...

  • Page 232
    ... and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. Date: March 27, 2015 /s/ Randy Garutti Randy Garutti Chief Executive Officer

  • Page 233
    ...summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. Date: March 27, 2015 /s/ Jeff Uttz Jeff Uttz Chief Financial Officer

  • Page 234
    ... contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 27, 2015 /s/ Randy Garutti Randy Garutti Chief Executive Officer and Director Date: March 27, 2015 /s/ Jeff Uttz Jeff Uttz Chief Financial Officer