CHEESECAKE FACTORY INC

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PROPOSAL THREE

Approval of the Second Amendment to the Plan

Summary.

On April 4, 2019 the Board adopted, and, on May 30, 2019, our stockholders approved, The Cheesecake Factory Incorporated Stock Incentive Plan (the “Stock Plan”) and on March 24, 2022 the Board adopted and, on May 19, 2022, our stockholders approved, the First Amendment to the Stock Plan (the “First Amendment”). The maximum number of common shares that can be issued under the Stock Plan as amended by the First Amendment is 7,150,000 plus any shares which, as of the effective date of the Stock Plan were available for issuance under our 2010 Stock Incentive Plan (as amended, the “2010 Stock Plan”) or were subject to awards under the 2010 Stock Plan which are forfeited or lapse unexercised and which following the effective date of the Stock Plan are not issued under the 2010 Stock Plan. The Stock Plan authorizes the Compensation Committee of the Board to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock and restricted stock units structured by the Compensation Committee within parameters set forth in the Stock Plan, for the purpose of providing equity compensation, incentives and rewards for superior performance to our employees, non-employee directors, and consultants and the employees and consultants of our parents, subsidiaries and affiliates.

Our Board believes that a balanced approach to compensation requires both short-term and long-term incentives. We provide long-term incentives in the form of equity compensation, which we believe aligns management’s interests with the interests of our stockholders and fosters an ownership mentality that drives optimal decision-making for the long-term health and profitability of our Company. Equally important, equity compensation is critical to our continuing ability to attract, retain and motivate qualified corporate executives and restaurant management, as well as other restaurant, bakery and corporate employees. Utilizing equity compensation as a part of our total compensation strategy has been important to our past success, and we expect it to be crucial to achieving our long-term growth strategy. However, the current authorized share reserve under the Stock Plan is limited, and we project that the current share reserve will provide only enough shares for us to grant equity compensation in accordance with our total compensation strategy through the third quarter of 2025 based on the current scope and structure of our equity incentive programs and the rate at which we expect to grant awards under the Amended Plan.

Accordingly, on March 26, 2025, our Board adopted the Second Amendment to the Stock Plan (the “Second Amendment”), subject to approval by the stockholders. The Stock Plan as amended by the First Amendment and the Second Amendment is hereinafter referred to as the “Amended Plan”. As more fully described below and if approved by the stockholders, the Second Amendment will:

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Increase the aggregate number of shares authorized for issuance pursuant to the Stock Plan by 6,000,000 shares, from 7,150,000 shares to 13,150,000 shares (the “Share Reserve Increase”).

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The complete text of the Amended Plan is attached as Appendix C to this Proxy Statement. Stockholders are urged to review the Amended Plan, together with the following information, which is qualified in its entirety by reference to Appendix C. If there is any inconsistency between this Proposal 3 and the Amended Plan terms, or if there is any inaccuracy in this Proposal 3, the terms of the Amended Plan shall govern.

Background for the Second Amendment. As of March 24, 2025, the Record Date, the following equity awards were outstanding under the 2010 Stock Plan and the Stock Plan (the Stock Plan is our only active plan under which we can grant equity-based awards):

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(1)

Includes performance-based shares based on the target performance level.

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The share amounts in the above table represent the actual number of shares and do not reflect the Stock Plan fungible share counting methodology which is described below in the “Shares Subject to the Amended Plan” section.

The following table sets forth information regarding stock options granted, time-vested equity awards granted, and performance-based equity awards earned, over each of the last three fiscal years under the Stock Plan and the 2010 Stock Plan.

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(1)

We calculate the burn rate based on the number of equity awards granted for the year divided by the weighted average basic shares outstanding.

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The proposed Second Amendment is intended to, among other things, provide us with a sufficient number of shares to satisfy our equity grant requirements until at least our 2028 annual meeting of stockholders, based on the current stock price and the 2024 grant activity, although this could vary due to changes in stock price, participation rates, forfeiture rates, new hire and promotional activity and other related factors. If we do not receive approval of the proposed Second Amendment at this Annual Meeting, we expect to exhaust the shares we have available for grant before the 2026 annual meeting. As a result, if the Second Amendment is not approved prior to the first fiscal quarter of 2026 we would not be able to make our annual equity grants to executives and other key employees in the first fiscal quarter of 2026. Without the ability to grant equity, we would need to shift our historically successful compensation program from a balanced mix of equity and cash compensation to one that is primarily cash-based. We believe this would be detrimental to our goal of aligning executives and employees’ interests with that of stockholders, as well as negatively impacting our earnings per share growth.

On March 26, 2025, our Board adopted the Second Amendment subject to approval by the stockholders. The Second Amendment will, among other things, increase the aggregate number of shares authorized for issuance pursuant to the Amended Plan by 6,000,000 shares from 7,150,000 shares to 13,150,000 shares. This increase in the number of shares available for grant constitutes approximately 12.1% of our issued and outstanding shares of common stock as of the Record Date.

When adopting the Second Amendment, the Board considered a number of factors, including those set forth below:

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Alignment with our Stockholders. Achieving superior, long-term results for our stockholders remains one of our primary objectives. In order for our employees to think and act like owners, we use equity as a central component of our overall compensation strategy at multiple levels of management within our Company. We believe that stock ownership enhances the alignment of the long-term economic interests of our employees and our stockholders.

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We historically grant our annual equity awards in the first quarter of each fiscal year, which is also when we determine other components of compensation. We make additional grants periodically in connection with corporate management promotions, new hires and restaurant management entry into our Managing Equity Program, the program under which we grant equity awards to our General Managers (“GM”), Executive Kitchen Managers (“EKM”), Area Directors of Operation and Area Kitchen Operations Managers who satisfy all applicable eligibility requirements of the program. As of March 24, 2025, the Record Date, only 597,474 unissued shares were available for future equity grants under the Stock Plan (such share amount does not reflect the Stock Plan fungible share counting methodology which is described below in the “Shares Subject to the Amended Plan” section). We project that between our 2025 Annual Meeting and 2026 annual meeting, awards covering approximately 1,700,000 shares (applying the Stock Plan’s fungible share counting methodology) will be granted under the Stock Plan. If the Second Amendment is not approved by stockholders, we project that we would be unable to grant equity as part of our total compensation strategy by the end of fiscal 2025. As a result, our ability to maintain our total compensation strategy, including adequately planning for annual grants in fiscal 2026 would be jeopardized. If we are unable to continue our current equity compensation program, our ability to align our employees’ long-term economic interests with those of our stockholders will be significantly hampered.

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Attract, Motivate and Retain High Performers. We compete for corporate and restaurant management talent in a variety of geographic and talent markets and strive to maintain compensation programs that are competitive in our industry in order to attract, motivate and retain high performers. Our use of equity compensation is not limited to corporate executives, but also extends to our restaurant management personnel, specifically our GMs and EKMs—the individuals responsible for the day-to-day operations in our restaurants. As of the Record Date, approximately 665 corporate executives, restaurant management, bakery management and corporate support staff members have outstanding equity awards under the Stock Plan. We believe that the equity component of our total compensation package contributes to the retention of these talented employees and helps us maintain one of the lowest turnover rates in our industry for these positions. If we are unable to grant equity as part of our overall compensation strategy due to the lack of adequate share authorization under our Stock Plan, we may not be able to effectively attract and retain the talented individuals we rely on to successfully operate our business.

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Equity vs. Cash Compensation. If the proposed Second Amendment is not approved by stockholders in 2025, we will need to substantially alter our historically successful compensation program which includes equity as well as cash compensation. If we adopt alternative compensation programs that are more cash-based, we believe that the level of cash compensation required to offset the lack of availability of equity grants could result in (i) an increase in our compensation costs, which would be detrimental to our future operating results, and (ii) a decrease in our cash flow, which would reduce the cash available to return to stockholders through such things as dividends and share repurchase plans.

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Balanced Approach to Compensation. We believe that a balanced approach to compensation—using a mix of salaries, performance-based bonus incentives and long-term equity incentives (including performance-based equity)—encourages management to make decisions that favor long-term stability and profitability, rather than short-term results. If the proposed Second Amendment is not approved by stockholders, our ability to continue to retain this balanced approach to compensation would be hampered.

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Burn Rate and Dilution. When determining the number of additional shares to make available for grant under the Stock Plan, the Board evaluated the current number of shares available to grant, our projected need for equity grants over the next four years, our three-year historical average and our most current fiscal year burn rates and the dilutive impact of the proposed share increase.

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Burn rate is the ratio of the number of shares underlying awards granted in a given year to the number of weighted average shares outstanding for the corresponding fiscal year expressed as a percentage. Canceled or forfeited equity compensation awards are excluded from this calculation. Our three-year average burn rate for fiscal years 2024, 2023 and 2022 was 2.1%. Additionally, our one-year burn rate was 2.3%. We estimate that based on our projected share usage for fiscal 2025, our current year burn rate will remain about the same as the prior year. Therefore, the Board determined that our current and projected rates of equity compensation usage are reasonable.

In addition, the Board considered whether the potential dilutive effect to stockholders is reasonable. Dilution is calculated by adding the number of shares subject to outstanding awards (including performance-based shares based on the target performance level) plus shares available to grant plus the proposed additional shares and expressing such sum as a percentage of the total number of diluted outstanding shares. The Board considered that if we were to increase the number of shares available under the Stock Plan by 6,000,000 shares (which itself represents only 12.1% of our total number of outstanding shares as of the Record Date), from 7,150,000 shares to 13,150,000 shares, dilution would