DOW JONES 1500 DEPARTMENT STORE AND APPAREL INDEX
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Department StoresStore Group | | Apparel StoresStore Group |
Dillard’s, Inc. | | Abercrombie & Fitch Co. | Collective Brands, Inc. |
J.C. Penney Corporation, Inc. | Aeropostale, Inc. | Foot Locker, Inc. |
J. C. Penney Company, Inc. | | Aeropostale, Inc. | The GAP, Inc. |
Kohl’s Corporation | | American Eagle Outfitters, Inc. | The GapGenesco Inc. |
Macy’s, Inc. | | Ann Inc. | Genesco,Guess?, Inc. |
Nordstrom, Inc. | | Ascena Retail Group, Inc. | LimitedL Brands, Inc. |
SAKS IncorporatedSears Holdings Corporation | | The Buckle, Inc. | The Men’s Wearhouse, Inc. |
Sears Holdings Corporation | The Cato Corporation | Chico’s FAS, Inc. | Ross Stores, Inc. |
| Chico’s FAS, | The Children’s Place, Inc. | The TJX Companies, Inc. |
| The Children’s Place Retail Stores, | DSW Inc. | Urban Outfitters, Inc. |
| | Express, Inc. | |
Beginning in Fiscal 2012, the following companies are no longer members of the Company’s Performance Group: Guess?, Inc. and Signet Jewelers Limited.
The following companies are new membersincluded in the Performance Group for 2013 were removed from the Performance Group for 2014: SAKS, Incorporated (Hudson Bay) and The Cato Corporation.
Role of Management
The Committee believes that having the input of management is important to the overall effectiveness of our executive compensation program. Our CEO and CHRO regularly attend Committee meetings to participate in the presentation of materials and discussion of management’s point of view regarding compensation issues. Additionally, our CEO and the Committee consult with management from our human resources, finance and legal departments regarding the design and administration of our compensation program for executives and directors.
Our CEO annually reviews and evaluates the performance of the Company’s Performance Group: J.C. Penney, Macy’sother named executive officers and Sears Holdings Corporation.presents recommendations regarding their compensation to the Committee for review, recommendation and approval. The Committee has the discretion to accept, reject or modify these recommendations. Our CEO and management do not participate in executive sessions of the Committee or when executive compensation determinations are made by the Committee and the other independent directors.
Role of Independent Compensation Consultant
The Committee may retain independent compensation consultants as it deems necessary. In establishing executive compensation for fiscal 2014, the Committee retained independent compensation consultant Towers Watson to provide Peer Group compensation and financial information from the public filings of those companies. The Committee also reviewed (as discussed above) non-customized compensation survey data provided by multiple independent compensation consultants.
Compensation Risk Management
Our Board, the Committee and management do not believe that there are any significant risks arising from our compensation policies and practices for our directors and employees that are reasonably likely to have a material adverse effect on us. Our compensation programs are balanced and emphasize pay-for-performance. A significant percentage of compensation is tied to our long-term performance. This provides strong incentives to manage us for the long term, while avoiding excessive risk taking in the short term. Goals and objectives reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Likewise, the elements of compensation are balanced among cash payments and equity awards. With limited exceptions, the Committee retains discretion to adjust compensation for quality of performance and adherence to our values. Our Board, the Committee and management monitor our compensation policies and practices on an ongoing basis to determine whether our risk management objectives are being met with respect to rewarding our employees for performance.
Say-on-Pay Vote Results and Response
At our 2014 annual meeting of shareholders, 96.5% of the votes cast approved the compensation paid to our named executive officers for 2013, as disclosed in last year’s Proxy Statement pursuant to Item 402 of SEC Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion (“Say-on-Pay Vote”). Our Board and the Committee believe that the Say-on-Pay Vote confirmed shareholder support for our executive compensation policies and decisions. Accordingly, our Board and the Committee did not make changes to our executive compensation program as a result of the Say-on-Pay Vote. Although non-binding, our Board and the Committee will continue to consider the results of Say-on-Pay Votes in determining future executive compensation.
Say-on-Frequency Vote Results and Response
At least once every six years, we are required to hold an advisory vote on the frequency of Say-on-Pay Votes (“Say-on-Frequency Votes”). We held our initial Say-on-Frequency Vote at our 2011 annual meeting of shareholders and a majority of the votes were cast in favor of holding annual Say-on-Pay Votes. In line with the preference of our shareholders, our Board determined that it will include the Say-on-Pay Vote in our proxy materials annually until the next Say-on-Frequency Vote, which will occur no later than our 2017 annual meeting of shareholders.
Compensation Recovery / Clawback Policy
Our named executive officers are subject to the compensation recovery or “clawback policy” adopted by our Board. Under the policy, if our Board determines that a named executive officer (or other officer at or above the executive vice president level) has engaged in fraudulent or intentional misconduct, our Board may take a range of actions to remedy the misconduct, prevent its recurrence and impose such discipline on the wrongdoers as would be appropriate. Discipline may vary depending on the facts and circumstances, and may include (1) termination of employment, (2) initiating an action for breach of fiduciary duty, and (3) if the misconduct resulted in a material inaccuracy in our financial statements or performance metrics which affect the executive’s compensation, seeking reimbursement of any portion of any bonus or other incentive-based or equity-based
compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the accurate financial statements or performance metrics. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
The clawback policy also provides that if we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws of the United States, we will recover from current or former executives who received incentive-based compensation (including any type of equity compensation) during the three-year period preceding the date on which we are required to prepare an accounting restatement, based on the erroneous data, the excess of what would have been paid to the executive under the accounting restatement.
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation arrangements or with respect to any termination or change in control arrangements. In order to make whole those named executive officers who we recruit and seek to relocate to our offices in Houston, we may provide a reimbursement of taxes related to certain relocation expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval. We have discontinued the use of stock options and SARs except in extraordinary circumstances.
Compensation Elements
In General
AllWe believe that all of the executive compensation and benefits programs for our Named Executive Officerselements described below meetadvance the primary purposes of our primary purpose to recruitexecutive compensation program and retain the executive talent required to successfully manage and growachievement of our business and to achieve our shortshort-term and long-term business objectives. Beyond that, differentThese compensation elements are designed for different purposes. the following, unique purposes:
Base salary, perquisites and other benefits are designed to attract and retain executives over time;
Annual performance incentive bonuses are designed to focus executives on the business objectives established by our Board for a particular year;
Long-term incentive compensation, which currently consists of equity compensation in the form of performance shares and restricted stock, is designed to focus executives on our long-term success, as reflected in increases to our stock price, growth in our earnings and other elements; and
Termination and change in control compensation and benefits are designed to attract and retain executives as we compete for talented employees in a marketplace where such compensation and benefits are customarily provided. Termination compensation and benefits are designed to ease an executive’s transition due to an unexpected employment termination, while change in control compensation and benefits are designed to encourage executives to remain focused on our business in the event of rumored or actual fundamental corporate changes.
The elementstotal compensation awarded to each named executive officer, as well as each element of compensation, is intended to foster our pay-for performance philosophy and provide a competitive compensation package as compared to executives in similar positions at competitive companies in our industry. Although the Committee does not have any specific formula for our Named Executive Officers are as follows:
· | Base salary, perquisites and other benefits, which are designed to attract and retain executives over time;
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· | Annual incentive (bonus) compensation, which is designed to focus executives on the business objectives established by our Board for a particular year;
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· | Long-term incentive compensation, which consists of stock appreciation rights (“SARs”), restricted stock, performance shares and stock options, is designed to focus executives on our long-term success, as reflected in increases to our stock price, growth in our earnings per share and other elements; and
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· | Termination and change in control compensation and benefits, which are designed to facilitate our ability to attract and retain executives as we compete for talented employees in a marketplace where those types of compensatory protections are commonly offered. Termination compensation and benefits are designed to ease an employee’s transition due to an unexpected employment termination, while change in control compensation and benefits are designed to encourage employees to remain focused on our business in the event of rumored or actual fundamental corporate changes.
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The Committee establishesestablishing the amount and mix of base salary and variable compensation, by referencingit does reference the Peer Group practices for each element.and additional comparative compensation data discussed above as a market check in making these determinations. The Committee does not have any specific formula for this determination. Italso considers factors relating to each Named Executive Officer’snamed executive officer’s individual position, and performance includingversus objectives, professional history and experience, relevant skill set, scope of duties, and meeting pre-established goals. In considering the total package of compensation, the Committee also considers the internal relationship of pay across all executive positions. Total compensation packagespositions as well as each element of compensation (i.e., base salary, annual incentive (bonus) compensation, long-term incentive compensation and perquisites and other benefits) are intended to provide a competitive compensation package as compared to similarly-situated executives at companies in our Peer Group.it establishes compensation.
the closing price on the NYSE of our common stock on that date (the “Fair Market Value”). From time to time, our Board will consider making grants under other special circumstances, such as when recruiting new executive talent, upon the promotion of an executive and to retain key individuals. Any and allAll grants other grants (other than the March grants)annual grants are effective as of the date of the event (e.g., the new hire or promotion date) and are priced at.
Restricted Stock
Restricted stock consists of common stock subject to vesting restrictions tied to continued employment. Restricted stock provides our named executive officers with the Fair Market Valueopportunity to earn full value shares of our common stock. The Committee views restricted stock as an excellent mechanism to align executive interests with those of shareholders by supporting increased share ownership for key executives. Restricted stock is also an effective retention tool based on that date.
Stock Options. Stock options represent the right to purchasevesting schedule which occurs over a share of our common stock at a fixed price (the exercise price) for a specified period of time (the option term). The exercise price is the Fair Market Value of our commonseveral years. Restricted stock on the date of grant. The executive officer benefits only if our stock value appreciates from the grant date through the exercise date. In Fiscal 2011, we did not grant stock options to any executive officers, but we have granted them in past years.
Most of the stock options we have awarded our executive officersgrants may either vest all at the rate of 25% per year over the first four years following the date of grant and some stock options vestonce at the end of three years followinga specified period or vest in pro rata increments over a specified period. Generally, the date of grant. Stock options issued prior to January 29, 2005 will generally expire if not exercised ten years fromCommittee awards restricted stock with a four year pro rata vesting schedule (i.e., 25% per year). If the date of grant while stock options granted after January 29, 2005 will generally expire if not exercised seven years from the date of grant. If an executive officer dies, unvested stock options will immediately vest and the executive officer’s estate will have one year from the date of death to exercise all stock options. If an executive officer’sexecutive’s employment is terminated by reason of retirement or disability (retirement as determined by our Board), unvested stock options will immediately vest and he or she will normally have one year from the date of termination to exercise all stock options. Upon the termination of an executive officer’s employmentbefore vesting for any reason other than death, disability or retirement, or disability,the unvested portion of the restricted stock award will be forfeited. If the executive officerdies, becomes disabled or retires, the restricted stock award will have sixty days from the date of termination to exercise all vested stock options.fully vest. In the event of a Changechange in Control, ascontrol, the restricted stock award will vest.
Performance Shares
Performance shares also provide our named executive officers with the opportunity to earn full value shares of our stock. The number of performance shares that termvest, if any, is defined on page 57determined by our TSR over a three-year performance cycle relative to the Performance Group established at the beginning of the year in which the performance shares are awarded (see the “Overview of 2014 Executive Compensation - Long-Term Incentives” section of this Proxy Statement, all stock options will immediately vest and will be exercisable byCD&A for additional information regarding the TSR calculation in connection with our performance share awards). If the executive’s employment is terminated before the end of the performance cycle for any reason other than death, disability or retirement, the performance share award is forfeited. If the executive officer.dies, becomes disabled or retires during the performance cycle, the executive will receive the target number of performance shares awarded. In anythe event of a change in control, the exercise must occur withintarget number of performance shares awarded will vest. The Committee views performance shares as a critical link between executive compensation and the remaining termcreation of the stock option. Any portion of the stock option not exercised within the remaining term of the stock option will terminate.shareholder value.
Stock Appreciation Rights (“SARs”). A stock appreciation right
Beginning in 2012, the use of SARs was discontinued except in extraordinary circumstances. Some of our named executive officers hold SARs granted prior to 2012, as is similar to a stock optionindicated in that it allowscompensation tables following this CD&A.
SARs allow the recipientexecutive to benefit from any appreciation in our stock price from the grant date through the exercise date. However, with a SAR,Upon exercise, the executive officer is not required to actually purchase all of the exercised shares (as with a stock option), but rather he or she just receives thean amount of our common shares equal to the increase in our stock price between the form of shares of our stock. SARs may not be settled in cash. The 2001grant date and 2008 Plans provide thatthe exercise date. SARs may not be granted at less than 100% of the Fair Market Valuefair market value of our common stock on the date of grant.grant date. SARs may not be settled in cash.
SARs have a seven-year term and vest either (i)(1) one-fourth (25%) on each of the first second, third and fourthfour anniversaries of the grant date or (2) one-half on the second anniversary of the grant or (ii) one-half (50%) on the second yeardate and one-fourth (25%) on each of the third and fourth anniversaries of the date of the grant.grant date. If an executive officer dies, unvested SARs will immediately vest and the executive officer’sexecutive’s estate will have one year from the date of death to exercise all SARs. If an executive officer’s employment is terminated by reason of retirementbecomes disabled or disability (retirement as determined by our Board),retires, unvested SARs will immediately vest and he or shethe executive will normally have one year from the date of termination to exercise all SARs. Upon the termination of an executive officer’sexecutive’s employment for reason other than death, retirementdisability or disability,retirement, the executive officer will have sixty60 days from the date of termination to exercise all vested SARs. In the event of a Changechange in Control,control, all SARs will immediately vest and will be exercisable by the executive officer.executive. In any event, the exercise must occur within the remaining term of the SARs. Any portion of the SARs not exercised within the remaining term of the SARs will terminate.
Restricted Stock. Restricted Stock is a share of our common stock that has vesting restrictions tied to continued employment. Restricted Stock provides executive officers with the opportunity to earn full value shares of our common stock. The Committee views Restricted Stock as an excellent mechanism to align executive interests with those of shareholders by supporting increased share ownership for key executives. Restricted Stock is also an effective employee retention tool based on the vesting schedule which occurs over a period of several years. Depending on the agreement, Restricted Stock grants may either cliff-vest, which means they vest all at once at the end of a specified vesting period, or step vest, which means they vest in pro rata increments over a specified vesting period. The Committee’s preferred vesting schedule is a four year pro-rata vesting (25% per year) structure. If the executive officer leaves for any reason other than death, retirement (as determined by our Board) or disability before vesting, the unvested portion of the Restricted Stock award will be forfeited. If the executive officer dies, becomes disabled or retires, the Restricted Stock award will fully vest. In the event of a Change in Control, the restricted
stock award will immediately vest and will be payable to the executive officer within thirty days of the Change in Control.
Performance Shares. As with Restricted Stock, Performance Shares provide executive officers with the opportunity to earn full value shares of our stock. However, a three-year performance cycle (the “Performance Cycle”) is established at the beginning of each grant and the amount of the award is determined by our performance on total shareholder return relative to the Performance Group over the Performance Cycle. If an executive officer’s employment is terminated for any reason other than death, retirement or disability before the end of the Performance Cycle, the Performance Share award is forfeited. If an executive officer’s employment is terminated due to death, retirement or disability during the Performance Cycle, he or she will receive the target number of shares set forth in his or her Performance Share Award Agreement within thirty days of the triggering event. In the event of a Change in Control, the Target Number of Performance Shares will immediately vest and will be payable to the executive officer within thirty days of the Change in Control. The Committee views Performance Shares as a critical link between management compensation accumulation and the creation of shareholder value.
BenefitsBase Salaries
Based on performance in the prior year and competitive market data, the 2014 base salaries of our named executive officers were increased by 2%, except for Mr. Shein who received an 8% increase to bring him more in line with our compensation Peer Group (as described later in this CD&A).
Annual Performance Incentive Bonuses
The opportunity to earn a performance incentive bonus in 2014 was based on two components. First, a pre-tax earnings performance component was weighted to determine two-thirds of the amount earned. Second, a relative comparable sales performance component was weighted to determine one-third of the amount earned. The pre-tax earnings component was based on our achievement relative to an earnings growth target established by the Committee and the other independent directors, after consultation with management, at the beginning of 2014. The comparable sales component was based on the year-over-year change in our comparable sales results in 2014 as compared to the 2014 Performance Group (as described later in this CD&A). “Comparable sales” means sales in stores open for at least 14 full months prior to the applicable reporting period and includes direct-to-consumer sales.
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◦ | Target. For 2014, our pre-tax earnings target was $65.3 million from continuing operations, an increase of $24.7 million or 60.8%, as compared to our 2013 actual pre-tax earnings from continuing operations which was impacted by expenses associated with the South Hill Consolidation. The comparable sales component was a 50th percentile ranking among the Performance Group for 2014 comparable sales. A threshold level of performance must be achieved to earn a bonus under each component, and a maximum level of performance limits the bonus that may be earned under each component. |
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◦ | Results. Our performance in 2014 resulted in pre-tax earnings from continuing operations of $60.7 million, which was an achievement of 93.0% of our target. For 2014, our comparable sales increased 1.4%, which yielded a 61.5 percentile ranking among the Performance Group. |
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◦ | Bonus Earned. While we achieved very positive comparable sales results and strong returns, we did not fully meet the pre-tax earnings bonus targets set for 2014. Based on these results, our named executive officers earned performance incentive bonuses for 2014 at 62.0% of target. |
Long-Term Incentives
For 2014, the long-term incentive program for our named executive officers consisted of equity awards in the form of performance shares and restricted stock. Our long-term incentive program is designed to reward sustained, multi-year performance and retain executives for the duration of each equity award. Performance shares may be earned based on our TSR over a three-year period versus the Performance Group established at the beginning of that three-year period. For purposes of the performance shares, we measure TSR for our common shares and the publicly-traded shares of the Performance Group companies by comparing the change in the average closing price of the shares during all trading days in our first fiscal month of the performance period and the average closing price of the shares during all trading days in our final fiscal month of the performance period, including the reinvestment of dividends. For the 2012 through 2014 performance cycle, 130.8% of the target number of shares was earned. Restricted stock will generally vest ratably over a four year period.
Significant Executive Compensation Policies and Practices
Stock Ownership and Retention Policy
Our named executive officers are subject to a stock ownership and retention policy that requires each executive to acquire and maintain a minimum ownership stake in our common shares (see the “Stock Ownership by Executive Officers” section of this Proxy Statement).
Hedging Prohibited
We prohibit hedging or monetization transactions by our directors, named executive officers and other employees with respect to our securities (see the “Hedging Prohibited” section of this Proxy Statement).
Pledging Prohibited
We prohibit our directors, named executive officers and other employees from pledging of our securities as collateral for a loan (see the “Pledging Prohibited” section of this Proxy Statement).
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation arrangements or with respect to any termination or change in control arrangements. In order to make whole those named executive officers whom we recruit and seek to relocate to our offices in Houston, we may provide a reimbursement of taxes related to certain relocation expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval.
Limited Perquisites
Our executive compensation program offers limited perquisites that we believe are reasonable and customary in our industry.
The Committee supportsClawback Policy
Our named executive officers are subject to a compensation philosophyrecovery or “clawback policy” (see the “Compensation Recovery / Clawback Policy” section in this CD&A).
Say-on-Pay Votes
At our 2014 annual meeting of shareholders, 96.5% of the votes cast approved the compensation paid to our named executive officers for 2013. Our pay-for-performance alignment remains strong. Accordingly, our Board recommends that shareholders vote FOR the compensation paid to our named executive officers in 2014 at our 2015 annual meeting of shareholders (see Item 3 in this Proxy Statement).
Compensation Objectives and Principles
The objectives of our executive compensation program are to:
Enable us to attract, motivate and retain the executive talent required to successfully drive and grow our business and to achieve our short-term and long-term business objectives;
Maximize the long-term commitment of our executive officers to our success by providing compensation elements that is more heavily weighted towardalign their interests with the interests of our shareholders by linking compensation elements directly to financial metrics that the Committee believes influence the creation of long-term shareholder value; and
Reward our executive officers upon the achievement of short-term and long-term business objectives and enhanced shareholder value.
The principles of our executive compensation program are as follows:
Emphasize pay-for-performance and encourage retention of those executive officers who enhance our performance;
Maintain an appropriate balance between base salary and annual and long-term performance-basedincentive compensation;
Link incentive compensation than toward benefits and perquisites.to the achievement of goals set in advance by the Committee;
The perquisites and other benefits we provide our Named Executive Officers are summarized in the 2011 Summary Compensation Table, the 2011 All Other Compensation Table and the 2011 Nonqualified Deferred Compensation Table, including footnotes, in this Proxy Statement. In addition, we provide our executive officers with core benefits available to all full-time employees (e.g., coverage for medical, dental, prescription drugs, basic life insuranceEvaluate CEO performance against annual and long-term disability coverage)performance goals on an absolute basis as well as a supplemental Executive Officer Medical Plan. The supplemental Executive Officer Medical Plan is an insured plan which provides current officers atrelative to the Executive Vice President level and above reimbursement for medical and dental out of pocket expenses that are not covered by the underlying medical plan. Typical payments are for deductibles, co-pays and similar expenses.
Retirement Plans
We do not provide a qualified retirement program for our Named Executive Officers nor is there a supplemental executive retirement plan or any other retirement plan available to them other than our 401(k) Plan and our Nonqualified Deferred Compensation Plan. Please see the 2011 Pension Benefits Table on page 48 and “Retirement Benefits” beginning on page 48 of this Proxy Statement.
Termination and Change In Control Arrangements
In General. Pursuant to their employment agreements, our Named Executive Officers are entitled to compensation and other benefits if their employment terminates or if there is a Change in Control, as described beginning on page 49 of this Proxy Statement under “Potential Payments upon Termination or Change In Control”. Termination and Change in Control compensation and other benefits are established at the time a Named Executive Officer signs an employment agreement.
Termination. Our Named Executive Officers are entitled to compensation and other benefits in an amount the Committee believes is appropriate, taking into account the time it is expected to take a terminated employee to find another job. Compensation and other benefits upon termination are intended to ease the consequences to an employee of an unexpected termination of employment. We benefit in that the employment agreements contain restrictive covenants that continue for a period of time following termination.
Change in Control-In General. The Committee and our Board recognize the importance to us and our shareholders of avoiding the distraction and loss of key management personnel that may occur in connection with any rumored, threatened or actual Change in Control of the Company. To that end, the Committee and our Board believe that properly designed Change in Control provisions in our Named Executive Officer’s employment agreements protect shareholder interests by enhancing executive focus during rumored or actual Change in Control activity through:
· | incentives to remain with us despite uncertainties while a transaction is under consideration or pending; |
· | assurances of severance and other benefits in the event of termination; and |
· | immediate vesting of equity elements of total compensation after a Change in Control. |
To diminish the potential distraction due to personal uncertainties and risks that inevitably arise when a Change in Control is rumored, threatened or pending, the Committee and our Board have provided our Named Executive Officers with what the Committee and our Board determined to be competitive Change in Control compensation and benefit provisions in their employment agreements. The employment agreements of our Named Executive Officers provide for specific enhanced payments and benefits in the event of a Change in Control.
Change in Control-Double Trigger. The enhanced termination benefits payable in connection with a Change in Control require a “double trigger” which means that (i) if a Change in Control occurs, and (ii) during the period beginning six (6) months before the Change in Control and ending twenty-four (24) months after the Change in Control, (a) an executive officer’s employment agreement is terminated by us or our successor without good cause, or (b) the executive officer’s employment agreement is terminated by the executive officer with good reason, the executive officer will be eligible for the Change in Control compensation and benefits. A double trigger was selected in order to enhance the likelihood that an executive officer will remain with us after a Change in Control, since the executive officer will not receive the change in control compensation payments and benefits if he or she voluntarily resigns after the Change in Control event. Thus, the executive officer is protected from actual or constructive dismissal for twenty-four months after a Change in Control, while any new controlling party or group is better able to retain the services of a key corporate asset.
Committee Actions in Fiscal 2011 Concerning Named Executive Officer Compensation
In General
At its March 2011 meeting, the Committee reviewed the market data and analyses provided by Hay Group and determined that our overall compensation program is reasonably competitive and consistent with the Committee’s compensation objectives. In determining compensation for our Named Executive Officers for Fiscal 2011, the Committee considered many factors, including:
· | our Board’s judgment and satisfaction with the Company’s performance; |
· | assessment of the individual executive officer’s performance; |
· | the nature and scope of the executive officer’s responsibilities and his effectiveness in leading our initiatives to successfully increase customer satisfaction, enhance our growth, and propose, implement and ensure compliance with our policies; |
· | desired competitive positioning of compensation; |
· | future potential for the executive officer; and |
The Committee also considered the compensation practices and performancesperformance of our Peer Group and our Performance Group.Group;
Base Salaries
Based on their performance during Fiscal 2010, and with input from Hay Group with respect to market salary dataAlign the interests of our Peer Group,executive officers with those of our shareholders;
Eliminate payouts under annual and long-term performance-based incentives if threshold performance is not achieved;
Convene an executive session (without management) of the Committee recommended,at least once annually;
Recuse our CEO from deliberations and voting regarding his or her compensation;
Consult our CEO, on an advisory basis only, on the Board approved,compensation awarded to our other named executive officers;
Conduct a thorough annual review and analysis of the following base salaries for our Named Executive Officers for Fiscal 2011. The base salaries were adjusted effective April 1, 2011.
recent compensation history of each named executive officer and all forms of compensation to which the executive may be entitled; andMake recommendations on named executive officer compensation to the independent directors after the Committee completes a thorough review and analysis.
FISCAL 2011 BASE SALARIES
Executive | 2010 Base Salary | 2011 Base Salary | Base Salary Increase |
Mr. Hall | $800,000 | $850,000 | 6.25% |
Mr. Shein | $350,000 | $350,000 | (1) |
Mr. Maloney | $550,000 | $561,000 | 2.00% |
Mr. Record | $550,000 | $572,000 | 4.00% |
Mr. Hunter | $375,000 | $400,000 | 6.67% |
(1) | As Mr. Shein joined the Company on January 10, 2011, his base salary was not adjusted. |
Key Considerations in Setting Compensation
Based on Hay Group’s analysis, it was determinedthese objectives and principles, the Committee has structured our executive compensation program to motivate our named executive officers to achieve the business goals set by our Board and to reward them for achieving those goals. The following is a summary of key considerations affecting the setting of compensation for our named executive officers by the Committee. In the “Executive Compensation for 2014” section of this CD&A, we describe additional considerations that the base salariesCommittee evaluated in establishing the compensation for our named executive officers in 2014.
Significance of Overall Corporate Performance
The Committee primarily evaluates our named executive officers’ contributions to our overall performance rather than focusing only on their individual function. The Committee believes that each named executive officer shares the responsibility to support our goals and performance as key members of our Named Executive Officers are generally at or belowleadership team. While this approach influences all of the medianCommittee’s compensation decisions, it has the biggest impact on the long-term incentive awards made annually.
Evaluation of Individual Performance
With the exception of the annual performance incentive bonuses and performance share awards, both of which depend on achieving specific quantitative financial performance objectives, the Committee does not use formulas in determining the amount and mix of compensation. The Committee exercises its discretion and judgment to evaluate a broad range of both quantitative and qualitative factors, including reliability in delivering financial and growth targets, performance in the context
of the economic environment relative to other companies, a track record of integrity, good judgment, the vision and ability to create further growth and the ability to lead others. For long-term incentive awards, the Committee primarily considers a named executive officer’s potential for future successful performance and leadership as part of our Peer Group.
Establishment of 2011 Senior Executive Incentive Bonus Plan
At its March 2011 meeting,executive management team, taking into account past performance as a key indicator. The Committee may also take into account extraordinary, unusual or non-recurring items anticipated or incurred by us that the Committee recommended,deems appropriate in determining compensation.
Pay-for-Performance
Aligning executive compensation with performance is a key principle of our executive compensation philosophy, and incentive compensation is designed to provide the Board approved,opportunity to reward executives if we exceed our targeted performance levels. We believe our executive compensation program effectively implements this principle by tying the parameters forvalue of bonus opportunities and equity awards under the 2011 Senior Executive Incentive Bonus Plan (the “2011 Bonus Plan”)program to our financial and approvedstock price performance.
The key metrics we currently use to evaluate the annual cashperformance of our named executive officers are pre-tax earnings, relative comparable sales and relative TSR (as calculated under the terms of our performance share awards). We believe our pre-tax earnings is an important financial measure as it reflects our efforts to increase revenue and control our expenses. Relative comparable sales is important to provide a barometer of our top line performance against our competition. Using relative TSR is important to gauge the return delivered to our shareholders in comparison to our competition. In addition, the value of the incentive opportunities for the Named Executive Officers for the Company’s 2011 fiscal year as set forthcompensation that we award in the table below. form of equity is significantly impacted by the price of our stock.
The methodologycharts that follow show the 2014 variable compensation (i.e., compensation that is impacted by our performance and/or the value of our common shares) for Mr. Glazer and measurement parametersour other named executive officers as a percentage of their respective target total compensation (base salary, annual performance incentive bonus opportunity at target, grant date fair value of long-term incentive equity awards at target, and other compensation and benefits). As the charts illustrate, 79% of Mr. Glazer’s and 69% of our other named executive officers’ compensation was dependent on our financial or stock price performance.
Mix of Compensation Elements
The Committee strives to provide an appropriate mix of compensation elements, including finding a balance between current and long-term compensation and between cash and equity incentive compensation. Cash payments primarily reward more recent performance while equity awards encourage our named executive officers to continue to deliver results over the long-term and also serve as a retention tool. The Committee believes that executive compensation should be appropriately weighted on both our long-term and short-term performance.
Use of Tally Sheets
The Committee annually reviews tally sheets that present for each named executive officer all elements of compensation, total annual compensation and total deferred compensation. The Committee also reviews the 2011 Bonus Plan were unchangedtotal benefits to which the named executive officer would be entitled upon various termination events. The Committee uses the tally sheets to ensure that our compensation is reasonable and competitive. The Committee also uses the tally sheets to evaluate the past performance of our named executive officers and to determine if our compensation strategy achieved our goals in the past and to align executive compensation with our short-term and long-term goals.
Comparative Compensation Data; 2014 Peer Group
In making compensation decisions, the Committee considers executive compensation data from a peer group of publicly-traded retailers listed below (“Peer Group”). The Peer Group provides direct incumbent information on a job title match basis (e.g., CEO, CFO, etc.) for key competitors. The companies in the 2010 Bonus Plan. However, the weightingPeer Group generally consist of U.S. based, publicly-traded apparel and accessories retailers with annual sales between one-half and two times our annual sales with which we compete for
business and talent. All of the Pre-Tax Earnings Parameter was decreased from 75% undercompanies in the 2010 Bonus Plan to 66 2/3rd percent under the 2011 Bonus Plan and the Comparable Store Sales Parameter was increased from 25% under the 2010 Bonus Plan to 33 1/3rd percent under the 2011 Bonus Plan.
2011 BONUS PLAN PARAMETERS
While the methodology and measurement parameters for the 2011 Bonus Plan were unchanged from the 2010 Bonus Plan except for the weighting described above, the Pre-Tax Earnings Target Level for the Financial Plan was increased from $57,000,000 under the 2010 Bonus Plan to $71,200,000 under the 2011 Bonus Plan (an increasePeer Group meet a majority of 20.9% over actual Fiscal 2010 Pre-Tax Earnings) to provide incentive to our management team in viewthose criteria. The members of the improving economy. The 2011 Bonus Plan design was as follows:
Pre-Tax Earnings Parameter
This parameter of the bonus formula is weighted to determine two-thirds (66 2/3rd percent) of the year-end bonus amount earned. Actual bonus payment will be prorated for Pre-Tax Earnings results between the Maximum and Threshold levels.
| Fiscal 2011
Pre-Tax Earnings
| |
Target bonus amount will be paid by achieving Fiscal 2011 Pre-Tax Earnings at an increase of 20.9% vs. actual Fiscal 2010 Pre-Tax Earnings. | $71,200,000 | Target Level |
Maximum bonus amount will be paid at 2 times Target by achieving Fiscal 2011 Pre-Tax Earnings at 117% of Target Level, an increase of 41.4% vs. actual Fiscal 2010 Pre-Tax Earnings. | $83,300,000 | 17% Above Target |
Minimum (Threshold) bonus amount will be paid at ¼ of Target at Fiscal 2011 Pre-Tax Earnings of 83% of Target Level, an increase of 0.4% vs. actual Fiscal 2010 Pre-Tax Earnings. | $59,100,00 | 17% Below Target |
Comparable Store Sales Parameter
This parameter of the bonus formula is weighted to determine one-third (33 1/3rd percent) of the year-end bonus amount earned. Measurement is based on fiscal year-end comparable store sales percent change, compared to our Performance Group. Notwithstanding, in order to earn any portion of the Comparable Store Sales bonus
payment, the Company must achieve 75% of the 2011 Pre-Tax Earnings Target level ($53,400,000). Actual bonus payment will be prorated for results between the Maximum and Threshold levels.
2014 Peer Group were:
Target amount will be paid if our ranking for total year-end comparable store sales change is at the fiftieth percentile (or middle mark) among our Performance Group.
|
Maximum amount (2 times Target) will be paid if our ranking of total year-end comparable store sales change is at the one-hundredth percentile (or highest rank) among our Performance Group.
| | |
Threshold bonus amount (1/4Abercrombie & Fitch Co.
| Chico’s FAS, Inc. | New York & Company, Inc. |
Aeropostale, Inc. | The Children’s Place Retail Stores, Inc. | Pacific Sunwear of Target) will be paid if our ranking of total year-end comparable store sales change is at the twenty-fifth percentile among our Performance Group.California, Inc. |
Potential 2011 Bonus Plan Awards
Depending on our Pre-Tax Earnings and our ranking among our Performance Group with respect to total year-end Comparable Store Sales, our Named Executive Officers had the opportunity to earn bonuses under the 2011 Bonus Plan as follows, with actual bonus payment to be prorated for results between the Maximum and Threshold levels:
POTENTIAL 2011 BONUS PLAN AWARDS
ExecutiveAmerican Eagle Outfitters, Inc. | Christopher & Banks Corporation | Base Salary($) Stein Mart, Inc. |
Ann Inc. | DSW Inc. | Urban Outfitters, Inc. |
Ascena Retail Group, Inc. | Bonus Range % (1)
(Threshold/Target/Maximum)
| | | Bonus Range $ (2)
(Threshold/Target/Maximum) Express, Inc. | |
Mr. HallThe Bon-Ton Stores, Inc. | | | 850,000 | | | 25-100-200 | | | | 212,500-850,000-1,700,000 | |
Mr. Shein | | | 350,000 | | | 12.5-50-100 | | | | 43,750-175,000-350,000 | |
Mr. Maloney | | | 561,000 | | | 17.5-70-140 | | | | 98,175-392,700-785,400 | |
Mr. Record | | | 572,000 | | | 17.5-70-140 | | | | 100,100-400,400-800,800 | |
Mr. Hunter | | | 400,000 | | | 12.5-50-100 | | | | 50,000-200,000-400,000The Men’s Wearhouse, Inc. | |
_________________________
(1) | Percentage of base salary.
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(2) | Amount to be paid depends upon the extent to which the Company achieves Fiscal 2011 Pre-Tax Earnings and Comparable Store Sales parameters established by the Board. Actual bonus payments will be prorated for Fiscal 2011 Pre-Tax Earnings and Comparable Store Sales results between the Threshold and Maximum levels. |
Please see “Committee Actions in 2012 Concerning Named Executive Officer Compensation –2011 Bonus Plan Awards” on page 37 of this Proxy Statement.
Long-Term Incentive Compensation Awards
At its March 2011 meeting,The Peer Group is reviewed annually and updated as the Committee (i) reviewed the final Total Shareholder Return (“TSR”) results for the three year performance cycle that ended on January 29, 2011 for the March 2008 Performance Based Restricted Share Grants for Senior Executives, (ii) discussed the attainment level based on our TSR results versus our Performance Group, (iii) reviewed the current standingdeems appropriate taking into consideration changes in business conditions, changes in revenues, mergers and attainment levels for LTI grants made in March 2009acquisitions and March 2010 basedother circumstances bearing on the TSR matrixavailability of compensation data and/or comparability of other companies. After the annual review, the following companies included in the 2013 Peer Group were removed from the 2014 Peer Group: The Cato Corporation; Charming Shoppes, Inc.; Collective Brands, Inc.; Hot Topic, Inc.; and The Talbots, Inc. The following companies were added to the Peer Group for 2014: Aeropostale, Inc.; The Bon-Ton Stores, Inc.; DSW Inc.; and Express, Inc.
In addition to the Peer Group analysis, the Committee considers data from the Towers Watson Compensation Data Bank (CDB) Retail/Wholesale Services Executive Database and the Hay Group Retail Executive and Management Total Remuneration Report. This information from Towers Watson and Hay Group is non-customized compensation data provided by job within the broader retail industry, including retailers with which we compete for executive talent. The Committee consults all three sets of information, because the Towers Watson and Hay Group data includes compensation information on more executives, including executives who are not included in publicly-available documents. The broader comparator group provides a more extensive basis on which to compare the compensation of our Performance Group, (iv) discussed individual LTI grantsnamed executive officers, particularly for senior managementthose whose responsibilities, experience and other factors are not directly comparable to those executives recommended by management, (v) reviewed and discussed proposed SAR equity grants for mid-management executives, (vi) reviewed estimated shares needed for 2011 awards, and (vii) reviewed shares available for future grants. To determineincluded in the size of each equity award, the Committee reviewed market data, prior years’ LTI decisions, the performancepublicly-available reports of the Named Executive Officers and recommendations from HayPeer Group.
Based upon the recommendation of the Committee and the approval of the Board, the following long-term equity incentive (“LTI”) awards were granted to the Named Executive Officers on March 29, 2011 in consideration of their 2010 performance and as incentive for their future performance:
2011 LTI AWARDS
Executive | Target Performance Shares (1) | SARs (2) | Restricted Stock (3) |
Mr. Hall | 22,500 | 68,500 | 36,000 |
Mr. Shein | 2,900 | 0 | 4,700 |
Mr. Maloney | 7,250 | 22,250 | 11,700 |
Mr. Record | 7,250 | 22,250 | 11,700 |
Mr. Hunter | 2,900 | 8,850 | 10,008 |
(1) | The Performance Shares cliff vest after a three-year measurement performance cycle (the “Performance Cycle”) which began on the first day of our 2011 Fiscal Year (January 30, 2011) and ends on the last day of our 2013 Fiscal Year (February 1, 2014). The number of Performance Shares earned will be based on our total shareholder return relative to the “Performance Group”. The number of shares reflected in the table above are the “Target Shares”, which means the number of shares of the Company’s common stock the Named Executive Officer will earn (and receive) at the end of the Performance Cycle if the Company’s results are in the middle (fiftieth percentile) of the Performance Group. On a sliding scale, the shares earned can vary as follows: |
Percentile Ranking of Performance Group | Performance Shares Earned * |
100% | 200% |
75% | 150% |
50% | 100% |
25% | 25% |
< 25% | 0% |
| * As a percentage of Target Performance Shares shown in the 2011 LTI Awards table above.
|
(2) | The SARs have a grant price of $18.84 (the closing price of our common stock on March 29, 2011) and will vest on a pro rata basis over four years (i.e., 25% per year).
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(3) | In general, the Restricted Stock will vest on a pro rata basis over four years (i.e., 25% per year). However, 5,308 shares of the Restricted Stock granted Mr. Hunter will cliff vest in three years (i.e., on March 29, 2014).
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Performance Shares Earned in 2011 Upon Completion of the 2008 Performance Cycle
As the performance criteria for the three-year Performance Cycle that began on the first day of our 2008 Fiscal Year (February 3, 2008) and ended on the last day of our 2010 Fiscal Year (January 29, 2011) (the “2008 Performance Cycle”) were met, the Named Executive Officers who were granted Performance Shares at the beginning of the 2008 Performance Cycle were issued shares of our common stock at 114.3% attainment of the Target Shares as follows:
| Target Shares | Performance | Payout |
Executive (1) | Target # Shares | Target $ Shares | Attainment | # Shares Earned | $ Shares Earned |
Mr. Hall | 26,000 | $486,720 | | 29,718 | $556,321 |
Mr. Record | 15,000 | $280,800 | | 17,145 | $320,954 |
____________________________
(1) | Messrs. Shein, Maloney and Hunter were not employed by the Company at the beginning of the 2008 Performance Cycle; therefore, they were not entitled to receive Performance Shares as a result of the completion of the 2008 Performance Cycle. |
Significant Events Related to the Employment of our Named Executive Officers
Entry Into Employment Agreements
On January 10, 2011, we entered into an Employment Agreement with Mr. Shein for which he received a lump sum payment of $200,000. On April 11, 2011, we entered into Employment Agreements with Messrs. Hall, Record, Maloney and Hunter for which they received shares of Restricted Stock, with a three-year pro rata vesting period, as follows: Mr. Hall (50,000), Mr. Record (30,000), Mr. Maloney (30,000) and Mr. Hunter (8,000). A brief description of the terms and conditions of the Employment Agreements is found under “Executive Officer Employment Agreements” on page 37 of this Proxy Statement.
Vesting Period for Restricted Stock
In prior years Restricted Stock generally cliff vested at the end of three years. However, in their January 2011 meetings, the Committee and the Board decided that beginning with grants in Fiscal 2011 and subject to the discretion of the Board, Restricted Stock will generally vest pro-rata over a four year period (i.e., 25% per year).
Discontinuation of SARS
In their January 2012 meetings, the Committee and the Board decided to discontinue the use of SARs from the equity plan mix except in extraordinary circumstances. The Committee and the Board’s target structure will be to award 45% of a given equity grant in Restricted Stock with a four year pro-rata vesting (i.e., 25% per year) and the remaining 55% in Performance Stock based on the Performance Group then in place. Hay Group, the Committee’s compensation consultant, will collect competitive stock grant (dollar value) information to guide the Committee and the Board with respect to the magnitude of the equity award that should be granted to the Named Executive Officers.
Senior Executive Incentive Bonus Plan
In their January 2012 meetings, the Committee and the Board decided that, unlike in Fiscal 2011 and prior years, beginning in Fiscal 2012 the Named Executive Officers and other key senior executives will be tasked with specific business goals, which will account for a portion of their bonus opportunity within the Senior Executive Incentive Bonus Plan. Historically, a cash bonus under a Senior Executive Incentive Bonus Plan was awarded based only on the achievement of the full year Pre-Tax Earnings Targets and Comparable Store Sales. The Committee and the Board believe these parameters are important and that system should remain for at least half of the cash bonus earnings opportunity for the Named Executive Officers and other members of senior management. However, the Committee and the Board also believe that they can focus our executive officers and other members of senior management on accomplishing key business objectives within the given fiscal year which can support increased profits and shareholder return over a period of years.
Adoption of NewIncentive-Based Compensation Benchmarking; 2014 Performance Group
In January 2012,To measure our Board adopted a new Performance Group for the Company’s 2012 fiscal year to measure the Company’s relative performance with respect to comparable store sales for purposes of the Senior Executive Incentive Bonus Plan and the Company’s total shareholder return for the purpose of awarding Performance Shares. Please see “Key Considerations in Setting Compensation-Adoption of New Performance Group” on page 25 of this Proxy Statement.
Resignation of Richard Maloney
On January 30, 2012, Richard Maloney, our Chief Merchandising Officer, resigned from the Company to pursue other interests. Mr. Maloney joined the Company in October 2008 and served as Chief Merchandising Officer since February 2010. On February 21, 2012, we entered into a Separation Agreement with Mr. Maloney. The approximate value of the transaction is $1,431,000. We intend to file a copy of the Separation Agreement as an Exhibit to our Form 10-Q for the period ending April 28, 2012. Please see “Transactions with Related Persons-Richard Maloney” on page 18 of this Proxy Statement.
Resignation of Andrew Hall
On March 28, 2012, Andrew Hall, our President and Chief Executive Officer, resigned from the Company to pursue other interests. Mr. Hall joined the Company in February 2006 as President and Chief Operating Officer and
assumed the position of President and Chief Executive Officer in November 2008. Please see “Transactions with Related Persons-Andrew Hall” on page 18 of this Proxy Statement.
Appointment of Michael Glazer as President and Chief Executive Officer
On March 28, 2012, Michael Glazer, a Director of the Company, was appointed to the position of President and Chief Executive Officer on an interim basis. Biographical information concerning Mr. Glazer is provided in “Information Relating to Directors and Director Nominees-Board Composition” beginning on page 3 of this Proxy Statement. Mr. Glazer’s base salary is $850,000, which was Mr. Hall’s base salary at the time of his resignation.
Committee Actions in 2012 Concerning Named Executive Officer Compensation
Fiscal 2011 Overview
The Company’s strategy for Fiscal 2011 was to build on its Fiscal 2010 achievements and to pursue meaningful sales and earnings growth. Total sales for the annual performance incentive bonus opportunities and our TSR for performance share awards, our Board and the Committee selected a group of 25 department store and apparel store retailers (“Performance Group”) that generally possess attributes similar to us, including market capitalization, annual sales, merchandise assortments, target customer, geography of store base and size of markets in which they operate. The companies comprising the Performance Group were included in the Dow Jones general retailers sector at the beginning of 2014. However, because the Dow Jones general retailers sector was comprised of 80 companies covering a broad range of subsectors within the retail industry, our Board and the Committee decided to include only department store and apparel store retailers from the Dow Jones apparel retailers and broadline retailers subsectors. Due to the fact that the companies within the Dow Jones general retailers sector are changed from time to time by Dow Jones, the companies included at the beginning of 2014 will be maintained as a fixed listing of companies for the duration of the applicable performance period (i.e., one year for performance incentive bonuses and three years for performance share awards).
The Performance Group for 2014 was as follows:
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| | | |
Department Store Group | | Apparel Store Group |
Dillard’s, Inc. | | Abercrombie & Fitch Co. | Foot Locker, Inc. |
J. C. Penney Company, Inc. | | Aeropostale, Inc. | The GAP, Inc. |
Kohl’s Corporation | | American Eagle Outfitters, Inc. | Genesco Inc. |
Macy’s, Inc. | | Ann Inc. | Guess?, Inc. |
Nordstrom, Inc. | | Ascena Retail Group, Inc. | L Brands, Inc. |
Sears Holdings Corporation | | The Buckle, Inc. | The Men’s Wearhouse, Inc. |
| | Chico’s FAS, Inc. | Ross Stores, Inc. |
| | The Children’s Place, Inc. | The TJX Companies, Inc. |
| | DSW Inc. | Urban Outfitters, Inc. |
| | Express, Inc. | |
The following companies included in the Performance Group for 2013 were removed from the Performance Group for 2014: SAKS, Incorporated (Hudson Bay) and The Cato Corporation.
Role of Management
The Committee believes that having the input of management is important to the overall effectiveness of our executive compensation program. Our CEO and CHRO regularly attend Committee meetings to participate in the presentation of materials and discussion of management’s point of view regarding compensation issues. Additionally, our CEO and the Committee consult with management from our human resources, finance and legal departments regarding the design and administration of our compensation program for executives and directors.
Our CEO annually reviews and evaluates the performance of the other named executive officers and presents recommendations regarding their compensation to the Committee for review, recommendation and approval. The Committee has the discretion to accept, reject or modify these recommendations. Our CEO and management do not participate in executive sessions of the Committee or when executive compensation determinations are made by the Committee and the other independent directors.
Role of Independent Compensation Consultant
The Committee may retain independent compensation consultants as it deems necessary. In establishing executive compensation for fiscal 2014, the Committee retained independent compensation consultant Towers Watson to provide Peer Group compensation and financial information from the public filings of those companies. The Committee also reviewed (as discussed above) non-customized compensation survey data provided by multiple independent compensation consultants.
Compensation Risk Management
Our Board, the Committee and management do not believe that there are any significant risks arising from our compensation policies and practices for our directors and employees that are reasonably likely to have a material adverse effect on us. Our compensation programs are balanced and emphasize pay-for-performance. A significant percentage of compensation is tied to our long-term performance. This provides strong incentives to manage us for the long term, while avoiding excessive risk taking in the short term. Goals and objectives reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Likewise, the elements of compensation are balanced among cash payments and equity awards. With limited exceptions, the Committee retains discretion to adjust compensation for quality of performance and adherence to our values. Our Board, the Committee and management monitor our compensation policies and practices on an ongoing basis to determine whether our risk management objectives are being met with respect to rewarding our employees for performance.
Say-on-Pay Vote Results and Response
At our 2014 annual meeting of shareholders, 96.5% of the votes cast approved the compensation paid to our named executive officers for 2013, as disclosed in last year’s Proxy Statement pursuant to Item 402 of SEC Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion (“Say-on-Pay Vote”). Our Board and the Committee believe that the Say-on-Pay Vote confirmed shareholder support for our executive compensation policies and decisions. Accordingly, our Board and the Committee did not make changes to our executive compensation program as a result of the Say-on-Pay Vote. Although non-binding, our Board and the Committee will continue to consider the results of Say-on-Pay Votes in determining future executive compensation.
Say-on-Frequency Vote Results and Response
At least once every six years, we are required to hold an advisory vote on the frequency of Say-on-Pay Votes (“Say-on-Frequency Votes”). We held our initial Say-on-Frequency Vote at our 2011 annual meeting of shareholders and a majority of the votes were cast in favor of holding annual Say-on-Pay Votes. In line with the preference of our shareholders, our Board determined that it will include the Say-on-Pay Vote in our proxy materials annually until the next Say-on-Frequency Vote, which will occur no later than our 2017 annual meeting of shareholders.
Compensation Recovery / Clawback Policy
Our named executive officers are subject to the compensation recovery or “clawback policy” adopted by our Board. Under the policy, if our Board determines that a named executive officer (or other officer at or above the executive vice president level) has engaged in fraudulent or intentional misconduct, our Board may take a range of actions to remedy the misconduct, prevent its recurrence and impose such discipline on the wrongdoers as would be appropriate. Discipline may vary depending on the facts and circumstances, and may include (1) termination of employment, (2) initiating an action for breach of fiduciary duty, and (3) if the misconduct resulted in a material inaccuracy in our financial statements or performance metrics which affect the executive’s compensation, seeking reimbursement of any portion of any bonus or other incentive-based or equity-based
compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the accurate financial statements or performance metrics. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
The clawback policy also provides that if we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws of the United States, we will recover from current or former executives who received incentive-based compensation (including any type of equity compensation) during the three-year period preceding the date on which we are required to prepare an accounting restatement, based on the erroneous data, the excess of what would have been paid to the executive under the accounting restatement.
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation arrangements or with respect to any termination or change in control arrangements. In order to make whole those named executive officers who we recruit and seek to relocate to our offices in Houston, we may provide a reimbursement of taxes related to certain relocation expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval. We have discontinued the use of stock options and SARs except in extraordinary circumstances.
Compensation Elements
We believe that all of the executive compensation elements described below advance the primary purposes of our executive compensation program and the achievement of our short-term and long-term business objectives. These compensation elements are designed for the following, unique purposes:
Base salary, perquisites and other benefits are designed to attract and retain executives over time;
Annual performance incentive bonuses are designed to focus executives on the business objectives established by our Board for a particular year;
Long-term incentive compensation, which currently consists of equity compensation in the form of performance shares and restricted stock, is designed to focus executives on our long-term success, as reflected in increases to our stock price, growth in our earnings and other elements; and
Termination and change in control compensation and benefits are designed to attract and retain executives as we compete for talented employees in a marketplace where such compensation and benefits are customarily provided. Termination compensation and benefits are designed to ease an executive’s transition due to an unexpected employment termination, while change in control compensation and benefits are designed to encourage executives to remain focused on our business in the event of rumored or actual fundamental corporate changes.
The total compensation awarded to each named executive officer, as well as each element of compensation, is intended to foster our pay-for performance philosophy and provide a competitive compensation package as compared to executives in similar positions at competitive companies in our industry. Although the Committee does not have any specific formula for establishing the amount and mix of base salary and variable compensation, it does reference the Peer Group and additional comparative compensation data discussed above as a market check in making these determinations. The Committee also considers factors relating to each named executive officer’s individual position, performance versus objectives, professional history and experience, relevant skill set, scope of duties, and the internal relationship of pay across all executive positions as it establishes compensation.
Base Salary
The Committee views a competitive base salary as an important component to attract and retain executive talent. Base salary is not intended to represent the primary method of rewarding performance. The Committee considers both internal pay equity and external competitiveness in determining the base salary of our named executive officers. After receiving input from our CEO regarding the performance of the other named executive officers, the Committee uses its judgment regarding individual performance, market competitiveness, length of service, job responsibilities and other factors to determine the appropriate base salary for each named executive officer.
Annual Performance Incentive Bonus
A performance incentive bonus opportunity for our named executive officers is determined annually. For 2014, a bonus could be earned based on our (1) pre-tax earnings from continuing operations (constituting two-thirds of the opportunity) and (2)
comparable sales relative to the Performance Group (constituting one-third of the opportunity). Annual performance incentive bonus targets are expressed as a percentage of base salary, with the target percentage increasing with job scope and complexity.
At the beginning of each year, increased 2.8%the Committee evaluates our annual operating plan to $1,512 milliondetermine if pre-tax earnings and comparable store sales increased 0.5%. SG&A expenses achievedremain appropriate for measuring the achievement of our objectives and to motivate our executives. Based on discussions with our CEO, CHRO, CFO and independent compensation consultant, the Committee recommends, and our independent directors approve, a 50 basis point improvementmatrix of financial parameters establishing the threshold (minimum), target and maximum performance levels for pre-tax earnings and comparable sales at a time when achievement of those objectives is substantially uncertain.
Following the completion of each year and prior to paying any performance incentive bonuses, the Committee also reviews our financial results for the completed performance period (i.e., fiscal year), certifies the calculation of bonus amounts and reports them to our Board.
For additional information on the performance incentive bonuses for 2014, see the “Executive Compensation for 2014” section of this CD&A.
Long-Term Incentive Compensation
The Committee considers long-term incentive compensation critical to the alignment of executive compensation with the creation of shareholder value. In 2014, our long-term incentive compensation consisted of equity awards granted under two shareholder approved plans: our Amended and Restated 2001 Equity Incentive Plan (“2001 Equity Plan”) and our Second Amended and Restated 2008 Equity Incentive Plan (“2008 Equity Plan”).
At its spring meeting, the Committee reviews the portfolio of long-term incentive vehicles, the targeted award size and the performance measures associated with any awards. The Committee also reviews recommendations provided by management and the Committee’s independent compensation consultant regarding long-term incentive design. The Committee, with the approval of our other independent directors, has historically made annual grants of equity awards. For 2014, awards made to our named executive officers were in the rate, while operating 27 net additional stores. form of performance shares and restricted stock. We have discontinued the use of stock options and SARs except in extraordinary circumstances.
The Company also managed inventory levelsCommittee believes that the use of multiple equity vehicles balances the equity-driven growth and endedperformance aspects of performance shares with the yearretention aspects of restricted stock. The grant date for annual equity awards is the same date that our Board approves the awards. From time to time, our Board will consider making grants under other special circumstances, such as when recruiting new executive talent, upon the promotion of an executive and to retain key individuals. All grants other than the annual grants are effective as of the date of the event (e.g., the new hire or promotion date).
Restricted Stock
Restricted stock consists of common stock subject to vesting restrictions tied to continued employment. Restricted stock provides our named executive officers with comparable store inventories up 1.7%. The Company’s strong balance sheet and cash flow allowed the Companyopportunity to increase its quarterly dividend rate by 20% and spend $110 million to repurchase 6.8 millionearn full value shares of itsour common stock. The Committee views restricted stock as an excellent mechanism to align executive interests with those of shareholders by supporting increased share ownership for key executives. Restricted stock is also an effective retention tool based on the vesting schedule which occurs over a period of several years. Restricted stock grants may either vest all at once at the end of a specified period or vest in pro rata increments over a specified period. Generally, the Committee awards restricted stock with a four year pro rata vesting schedule (i.e., 25% per year). If the executive’s employment is terminated before vesting for any reason other than death, disability or retirement, the unvested portion of the restricted stock award will be forfeited. If the executive dies, becomes disabled or retires, the restricted stock award will fully vest. In the event of a change in control, the restricted stock award will vest.
Performance Shares
Operationally,Performance shares also provide our named executive officers with the Company continuedopportunity to make progress on aearn full value shares of our stock. The number of its strategic initiatives during 2011. The Company opened 28 new Goody’s stores, rebranded 148 non-Goody’s stores withperformance shares that vest, if any, is determined by our TSR over a three-year performance cycle relative to the Goody’s name and ended the year with 243 Goody’s stores. The Company added 10 Estee Lauder and 10 Clinique counters throughout the year, which helped drive a comparable store sales increase of 9% in cosmetics. During the year, the Company moved forward on the development of an off-price concept, with the goal to leverage its small market expertise with a complementary format to its department store model. Steele’s, its off-price concept, was launched November 1, 2011 with the opening of three stores. The Company also expanded its eCommerce business in 2011 as the number of offerings on the eCommerce website has grown from less than 1,000 productsPerformance Group established at the beginning of the year to approximately 13,200 products at January 28, 2012. Total eCommerce sales reached $8.6 millionin which the performance shares are awarded (see the “Overview of 2014 Executive Compensation - Long-Term Incentives” section of this CD&A for 2011.additional information regarding the TSR calculation in connection with our performance share awards). If the executive’s employment is terminated before the end of the performance cycle for any reason other than death, disability or retirement, the performance share award is forfeited. If the executive dies, becomes disabled or retires during the performance cycle, the executive will receive the target number of performance shares awarded. In the event of a change in control, the target number of performance shares awarded will vest. The Company also completed the roll-out of its markdown optimization tool.
The Company operated throughout the yearCommittee views performance shares as a financially sound company. However, the Company did not achieve the Threshold Pre-Tax Earnings and Comparable Store Sales parameters described under “Establishment of 2011 Senior Executive Incentive Bonus Plan” on page 31 of this Proxy Statement.
CEO Fiscal 2011 Performance and Compensation
The Committee focuses much of its time on CEO and seniorcritical link between executive compensation to assure that it reflects operating and financial performance and demonstrates our commitment to enforcing a strong pay for performance philosophy.
Mr. Hall and the management team respondedcreation of shareholder value.
Stock Appreciation Rights
Beginning in 2012, the use of SARs was discontinued except in extraordinary circumstances. Some of our named executive officers hold SARs granted prior to 2012, as is indicated in compensation tables following this CD&A.
SARs allow the executive to benefit from any appreciation in our stock price from the grant date through the exercise date. Upon exercise, the executive receives an amount of our common shares equal to the economicincrease in our stock price between the grant date and the exercise date. SARs may not be granted at less than 100% of the fair market conditions in Fiscal 2011 by focusingvalue of our common stock on the following: 27 net additional storesgrant date. SARs may not be settled in Fiscal 2011, growing its eCommerce business, launchingcash.
SARs have a new “off-price” division (“Steele’s”), completionseven-year term and vest either (1) one-fourth on each of the roll-outfirst four anniversaries of the markdown optimization tool, strong inventorygrant date or (2) one-half on the second anniversary of the grant date and expense controls,one-fourth on each of the third and aggressive promotional programs focused on our customer’s needs. Corporate results in Fiscal 2011 included:
· | total sales for the year increased 2.8% to $1,512 million and comparable store sales increased 0.5%; |
· | fiscal 2011 earnings were $31.0 million compared to $37.6 million in Fiscal 2010; |
· | SG&A expenses achieved a 50 basis point improvement in rate while operating 27 net additional stores; |
· | sales productivity by square footage increased and the net number of stores increased by 27 from 786 in 39 states to 813 in 40 states; |
· | the Company’s eCommerce sales grew from $0.4 million in Fiscal 2010 to $8.6 million; and |
· | the Company successfully launched Steele’s by opening 3 stores in 2 states. |
On March 28, 2012, Mr. Hall resigned as President and Chief Executive Officer to pursue other interests.
Other Named Executive Officers Fiscal 2011 Performance and Compensation
Oded Shein. As Chief Financial Officer, Mr. Shein’s responsibilities were to oversee the Company’s finance functions, which include accounting, tax, treasury, financial planning and analysis, private label credit card program, loss prevention and investor relations. He was instrumental in the Company’s fiscal managementgrant date. If an executive dies, unvested SARs will vest and the achievementexecutive’s estate will have one year from the date of growth objectives. His financial expertise has added tremendous valuedeath to exercise all SARs. If an executive becomes disabled or retires, unvested SARs will vest and the Company.
The Committee believes that Mr. Shein performed wellexecutive will normally have one year from the date of termination to exercise all SARs. Upon the termination of an executive’s employment for reason other than death, disability or retirement, the executive will have 60 days from the date of termination to exercise all vested SARs. In the event of a change in Fiscal 2011.
As a result of Mr. Shein’s performance in Fiscal 2011control, all SARs will immediately vest and as an incentive for future performance, he was granted 10,000 Performance Shares and 8,200 shares of Restricted Stock on March 28, 2012.
Richard Maloney. On January 30, 2012, Mr. Maloney resigned as Chief Merchandising Officer to pursue other interests.
Edward Record. As Chief Operating Officer, Mr. Record’s responsibilities were to (i) oversee real estate and store construction and (ii) overseewill be exercisable by the Company’s finance, information technology, internal audit, logistics, risk management and legal functions. He was instrumental inexecutive. In any event, the Company’s achievement of growth objectives includingexercise must occur within the increase of 27 net new stores in Fiscal 2011. He was also instrumental in the growthremaining term of the Company's eCommerce platform and the launching of Steele’s in Fiscal 2011.
The Committee believes that Mr. Record performed well in Fiscal 2011.
As a result of Mr. Record’s performance in Fiscal 2011 and as an incentive for future performance, he was granted 20,800 Performance Shares and 17,000 shares of Restricted Stock on March 28, 2012.
Steven Hunter. As Executive Vice President, Chief Information Officer, Mr. Hunter's responsibilities were to oversee allSARs. Any portion of the Company's technology strategies, investments and implementations. He was instrumental inSARs not exercised within the growthterm of the Company's eCommerce platform in Fiscal 2011 and in the successful launching of Steele’s.SARs will terminate.
The Committee believes that Mr. Hunter performed well in Fiscal 2011.
As a result of Mr. Hunter’s performance in Fiscal 2011 and as an incentive for future performance, he was granted 8,300 Performance Shares and 6,800 shares of Restricted Stock on March 28, 2012.
At their March 2012 meetings, the Compensation Committee and the Board took the following actions with respect to the compensation of the Company’s Named Executive Officers:
Base Salaries
Based on performance in the prior year and competitive market data, the 2014 base salaries of our named executive officers were increased by 2%, except for Mr. Shein who received an 8% increase to bring him more in line with our compensation Peer Group (as described later in this CD&A).
Annual Performance Incentive Bonuses
The opportunity to earn a performance incentive bonus in 2014 was based on two components. First, a pre-tax earnings performance component was weighted to determine two-thirds of the amount earned. Second, a relative comparable sales performance component was weighted to determine one-third of the amount earned. The pre-tax earnings component was based on our achievement relative to an earnings growth target established by the Committee and the other independent directors, after consultation with input from Haymanagement, at the beginning of 2014. The comparable sales component was based on the year-over-year change in our comparable sales results in 2014 as compared to the 2014 Performance Group (as described later in this CD&A). “Comparable sales” means sales in stores open for at least 14 full months prior to the applicable reporting period and includes direct-to-consumer sales.
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◦ | Target. For 2014, our pre-tax earnings target was $65.3 million from continuing operations, an increase of $24.7 million or 60.8%, as compared to our 2013 actual pre-tax earnings from continuing operations which was impacted by expenses associated with the South Hill Consolidation. The comparable sales component was a 50th percentile ranking among the Performance Group for 2014 comparable sales. A threshold level of performance must be achieved to earn a bonus under each component, and a maximum level of performance limits the bonus that may be earned under each component. |
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◦ | Results. Our performance in 2014 resulted in pre-tax earnings from continuing operations of $60.7 million, which was an achievement of 93.0% of our target. For 2014, our comparable sales increased 1.4%, which yielded a 61.5 percentile ranking among the Performance Group. |
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◦ | Bonus Earned. While we achieved very positive comparable sales results and strong returns, we did not fully meet the pre-tax earnings bonus targets set for 2014. Based on these results, our named executive officers earned performance incentive bonuses for 2014 at 62.0% of target. |
Long-Term Incentives
For 2014, the long-term incentive program for our named executive officers consisted of equity awards in the form of performance shares and restricted stock. Our long-term incentive program is designed to reward sustained, multi-year performance and retain executives for the duration of each equity award. Performance shares may be earned based on our TSR over a three-year period versus the Performance Group established at the beginning of that three-year period. For purposes of the performance shares, we measure TSR for our common shares and the publicly-traded shares of the Performance Group companies by comparing the change in the average closing price of the shares during all trading days in our first fiscal month of the performance period and the average closing price of the shares during all trading days in our final fiscal month of the performance period, including the reinvestment of dividends. For the 2012 through 2014 performance cycle, 130.8% of the target number of shares was earned. Restricted stock will generally vest ratably over a four year period.
Significant Executive Compensation Policies and Practices
Stock Ownership and Retention Policy
Our named executive officers are subject to a stock ownership and retention policy that requires each executive to acquire and maintain a minimum ownership stake in our common shares (see the “Stock Ownership by Executive Officers” section of this Proxy Statement).
Hedging Prohibited
We prohibit hedging or monetization transactions by our directors, named executive officers and other employees with respect to marketour securities (see the “Hedging Prohibited” section of this Proxy Statement).
Pledging Prohibited
We prohibit our directors, named executive officers and other employees from pledging of our securities as collateral for a loan (see the “Pledging Prohibited” section of this Proxy Statement).
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation arrangements or with respect to any termination or change in control arrangements. In order to make whole those named executive officers whom we recruit and seek to relocate to our offices in Houston, we may provide a reimbursement of taxes related to certain relocation expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval.
Limited Perquisites
Our executive compensation program offers limited perquisites that we believe are reasonable and customary in our industry.
Clawback Policy
Our named executive officers are subject to a compensation recovery or “clawback policy” (see the “Compensation Recovery / Clawback Policy” section in this CD&A).
Say-on-Pay Votes
At our 2014 annual meeting of shareholders, 96.5% of the votes cast approved the compensation paid to our named executive officers for 2013. Our pay-for-performance alignment remains strong. Accordingly, our Board recommends that shareholders vote FOR the compensation paid to our named executive officers in 2014 at our 2015 annual meeting of shareholders (see Item 3 in this Proxy Statement).
Compensation Objectives and Principles
The objectives of our executive compensation program are to:
Enable us to attract, motivate and retain the executive talent required to successfully drive and grow our business and to achieve our short-term and long-term business objectives;
Maximize the long-term commitment of our executive officers to our success by providing compensation elements that align their interests with the interests of our shareholders by linking compensation elements directly to financial metrics that the Committee believes influence the creation of long-term shareholder value; and
Reward our executive officers upon the achievement of short-term and long-term business objectives and enhanced shareholder value.
The principles of our executive compensation program are as follows:
Emphasize pay-for-performance and encourage retention of those executive officers who enhance our performance;
Maintain an appropriate balance between base salary dataand annual and long-term incentive compensation;
Link incentive compensation to the achievement of goals set in advance by the Committee;
Evaluate CEO performance against annual and long-term performance goals on an absolute basis as well as relative to the performance of our Peer Group and based uponPerformance Group;
Align the Company’sinterests of our executive officers with those of our shareholders;
Eliminate payouts under annual and long-term performance-based incentives if threshold performance is not achieved;
Convene an executive session (without management) of the Committee at least once annually;
Recuse our CEO from deliberations and voting regarding his or her compensation;
Consult our CEO, on an advisory basis only, on the compensation awarded to our other named executive officers;
Conduct a thorough annual review and analysis of the recent compensation history of each named executive officer and all forms of compensation to which the executive may be entitled; and
Make recommendations on named executive officer compensation to the independent directors after the Committee completes a thorough review and analysis.
Key Considerations in Fiscal 2011, recommendedSetting Compensation
Based on these objectives and principles, the Committee has structured our executive compensation program to motivate our named executive officers to achieve the business goals set by our Board and our Board approved,to reward them for achieving those goals. The following is a summary of key considerations affecting the following base salariessetting of compensation for our Named Executive Officersnamed executive officers by the Committee. In the “Executive Compensation for 2014” section of this CD&A, we describe additional considerations that the Committee evaluated in Fiscal 2012. establishing the compensation for our named executive officers in 2014.
Significance of Overall Corporate Performance
The base salaries were adjusted effective April 2, 2012.Committee primarily evaluates our named executive officers’ contributions to our overall performance rather than focusing only on their individual function. The Committee believes that each named executive officer shares the responsibility to support our goals and performance as key members of our leadership team. While this approach influences all of the Committee’s compensation decisions, it has the biggest impact on the long-term incentive awards made annually.
Evaluation of Individual Performance
With the exception of the annual performance incentive bonuses and performance share awards, both of which depend on achieving specific quantitative financial performance objectives, the Committee does not use formulas in determining the amount and mix of compensation. The Committee exercises its discretion and judgment to evaluate a broad range of both quantitative and qualitative factors, including reliability in delivering financial and growth targets, performance in the context
of the economic environment relative to other companies, a track record of integrity, good judgment, the vision and ability to create further growth and the ability to lead others. For long-term incentive awards, the Committee primarily considers a named executive officer’s potential for future successful performance and leadership as part of our executive management team, taking into account past performance as a key indicator. The Committee may also take into account extraordinary, unusual or non-recurring items anticipated or incurred by us that the Committee deems appropriate in determining compensation.
FISCAL 2012 BASE SALARIESPay-for-Performance
Aligning executive compensation with performance is a key principle of our executive compensation philosophy, and incentive compensation is designed to provide the opportunity to reward executives if we exceed our targeted performance levels. We believe our executive compensation program effectively implements this principle by tying the value of bonus opportunities and equity awards under the program to our financial and stock price performance.
Executive | 2011 Base Salary | 2012 Base Salary | Base Salary Increase |
Mr. Glazer (1) | N/A | $850,000 | N/A |
Mr. Shein | $350,000 | $355,000 | 1.43% |
Mr. Record | $572,000 | $585,000 | 2.27% |
Mr. Hunter | $400,000 | $405,000 | 1.25% |
The key metrics we currently use to evaluate the performance of our named executive officers are pre-tax earnings, relative comparable sales and relative TSR (as calculated under the terms of our performance share awards). We believe our pre-tax earnings is an important financial measure as it reflects our efforts to increase revenue and control our expenses. Relative comparable sales is important to provide a barometer of our top line performance against our competition. Using relative TSR is important to gauge the return delivered to our shareholders in comparison to our competition. In addition, the value of the incentive compensation that we award in the form of equity is significantly impacted by the price of our stock.___________________________The charts that follow show the 2014 variable compensation (i.e., compensation that is impacted by our performance and/or the value of our common shares) for Mr. Glazer and our other named executive officers as a percentage of their respective target total compensation (base salary, annual performance incentive bonus opportunity at target, grant date fair value of long-term incentive equity awards at target, and other compensation and benefits). As the charts illustrate, 79% of Mr. Glazer’s and 69% of our other named executive officers’ compensation was dependent on our financial or stock price performance.
Mix of Compensation Elements
The Committee strives to provide an appropriate mix of compensation elements, including finding a balance between current and long-term compensation and between cash and equity incentive compensation. Cash payments primarily reward more recent performance while equity awards encourage our named executive officers to continue to deliver results over the long-term and also serve as a retention tool. The Committee believes that executive compensation should be appropriately weighted on both our long-term and short-term performance.
Use of Tally Sheets
The Committee annually reviews tally sheets that present for each named executive officer all elements of compensation, total annual compensation and total deferred compensation. The Committee also reviews the total benefits to which the named executive officer would be entitled upon various termination events. The Committee uses the tally sheets to ensure that our compensation is reasonable and competitive. The Committee also uses the tally sheets to evaluate the past performance of our named executive officers and to determine if our compensation strategy achieved our goals in the past and to align executive compensation with our short-term and long-term goals.
Comparative Compensation Data; 2014 Peer Group
In making compensation decisions, the Committee considers executive compensation data from a peer group of publicly-traded retailers listed below (“Peer Group”). The Peer Group provides direct incumbent information on a job title match basis (e.g., CEO, CFO, etc.) for key competitors. The companies in the Peer Group generally consist of U.S. based, publicly-traded apparel and accessories retailers with annual sales between one-half and two times our annual sales with which we compete for
business and talent. All of the companies in the Peer Group meet a majority of those criteria. The members of the 2014 Peer Group were:
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| (1) | Although he is not a Named Executive Officer in this Proxy Statement, as our President and Chief Executive Officer, Mr. Glazer’s base salary will be $850,000, which was Mr. Hall’s base salary at the time |
Abercrombie & Fitch Co. | Chico’s FAS, Inc. | New York & Company, Inc. |
Aeropostale, Inc. | The Children’s Place Retail Stores, Inc. | Pacific Sunwear of his resignation.California, Inc. |
American Eagle Outfitters, Inc. | Christopher & Banks Corporation | Stein Mart, Inc. |
Ann Inc. | DSW Inc. | Urban Outfitters, Inc. |
Ascena Retail Group, Inc. | Express, Inc. | |
The Bon-Ton Stores, Inc. | The Men’s Wearhouse, Inc. | |
The Peer Group is reviewed annually and updated as the Committee deems appropriate taking into consideration changes in business conditions, changes in revenues, mergers and acquisitions and other circumstances bearing on the availability of compensation data and/or comparability of other companies. After the annual review, the following companies included in the 2013 Peer Group were removed from the 2014 Peer Group: The Cato Corporation; Charming Shoppes, Inc.; Collective Brands, Inc.; Hot Topic, Inc.; and The Talbots, Inc. The following companies were added to the Peer Group for 2014: Aeropostale, Inc.; The Bon-Ton Stores, Inc.; DSW Inc.; and Express, Inc.
In addition to the Peer Group analysis, the Committee considers data from the Towers Watson Compensation Data Bank (CDB) Retail/Wholesale Services Executive Database and the Hay Group Retail Executive and Management Total Remuneration Report. This information from Towers Watson and Hay Group is non-customized compensation data provided by job within the broader retail industry, including retailers with which we compete for executive talent. The Committee consults all three sets of information, because the Towers Watson and Hay Group data includes compensation information on more executives, including executives who are not included in publicly-available documents. The broader comparator group provides a more extensive basis on which to compare the compensation of our named executive officers, particularly for those whose responsibilities, experience and other factors are not directly comparable to those executives included in the publicly-available reports of the Peer Group.
Incentive-Based Compensation Benchmarking; 2014 Performance Group
To measure our relative performance with respect to comparable sales for the annual performance incentive bonus opportunities and our TSR for performance share awards, our Board and the Committee selected a group of 25 department store and apparel store retailers (“Performance Group”) that generally possess attributes similar to us, including market capitalization, annual sales, merchandise assortments, target customer, geography of store base and size of markets in which they operate. The companies comprising the Performance Group were included in the Dow Jones general retailers sector at the beginning of 2014. However, because the Dow Jones general retailers sector was comprised of 80 companies covering a broad range of subsectors within the retail industry, our Board and the Committee decided to include only department store and apparel store retailers from the Dow Jones apparel retailers and broadline retailers subsectors. Due to the fact that the companies within the Dow Jones general retailers sector are changed from time to time by Dow Jones, the companies included at the beginning of 2014 will be maintained as a fixed listing of companies for the duration of the applicable performance period (i.e., one year for performance incentive bonuses and three years for performance share awards).
The Performance Group for 2014 was as follows:
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Department Store Group | | Apparel Store Group |
Dillard’s, Inc. | | Abercrombie & Fitch Co. | Foot Locker, Inc. |
J. C. Penney Company, Inc. | | Aeropostale, Inc. | The GAP, Inc. |
Kohl’s Corporation | | American Eagle Outfitters, Inc. | Genesco Inc. |
Macy’s, Inc. | | Ann Inc. | Guess?, Inc. |
Nordstrom, Inc. | | Ascena Retail Group, Inc. | L Brands, Inc. |
Sears Holdings Corporation | | The Buckle, Inc. | The Men’s Wearhouse, Inc. |
| | Chico’s FAS, Inc. | Ross Stores, Inc. |
| | The Children’s Place, Inc. | The TJX Companies, Inc. |
| | DSW Inc. | Urban Outfitters, Inc. |
| | Express, Inc. | |
The following companies included in the Performance Group for 2013 were removed from the Performance Group for 2014: SAKS, Incorporated (Hudson Bay) and The Cato Corporation.
Role of Management
The Committee believes that having the input of management is important to the overall effectiveness of our executive compensation program. Our CEO and CHRO regularly attend Committee meetings to participate in the presentation of materials and discussion of management’s point of view regarding compensation issues. Additionally, our CEO and the Committee consult with management from our human resources, finance and legal departments regarding the design and administration of our compensation program for executives and directors.
Our CEO annually reviews and evaluates the performance of the other named executive officers and presents recommendations regarding their compensation to the Committee for review, recommendation and approval. The Committee has the discretion to accept, reject or modify these recommendations. Our CEO and management do not participate in executive sessions of the Committee or when executive compensation determinations are made by the Committee and the other independent directors.
Role of Independent Compensation Consultant
The Committee may retain independent compensation consultants as it deems necessary. In establishing executive compensation for fiscal 2014, the Committee retained independent compensation consultant Towers Watson to provide Peer Group compensation and financial information from the public filings of those companies. The Committee also reviewed (as discussed above) non-customized compensation survey data provided by multiple independent compensation consultants.
Compensation Risk Management
Our Board, the Committee and management do not believe that there are any significant risks arising from our compensation policies and practices for our directors and employees that are reasonably likely to have a material adverse effect on us. Our compensation programs are balanced and emphasize pay-for-performance. A significant percentage of compensation is tied to our long-term performance. This provides strong incentives to manage us for the long term, while avoiding excessive risk taking in the short term. Goals and objectives reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Likewise, the elements of compensation are balanced among cash payments and equity awards. With limited exceptions, the Committee retains discretion to adjust compensation for quality of performance and adherence to our values. Our Board, the Committee and management monitor our compensation policies and practices on an ongoing basis to determine whether our risk management objectives are being met with respect to rewarding our employees for performance.
Say-on-Pay Vote Results and Response
At our 2014 annual meeting of shareholders, 96.5% of the votes cast approved the compensation paid to our named executive officers for 2013, as disclosed in last year’s Proxy Statement pursuant to Item 402 of SEC Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion (“Say-on-Pay Vote”). Our Board and the Committee believe that the Say-on-Pay Vote confirmed shareholder support for our executive compensation policies and decisions. Accordingly, our Board and the Committee did not make changes to our executive compensation program as a result of the Say-on-Pay Vote. Although non-binding, our Board and the Committee will continue to consider the results of Say-on-Pay Votes in determining future executive compensation.
Say-on-Frequency Vote Results and Response
At least once every six years, we are required to hold an advisory vote on the frequency of Say-on-Pay Votes (“Say-on-Frequency Votes”). We held our initial Say-on-Frequency Vote at our 2011 annual meeting of shareholders and a majority of the votes were cast in favor of holding annual Say-on-Pay Votes. In line with the preference of our shareholders, our Board determined that it will include the Say-on-Pay Vote in our proxy materials annually until the next Say-on-Frequency Vote, which will occur no later than our 2017 annual meeting of shareholders.
Compensation Recovery / Clawback Policy
Our named executive officers are subject to the compensation recovery or “clawback policy” adopted by our Board. Under the policy, if our Board determines that a named executive officer (or other officer at or above the executive vice president level) has engaged in fraudulent or intentional misconduct, our Board may take a range of actions to remedy the misconduct, prevent its recurrence and impose such discipline on the wrongdoers as would be appropriate. Discipline may vary depending on the facts and circumstances, and may include (1) termination of employment, (2) initiating an action for breach of fiduciary duty, and (3) if the misconduct resulted in a material inaccuracy in our financial statements or performance metrics which affect the executive’s compensation, seeking reimbursement of any portion of any bonus or other incentive-based or equity-based
compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the accurate financial statements or performance metrics. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
The clawback policy also provides that if we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws of the United States, we will recover from current or former executives who received incentive-based compensation (including any type of equity compensation) during the three-year period preceding the date on which we are required to prepare an accounting restatement, based on the erroneous data, the excess of what would have been paid to the executive under the accounting restatement.
No Gross-Up Payments
Our named executive officers are not entitled to gross-up payments as part of their annual and long-term compensation arrangements or with respect to any termination or change in control arrangements. In order to make whole those named executive officers who we recruit and seek to relocate to our offices in Houston, we may provide a reimbursement of taxes related to certain relocation expenses.
No Repricing
It is the policy of our Board that we will not reprice or swap stock options or SARs without shareholder approval. We have discontinued the use of stock options and SARs except in extraordinary circumstances.
Compensation Elements
We believe that all of the executive compensation elements described below advance the primary purposes of our executive compensation program and the achievement of our short-term and long-term business objectives. These compensation elements are designed for the following, unique purposes:
Base salary, perquisites and other benefits are designed to attract and retain executives over time;
Annual performance incentive bonuses are designed to focus executives on the business objectives established by our Board for a particular year;
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Long-term incentive compensation, which currently consists of equity compensation in the form of performance shares and restricted stock, is designed to focus executives on our long-term success, as reflected in increases to our stock price, growth in our earnings and other elements; andTableTermination and change in control compensation and benefits are designed to attract and retain executives as we compete for talented employees in a marketplace where such compensation and benefits are customarily provided. Termination compensation and benefits are designed to ease an executive’s transition due to an unexpected employment termination, while change in control compensation and benefits are designed to encourage executives to remain focused on our business in the event of Contentsrumored or actual fundamental corporate changes.The total compensation awarded to each named executive officer, as well as each element of compensation, is intended to foster our pay-for performance philosophy and provide a competitive compensation package as compared to executives in similar positions at competitive companies in our industry. Although the Committee does not have any specific formula for establishing the amount and mix of base salary and variable compensation, it does reference the Peer Group and additional comparative compensation data discussed above as a market check in making these determinations. The Committee also considers factors relating to each named executive officer’s individual position, performance versus objectives, professional history and experience, relevant skill set, scope of duties, and the internal relationship of pay across all executive positions as it establishes compensation.
Base Salary
The Committee views a competitive base salary as an important component to attract and retain executive talent. Base salary is not intended to represent the primary method of rewarding performance. The Committee considers both internal pay equity and external competitiveness in determining the base salary of our named executive officers. After receiving input from our CEO regarding the performance of the other named executive officers, the Committee uses its judgment regarding individual performance, market competitiveness, length of service, job responsibilities and other factors to determine the appropriate base salary for each named executive officer.
Annual Performance Incentive Bonus
A performance incentive bonus opportunity for our named executive officers is determined annually. For 2014, a bonus could be earned based on our (1) pre-tax earnings from continuing operations (constituting two-thirds of the opportunity) and (2)
comparable sales relative to the Performance Group (constituting one-third of the opportunity). Annual performance incentive bonus targets are expressed as a percentage of base salary, with the target percentage increasing with job scope and complexity.
At the beginning of each year, the Committee evaluates our annual operating plan to determine if pre-tax earnings and comparable sales remain appropriate for measuring the achievement of our objectives and to motivate our executives. Based on Hay Group’s analysis,discussions with our CEO, CHRO, CFO and independent compensation consultant, the Committee recommends, and our independent directors approve, a matrix of financial parameters establishing the threshold (minimum), target and maximum performance levels for pre-tax earnings and comparable sales at a time when achievement of those objectives is substantially uncertain.
Following the completion of each year and prior to paying any performance incentive bonuses, the Committee also reviews our financial results for the completed performance period (i.e., fiscal year), certifies the calculation of bonus amounts and reports them to our Board.
For additional information on the performance incentive bonuses for 2014, see the “Executive Compensation for 2014” section of this CD&A.
Long-Term Incentive Compensation
The Committee considers long-term incentive compensation critical to the alignment of executive compensation with the creation of shareholder value. In 2014, our long-term incentive compensation consisted of equity awards granted under two shareholder approved plans: our Amended and Restated 2001 Equity Incentive Plan (“2001 Equity Plan”) and our Second Amended and Restated 2008 Equity Incentive Plan (“2008 Equity Plan”).
At its spring meeting, the Committee reviews the portfolio of long-term incentive vehicles, the targeted award size and the performance measures associated with any awards. The Committee also reviews recommendations provided by management and the Committee’s independent compensation consultant regarding long-term incentive design. The Committee, with the approval of our other independent directors, has historically made annual grants of equity awards. For 2014, awards made to our named executive officers were in the form of performance shares and restricted stock. We have discontinued the use of stock options and SARs except in extraordinary circumstances.
The Committee believes that the use of multiple equity vehicles balances the equity-driven growth and performance aspects of performance shares with the retention aspects of restricted stock. The grant date for annual equity awards is the same date that our Board approves the awards. From time to time, our Board will consider making grants under other special circumstances, such as when recruiting new executive talent, upon the promotion of an executive and to retain key individuals. All grants other than the annual grants are effective as of the date of the event (e.g., the new hire or promotion date).
Restricted Stock
Restricted stock consists of common stock subject to vesting restrictions tied to continued employment. Restricted stock provides our named executive officers with the opportunity to earn full value shares of our common stock. The Committee views restricted stock as an excellent mechanism to align executive interests with those of shareholders by supporting increased share ownership for key executives. Restricted stock is also an effective retention tool based on the vesting schedule which occurs over a period of several years. Restricted stock grants may either vest all at once at the end of a specified period or vest in pro rata increments over a specified period. Generally, the Committee awards restricted stock with a four year pro rata vesting schedule (i.e., 25% per year). If the executive’s employment is terminated before vesting for any reason other than death, disability or retirement, the unvested portion of the restricted stock award will be forfeited. If the executive dies, becomes disabled or retires, the restricted stock award will fully vest. In the event of a change in control, the restricted stock award will vest.
Performance Shares
Performance shares also provide our named executive officers with the opportunity to earn full value shares of our stock. The number of performance shares that vest, if any, is determined by our TSR over a three-year performance cycle relative to the Performance Group established at the beginning of the year in which the performance shares are awarded (see the “Overview of 2014 Executive Compensation - Long-Term Incentives” section of this CD&A for additional information regarding the TSR calculation in connection with our performance share awards). If the executive’s employment is terminated before the end of the performance cycle for any reason other than death, disability or retirement, the performance share award is forfeited. If the executive dies, becomes disabled or retires during the performance cycle, the executive will receive the target number of performance shares awarded. In the event of a change in control, the target number of performance shares awarded will vest. The Committee views performance shares as a critical link between executive compensation and the creation of shareholder value.
Stock Appreciation Rights
Beginning in 2012, the use of SARs was discontinued except in extraordinary circumstances. Some of our named executive officers hold SARs granted prior to 2012, as is indicated in compensation tables following this CD&A.
SARs allow the executive to benefit from any appreciation in our stock price from the grant date through the exercise date. Upon exercise, the executive receives an amount of our common shares equal to the increase in our stock price between the grant date and the exercise date. SARs may not be granted at less than 100% of the fair market value of our common stock on the grant date. SARs may not be settled in cash.
SARs have a seven-year term and vest either (1) one-fourth on each of the first four anniversaries of the grant date or (2) one-half on the second anniversary of the grant date and one-fourth on each of the third and fourth anniversaries of the grant date. If an executive dies, unvested SARs will vest and the executive’s estate will have one year from the date of death to exercise all SARs. If an executive becomes disabled or retires, unvested SARs will vest and the executive will normally have one year from the date of termination to exercise all SARs. Upon the termination of an executive’s employment for reason other than death, disability or retirement, the executive will have 60 days from the date of termination to exercise all vested SARs. In the event of a change in control, all SARs will immediately vest and will be exercisable by the executive. In any event, the exercise must occur within the remaining term of the SARs. Any portion of the SARs not exercised within the term of the SARs will terminate.
Benefits and Perquisites
We provide limited benefits and perquisites that are an important element of total compensation because of the value our named executive officers place on these benefits. The perquisites and other benefits we provide our named executive officers are summarized below in the Summary Compensation Table, the Nonqualified Deferred Compensation table and related footnotes. In addition, we provide our named executive officers with core benefits available to all full-time employees (e.g., coverage for medical, dental, prescription drugs, basic life insurance and long-term disability coverage) as well as a supplemental executive medical plan. The supplemental executive medical plan is an insured plan which reimburses officers at the executive vice president level and above for out-of-pocket medical and dental expenses not covered by the primary medical plan.
Retirement Plans
We do not provide a qualified retirement program for our named executive officers; however, participation in our Nonqualified Deferred Compensation Plan (Senior Executives) (“DC Plan”) is available for our named executive officers. For additional information, see the “Nonqualified Deferred Compensation” and “Retirement Plans” sections following this CD&A.
Termination and Change in Control Arrangements
Pursuantto theiremployment agreements, our named executive officers are entitled to compensation and other benefits if their employment terminates or if there is a change in control, as described in the “Potential Payments upon Termination or Change in Control” section following this CD&A. Termination and change in control compensation and other benefits are established at the time a named executive officer signs an employment agreement. In exchange for the benefits provided to the named executive officers in their respective employment agreements, we receive a post-termination release of claims and various restrictive covenants in our favor (e.g., non-competition, non-solicitation and continuing cooperation).
Termination
Our named executive officers are entitled to compensation and other benefits in an amount the Committee believes is appropriate, taking into account the time it is expected to take a terminated employee to find another job. Compensation and other benefits upon termination are intended to ease the consequences to an employee of an unexpected termination of employment. We benefit in that the employment agreements contain restrictive covenants in our favor that continue for a period of time following termination.
Change in Control
The Committee and our Board recognize the importance to us and our shareholders of avoiding the distraction and loss of key management personnel that may occur in connection with any rumored, threatened or actual change in control. To that end, the Committee and our Board believe that properly designed change in control provisions in our named executive officers’ employment agreements protect shareholder interests by enhancing executive focus during rumored or actual change in control activity through (1) incentives to remain with us despite uncertainties while a transaction is under consideration or pending and (2) assurances of severance and other benefits in the event of termination.
To diminish the potential distraction due to personal uncertainties and risks that inevitably arise when a change in control is rumored, threatened or pending, the Committee and our Board have provided our named executive officers with what the Committee and our Board determined to be competitive change in control compensation and benefit provisions in their employment agreements. The employment agreements of our named executive officers provide for specific enhanced payments and benefits in the event of a change in control.
Double Trigger
The enhanced termination benefits payable under the named executive officers’ employment agreements in connection with a change in control require a “double trigger” which means the named executive officer will only be eligible to receive change in control compensation and benefits (1) if a change in control occurs and (2) during the period beginning six months before the change in control and ending 24 months after the change in control, (a) the executive’s employment agreement is terminated by us or our successor without good cause, or (b) the executive’s employment agreement is terminated by the executive with good reason. A double trigger was selected to enhance the likelihood that the named executive officers will remain with us after a change in control, since the executives will not receive the change in control compensation payments and benefits following a voluntarily resignation after the change in control. Thus, the executive is protected from actual or constructive dismissal for 24 months after a change in control, while any new controlling party or group is better able to retain the services of a key asset.
Employment Agreements
We are a party to three-year, automatically renewable employment agreements with each of our named executive officers. The employment agreements provide for a base salary and an annual performance incentive bonus opportunity. The employment agreements also provide for perquisites such as an automobile allowance, a financial planning allowance and participation in all other bonus and benefit plans available to our executive officers. Provisions of the employment agreements related to termination and change in control are discussed in the “Potential Payments Upon Termination or Change In Control” section following this CD&A.
The employment agreements have been filed with the SEC and may be reviewed on the SEC’s EDGAR database at www.sec.gov. Mr. Glazer’s employment agreement was included as Exhibit 10.25 to our Quarterly Report on Form 10-Q filed on September 6, 2012. Mr. Shein’s employment agreement was included as Exhibit 10.4 to our Quarterly Report on Form 10-Q filed SEC on June 9, 2011. Mr. Lawrence’s employment agreement was included as Exhibit 10.3 to our Quarterly Report on Form 10-Q filed on June 13, 2013. Mr. Hunter’s employment agreement was included as Exhibit 10.1 to our Current Report on Form 8-K filed on April 7, 2015. Mr. Parson’s employment agreement was included as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on June 10, 2014.
Executive Compensation for 2014
Considerations
At its April 2014 meeting, the Committee reviewed the market data and analyses provided by its independent compensation consultant and determined that our overall compensation program was generally competitive and consistent with the base salariesCommittee’s compensation objectives. In determining 2014 compensation for our named executive officers, the Committee considered many factors, including:
our Board’s judgment and satisfaction with our performance in 2013, including with respect to revenues, earnings and expense control;
assessments of the executive’s individual performance and leadership in 2013, and the potential for future contributions to our business and operations;
achievement of long-term strategic and short-term business goals;
the nature and scope of the executive’s responsibilities and his effectiveness in leading our initiatives to successfully increase customer satisfaction, enhance our growth and ensure compliance with our policies;
desired competitive positioning of compensation;
retention needs;
the compensation practices of our Peer Group; and
the performance of our Performance Group.
The Committee focused much of its time on aligning executive compensation with corporate and individual performance. In evaluating 2013 performance, the Committee and other independent directors believed that our named executive officers responded well to challenging economic and market conditions. So despite our 2013 financial results falling short of initial
expectations, the leadership, retail expertise and key actions of Mr. Glazer and the other named executive officers were able to strengthen our Named Executive Officers are generally at or belowbusiness and prepare us for improved results. Among the mediankey actions of 2013 led by Mr. Glazer and the other named executive officers (excluding Mr. Parsons who joined us in 2014) were the South Hill Consolidation, developing a strategy for the disposition of the Steele’s off-price division and further enhancement of our Peer Group.e-commerce platform.
CEO 2013 Performance2011 Bonus Plan AwardsIn addition to the performance considerations discussed above, the 2013 corporate and individual performance matters below were most significant in formulating 2014 compensation for Mr. Glazer. These items are important to achieve our objectives to improve our financial performance, promote corporate efficiencies and grow our business.
Pre-tax earnings in 2013 offset a portion of the costs associated with the South Hill Consolidation, but not to the extent targeted;
Our 2013 comparable sales result was below our objective;
The Company did notdevelopment of a succession plan, with a particular focus on the top management positions;
Initiating the development of a comprehensive marketing plan focused on our customer, brand development, direct-to-consumer business, including conducting customer research in order to appropriately shape our strategic objectives; and
Launching and continued work toward a five-year growth plan for our business, including plans for Steele’s (which was sold to an independent buyer in 2014), and shaping the role of our real estate department to align with the plan.
Other NEOs 2013 Performance
Mr. Shein
As CFO, Mr. Shein’s responsibilities were to oversee our finance functions, which include accounting, tax, treasury, financial planning and analysis, private label credit card program, loss prevention and investor relations. He was instrumental in our fiscal management. His financial expertise and efforts to expand our private label credit card program have added significant value to us.
Mr. Lawrence
As Chief Merchandising Officer, Mr. Lawrence’s responsibilities were to oversee all of our merchandising strategies. He was instrumental in bringing new brands into our stores that our customers desired. Mr. Lawrence’s merchandising expertise and relationships with high profile brands have added tremendous value to us.
Mr. Hunter
As Chief Information Officer, Mr. Hunter’s responsibilities were to oversee all of our information technology, systems, ancillary sales, e-commerce platform and customer service functions. He was instrumental in an increase in our direct-to-consumer revenue of 30.6% and he made significant contributions to our earnings. Mr. Hunter’s expertise has been of critical importance to us.
Mr. Parsons
Mr. Parsons joined us in 2014 as our CHRO, and his compensation was established as part of the negotiations to retain him to lead our human resources department.
Base Salaries for 2014
Each named executive officer’s base salary was adjusted effective March 30, 2014, except Mr. Parsons who joined us on April 28, 2014. The Committee recommended, and the independent directors approved, the adjustments principally on the basis of each executive’s prior performance and salary data for our Peer Group obtained from the Committee’s independent compensation consultant.
|
| | | | | | |
Executive | | 2013 Base Salary | | 2014 Base Salary | | Increase |
Mr. Glazer | | $950,000 | | $969,001 | | 2.0% |
Mr. Shein | | $370,000 | | $400,010 | | 8.1% |
Mr. Lawrence | | $620,000 | | $632,401 | | 2.0% |
Mr. Hunter | | $425,000 | | $433,501 | | 2.0% |
Mr. Parsons | | — | | $425,000 | | — |
Mr. Shein’s increase in base salary was primarily in an effort to provide more competitive compensation as compared to CFOs of Peer Group companies.
Annual Performance Incentive Bonuses for 2014
At its April 2014 meeting, the Committee recommended, and the independent directors approved, the components for the 2014 performance incentive bonus opportunity for our named executive officers. A bonus could be earned based on our (1) pre-tax earnings from continuing operations (constituting two-thirds of the opportunity) and (2) comparable sales relative to the Performance Group (constituting one-third of the opportunity).
While this approach for the performance incentive bonus was unchanged from 2013, the pre-tax earnings target decreased from $69.0 million for 2013 to $65.3 million for 2014 (a $3.7 million decrease (5.4%) to align with our operating plan and provide a realistic target based on 2013 actual performance and market conditions). Our 2014 pre-tax earnings target increased $24.7 million (60.8%) compared to 2013 actual pre-tax earnings from continuing operations, which were negatively impacted by the South Hill Consolidation. Actual bonus payments will be prorated for results between threshold and maximum levels, and in order to earn any portion of the comparable sales component, we must achieve 75% of the pre-tax earnings target.
The following table shows the threshold, target and maximum payout percentages and performance goals established for each component of the 2014 performance incentive bonus opportunity:
|
| | | | | | | | |
| | Pre-Tax Earnings | | Comparable Sales |
Performance Goal | | Payout as (%) of Target | | Performance Goal (Relative Percentile) | | Payout as (%) of Target |
Threshold | | $60.7 million | | 25 | | 25th | | 25 |
Target | | $65.3 million | | 100 | | 50th | | 100 |
Maximum | | $69.4 million | | 200 | | 75th | | 200 |
The following table shows the: (1) threshold, target and maximum amounts of the 2014 performance incentive bonus that were attainable, both as a percentage of the named executive officer’s annual base salary and as a dollar amount, based on the extent to which we achieve the Threshold Pre-Tax Earningspre-tax earnings and Comparable Store Sales parameters described under “Establishmentcomparable sales components set forth above; and (2) total actual performance incentive bonus payments earned based on our 2014 performance of 2011 Senior Executive Incentive Bonus Plan” on page 31$60.7 million of this Proxy Statement. Therefore, our Named Executive Officers were not entitled to,pre-tax earnings from continuing operations (i.e., 14.4% of the total bonus target earned) and were not paid, performance based bonuses undercomparable sales at the 2011 Bonus Plan.62nd percentile of the 2014 Performance Group (i.e., 47.6% of the bonus target earned):
|
| | | | | | | | | | | | |
Executive | | Threshold | | Target | | Maximum | | 2014 Bonus Earned |
| % of Salary | Potential Payout | | % of Salary | Potential Payout | | % of Salary | Potential Payout | | % of Salary | Actual Payout |
Mr. Glazer | | 25 | $242,250 | | 100 | $969,001 | | 200 | $1,938,001 | | 62 | $600,780 |
Mr. Shein | | 12.5 | $50,001 | | 50 | $200,005 | | 100 | $400,010 | | 62 | $124,003 |
Mr. Lawrence | | 17.5 | $110,670 | | 70 | $442,680 | | 140 | $885,361 | | 62 | $274,462 |
Mr. Hunter | | 12.5 | $54,188 | | 50 | $216,750 | | 100 | $433,501 | | 62 | $134,385 |
Mr. Parsons | | 12.5 | $53,125 | | 50 | $212,500 | | 100 | $425,000 | | 62 | $131,750 |
Long-Term Incentive Compensation Awards for 2014
At its April 2014 meeting, the Committee (1) reviewed the final TSR results for the three-year performance cycle (i.e., 2011 through 2013) for the 2011 performance shares, (2) discussed the attainment level based on our TSR results versus our 2011 Performance Group, (3) reviewed the current standing and attainment levels for 2012 and 2013 performance shares based on the TSR of the Performance Groups established at the beginning of those years, (4) discussed individual long-term incentive
grants for senior management executives recommended by management, (5) reviewed estimated shares needed for 2014 awards, and (6) reviewed shares available for future grants. To determine the size of each equity award, the Committee reviewed market data, prior years’ long-term equity incentive (“LTI”)decisions, the performance of our named executive officers and recommendations from the Committee’s independent compensation consultant.
Based upon the recommendation of the Committee and the approval of the independent directors, the following long-term incentive awards were granted to our currently employed Named Executive Officersnamed executive officers on March 28, 2012April 3, 2014 in consideration of their 20112013 performance and in recognition of theirthe critical roleroles they play in theour future success and long-term growth of the Company:growth:
2012 LTI AWARDS |
| | | | |
Executive | | Target Performance Shares (#)(1) | | Restricted Stock (#)(2) |
Mr. Glazer | | 50,417 | | 41,250 |
Mr. Shein | | 9,167 | | 7,500 |
Mr. Lawrence | | 34,375 | | 28,125 |
Mr. Hunter | | 11,458 | | 9,375 |
Mr. Parsons (3) | | — | | 20,000 |
_________
Executive | Performance Shares (1) | Restricted Stock (2) |
Mr. Shein | 10,000 | 8,200 |
Mr. Record | 20,800 | 17,000 |
Mr. Hunter | 8,300 | 6,800 |
(1) | |
(1) | The Performance Shares cliff vest after avesting of the performance shares depends on our TSR over the three-year measurement performance cycle (the “Performance Cycle”) whichcompared to the Performance Group established at the beginning of 2014 (see the “Overview of 2014 Executive Compensation - Long-Term Incentives” section of this CD&A for additional information regarding the TSR calculation in connection with our performance share awards). The performance cycle began on the first day of the Company’s 2012 Fiscal Year (January 29, 2012)2014 (February 2, 2014) and ends on the last day of the Company’s 2014 Fiscal Year2016 (January 31, 2015)28, 2017). The number of Performance Shares earned will be based on the Company’s total shareholder return relative to the Fiscal 2012 Performance Group. The number of shares reflected in the table above are the “Target Shares”, which meansis the number of shares of the Company’sour common stock the Named Executive Officereach named executive officer will earn (and receive)and receive if our TSR for the performance cycle is at the end50th percentile of the Performance Cycle if the Company’s results are in the middle (fiftieth percentile) of the Fiscal 20122014 Performance Group. On a sliding scale, the performance shares earned can vary as follows: |
|
(2) | | |
Percentile Ranking in Performance Group | | Performance Shares Earned as (%) of Target |
Top | | 200% |
75th | | 150% |
50th | | 100% |
25th | | 25% |
< 25th | | — |
| |
(2) | The Restricted Stockrestricted stock will vest on a pro-ratapro rata basis over four years (i.e., 25% per year). |
| |
(3) | Mr. Parsons was granted the 20,000 shares of restricted stock shown in this table on April 28, 2014, in connection with his execution of an Employment Agreement with us. |
Executive Officer Employment AgreementsCompensation for 2015
The Company has three-year, automatically renewable Employment Agreements (the “Agreements”) with threeAt its March 2015 meeting, the Committee reviewed (1) our performance in 2014, (2) each named executive officer’s performance in 2014, (3) comparative compensation information regarding our Peer Group and additional survey data provided by the Committee’s independent compensation consultant, (4) the criticality of the Named Executive Officers (individually an “Executive”). Mr. Shein is employed as Executive Vice President, Chief Financial Officer; Mr. Record is employed as Chief Operating Officer; and Mr. Hunter is employed as Executive Vice President, Chief Information Officer. Prior to his resignation, Mr. Hall was employed as President and Chief Executive Officer and had a three-year renewable Employment Agreement. Prior to his resignation, Mr. Maloney was employed as Chief Merchandising Officer and had a three-year renewable Employment Agreement. The Agreements provide for a base salary and annual incentive (bonus) compensation. The Agreements also provide for perquisites such as an automobile allowance and a financial planning allowance and the Executive’s participation in all other bonus and benefit plans available to executive officers of the Company. Provisions of the Agreements related to termination and Change in Control are discussed in “Potential Payments Upon Termination or Change In Control” beginning on page 49 of this Proxy Statement.
We filed copies of the Employment Agreements as Exhibits to our Quarterly Report on Form 10-Q for the period ending April 30, 2011, which we filed on June 9, 2011. The Employment Agreements can be reviewed on the SEC’s EDGAR database at www.sec.gov.
Stock Ownership by Executive Officers
Our Board believes that an officer who has reached the level of Executive Vice President or above should be a shareholder and should have a financial stake in the Company. On March 29, 2011, the Board adopted a Stock Ownership and Retention Policy for Senior Management (the “Policy”). Among the provisions of the Policy are the following:
1. Target Ownership Level. On and after the later of (i) the fifth anniversary of his or her appointment as an Executive Vice President or higher of the Company, or (ii) March 29, 2016 (i.e., the fifth anniversary of the effective date of this Policy)(in either case, the “Target Date”),role each named executive officer plays in our future success and long-term growth, (5) the need to create an incentive for future performance, (6) tally sheets reflecting all elements of the Company must have developedcompensation, total annual compensation and must thereafter maintain a stock ownership position in the Company (the “Target Ownership Level”) with a minimum value (the “Value”) as follows:
· | A Target Ownership Level for the CEO having a Value equal to three times his or her base salary; and |
· | A Target Ownership Level for all other Executive Vice Presidents or higher having a Value equal to one times his or her base salary. |
2. Eligible Stock. In determining whether the executive officer has achieved his or her Target Ownership Level, the executive officer may include the Value of any Stock owned outright or beneficially owned (e.g., trusts) and shares held in qualified and nonqualified benefit plans, in any event acquired by him or her (i) in open market purchases, (ii) from vested Restricted Stock, (iii) from net shares held following the exercise of Stock Options and Stock Appreciation Rights, (iv) from earned Performance Shares, and (v) from the purchase of Stock in anytotal deferred compensation plan. The executive officer may also include the share value equivalents of gains on vested but unexercised Stock Options and Stock Appreciation Rights. Individual and joint holdings of Stock with an executive officer’s spouse shall count toward achieving the Target Ownership Level.
3. Determination of Stock Value. For purposes of assessing compliance with this Policy, the “Value” of Stock means the greater of (i) the then current fair market value (as defined below) of such Stock held of record by anfor each named executive officer and his or her spouse, or (ii)(7) internal pay equity.
As a result of that review and discussion with our other independent directors, the valueCommittee and our other independent directors approved the following 2015 compensation for our named executive officers:
|
| | | | | | | | |
Executive | | 2015 Base Salary ($) (1) | | 2015 Target Performance Bonus Opportunity (as Pct. of Salary) (%) (2) | | Performance Shares (#) (3) | | Restricted Stock (#) (4) |
Mr. Glazer | | 1,000,000 | | 100 | | 60,942 | | 49,861 |
Mr. Shein | | 412,000 | | 60 | | 12,061 | | 9,868 |
Mr. Lawrence | | 657,400 | | 75 | | 41,898 | | 34,280 |
Mr. Hunter | | 470,000 | | 60 | | 6,348 | | 21,353 |
Mr. Parsons | | 437,000 | | 60 | | 12,696 | | 10,388 |
_________
| |
(1) | The base salaries were adjusted effective March 29, 2015. As compared to 2014, the 2015 base salaries were increased by 3.2% for Mr. Glazer, 3.0% for Mr. Shein, 4.0% for Mr. Lawrence, 8.4% for Mr. Hunter and 2.8% for Mr. Parsons. |
| |
(2) | The percentage of base salary for a threshold performance incentive bonus opportunity is 25% of the target reflected in the above table for each named executive officer. The percentage of base salary for a maximum performance incentive bonus opportunity is double the target reflected in the above table for each named executive officer. |
| |
(3) | The vesting of the performance shares depends on our TSR over the three-year performance cycle compared to the Performance Group established at the beginning of 2015. The performance cycle began on the first day of 2015 (February 1, 2015) and ends on the last day of 2017 (February 3, 2018). The number of shares reflected in the table above is the number of shares of our common stock each named executive officer will earn and receive if our TSR for the performance cycle is at the 50th percentile of the 2015 Performance Group. |
| |
(4) | The restricted stock will vest on a pro rata basis over four years (i.e., 25% per year). |
Executive Compensation Program Administration
The Committee administers the base salary, annual performance incentive bonus, long-term incentive and other compensation programs for our named executive officers and other executive officers. The Committee ensures that the total compensation paid to our named executive officers is fair, reasonable and competitive. Although the compensation committees of some companies make all compensation decisions with respect to their named executive officers, we believe it is consistent with best practices in corporate governance to reach a consensus among all independent directors when establishing executive compensation. Accordingly, while the Committee takes the lead in formulating executive compensation, it also seeks the approval of our other independent directors before finalizing annual executive compensation to provide an additional check on the appropriateness of the Stock at the time of acquisition. The Compensation Committee may, in its sole discretion, determine the value of Stock other than those referenced in Section 2 above. For purposes of this paragraph, “fair market value” will mean the closing price of the Stock on the New York Stock Exchange for such date or, if there was no trading of the Stock on such date, for the next preceding date on which there was such trading.
4. Financial Hardship. In the event of a Financial Hardship (e.g., illness, tuition, mortgage), an executive officer, with the prior written consent of the Compensation Committee, may sell Company stock acquired by him or her (such approval would not include any shares of Company stock in any Company sponsored deferred compensation plan) which was acquired to satisfy the Target Ownership Level requirement of this Policy.
The Compensation Committee monitors annual progress toward achieving the Target Ownership Levels set forth in the Policy.
amounts awarded.
Tax and Accounting and Other ImplicationsConsiderations
Deductibility of Executive Compensation
IRC Section 162(m) of the Internal Revenue Code of 1986, as amended,(“Section 162(m)”) imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company’sits CEO or any of the company’sits three other most highly compensated executive officers (other than the Chief Financial Officer)CFO) who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria approved by the shareholders.)shareholders). The Committee’s policy is to design compensation programs that further our bestcompensation objectives and the interests and those of our shareholders and that generally preserve the tax deductibility of compensation expenses.
IncentivePerformance incentive bonuses paid to executive officers under our Senior Executive Incentive Bonus Plan and awards granted under our 2001 Plan and our 2008 Planequity incentive plans, other than restricted stock awards, are designed to qualify as performance-based compensation. The Committee also believes, however, that it must maintain the flexibility to take actions that it deems to be in our best interests but which may not qualify for tax deductibility under Section 162(m). In this regard, if the amount of base salary, plus the value of any restricted stock awards vesting in the same year, for any of oura named executive officersofficer exceeds $1 million, which is not anticipated to be the case, any amounts over $1 million will not be deductible for federal income tax purposes.
As required under the tax rules, the Companywe must obtain shareholder approval of the material terms of the performance goals for qualifying performance-based compensation every five years. We last requested and received shareholder approval in 2008. We are seeking shareholder approval at the 2012 Annual Meeting.annual meeting.
Committee Considerations
The Committee considered (i) the impact of the $1 million limit on the deductibility of non-performance based compensation imposed by Code Section 162(m), (ii) the accounting treatment of various types of equity-based compensation under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, and (iii) the non-deductibility of excess parachute tax payments under CodeIRC Section 280G (and the related excise tax imposed on covered employees under CodeIRC Section 4999) in its design of executive compensation programs. In addition, the Committee considered other tax and accounting provisions in developing the compensation programs for our Named Executive Officers.named executive officers. These included the special rules applicable to non-qualified deferred compensation arrangements under CodeIRC Section 409A, as well as the overall income tax rules applicable to various forms of compensation. While the Committee strives to compensate our Named Executive Officersnamed executive officers in a manner that produces favorable tax and accounting treatment, its main objective is to develop fair, equitable and competitive compensation arrangements that appropriately motivate, reward and retain those executives.
Summary Compensation Table for 2014
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with our management. Based on that review and discussion, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for 2011 and in this Proxy Statement.
Mr. Glazer was a member of the Compensation Committee during all of Fiscal 2011 and until March 28, 2012, at which time he became employed by the Company as our President and Chief Executive Officer on an interim basis. Since as an employee he is no longer deemed to be independent, as that term is defined by the NYSE and our Corporate Governance Guidelines, Mr. Glazer resigned from the Compensation Committee effective March 28, 2012, which is why this Compensation Committee Report is dated March 28, 2012.
This Compensation Committee Report is provided by the following Independent Directors as of March 28, 2012, who constituted all of the members of the Compensation Committee on that date, with the exception of Mr. Scozzafava, who did not become a Director and a member of the Compensation Committee until February 21, 2012 and who did not attend his first Compensation Committee meeting until March 27, 2012:
Earl J. Hesterberg (Chairman)
Alan J. Barocas
Michael L. Glazer
March 28, 2012
The following table summarizessets forth the compensation earned by or paid to our named executive officers for each of our Named Executive Officers for ourthe last three fiscal years ended January 28, 2012 (“Fiscal 2011”), January 29, 2011 (“Fiscal 2010”) and January 30, 2010 (“Fiscal 2009”), with the exception of Mr. Shein and Mr. Hunter, who were not Named Executive Officers in Fiscal 2009.
Named and Principal Position | | Fiscal Year | | | | | Bonus ($) (1) | | Stock Awards ($) (2) | | Option Awards ($) (3) | | Non-Equity Incentive Plan Compensation ($) (4) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | | All Other Compensation ($) (5) | | Total ($) |
Salary ($) | | | | | |
| | | | | | | | | | | | | | | | | | | |
Andrew T. Hall | | 2011 | | 841,346 | | | - | | 2,207,765 | | 595,265 | | - | | (3,519) | | 175,667 | | 3,816,524 |
President and | | 2010 | | 791,346 | | | - | | 496,250 | | 719,000 | | 630,000 | | 89,709 | | 150,398 | | 2,876,703 |
Chief Executive Officer | | 2009 | | 750,000 | | | - | | 381,900 | | 402,000 | | 408,000 | | 34,176 | | 119,744 | | 2,095,820 |
| | | | | | | | | | | | | | | | | | | |
Oded Shein | | 2011 | | 350,000 | | | - | | 161,309 | | - | | - | | (1,086) | | 142,365 | | 652,588 |
Executive Vice President, | | 2010 | | 20,192 | (6) | 200,000 | | 163,100 | | 222,600 | | - | | (16) | | 22,780 | | 628,656 |
Chief Financial Officer | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Richard A. Maloney | | 2011 | | 559,096 | | | - | | 981,331 | | 193,353 | | - | | 13 | | 166,379 | | 1,900,171 |
Chief Merchandising Officer | 2010 | | 547,116 | (7) | - | | 720,500 | | 587,000 | | 336,875 | | 1 | | 280,597 | | 2,472,089 |
| | 2009 | | 475,000 | | | - | | 190,950 | | 180,900 | | 193,800 | | 53 | | 156,276 | | 1,196,979 |
| | | | | | | | | | | | | | | | | | | |
Edward J. Record | | 2011 | | 568,192 | | | - | | 981,331 | | 193,353 | | - | | (17,156) | | 116,508 | | 1,842,227 |
Chief Operating Officer | | 2010 | | 540,442 | (8) | - | | 720,500 | | 587,000 | | 336,875 | | 90,659 | | 102,774 | | 2,378,250 |
| | 2009 | | 460,000 | | | - | | 190,950 | | 180,900 | | 203,300 | | 85,191 | | 182,570 | | 1,302,911 |
| | | | | | | | | | | | | | | | | | | |
Steven L. Hunter | | 2011 | | 395,673 | | | - | | 415,712 | | 76,907 | | - | | 132 | | 47,591 | | 936,014 |
Executive Vice President, | | 2010 | | 372,116 | (9) | - | | 119,100 | | 129,420 | | 164,063 | | 2,117 | | 37,325 | | 824,141 |
Chief Information Officer | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
years.
|
| | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Fiscal Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) (1) | | Non-Equity Incentive Plan Compensation ($) (2) | | All Other Compensation ($) (3) | | Total ($) |
Michael L. Glazer President and Chief Executive Officer | | 2014 | | 966,077 |
| | — |
| | 2,736,628 |
| | 600,780 |
| | 159,670 |
| | 4,463,155 |
|
| 2013 | | 932,693 |
| | — |
| | 2,195,856 |
| | — |
| | 289,878 |
| | 3,418,427 |
|
| 2012 | | 709,423 |
| | — |
| | 2,638,923 |
| | 1,488,945 |
| | 95,108 |
| | 4,932,399 |
|
| | | | | | | | | | | | | | |
Oded Shein Executive Vice President, Chief Financial Officer and Treasurer | | 2014 | | 395,360 |
| | — |
| | 497,578 |
| | 124,003 |
| | 75,140 |
| | 1,092,081 |
|
| 2013 | | 367,404 |
| | — |
| | 426,972 |
| | — |
| | 94,846 |
| | 889,222 |
|
| 2012 | | 354,135 |
| | — |
| | 326,728 |
| | 308,318 |
| | 62,417 |
| | 1,051,598 |
|
| | | | | | | | | | | | | | |
Steven P. Lawrence Chief Merchandising Officer | | 2014 | | 630,493 |
| | — |
| | 1,865,876 |
| | 274,462 |
| | 107,782 |
| | 2,878,613 |
|
| 2013 | | 609,616 |
| | — |
| | 1,219,920 |
| | — |
| | 154,976 |
| | 1,984,512 |
|
| 2012 | | 420,000 |
| | — |
| | 1,378,039 |
| | 690,704 |
| | 116,896 |
| | 2,605,639 |
|
| | | | | | | | | | | | | | |
Steven L. Hunter Executive Vice President, Chief Information Officer | | 2014 | | 432,193 |
| | — |
| | 671,123 |
| | 134,385 |
| | 71,800 |
| | 1,309,501 |
|
| 2013 | | 421,539 |
| | — |
| | 426,972 |
| | — |
| | 56,910 |
| | 905,421 |
|
| 2012 | | 404,135 |
| | — |
| | 271,085 |
| | 360,045 |
| | 43,056 |
| | 1,078,321 |
|
| | | | | | | | | | | | | | |
Stephen B. Parsons Executive Vice President, Chief Human Resources Officer (4) | | 2014 | | 326,923 |
| | 25,000 |
| | 398,600 |
| | 131,750 |
| | 313,001 |
| | 1,195,274 |
|
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
_________
(1) | Any amounts shown in this column are discretionary cash bonuses awarded for performance in the fiscal year indicated, but paid during the subsequent fiscal year. In consideration for his decision to accept employment with the Company on January 10, 2011, Mr. Shein received a lump sum of $200,000. |
(2)(1) | The amounts shown in this column reflect the grant date fair value for performance stockshares and restricted stock for the Named Executive Officersnamed executive officers with respect to the fiscal year in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 912 to our audited consolidated financial statements for Fiscal 2011, Note 9 to our audited consolidated financial statements for Fiscal 2010 and Note 8 to our audited consolidated financial statements for Fiscal 2009 included in our Annual ReportsReport on Form 10-K for thosethe fiscal years.year ended January 31, 2015. Further information regarding the 20112014 awards is included in the “2011Grants of Plan-Based Awards”Awards table and “2011the Outstanding Awards at Fiscal Year-End” tablesYear-End table later in this Proxy Statement. The grant date fair value of the performance-based awardsperformance shares awarded in 2014 and reflected in this column (the “2011 Performance Shares”) is the Target payout based on the probable outcome of the performance criteria, determined as of the grant date. The maximum potential valuesachievement for the 2011 Performance Shares2014 performance shares would be 200% of Targetthe target number of shares awarded and would be as follows: Mr. Shein ($145,522), Mr. Record ($363,805), and Mr. Hunter ($145,522). As a result of his resignation, Mr. Maloney forfeited his 2011 and 2010 Performance Shares as well as his unvested restricted stock awards as of February 15, 2012. As a result of his resignation, Mr. Hall forfeited his 2011 and 2010 Performance Shares as well as his unvested restricted stock awards as of April 12, 2012. |
(3) | The amounts shown in this column reflect the grant date fair value if the |
highest level of performance is attained would be as follows: Mr. Glazer ($3,422,306), Mr. Shein ($622,256), Mr. Lawrence ($2,333,376) and Mr. Hunter ($777,769). The amounts in this column also include the fair market value of the 2012 awards of 33,333 shares of restricted stock ($506,662) to Mr. Glazer and 20,000 shares of restricted stock ($305,400) to Mr. Lawrence associated with a two-year non-competition restriction in their respective employment agreements.
| |
(2) | The amounts in this column reflect annual performance incentive bonus awards earned under the applicable incentive bonus plan for SARs forperformance during each of the Named Executive Officers with respect to the fiscal year in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 9 to our audited consolidated financial statements for Fiscal 2011, Note 9 to our audited consolidated financial statements for Fiscal 2010 and Note 8 to our audited consolidated financial statements for Fiscal 2009 included in our Annual Reports on Form 10-K for thoselast three fiscal years. Further information regarding the 2011 awards is included in the “2011 Plan-Based Awards” and “2011 Outstanding Awards at Fiscal Year-End” tables later in this Proxy Statement. As a result of his resignation, |
| Mr. Maloney forfeited his unvested SARs awards as of February 15, 2012. As a result of his resignation, Mr. Hall forfeited his unvested SARs awards as of April 12, 2012. |
(4) | Non-Equity Incentive Plan Compensation (performance based cash bonus) amounts include any amounts deferred under the Executive Deferred Compensation Plan. Amounts reflectearned for performance based bonuses earned during the fiscal year covered (andare paid during the subsequent fiscal year) under the applicable Senior Executive Incentive Bonusyear. The amounts reflected include any deferrals made pursuant to our DC Plan. |
| |
(3) | For 2014, the amounts in this column include the following compensation for the executives, as more fully described in the table included with this footnote: |
| |
a. | Matching contributions made by us pursuant to our DC Plan, as described in the narrative disclosure accompanying the Nonqualified Deferred Compensation table below; |
| |
b. | Reimbursement of out-of-pocket healthcare costs under our supplemental executive medical plan, as described in the “Compensation Elements - Benefits and Perquisites” section of the CD&A; |
| |
c. | Healthcare insurance premium payments associated with our supplemental executive medical plan; |
| |
d. | Life insurance premium payments; |
| |
e. | Long-term disability insurance premium payments; |
| |
f. | The cost to us associated with the executive’s use of an automobile or the cash allowance provided in lieu of an automobile; |
| |
g. | An allowance for professional fees incurred in connection with estate planning, personal financial advisory services and individual tax preparation services; |
| |
h. | Relocation expenses; and |
| |
i. | The reimbursement of taxes related to our payment of relocation expenses. |
(5) | All other compensation includes deferred compensation matching contributions, auto allowances, estate planning allowances, insurance premiums and other compensation, as set forth in the 2011 All Other Compensation Table below. |
(6) | Mr. Shein joined the Company on January 10, 2011 at a base salary of $350,000. |
(7) | On February 15, 2010, Mr. Maloney was promoted to Chief Merchandising Officer. Mr. Maloney had been serving as President and Chief Operating Officer of our South Hill Division. In connection with his promotion, Mr. Maloney’s base salary was increased from $475,000 to $550,000. |
(8) | On February 15, 2010, Mr. Record was promoted to Chief Operating Officer. Mr. Record had been serving as our Chief Financial Officer. In connection with his promotion, Mr. Record’s base salary was increased from $460,000 to $550,000. |
(9) | On February 26, 2010, Mr. Hunter was promoted to Executive Vice President, Chief Information Officer. Mr. Hunter had been serving as Senior Vice President, Chief Information Officer. In connection with his promotion, Mr. Hunter’s base salary was increased from $325,000 to $375,000. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | DC Plan Matching Contributions ($) | | Healthcare Cost Reimburse-ment ($) | | Healthcare Insurance Premiums ($) | | Life Insurance Premiums ($) | | Long-Term Disability Insurance Premiums ($) | | Auto Use / Allowance ($) | | Professional Fees Allowance ($) | | Relocation Expenses ($) | | Relocation Expense Tax Reimburse- ment ($) |
Mr. Glazer | | 98,541 |
| | 30,170 |
| | 8,085 |
| | 466 |
| | 408 |
| | 12,000 |
| | 10,000 |
| | — |
| | — |
|
Mr. Shein | | 42,242 |
| | 9,308 |
| | 10,762 |
| | 420 |
| | 408 |
| | 12,000 |
| | — |
| | — |
| | — |
|
Mr. Lawrence | | 65,816 |
| | 12,668 |
| | 6,894 |
| | 636 |
| | 408 |
| | 12,000 |
| | 9,360 |
| | — |
| | — |
|
Mr. Hunter | | 36,709 |
| | 11,603 |
| | 10,623 |
| | 457 |
| | 408 |
| | 12,000 |
| | — |
| | — |
| | — |
|
Mr. Parsons | | 32,557 |
| | 2,241 |
| | 6,450 |
| | 286 |
| | 306 |
| | 9,231 |
| | 5,000 |
| | 201,849 |
| | 55,081 |
|
2011 ALL OTHER COMPENSATION TABLE(4) On April 28, 2014, Mr. Parsons joined us as Executive Vice President, Chief Human Resources Officer. Mr. Parson’s annualized base salary for 2014 was $425,000. In consideration for accepting employment with us, Mr. Parsons received a lump sum payment of $25,000, which is reported in the Bonus column of the Summary Compensation Table.
Grants of Plan-Based Awards in 2014
The following table provides information concerning the compensation of our Named Executive Officers found in the “All Other Compensation” column of the 2011 Summary Compensation Table on page 40.
Name | | Fiscal Year | | Deferred Compensation Matching Contributions ($) | | Auto Allowances ($) | | Estate Planning Allowances ($) | | Life Insurance Premiums ($) | | Health Insurance Premiums ($) | | Relocation Expense Reimburse- ments ($) | | Tax Reimburse-ments ($) | | Cell Phone Allowances ($) | | Total ($) |
| | | | | | | | | | | | | | | | | | | | |
Andrew T. Hall | | 2011 | | 149,336 | | 12,000 | | 1,395 | | 2,919 | | 9,777 | | - | | - | | 240 | | 175,667 |
| | 2010 | | 122,233 | | 12,000 | | 2,078 | | 3,105 | | 9,422 | | - | | - | | 1,560 | | 150,398 |
| | 2009 | | 93,236 | | 12,000 | | 2,003 | | 2,070 | | 8,875 | | - | | - | | 1,560 | | 119,744 |
| | | | | | | | | | | | | | | | | | | | |
Oded Shein | | 2011 | | 37,038 | | 12,000 | | - | | 2,446 | | 8,757 | | 52,190 | | 29,934 | | - | | 142,365 |
| | 2010 | | 22,088 | | 692 | | - | | - | | - | | - | | - | | - | | 22,780 |
| | | | | | | | | | | | | | | | | | | | |
Richard A. Maloney | 2011 | | 91,557 | | 12,000 | | 5,165 | | 8,450 | | 7,354 | | 26,445 | | 15,168 | | 240 | | 166,379 |
| | 2010 | | 76,164 | | 12,000 | | 6,500 | | 8,041 | | 7,168 | | 137,117 | | 32,047 | | 1,560 | | 280,597 |
| | 2009 | | 52,032 | | 12,000 | | 3,742 | | 7,107 | | 6,755 | | 43,743 | | 29,337 | | 1,560 | | 156,276 |
| | | | | | | | | | | | | | | | | | | | |
Edward J. Record | | 2011 | | 92,698 | | 12,000 | | 600 | | 1,301 | | 9,669 | | - | | - | | 240 | | 116,508 |
| | 2010 | | 77,284 | | 12,000 | | 1,298 | | 1,210 | | 9,422 | | - | | - | | 1,560 | | 102,774 |
| | 2009 | | 48,244 | | 12,000 | | 1,338 | | 1,041 | | 8,875 | | 69,595 | | 39,917 | | 1,560 | | 182,570 |
| | | | | | | | | | | | | | | | | | | | |
Steven L. Hunter | | 2011 | | 19,975 | | 12,000 | | 4,585 | | 1,361 | | 9,669 | | - | | - | | - | | 47,591 |
| | 2010 | | 12,094 | | 11,769 | | 3,292 | | 1,105 | | 9,065 | | - | | - | | - | | 37,325 |
The following table provides information concerningsets forth each grant of an award made to a Named Executive Officerour named executive officers in Fiscal 20112014 under any plan. DefinitionsDescriptions of Performance Shares, Restricted Stockperformance shares and SARsrestricted stock, as used in the footnotes to this table, are found in the CD&A beginning on page 19“Compensation Elements - Long-Term Incentive Compensation” section of this Proxy Statement.
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | | All Other Options Awards: Number of Securities Underlying Options (#) (4) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($) (5) |
Name | | Grant Date | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | | | | |
| | | | | | | | | | | | | | | | | |
Andrew T. Hall | | | 212,500 | 850,000 | 1,700,000 | | - | - | - | | - | | - | | - | | - |
| | 3/29/2011 | - | - | - | | 5,625 | 22,500 | 45,000 | | - | | - | | - | | 564,525 |
| | 3/29/2011 | - | - | - | | - | - | - | | - | | 68,500 | | 18.84 | | 595,265 |
| | 3/29/2011 | - | - | - | | - | - | - | | 36,000 | | - | | - | | 678,240 |
| | 4/11/2011 | - | - | - | | - | - | - | | 50,000 | | - | | - | | 965,000 |
| | | | | | | | | | | | | | | | | |
Oded Shein | | | 43,750 | 175,000 | 350,000 | | - | - | - | | - | | - | | - | | - |
| | 3/29/2011 | - | - | - | | 725 | 2,900 | 5,800 | | - | | - | | - | | 72,761 |
| | 3/29/2011 | - | - | - | | - | - | - | | 4,700 | | - | | - | | 88,548 |
| | | | | | | | | | | | | | | | | |
Richard A. Maloney | | | 98,175 | 392,700 | 785,400 | | - | - | - | | - | | - | | - | | - |
| | 3/29/2011 | - | - | - | | 1,813 | 7,250 | 14,500 | | - | | - | | - | | 181,903 |
| | 3/29/2011 | - | - | - | | - | - | - | | - | | 22,250 | | 18.84 | | 193,353 |
| | 3/29/2011 | - | - | - | | - | - | - | | 11,700 | | - | | - | | 220,428 |
| | 4/11/2011 | - | - | - | | - | - | - | | 30,000 | | - | | - | | 579,000 |
| | | | | | | | | | | | | | | | | |
Edward J. Record | | | 100,100 | 400,400 | 800,800 | | - | - | - | | - | | - | | - | | - |
| | 3/29/2011 | - | - | - | | 1,813 | 7,250 | 14,500 | | - | | - | | - | | 181,903 |
| | 3/29/2011 | - | - | - | | - | - | - | | - | | 22,250 | | 18.84 | | 193,353 |
| | 3/29/2011 | - | - | - | | - | - | - | | 11,700 | | - | | - | | 220,428 |
| | 4/11/2011 | - | - | - | | - | - | - | | 30,000 | | - | | - | | 579,000 |
| | | | | | | | | | | | | | | | | |
Steven L. Hunter | | | 50,000 | 200,000 | 400,000 | | - | - | - | | - | | - | | - | | - |
| | 3/29/2011 | - | - | - | | 725 | 2,900 | 5,800 | | - | | - | | - | | 72,761 |
| | 3/29/2011 | - | - | - | | - | - | - | | - | | 8,850 | | 18.84 | | 76,907 |
| | 3/29/2011 | - | - | - | | - | - | - | | 10,008 | | - | | - | | 188,551 |
| | 4/11/2011 | - | - | - | | - | - | - | | 8,000 | | - | | - | | 154,400 |
the CD&A.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | | Grant Date Fair Value of Stock Awards ($) (4) |
Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | |
Mr. Glazer | | — |
| | 242,250 |
| | 969,001 |
| | 1,938,001 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | 12,604 |
| | 50,417 |
| | 100,834 |
| | — |
| | 1,711,153 |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 41,250 |
| | 1,025,475 |
|
Mr. Shein | | — |
| | 50,001 |
| | 200,005 |
| | 400,010 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | 2,292 |
| | 9,167 |
| | 18,334 |
| | — |
| | 311,128 |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 7,500 |
| | 186,450 |
|
Mr. Lawrence | | — |
| | 110,670 |
| | 442,680 |
| | 885,361 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | 8,594 |
| | 34,375 |
| | 68,750 |
| | — |
| | 1,166,688 |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 28,125 |
| | 699,188 |
|
Mr. Hunter | | — |
| | 54,188 |
| | 216,750 |
| | 433,501 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | 2,865 |
| | 11,458 |
| | 22,916 |
| | — |
| | 388,885 |
|
| | 4/3/2014 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 9,375 |
| | 233,063 |
|
| | 12/1/2014 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,500 |
| | 49,175 |
|
Mr. Parsons | | — |
| | 53,125 |
| | 212,500 |
| | 425,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | 4/28/2014 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 20,000 |
| | 398,600 |
|
________
(1) | Shown are |
(1) | The amounts in these columns represent the Threshold, Targetthreshold, target and Maximummaximum payouts for which each executive was eligible under our 2011 Senior Executive Incentive Bonus Plan (the “2011 Bonus Plan”).2014 performance incentive bonus awards. Amounts actually earned with respect to these awards are included in the 2011 Summary Compensation Table as Non-Equity Incentive Plan Compensation.non-equity incentive plan compensation. Further detail regarding potential 2011 Bonus Planthe 2014 performance incentive bonus awards canmay be found in “Establishment“Executive Compensation for 2014 - Annual Performance Incentive Bonuses for 2014” section of 2011 Senior Executive Incentive Bonus Plan” beginning on page 31 and “2011 Bonus Plan Awards” on page 37 of this Proxy Statement.the CD&A. |
(2) | These |
(2) | The amounts in these columns reflect Performance Sharesperformance shares that vest over time in an amount depending on achievement of performance criteria. The Performance Sharesperformance shares will vest after a three-year Performance Cycleperformance cycle based on the Company’s total shareholder returnour TSR relative to the Performance Group, as described in the CD&A. As a result“Executive Compensation for 2014 - Long-Term Incentive Compensation Awards for 2014” section of his resignation, Mr. Maloney forfeited his 2011 Performance Shares. As a resultthe CD&A (see also the “Overview of his resignation, Mr. Hall forfeited his 2011 Performance Shares. |
| 2014 Executive Compensation - Long-Term Incentives” section of the CD&A for additional information regarding the TSR calculation in connection with our performance share awards). The “Threshold”threshold number of shares refers to the lowest number of shares of our common stockshares the Named Executive Officer cannamed executive officer may earn (and receive)and receive at the end of the Performance Cycleperformance cycle if the results are at the twenty-fifth percentile of the Performance Group. Performance results below the twenty-fifth percentile at the end of the performance cycle will result in the executives earning no common shares under this equity grant. award. The “Target”target number of shares refers to the number of shares of our common stockshares the Named Executive Officer cannamed executive officer may earn (and receive)and receive at the end of the Performance Cycleperformance cycle if the results are at the fiftieth50th percentile of the Performance Group. |
| The "Maximum"maximum number of shares refers to the number of shares of our common stockshares the Named Executive Officer cannamed executive officer may earn (and receive)and receive at the end of the Performance Cycleperformance cycle if the results are at the one hundredthtop percentile of the Performance Group, which is twice the Target number of shares. |
(3) | This column reflects Restricted Stock. Restricted stock granted on March 29, 2011 vest ratably over a four-year period (i.e. 25% per year) and Restricted Stock granted on April 11, 2011 vest ratably over a three-year period (i.e. 33 1/3rd % per year). As a result of his resignation, Mr. Maloney forfeited his unvested restricted stock awards as of February 15, 2012. As a result of his resignation, Mr. Hall forfeited his unvested restricted stock awards as of April 12, 2012.Group.
|
(4) | |
(3) | This column reflects SARs. The SARsrestricted stock awards that vest ratably over a four-year period (i.e., 25% per year). As a result |
| |
(4) | The amounts in this column reflect the grant date fair value for performance shares and restricted stock for the named executive officers in accordance with FASB ASC Topic 718. Assumptions used in the calculation of his resignation, Mr. Maloney forfeited his unvested SARs awards as of February 15, 2012. As a result of his resignation, Mr. Hall forfeited his unvested SARs awards as of Aprilthese amounts are included in Note 12 2012. |
(5) | to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015. The grant date fair value of the performance-basedperformance share awards reflected in this column (the “Performance Shares”) is the Target payout based on the probable outcome of the performance criteria, determined as of the grant date. As a result of his resignation, Mr. Maloney forfeited his 2011 Performance Shares. As a result of his resignation, Mr. Hall forfeited his 2011 Performance Shares. |
Outstanding Equity Awards at 2014 Fiscal Year-End
The following table provides information, on an award by award basis, concerning unexercised options, stock that has not vested, and equity incentive plan awards for each Named Executive Officer outstandingsets forth, as of the end of Fiscal 2011. As a result of his resignation, Mr. Maloney forfeited2014, all equity awards that had not vested as of February 15, 2012. As a result of his resignation, Mr. Hall forfeited all awards that had not vested as of April 12, 2012.outstanding under our equity compensation plans for each named executive officer. Market value is computed using the closing market price of our common stock on January 27, 2012,30, 2015, the last trading day prior to the end of our last completed fiscal year ($15.80)20.00).
| | Options/SARs Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options/SARs Exercisable (#) | | Number of Securities Underlying Unexercised Options/SARs Unexercisable (#) (1) | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options /SARs (#) | | Option/ SARs Exercise Price ($/Sh) | | Option/ SARs Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) (2) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plans Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) (3) | | Equity Incentive Plans Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) |
| | | | | | | | | | | | | | | | | | |
Andrew T. Hall | | 150,000 | | - | | - | | 18.74 | | 2/20/2013 | | - | | - | | - | | - |
| | 50,000 | | - | | - | | 22.96 | | 3/28/2014 | | - | | - | | - | | - |
| | 64,500 | | 21,500 | | - | | 15.87 | | 3/28/2015 | | - | | - | | - | | - |
| | 75,000 | | 25,000 | | - | | 7.07 | | 11/3/2015 | | - | | - | | - | | - |
| | 50,000 | | 50,000 | | - | | 9.77 | | 3/27/2016 | | - | | - | | - | | - |
| | 25,000 | | 75,000 | | - | | 15.50 | | 3/26/2017 | | - | | - | | - | | - |
| | - | | 68,500 | | - | | 18.84 | | 3/29/2018 | | | | | | | | |
| | - | | - | | - | | - | | - | | 86,000 | | 1,358,800 | | 47,500 | | 750,500 |
| | | | | | | | | | | | | | | | | | |
Oded Shein | | - | | 30,000 | | - | | 16.31 | | 1/10/2018 | | - | | - | | - | | - |
| | - | | - | | - | | - | | - | | 14,700 | | 232,260 | | 2,900 | | 45,820 |
| | | | | | | | | | | | | | | | | | |
Richard A. Maloney | | 75,000 | | 25,000 | | - | | 11.03 | | 10/6/2015 | | - | | - | | - | | - |
| | 22,500 | | 22,500 | | - | | 9.77 | | 3/27/2016 | | - | | - | | - | | - |
| | 25,000 | | 75,000 | | - | | 12.94 | | 2/15/2017 | | - | | - | | - | | - |
| | - | | 22,250 | | - | | 18.84 | | 3/29/2018 | | - | | - | | - | | - |
| | - | | - | | - | | - | | - | | 66,700 | | 1,053,860 | | 27,250 | | 430,550 |
| | | | | | | | | | | | | | | | | | |
Edward J. Record | | 100,000 | | - | | - | | 19.96 | | 5/14/2014 | | - | | - | | - | | - |
| | 33,750 | | 11,250 | | - | | 15.87 | | 3/28/2015 | | - | | - | | - | | - |
| | 22,500 | | 22,500 | | - | | 9.77 | | 3/27/2016 | | - | | - | | - | | - |
| | 25,000 | | 75,000 | | - | | 12.94 | | 2/15/2017 | | - | | - | | - | | - |
| | - | | 22,250 | | - | | 18.84 | | 3/29/2018 | | - | | - | | - | | - |
| | - | | - | | - | | - | | - | | 66,700 | | 1,053,860 | | 27,250 | | 430,550 |
| | | | | | | | | | | | | | | | | | |
Steven L. Hunter | | 11,250 | | 3,750 | | - | | 13.26 | | 6/2/2015 | | - | | - | | - | | - |
| | 7,500 | | 7,500 | | - | | 9.77 | | 3/27/2016 | | - | | - | | - | | - |
| | 4,500 | | 13,500 | | - | | 15.50 | | 3/26/2017 | | - | | - | | - | | - |
| | - | | 8,850 | | - | | 18.84 | | 3/29/2018 | | - | | - | | - | | - |
| | - | | - | | - | | - | | - | | 18,008 | | 284,526 | | 8,900 | | 140,620 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option / SARs Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options / SARs Exercisable (#) | | Number of Securities Underlying Unexercised Options / SARs Unexercis-able (#) (1) | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options / SARs (#) | | Option / SARs Exercise Price ($) | | Option / SARs Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) (2) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
Mr. Glazer | | — |
| | — |
| | — |
| | — |
| | — |
| | 112,217 |
| | 2,244,340 |
| | 163,350 |
| | 3,267,000 |
|
Mr. Shein | | 30,000 |
| | — |
| | — |
| | 16.31 |
| | 1/10/2018 |
| | — |
| | — |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | 17,500 |
| | 350,000 |
| | 26,867 |
| | 537,340 |
|
Mr. Lawrence | | — |
| | — |
| | — |
| | — |
| | — |
| | 66,625 |
| | 1,332,500 |
| | 93,042 |
| | 1,860,840 |
|
Mr. Hunter | | 18,000 |
| | — |
| | — |
| | 15.50 |
| | 3/26/2017 |
| | — |
| | — |
| | — |
| | — |
|
| | 6,637 |
| | 2,213 |
| | — |
| | 18.84 |
| | 3/29/2018 |
| | — |
| | — |
| | — |
| | — |
|
| | — |
| | — |
| | — |
| | — |
| | — |
| | 21,175 |
| | 423,500 |
| | 27,458 |
| | 549,160 |
|
Mr. Parsons | | — |
| | — |
| | — |
| | — |
| | — |
| | 20,000 |
| | 400,000 |
| | — |
| | — |
|
(1) | All |
(1) | Common shares reported in this column underlie an unvested (unexercisable) SARs have vested. The future vesting datesaward as of the end of 2014. The vesting date following the end of 2014 for SARs areis as follows: |
|
| | | | |
Name | | Number of Securities Underlying Unexercised SARs (#) | | Vesting Date |
Mr. Hunter | | 2,213 | | 3/29/2015 |
(2) Common shares reported in this column underlie unvested restricted stock awards as of the end of 2014. The vesting dates following the end of 2014 for each award of restricted stock are as follows (with a prorated portion of each award scheduled to vest annually):
|
| | | | |
Name | | Number of Shares of Restricted Stock That Have Not Vested (#) | | Vesting Dates |
Mr. Glazer | | 41,250 | | 4/3/2015, 4/3/2016, 4/3/2017, 4/3/2018 |
| | 24,300 | | 4/4/2015, 4/4/2016, 4/4/2017 |
| | 46,667 | | 4/19/2015, 4/19/2016 |
| | | | |
Andrew T. HallMr. Shein | | 25,0004,100 | | 3/26/201228/2015, 3/28/2016 |
| | 25,0001,175 | | 3/27/201229/2015 |
| | 21,5007,500 | | 4/3/28/20122015, 4/3/2016, 4/3/2017, 4/3/2018 |
| | 17,1254,725 | | 3/29/2012 |
| | 25,000 | | 11/3/2012 |
| | 25,000 | | 3/26/2013 |
| | 25,000 | | 3/27/2013 |
| | 17,125 | | 3/29/2013 |
| | 25,000 | | 3/26/2014 |
| | 17,125 | | 3/29/2014 |
| | 17,125 | | 3/29/4/4/2015, 4/4/2016, 4/4/2017 |
| | | | |
Oded SheinMr. Lawrence | | 15,00028,125 | | 1/10/20134/3/2015, 4/3/2016, 4/3/2017, 4/3/2018 |
| | 7,50013,500 | | 1/10/20144/4/2015, 4/4/2016, 4/4/2017 |
| | 7,50025,000 | | 1/10/4/30/2015, 4/30/2016 |
| | | | |
Richard A. MaloneyMr. Hunter | | 25,0003,400 | | 2/15/20123/28/2015, 3/28/2016 |
| | 11,2501,175 | | 3/27/201229/2015 |
| | 5,5629,375 | | 4/3/29/20122015, 4/3/2016, 4/3/2017, 4/3/2018 |
| | 25,0004,725 | | 10/6/20124/4/2015, 4/4/2016, 4/4/2017 |
| | 25,0002,500 | | 2/15/2013 |
| | 11,250 | | 3/27/2013 |
| | 5,563 | | 3/29/2013 |
| | 25,000 | | 2/15/2014 |
| | 5,562 | | 3/29/2014 |
| | 5,563 | | 3/29/12/1/2015, 12/1/2016, 12/1/2017, 12/1/2018 |
| | | | |
Edward J. RecordMr. Parsons | | 25,00020,000 | | 2/15/20124/28/2015, 4/28/2016, 4/28/2017, 4/28/2018 |
(3) Common shares reported in this column underlie unvested performance shares (at the target number of performance shares) as of the end of 2014. The performance shares cliff vest after a three-year performance cycle based on our TSR return relative to the Performance Group, as described in the CD&A. The final day of each three-year performance cycle is as follows:
|
| | | | |
Name | | Number of Performance Shares That Have Not Vested (#) | | Final Day of the Three-Year Performance Cycle |
Mr. Glazer | | 73,333 | | 1/31/2015 |
| | 11,25039,600 | | 3/27/20121/30/2016 |
| | 11,25050,417 | | 3/1/28/2012 |
| | 5,562 | | 3/29/2012 |
| | 25,000 | | 2/15/2013 |
| | 11,250 | | 3/27/2013 |
| | 5,563 | | 3/29/2013 |
| | 25,000 | | 2/15/2014 |
| | 5,562 | | 3/29/2014 |
| | 5,563 | | 3/29/20152017 |
| | | | |
Steven L. HunterMr. Shein | | 4,50010,000 | | 3/26/20121/31/2015 |
| | 3,7507,700 | | 3/27/20121/30/2016 |
| | 2,2129,167 | | 3/29/2012 |
| | 3,750 | | 06/2/2012 |
| | 4,500 | | 3/26/2013 |
| | 3,750 | | 3/27/2013 |
| | 2,213 | | 3/29/2013 |
| | 4,500 | | 3/26/2014 |
| | 2,212 | | 3/29/2014 |
| | 2,213 | | 3/29/2015 |
(2) | The future vesting dates of Restricted Stock are as follows: |
Name | | Number of Restricted Stock (#) | | Vesting Date1/28/2017 |
| | | | |
Andrew T. HallMr. Lawrence | | 9,00036,667 | | 3/29/20121/31/2015 |
| | 16,66722,000 | | 4/11/20121/30/2016 |
| | 9,00034,375 | | 3/29/2013 |
| | 16,666 | | 4/11/2013 |
| | 9,000 | | 3/29/2014 |
| | 16,667 | | 4/11/2014 |
| | 9,000 | | 3/29/20151/28/2017 |
| | | | |
Oded SheinMr. Hunter | | 1,175 | | 3/29/2012 |
| | 1,175 | | 3/29/2013 |
| | 10,0008,300 | | 1/10/2014 |
| | 1,175 | | 3/29/2014 |
| | 1,175 | | 3/29/31/2015 |
| | 7,700 | | |
Richard A. Maloney | | 2,925 | | 3/29/20121/30/2016 |
| | 10,00011,458 | | 4/11/2012 |
| | 25,000 | | 2/15/2013 |
| | 2,925 | | 3/29/2013 |
| | 10,000 | | 4/11/2013 |
| | 2,925 | | 3/29/2014 |
| | 10,000 | | 4/11/2014 |
| | 2,925 | | 3/29/2015 |
| | | | |
Edward J. Record | | 2,925 | | 3/29/2012 |
| | 10,000 | | 4/11/2012 |
| | 25,000 | | 2/15/2013 |
| | 2,925 | | 3/29/2013 |
| | 10,000 | | 4/11/2013 |
| | 2,925 | | 3/29/2014 |
| | 10,000 | | 4/11/2014 |
| | 2,925 | | 3/29/2015 |
| | | | |
Steven L. Hunter | | 1,175 | | 3/29/2012 |
| | 2,667 | | 4/11/2012 |
| | 1,175 | | 3/29/2013 |
| | 2,666 | | 4/11/2013 |
| | 1,175 | | 3/29/2014 |
| | 5,308 | | 3/29/2014 |
| | 2,667 | | 4/11/2014 |
| | 1,175 | | 3/29/20151/28/2017 |
46Option Exercises and Stock Vested in 2014
(3) | Reflects Target amount of Performance Shares, which cliff vest after a three-year Performance Cycle based on our total shareholder return relative to the Performance Group, as described in the CD&A. The vesting dates of these Performance Shares are as follows: |
Name | | Number of Performance Shares (#) | | Vesting Date |
| | | | |
Andrew T. Hall | | 25,000 | | 2/2/2013 |
| | 22,500 | | 2/1/2014 |
| | | | |
Oded Shein | | 2,900 | | 2/1/2014 |
| | | | |
Richard A. Maloney | | 20,000 | | 2/2/2013 |
| | 7,250 | | 2/1/2014 |
| | | | |
Edward J. Record | | 20,000 | | 2/2/2013 |
| | 7,250 | | 2/1/2014 |
| | | | |
Steven L. Hunter | | 6,000 | | 2/2/2013 |
| | 2,900 | | 2/1/2014 |
The following table provides information concerning each exercisereflects all exercises of stock options, stock appreciation rightsSARs and similar instruments, and eachthe vesting of stock, including restricted stock restricted stock units and similar instruments, during Fiscal 2011 forperformance shares held by each of our Named Executive Officers on an aggregated basis.named executive officers during 2014.
|
| | | | | | | | | | | | |
| | Option / SARs Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) (1) | | Value Realized on Vesting ($) (2) |
Mr. Glazer | | — |
| | — |
| | 31,433 |
| | 721,416 |
|
Mr. Shein | | — |
| | — |
| | 6,482 |
| | 157,865 |
|
Mr. Lawrence | | — |
| | — |
| | 17,000 |
| | 350,205 |
|
Mr. Hunter | | 15,000 |
| | 178,485 |
| | 14,107 |
| | 334,343 |
|
Mr. Parsons | | — |
| | — |
| | — |
| | — |
|
| | Options/SARs Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (1) |
| | | | | | | | |
Andrew T. Hall | | - | | - | | 59,718 | (2) | 990,571 |
| | | | | | | | |
Oded Shein | | - | | - | | - | | - |
| | | | | | | | |
Richard A. Maloney | | - | | - | | 30,000 | (3) | 439,800 |
| | | | | | | | |
Edward J. Record | | - | | - | | 17,145 | (4) | 320,954 |
| | | | | | | | |
Steven L. Hunter | | - | | - | | 5,000 | (3) | 86,300 |
________(1) | Based |
(1) | The amounts in this column reflect the number of our common shares distributed to the named executive officer upon the vesting of the 2011 performance share award following the completion of its three-year performance cycle and the vesting of restricted stock awards during 2014. |
| |
(2) | The value realized is based on the average of the high and low market priceprices of our common stockshares on the date of issuance.vesting date. |
(2) | Reflects shares earned on the 2008 Performance Shares and Restricted Stock that vested during Fiscal 2011. |
(3) | Reflects Restricted Stock vested during Fiscal 2011. |
(4) | Reflects shares earned on the 2008 Performance Shares. |
Pension Benefits in 2014
None of our Named Executive Officers were participants under thenamed executive officers participate in our defined benefit plan, sponsored by the Company as itwhich was closed to new participants and was frozen effective June 30, 1998.
Nonqualified Deferred Compensation in 2014
The following table provides Fiscal 2011 information with respectreflects the contributions to, earnings in and balance of each defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified to a Named Executive Officer. named executive officer’s account held under our DC Plan.
|
| | | | | | | | | | | | | | | |
Name | | Executive Contributions in Last Fiscal Year ($) (1) | | Registrant Contributions in Last Fiscal Year ($) (2) | | Aggregate Earnings in Last Fiscal Year ($) (3) | | Aggregate Withdrawals / Distributions ($) | | Aggregate Balance at Last Fiscal Year End ($) |
Mr. Glazer | | 98,541 |
| | 98,541 |
| | 49,855 |
| | — |
| | 861,585 |
|
Mr. Shein | | 45,543 |
| | 42,242 |
| | 7,169 |
| | — |
| | 506,139 |
|
Mr. Lawrence | | 65,816 |
| | 65,816 |
| | 21,123 |
| | — |
| | 531,244 |
|
Mr. Hunter | | 36,709 |
| | 36,709 |
| | 6,565 |
| | — |
| | 278,594 |
|
Mr. Parsons | | 32,557 |
| | 32,557 |
| | 1,466 |
| | — |
| | 66,580 |
|
Name | | Executive Contributions in Last Fiscal Year ($) (1) | | Registrant Contributions in Last Fiscal Year ($) | | Aggregate Earnings in Last Fiscal Year ($) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($) |
| | | | | | | | | | |
Andrew T. Hall | | 149,336 | | 149,336 | | (3,519) | | - | | 1,252,932 |
| | | | | | | | | | |
Oded Shein | | 37,324 | | 37,038 | | (1,086) | | - | | 117,436 |
| | | | | | | | | | |
Richard A. Maloney | | 91,557 | | 91,557 | | 13 | | - | | 483,013 |
| | | | | | | | | | |
Edward J. Record | | 204,469 | | 92,698 | | (17,156) | | - | | 948,104 |
| | | | | | | | | | |
Steven L. Hunter | | 19,975 | | 19,975 | | 132 | | - | | 68,623 |
__________________________________
(1) Included in the amount reported in the 2011 Summary Compensation Table.
| |
(1) | The amounts in this column are included in the Salary column of the Summary Compensation Table for 2014. |
| |
(2) | The amounts in this column are included in the All Other Compensation column of the Summary Compensation Table for 2014. |
| |
(3) | The amounts in this column are not included in the Summary Compensation Table as these amounts reflect only the earnings on the investments designated by the named executive officer in his or her DC Plan account (i.e., appreciation or decline in account value). The amounts in this column do not include any above-market or preferential earnings, as defined by Item 402(c)(2)(viii) of Regulation S-K and the instructions thereto. |
Retirement Benefits
Plans
Deferred Compensation Plan
We provide a deferred compensation plan (the “Deferred Compensation Plan”) thatsponsor the DC Plan which provides executivesour named executive officers and certain other officers with the opportunity to participate in an unfunded, deferred compensation program that is not qualified under the Internal Revenue Code of 1986, as amended (the “Code”).IRC. Generally, the CodeIRC and the Employee Retirement Income Security Act of 1974, as amended, restrict contributions to a tax-qualified 401(k) plan by highly compensated employees.employees, and our named executive officers are unable to participate in our tax-qualified 401(k) plan. The Deferred Compensation DC
Plan is intended to allow participants to defer income on a pre-tax basis. Under the Deferred CompensationDC Plan, participants may defer up to 50% of their base salary and up to 100% of their bonus and earn a rate of return based on actual investments chosen by each participant. We have established a grantor trust for the purpose of holding assets to provide benefits to the participants. We will match 100% of each participant’s contributions, up to 10% of the sum of their base salary and bonus.
The Named Executive Officersnamed executive officers have the opportunity to allocate the investment of the funds in their Participant Employee Accountparticipant employee account among sixteenmore than thirty investment options, including a Company Stock Investment Option.an option to invest in our common shares. In the case of the Company Stock Investment Option,option to invest in our common shares, the Deferred CompensationDC Plan provides the opportunity for increased pre-tax shareholding.
401(k) Savings Plan
We have a contributory 401(k) savings plan (the “401(k) Plan”) covering substantially all qualifying employees. Under the 401(k) Plan, participants may contribute up to 25% of their qualifying earnings, subject to certain restrictions. We currently match 50% of each participant’s contributions, up to 6% of each participant’s compensation under the 401(k) Plan. We may make discretionary bi-weekly matching contributions during the year.
Frozen Defined Benefit Plan
We sponsor the DB Plan, a defined benefit pension plan which coversfor substantially all employees who had met eligibility requirements and were enrolled prior to June 30, 1998 (the “Stage Plan”).1998. The StageDB Plan was frozen effective June 30, 1998. None of our Named Executive Officersnamed executive officers are participants in the StageDB Plan.
In General
The tables below reflectThis section addresses the amount of compensation to be paid to eachrights of our Named Executive Officersnamed executive officers under their employment agreements and other compensation plans and arrangements upon a change in control (as defined below) or in the event of termination of that executive’stheir employment under different circumstances pursuant to the terms of their Employment Agreements. Specific information concerning the resignation of Mr. Maloneywith us is found under “Transactions with Related Persons-Richard Maloney” on page 18 of this Proxy Statement and under “Significant Events Related to the Employment of Our Named Executive Officers-Resignation of Richard Maloney” on page 34 of this Proxy Statement. Specific information concerning the resignation of Mr. Hall is found under “Transactions with Related Persons-Andrew Hall” on page 18 of this Proxy Statement and under “Significant Events Related to the Employment of Our Named Executive Officers-Resignation of Andrew Hall” on page 34 of this Proxy Statement.
Generally, under the post-termination arrangements described below, other than pursuant to a termination without Good Cause or by the executive for Good Reason, as defined on page 57 or pursuant to a Change in Control, as defined on page 57, a Named Executive Officer who terminates his employment, or whose employment is terminated, is entitled to receive solely those amounts earned by the Named Executive Officer through the date of termination.
terminated. The amount of compensation payable to each Named Executive Officer upon (i) termination without Good Cause or by the executive for Good Reason, (ii) termination without Good Cause or by the executive for Good Reason after a Change in Control, (iii) termination by the Company for Good Cause or by the executive without Good Reason, (iv) retirement, (v) death or (vi) disability, is shown below. The amounts shown assume that the termination was effective as of January 28, 2012, and thus include amounts earned through that date and are estimates of the amounts that would be paid out to the executives upon their termination. The dollar value of stock-based compensation is calculated using the closing share price of our common stock on Friday, January 27, 2012, the last trading day prior to the end of Fiscal 2011, which was $15.80. The actual amounts to be paid out can only be determined at the time of the Named Executive Officer’s separation from the Company.
Payments Made Upon Termination
Depending upon the manner in which a Named Executive Officer’s employment terminates, he may be entitled to receive the following payments and benefits:
· | any base salary and fringe benefits earned and unpaid through the date of termination; |
· | severance pay equal to a multiple of the executive’s base salary plus the executive’s annual bonus target amount; |
· | any incentive (performance) bonus for the fiscal year in which the termination occurs pro-rated through the date of termination provided the Board determines, in good faith, that the executive would have been entitled to receive a performance bonus for the fiscal year in which the termination occurred; |
· | continuation of medical and dental insurance (“Fringe Benefits”) under which the executive is participating for a specified period; |
· | payment for outplacement services up to a specified maximum amount; |
· | payment for financial/estate planning (“Financial Planning”) up to a specified maximum amount; |
· | amounts accrued and vested through the Deferred Compensation Plan; and |
· | vesting of outstanding Stock Options, SARs, Restricted Stock and Performance Shares. |
The Named Executive Officers will not receive any compensation for any unused vacation days and upon termination of employment for any reason, any unused vacation days will be forfeited.
Payments Made Upon Termination Without Good Cause or by the Executive For Good Reason
The following table shows the amounts payable to each of our Named Executive Officers assuming that we terminated him without Good Cause or that he terminated his employment agreement for Good Reason on January 28, 2012.
Name | Severance | Incentive Bonus ($) | Fringe Benefits ($) (1) | Max Outplacement ($) | Max Financial Planning ($) | Pension and Deferred Compensation ($) | Stock Options, SARs, Restricted Stock and Performance Shares ($) |
| | | | | | | |
Mr. Hall | $3.4 million | Amount earned and prorated through date of termination | $34,404 | Provided for up to 1 year with $15,000 maximum | None | (2) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Shein | $0.5 million | Amount earned and prorated through date of termination | $17,458 | Provided for up to 1 year with $15,000 maximum | None | (2) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Maloney | $1.4 million | Amount earned and prorated through date of termination | $22,200 | Provided for up to 1 year with $15,000 maximum | None | (2) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Record | $1.5 million | Amount earned and prorated through date of termination | $25,666 | Provided for up to 1 year with $15,000 maximum | None | (2) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Hunter | $0.6 million | Amount earned and prorated through date of termination | $17,111 | Provided for up to 1 year with $15,000 maximum | None | (2) | All unvested awards are forfeited. |
________________________
(1) | The amount shown reflects the estimated premiums to be paid by the Company on behalf of the Named Executive Officer for medical and dental insurance. |
(2) | Please see the 2011 Pension Benefits Table and the 2011 Nonqualified Deferred Compensation Table for these amounts. |
Payments Made Upon Termination Without Good Cause or by the Executive For Good Reason After a Change In Control
The following table shows the amounts payable to each of our Named Executive Officers assuming that we terminated him without Good Cause or that he terminated his employment agreement for Good Reason on January 28, 2012 as a result of a Change In Control.
Payments that a Named Executive Officernamed executive officer would be entitled to receive underupon termination or a Changechange in Controlcontrol are not considered by the Compensation Committee when making annual compensation decisions for the Named Executive Officersnamed executive officers and do not factor into decisions made by the Companyus regarding other compensation elements. Rather, these provisions
The narrative discussion and tables below set forth the compensation payable to each named executive officer (or his beneficiaries, as applicable) upon a change in control or as a result of his termination of employment with us under various scenarios. The amounts shown in the tables are based on the assumption that the termination was effective as of January 31, 2015, the final day of 2014. The closing market price of our common shares on January 30, 2015, the final trading day of 2014, was $20.00. The actual amounts that would be payable in connection with a change in control or the termination of a named executive officer could only be determined at the time of the actual triggering event.
Upon termination, each participating named executive officer would receive his aggregate balance in our DC Plan, as is reflected in the “Aggregate Balance at Last Fiscal Year End” column of the Nonqualified Deferred Compensation table above. However, the named executive officers are not entitled to receive compensation for any unused vacation days upon termination.
Payments Upon Various Triggering Events at 2014 Fiscal Year-End
Termination by Us For Good Cause or Termination by Executive Without Good Reason
If we terminate a named executive officer for Good Cause (as defined below) or a named executive officer terminates his employment agreementswith us without Good Reason (as defined below), the executive will be entitled to receive any base salary earned and unpaid, and certain benefits accrued and unpaid, through the date of termination and will automatically forfeit any unvested restricted stock, performance shares, SARs, stock options or similar rights as of the date of termination.
Termination by Reason of Death, Disability or Retirement
If a named executive officer’s employment with us terminates as a result of his death, disability or retirement, (1) the executive will be entitled to receive any base salary earned and unpaid, and certain benefits accrued and unpaid, through the date of termination, (2) all unvested restricted stock, SARs, stock options or similar rights held by the executive will fully vest as of, and (in the case of SARs and stock options) be exercisable for one year following, the date of termination and (3) all unvested performance shares will vest at the target level and be payable to the executive.
|
| | | | | | | | | | | | | | | |
Source of Payment | | Mr. Glazer | | Mr. Shein | | Mr. Lawrence | | Mr. Hunter | | Mr. Parsons |
Vesting of SARs ($) | | — |
| | — |
| | — |
| | 2,567 |
| | — |
|
Vesting of Restricted Stock ($) | | 2,244,340 |
| | 350,000 |
| | 1,332,500 |
| | 423,500 |
| | 400,000 |
|
Vesting of Performance Shares (at target level) ($) | | 3,267,000 |
| | 537,340 |
| | 1,860,840 |
| | 549,160 |
| | — |
|
Total ($) | | 5,511,340 |
| | 887,340 |
| | 3,193,340 |
| | 975,227 |
| | 400,000 |
|
Termination by Us Without Good Cause or Termination by Executive For Good Reason
If we terminate a named executive officer without Good Cause or a named executive officer terminates his employment with us for Good Reason, the named executive officer will be entitled to receive any base salary earned and unpaid, and certain benefits accrued and unpaid, through the date of termination, and the following:
severance in an amount equal to two times his base salary in the case of Mr. Glazer;
severance in an amount equal to one and one-half times in the case of Mr. Lawrence, and one times in the case of Mr. Shein, Mr. Hunter and Mr. Parsons, the aggregate of his (1) base salary plus (2) performance incentive bonus at the target level as in effect as of the date of termination;
the performance incentive bonus for the fiscal year in which the termination occurs prorated through the date of termination; provided, however, the named executive officer will not receive any portion of the performance incentive bonus unless our Board determines that the performance incentive bonus was earned and the executive would have been entitled to receive it had the termination not occurred;
| |
• | in the case of Mr. Glazer, all unvested restricted stock held by him will fully vest as of the date of termination and all unvested performance shares at or above the 50th percentile of achievement as of the termination date will vest on a prorated basis at the target level and be payable to him; |
continuation of healthcare benefits to which the named executive officer is participating as of the date of termination for a period of 18 months in the case of Mr. Glazer and Mr. Lawrence and 12 months in the case of Mr. Shein, Mr. Hunter and Mr. Parsons from the date of termination, and
outplacement services for a period of 12 months from the date of termination up to a maximum of $15,000 ($10,000 in the case of Mr. Hunter).
In the following table, the benefits continuation amounts shown include the estimated premiums to be paid by us on behalf of the named executive officer for healthcare insurance.
|
| | | | | | | | | | | | | | | |
Source of Payment | | Mr. Glazer | | Mr. Shein | | Mr. Lawrence | | Mr. Hunter | | Mr. Parsons |
Severance ($) | | 1,938,001 |
| | 600,015 |
| | 1,612,622 |
| | 650,251 |
| | 637,500 |
|
2014 Performance Incentive Bonus ($) | | 600,780 |
| | 124,003 |
| | 274,462 |
| | 134,385 |
| | 131,750 |
|
Vesting of Restricted Stock ($) | | 2,244,340 |
| | — |
| | — |
| | — |
| | — |
|
Vesting of Performance Shares (at target level) ($) | | 2,330,773 |
| | — |
| | — |
| | — |
| | — |
|
Healthcare Benefits ($) | | 58,798 |
| | 19,906 |
| | 32,545 |
| | 23,580 |
| | 15,819 |
|
Outplacement ($) | | 15,000 |
| | 15,000 |
| | 15,000 |
| | 10,000 |
| | 15,000 |
|
Total ($) | | 7,187,692 |
| | 758,924 |
| | 1,934,629 |
| | 818,216 |
| | 800,069 |
|
Change in Control - Termination Without Good Cause or Termination by Executive For Good Reason
If a change in control occurs, and during the period beginning six months before and ending 24 months after the change in control, we or our successor terminates the named executive officer’s employment without Good Cause or the named executive officer terminates his employment with Good Reason, the named executive officer will be entitled to receive any base salary earned and unpaid, and certain benefits accrued and unpaid, through the date of the change in control or termination, and the following:
severance in an amount equal to three times in the case of Mr. Glazer and Mr. Lawrence, and two times in the case of Mr. Shein, Mr. Hunter and Mr. Parsons, the aggregate of his (1) base salary plus (2) performance incentive bonus at the target level as in effect as of the date of the change in control or termination;
the performance incentive bonus for the fiscal year in which the termination occurs prorated through the date of termination;
all unvested restricted stock, SARs, stock options or similar rights will fully vest and all unvested performance shares will vest at the target level and be payable to him as of the date of the change in control;
continuation of healthcare benefits to which the named executive officer is participating as of the date of change in control or termination for a period of 36 months in the case of Mr. Glazer and Mr. Lawrence, and 24 months in the case of Mr. Shein, Mr. Hunter and Mr. Parsons, from the date of the change in control or termination;
outplacement services for a period of 12 months from the date of the change in control or termination up to a maximum of $15,000 ($10,000 in the case of Mr. Hunter); and
financial planning allowance for a period of 36 months in the case of Mr. Glazer and Mr. Lawrence, and 24 months in the case of Mr. Shein, Mr. Hunter and Mr. Parsons, from the date of the change in control or termination.
If any payment to the named executive officer due to a change in control subjects the executive to any excise tax, we will not pay to the executive a gross-up payment to compensate him for the amount of the excise tax.
The payments and benefits provided in connection with a change in control are intended to help provide us with continuity of management and continued focus on the business by senior management in the event of a Change change in control.
In Control.the following table, the benefits continuation amounts shown include the estimated premiums to be paid by us on behalf of the named executive officer for healthcare insurance.
Name | Severance | Incentive Bonus ($) | Fringe Benefits ($) (1) | Max Outplacement ($) | Max Financial Planning ($) | Pension and Deferred Compensation ($) | Stock Options, SARs, Restricted Stock and Performance Shares ($) |
| | | | | | | |
Mr. Hall | $5.1 million | Amount earned and prorated through date of termination | $51,606 | Provided for up to 1 year with $15,000 maximum | Provided for up to 3 years with $10,000 annual maximum | (2) | Unvested Stock Options, SARs and Restricted Stock automatically vest; all Performance Shares are vested at target level and are payable to the Executive within 30 days of the effective date of the Change in Control. |
| | | | | | | |
Mr. Shein | $1.1 million | Amount earned and prorated through date of termination | $34,916 | Provided for up to 1 year with $15,000 maximum | Provided for 2 years with $5,000 annual maximum | (2) | Unvested Stock Options, SARs and Restricted Stock automatically vest; all Performance Shares are vested at target level and are payable to the Executive within 30 days of the effective date of the Change in Control. |
| | | | | | | |
Mr. Maloney | $2.9 million | Amount earned and prorated through date of termination | $44,400 | Provided for up to 1 year with $15,000 maximum | Provided for 3 years with $7,500 annual maximum | (2) | Unvested Stock Options, SARs and Restricted Stock automatically vest; all Performance Shares are vested at target level and are payable to the Executive within 30 days of the effective date of the Change in Control. |
| | | | | | | |
Mr. Record | $2.9 million | Amount earned and prorated through date of termination | $51,332 | Provided for up to 1 year with $15,000 maximum | Provided for 3 years with $7,500 annual maximum | (2) | Unvested Stock Options, SARs and Restricted Stock automatically vest; all Performance Shares are vested at target level and are payable to the Executive within 30 days of the effective date of the Change in Control. |
| | | | | | | |
Mr. Hunter | $1.2 million | Amount earned and prorated through date of termination | $34,222 | Provided for up to 1 year with $15,000 maximum | Provided for 2 year with $5,000 annual maximum | (2) | Unvested Stock Options, SARs and Restricted Stock automatically vest; all Performance Shares are vested at target level and are payable to the Executive within 30 days of the effective date of the Change in Control. |
_________________________
|
| | | | | | | | | | | | | | | |
Source of Payment | | Mr. Glazer | | Mr. Shein | | Mr. Lawrence | | Mr. Hunter | | Mr. Parsons |
Severance ($) | | 5,814,003 |
| | 1,200,030 |
| | 3,225,243 |
| | 1,300,502 |
| | 1,275,000 |
|
2014 Performance Incentive Bonus ($) | | 600,780 |
| | 124,003 |
| | 274,462 |
| | 134,385 |
| | 131,750 |
|
Vesting of SARs ($) | | — |
| | — |
| | — |
| | 2,567 |
| | — |
|
Vesting of Restricted Stock ($) | | 2,244,340 |
| | 350,000 |
| | 1,332,500 |
| | 423,500 |
| | 400,000 |
|
Vesting of Performance Shares (at target level) ($) | | 3,267,000 |
| | 537,340 |
| | 1,860,840 |
| | 549,160 |
| | — |
|
Healthcare Benefits ($) | | 117,596 |
| | 39,811 |
| | 65,091 |
| | 47,159 |
| | 31,638 |
|
Outplacement ($) | | 15,000 |
| | 15,000 |
| | 15,000 |
| | 10,000 |
| | 15,000 |
|
Financial Planning ($) | | 30,000 |
| | 10,000 |
| | 30,000 |
| | 10,000 |
| | 10,000 |
|
Total ($) | | 12,088,719 |
| | 2,276,185 |
| | 6,803,136 |
| | 2,477,273 |
| | 1,863,388 |
|
Change in Control - Without Termination
If a change in control occurs, all unvested restricted stock, SARs, stock options or similar rights will fully vest and all unvested performance shares will vest at the target level and be payable to the named executive officer as of the date of the change in control.
|
| | | | | | | | | | | | | | | |
Source of Payment | | Mr. Glazer | | Mr. Shein | | Mr. Lawrence | | Mr. Hunter | | Mr. Parsons |
Vesting of SARs ($) | | — |
| | — |
| | — |
| | 2,567 |
| | — |
|
Vesting of Restricted Stock ($) | | 2,244,340 |
| | 350,000 |
| | 1,332,500 |
| | 423,500 |
| | 400,000 |
|
Vesting of Performance Shares (at target level) ($) | | 3,267,000 |
| | 537,340 |
| | 1,860,840 |
| | 549,160 |
| | — |
|
Total ($) | | 5,511,340 |
| | 887,340 |
| | 3,193,340 |
| | 975,227 |
| | 400,000 |
|
A “change in control” shall be deemed to have occurred:
on such date, within the 12-month period following the date that any one person, or more than one person acting as a group (as defined in §1.409A 3(i)(5)(v)(B) of Contents
the Treasury Regulations), acquires ownership of stock that represents twenty-five percent (25%) or more of the combined voting power of our then outstanding securities (“Trigger Date”), that a majority of the individuals who, as of the Trigger Date, constitute the Board (“Incumbent Board”) are replaced by new members whose appointment or election is not endorsed by a majority of the members of the Incumbent Board before the date of such appointment or election;(1) | The amount shown reflects the estimated premiums to be paid by the Company on behalf of the Named Executive Officer for medical and dental insurance. |
(2) | Please see the 2011 Pension Benefits Table and the 2011 Nonqualified Deferred Compensation Table for these amounts. |
Payments Made Upon Terminationas of the date that any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that, together with stock held by such person or group, constitutes more than 50% of either (a) the then outstanding shares of our common stock or (b) the combined voting power of our then outstanding voting securities entitled to vote generally in the election of directors; provided, however, if any one person or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of our stock, the acquisition of additional stock by the Companysame person or persons shall not be considered to cause a change in control; or
on the date any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires (or has acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) all, or substantially all, of our assets, except for any sale, lease exchange or transfer resulting from any action taken by any creditor of ours in enforcing its rights or remedies against any of our assets in which such creditor holds a security interest. Provided further, a transfer of assets by us shall not be treated as a change in control if the assets are transferred to: (1) a shareholder of ours (immediately before the asset transfer) in exchange for or with respect to its stock; (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by us; (3) a person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all our outstanding stock; or (4) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in this paragraph. For purposes of this paragraph and except as otherwise provided in clause (1), a person’s status is to be determined immediately after the transfer of the assets.
Good Cause and Good Reason Defined
As used in this discussion, the definitions for Good Cause and Good Reason are as follows:
“Good Cause” means: (1) the named executive officer’s criminal conviction of a felony by a federal or state court of competent jurisdiction including any plea of guilty or no contest; (2) a material and significant act of dishonesty by the Executivenamed executive officer relating to us; (3) a failure to comply with our Code of Ethics and Business Conduct; or (4) the named executive officer’s failure to follow a direct, reasonable and lawful order from the our Board within the reasonable scope of his position, which failure, if remediable, is not remedied within thirty days after written notice to the named executive officer.
“Good Reason” shall exist if, without Good Reason
The following table shows the amounts payablenamed executive officer’s express written consent, we: (1) materially reduce or decrease the named executive officer’s Base Salary or Incentive Compensation opportunity level from the level in effect on the Effective Date of the Employment Agreement (or some subsequent higher level put into effect by the Board subsequent to eachthe Effective Date of the Employment Agreement), unless such reduction or decrease is in connection with an across-the-board reduction or decrease in the Base Salaries or Incentive Compensation opportunity levels of all of our Named Executive Officers assuming that we terminated him for Good Causeother senior level executives; (2) willfully fail to include the named executive officer in any incentive compensation plans, bonus plans, or that he terminatedother plans and benefits provided by us to other executive level executives; (3) materially reduces, decreases or diminishes the nature, status or duties and responsibilities of the named executive officer’s position from those in effect on the Effective Date of the Employment Agreement, and such reduction, decrease or diminution is not reasonably related to or the result of an adverse change in the named executive officer’s performance of assigned duties and responsibilities; (4) hires an executive senior to the named executive officer; or (5) require the named executive officer to (a) regularly perform the duties and responsibilities of his position at, or (b) relocate the named executive officer’s principal place of employment withoutto, a location which is more than fifty miles from the location of the named executive officer’s principal place of employment. Good Reason on January 28, 2012.
Name | Severance | Incentive
Bonus ($)
| Fringe
Benefits
($)
| Max Outplacement
($)
| Max Financial Planning ($) | Pension and Deferred Compensation ($) | Stock Options, SARs, Restricted Stock and Performance Shares ($) |
| | | | | | | |
Mr. Hall | None | None | None | None | None | (1) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Shein | None | None | None | None | None | (1) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Maloney | None | None | None | None | None | (1) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Record | None | None | None | None | None | (1) | All unvested awards are forfeited. |
| | | | | | | |
Mr. Hunter | None | None | None | None | None | (1) | All unvested awards are forfeited. |
__________________________
(1) | Please see the 2011 Pension Benefits Table and the 2011 Nonqualified Deferred Compensation Table for these amounts. |
Payments Made Upon Retirement
The following table shows the amounts payablenamed executive officer or any other voluntary action taken by or agreed to each of our Named Executive Officers assuming that he retired as of January 28, 2012.
Name | Severance | Incentive
Bonus ($)
| Fringe
Benefits
($)
| Max Outplacement
($)
| Max Financial Planning ($) | Pension and Deferred Compensation ($) | Stock Options, SARs, Restricted Stock and Performance Shares ($) |
| | | | | | | |
Mr. Hall | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Shein | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Maloney | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Record | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Hunter | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
_________________________
(1) | Please see the 2011 Pension Benefits Table and the 2011 Nonqualified Deferred Compensation Table for these amounts. |
Payments Made Upon Death
The following table showsby the amounts payablenamed executive officer related to each of our Named Executive Officers assuming that his or her position or employment was terminated as a result of death as of January 28, 2012.with us.
Name | Severance | Incentive
Bonus ($)
| Fringe
Benefits
($)
| Max Outplacement
($)
| Max Financial Planning ($) | Pension and Deferred Compensation ($) | Stock Options, SARs, Restricted Stock and Performance Shares ($) |
| | | | | | | |
Mr. Hall | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Shein | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Maloney | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Record | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Hunter | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
________________________
(1) | Please see the 2011 Pension Benefits Table and the 2011 Nonqualified Deferred Compensation Table for these amounts. |
Payments Made Upon Disability
The following table shows the amounts payable to each of our Named Executive Officers assuming that his employment was terminated as a result of disability as of January 28, 2012.
Name | Severance | Incentive
Bonus ($)
| Fringe
Benefits
($)
| Max Outplacement
($)
| Max Financial Planning ($) | Pension and Deferred Compensation ($) | Stock Options, SARs, Restricted Stock and Performance Shares ($) |
| | | | | | | |
Mr. Hall | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Shein | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Maloney | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Record | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
| | | | | | | |
Mr. Hunter | None | None | None | None | None | (1) | Unvested Stock Options, SARs and Restricted Stock fully vest and are exercisable within one year from termination date; all Performance Shares are vested at target level and are payable to the Executive. |
_________________________
(1) | Please see the 2011 Pension Benefits Table and the 2011 Nonqualified Deferred Compensation Table for these amounts. |
Timing of Payments
Thepayments reflectedprovided in connection with the foregoing tablestermination events will be paid as follows:
Severance payment will be made to the executive in regular payroll payments throughout the severance period;
· | Severance payment will be made to the executive in regular payroll payments throughout the severance period; |
· | Incentive bonus payments will be made to the executive in a lump sum on or beforeIncentive bonus payments will be made to the executive in a lump sum on or around April 1 following the end of the fiscal year in which the termination occurred; |
· | Fringe Benefits will be provided in accordance with our standard policies and practices; |
· | Outplacement payments will be made directly to the entity providing outplacement services following receipt of an invoice or statement from the entity providing the outplacement services; |
· | Financial Planning reimbursements will be made in accordance with our or our successor’s policies and procedures; and |
· | Pension and Deferred Compensation payments will be made in accordance with the provisions of the respective plan. |
Termination
In General. The Employment Agreements of our Named Executive Officers provide (and provided in the case of Messrs. Hall and Maloney) that if the Executive is terminated by us for Good Cause (as defined below), the Executive will be entitled to receive any base salary earned and unpaid, and certain fringe benefits accrued and unpaid, through the date of termination, and the Executive will automatically forfeit any unvested stock options, warrants or similar rights as of the date of termination.
If the Executive is terminated by us without Good Cause or terminates his employment for Good Reason (as defined below), the Executive will be entitled to receive: (i) earned and unpaid Base Salary, and certain fringe benefits accrued and unpaid through the date of termination, (ii) an amount equal to two times in the case of Mr. Hall, one and one-half times in the case of Messrs. Record and Maloney, and one time in the case of Messrs. Shein and Hunter the aggregate of (x) his Base Salary plus (y) the Incentive Compensation at the Target Rate (as defined below) in effect as of the date of termination, (iii) the Incentive Compensation for the fiscal year in which the termination occurs pro-rated throughoccurred;
Benefits will be provided in accordance with our standard policies and practices;
Outplacement payments will be made directly to the dateentity providing outplacement services following receipt of termination; provided, however,an invoice or statement from the Executiveentity providing the outplacement services;
Financial planning reimbursements will not receive any portionbe made in accordance with our or our successor’s policies and procedures; and
Deferred compensation payments will be made in accordance with the provisions of the Incentive Compensation unless the Board determines that the Executive would have been entitled to receive any Incentive Compensation for the fiscal year in which the termination occurred as set forth in the Employment Agreement, (iv) continuation of certain fringe benefits to which the Executive is participating as of the date of termination for a period of 24 months in the case of Mr. Hall, 18 months for Messrs. Record and Maloney and 12 months in the case of Messrs. Shein and Hunter from the date of termination, and (v) payment of outplacement services for a period of 12 months from the date of termination with payments not to exceed $15,000, and the Executive will automatically forfeit any unvested stock options, warrants or similar rights in the Company as of the date of termination.DC Plan.
If the Executive terminates his employment without Good Reason, the Executive will be entitled to receive any base salary earned and unpaid, and certain fringe benefits accrued and unpaid, through the date of termination, and the Executive will automatically forfeit any unvested stock options, warrants or similar rights as of the date of termination.
Change in Control. If a Change in Control (as defined below) occurs, and during the period beginning 6 months before and ending 24 months after the Change in Control, we or our successor terminates the Employment Agreement without Good Cause or the Executive terminates his employment with us or our successor with Good Reason, the Executive will be entitled to receive any base salary earned and unpaid, and certain fringe benefits accrued and unpaid, through the date of the Change in Control or termination, and the following:
(i) | an amount equal to three times (two times in the case of Messrs. Shein and Hunter) the aggregate of the base salary plus the Incentive Compensation at the Target Rate in effect as of the date of the Change in Control or termination; |
(ii) | the Incentive Compensation for the fiscal year in which the Change in Control or termination occurs pro-rated through the date of the Change in Control or termination; |
(iii) | continuation of certain fringe benefits to which the Executive is participating as of the date of Change in Control or termination for a period of 36 months (24 months in the case of Messrs. Shein and Hunter) from the date of the Change in Control or termination; |
(iv) | payment of outplacement services for a period of 12 months from the date of the Change in Control or termination with payments not to exceed $15,000; and |
(v) | continuation of the financial planning allowance for a period of 36 months (24 months in the case of Messrs. Shein and Hunter) from the date of the Change in Control or termination, with payments not to exceed $10,000 for any 12 month period in the case of Mr. Hall, $7,500 for any 12 month period in the case of Messrs. Record and Maloney, and $5,000 for any 12 month period in the case of Messrs. Shein and Hunter. |
In addition, all the Executive’s stock options, warrants or similar rights will immediately become fully and completely vested and exercisable as of the date of the Change in Control or termination and we or our successor shall be obligated to compensate the Executive for any options or rights the Executive does not exercise within 60 days of the date of the Change in Control or termination at the price and in the manner described in the Employment Agreement.
No Gross-Up Payments. If any payment to the Executive due to a Change in Control subjects the Executive to any excise tax, we will not pay to the Executive a gross-up payment to compensate the Executive for the amount of the excise tax.
Defined Terms. Definitions for some of the terms used in this discussion in the order they are first used are as follows:
“Good Cause” means (i) the Executive’s criminal conviction of a felony by a federal or state court of competent jurisdiction including any plea of guilty or no contest; (ii) a material and significant act of dishonesty by the Executive relating to the Company; (iii) a failure to comply with the Company’s “Code of Ethics and Business Conduct” policy; or (iv) the Executive’s failure to follow a direct, reasonable and lawful order from the Company’s Board within the reasonable scope of his position, which failure, if remediable, is not remedied within thirty (30) days after written notice to the Executive.
“Good Reason��� shall exist if, without the Executive’s express written consent, the Company: (i) materially reduces or decreases the Executive’s Base Salary or Incentive Compensation opportunity level from the level in effect on the Effective Date of the Employment Agreement (or some subsequent higher level put into effect by the Board subsequent to the Effective Date of the Employment Agreement), unless such reduction or decrease is in connection with an across-the-board reduction or decrease in the Base Salaries or Incentive Compensation opportunity levels of all the Company’s other senior level executives, (ii) willfully fails to include the Executive in any incentive compensation plans, bonus plans, or other plans and benefits provided by the Company to other executive level executives, (iii) materially reduces, decreases or diminishes the nature, status or duties and responsibilities of the Executive’s position from those in effect on the Effective Date of the Employment Agreement, and such reduction, decrease or diminution is not reasonably related to or the result of an adverse change in the Executive’s performance of assigned duties and responsibilities, (iv) hires an executive senior to the Executive; or (v) requires the Executive to (A) regularly perform the duties and responsibilities of his position at, or (B) relocate the Executive’s principal place of employment to, a location which is more than fifty (50) miles from the location of the Executive’s principal place of employment as of the Effective Date of the Employment Agreement. Notwithstanding the above, Good Reason shall not include the death, disability or voluntary retirement of the Executive or any other voluntary action taken by or agreed to by the Executive related to his position or his employment with the Company or its Subsidiaries.
“Change in Control” shall be deemed to have occurred:
(a) on such date within the 12-month period following the date that any one person, or more than one person acting as a group (as defined in §1.409A 3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that represents twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities (the “Trigger Date”), that a majority of the individuals who, as of the Trigger Date, constitute the Board (the “Incumbent Board”) are replaced by new members whose appointment or election is not endorsed by a majority of the members of the Incumbent Board before the date of such appointment or election;
(b) as of the date that any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that, together with stock held by such person or group, constitutes more than 50% of either (1) the then outstanding shares of common stock of the Company or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, if any one person or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons shall not be considered to cause a Change in Control; or
(c) the date any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) all, or substantially all, of the assets of the Company, except for any sale, lease exchange or transfer resulting from any action taken by any creditor of the Company in enforcing its rights or remedies against any assets of the Company in which such creditor holds a security interest. Provided further, a transfer of assets by the Company shall not be treated as a Change in Control if the assets are transferred to:
| (i) | A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; |
| (ii) | An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; |
| (iii) | A person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or |
| (iv) | An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii) herein. |
For purposes of subsection (c) and except as otherwise provided in paragraph (i), a person’s statusis determined immediately after the transfer of the assets.
“Incentive Compensation” means compensation based upon the Company’s operating results for and the Executive’s performance during such fiscal year and such other performance objectives, targets and criteria for the Executive that the Board may establish and adjust for that fiscal year.
“Target Rate” means the amount of Incentive Compensation calculated as a percentage of the Base Salary in effect during that fiscal year, which percentage shall be determined and may be adjusted by the Board based on the Company’s operating results, the Executive’s performance and other performance objectives.
The following table provides information concerning the compensation of all persons who served as our Independent Directors during any part of Fiscal 2011 for their service as Directors during Fiscal 2011.
Name | | Fees Earned or Paid in Cash ($) (1) | | Stock Awards ($) (2) | | Option Awards ($) (3) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (4) | | All Other Compensation ($) | | Total ($) |
| | | | | | | | | | | | | | |
Alan J. Barocas | | 59,000 | | 102,562 | | - | | - | | - | | - | | 161,562 |
| | | | | | | | | | | | | | |
Michael L. Glazer | | 65,000 | | 102,562 | | - | | - | | - | | - | | 167,562 |
| | | | | | | | | | | | | | |
Gabrielle E. Greene | | 57,000 | | 102,562 | | - | | - | | - | | - | | 159,562 |
| | | | | | | | | | | | | | |
Earl J. Hesterberg | | 60,417 | | 102,562 | | - | | - | | - | | - | | 162,979 |
| | | | | | | | | | | | | | |
William J. Montgoris | | 153,000 | | 102,562 | | - | | - | | - | | - | | 255,562 |
| | | | | | | | | | | | | | |
David Y. Schwartz | | 73,000 | | 102,562 | | - | | - | | (7,642) | | - | | 167,920 |
| | | | | | | | | | | | | | |
Cheryl Nido Turpin (5) | 24,416 | | - | | - | | - | | - | | - | | 24,416 |
(1) | The amounts shown in this column reflect the amount of cash compensation earned for Fiscal 2011 for Board and committee service. Directors may elect to receive the Annual Retainer, the Chairman Retainer, Special Board Meeting Fees, Committee Meeting Fees, Committee Chairman Fees and such other compensation as the Board may deem appropriate, as the case may be, either (a) in restricted stock, deferred stock units (“DSU”), cash, or a combination of restricted stock, deferred stock units and cash at the time that such compensation is earned, or (b) in cash or restricted stock at a later date. Please see “Compensation of Directors” below. |
(2) | The amounts shown in this column reflect the dollar amounts of the aggregate grant date fair value of stock awards granted in 2011 for the named Directors in accordance with SEC rules. |
(3) | No stock options were awarded to Directors in 2011. |
(4) | The amounts shown reflect deferred compensation as well as the increase (decrease) in value related to the DSUs from dividends and changes in market price of our common stock. |
(5) | Ms. Nido Turpin did not stand for reelection and retired from the Board after the 2011 Annual Meeting held on June 9, 2011. |
Compensation of Directors
The compensation of our Independent Directorsnon-employee directors is set by theour Board at the recommendation of the Corporate Governance and Nominating Committee (the(referred to as the “CGNC”) in this section). In developing its recommendations, the CGNC is guided by the following objectives: (1) compensation should fairly pay Independent Directorsnon-employee directors for work required in a company our sizesize; and (2) compensation should align the Independent Directors’directors’ interests withand the long-term interest of our shareholders. Hay GroupAs requested by
the CGNC, its director compensation consultant prepares competitive compensation analyses regarding both the Peer Group and the broader market for similarly situated companies and advises the CGNC on the level and design of compensation programs for the Independent Directors.non-employee directors. The ChairmanChair of the CGNC works directly with Hay Groupthe CGNC’s director compensation consultant, if any, to determine the scope of the work needed to assist the CGNC in its decision making processes. Directors are reimbursed for actual expenses they incur while attending, or otherwise participating in, Board meetings, committee meetings and ad hoc committee assignments.
Directors who are our full-time employees receive no additional compensation for serving on theour Board. Directors who are not our full-time employeesNon-employee directors receive the following compensation:
compensation described below.Retainers and Fees
Annual Retainer. Directors receiveNon-employee directors received a $50,000 Annual Retainer,$60,000 annual retainer for service on our Board, which iswas earned and paid pro rata over their term at the beginning of each month. The Annual Retainerannual retainer is intended to compensate the Directordirector for attendance at regularly scheduled quarterly Board meetings (including by teleconference) and up to two special meetings of our Board, as well as consultation and participation in teleconference meetings held for periodic Board updates.
Chairman Retainer.
In addition to the Annual Retainer,annual board retainer, the Chairman of the Board receivesreceived a $100,000$125,000 retainer, (the “Chairman Retainer”), which iswas earned and paid pro rata over his or her term at the beginning of each month. The Chairman Retainerretainer is intended to compensate the Chairman for the additional duties set forth in the Governance Guidelines.
Special Board Meeting Fee. Directors receive
Beginning with the seventh meeting of our Board, directors received a Special Board Meeting Feespecial board meeting fee of $1,500 per meeting for their preparation and attendance at special meetings of theour Board (may be(including attendance by teleconference) called for the purpose of specific actions by theour Board (consents, resolutions, etc.) and held at times other than in conjunction with regular quarterly meetings of theour Board. No additional meeting fee is to bewas paid for attendance at regular quarterly boardBoard meetings and the first two special Board meetings.
Committee Meeting Fees. Directors receive (i)
Non-employee directors received (1) a Regular Committee Meeting Feeregular committee meeting fee of $1,000$1,500 per meeting for their preparation and attendance at regular quarterly meetings of the Committeescommittees on which they serve (including by teleconference), and (ii)(2) a Special Committee Meeting Feespecial committee meeting fee of $1,000$1,500 per meeting for (a) their preparation and attendance at Committeecommittee meetings (may be(including by teleconference) called for the purpose of specific actions by their Committees (consents, resolutions, etc.)committees and held at times other than in conjunction with regular quarterly meetings of their Committees,committees, and (b) their preparation and attendance at “ad hoc” Board Committeead hoc committee assignments held at times other than in conjunction with regular quarterly meetings of their Committeescommittees or theour Board. Non-committee members who voluntarily attend a committee meeting do not receive a fee.
Committee Chair Fees
Committee Chairman Fees.The ChairmanChair of the Audit Committee receivesreceived a Committee Chairman Feecommittee chair fee of $17,500 per year; the Chairman$20,000. The Chair of the Compensation Committee receivesreceived a Committee Chairman Feecommittee chair fee of $15,000 per year; and the Chairman$15,000. The Chair of the Corporate Governance and Nominating Committees receivesreceived a Committee Chairman Feecommittee chair fee of $12,500 per year.$12,500. The Committee Chairman Fee isannual committee chair fee was earned and paid pro rata over the Chairman’sChair’s term at the beginning of each month.
Stock Options and Restricted Stock Grants.Awards
Initial Grant
· | Upon a non-employee director’s initial appointment or election, the director will receive a restricted stock award valued at $100,000, based on the closing price of our common shares on the date of appointment or election, but prorated for the number of months the director will serve until the next annual meeting of our shareholders (“Initial Grant”). For example, a director initially appointed or elected three months after the last annual meeting of our shareholders would serve a term of nine months and would be entitled to a restricted stock award valued at $75,000, while a director initially appointed or elected nine months after the last annual meeting of our shareholders would serve a term of three months and would be entitled to a restricted stock award valued at $25,000. The Initial Grant will cliff vest on the earlier of one year from the grant date or the date of the first annual meeting of our shareholders following the grant date.
Reelection Grant. Upon a Director’s initial election to the Board, the Director will be granted, at the Director’s election, either (i) stock options to purchase our common stock, or (ii) restricted shares of our common stock, in either case valued at $50,000 based on a Net Present Value (the “Initial Grant”). The exercise price and the share price used in granting stock options and the share price used in granting restricted shares shall be equal to the closing price of our common stock on the date the Director is elected to the Board. The Initial Grant will vest 25% per year over four years from the date of grant and if stock options are granted, they will expire if not exercised within seven years from the date of grant. |
Upon a non-employee director’s reelection to our Board, the director will be granted a restricted stock award valued at $100,000, based on the closing price of our common shares on the date of reelection (“Reelection Grant”). The Reelection Grant will cliff vest on the earlier of one year from the grant date or the date of the first annual meeting of our shareholders following the grant date.
· | Reelection Grant. Upon a Director’s reelection to the Board, the Director will be granted restricted shares of our common stock valued at $100,000 based on a Net Present Value (the “Reelection Grant”). The share price used in granting the restricted shares shall be equal to the closing price of our common stock on the date the Director is reelected to the Board. The Reelection Grant will vest, on a cliff basis, one year from the date of grant.
|
Forfeiture of GrantsA director will forfeit any unvested Initial Grant and Reelection Grants if he or she ceases to be a director at any time prior to the vesting date other than due to (1) the fact that the director’s age prohibits him or her from serving as a director per the Governance Guidelines; (2) death, (3) permanent disability (as determined by our Board) or (4) a change in control (as defined in the applicable equity incentive plan), at which time the unvested Initial Grant and Reelection Grant will fully vest.
· | Forfeiture of Grants. A Director will forfeit any unvested Initial Grant and Reelection Grants if the Director ceases to be a Director at any time prior to their vesting date other than due to (i) the fact that the Director’s age prohibits the Director from serving as a Director, (ii) death, or (iii) disability (as determined by the Board), at which time the unvested Initial Grant and Reelection Grants will fully vest.
|
Health BenefitsWe have made arrangements with our medical provider to offer medical and dental coverage to the directors and their eligible family members. The cost to the directors will be the same premiums our active employees pay through payroll deductions.
Reimbursement of Expenses. Directors shall be reimbursed for actual expenses they incur while attending, or otherwise participating in, Board meetings, Board Committee meetings and “ad hoc” committee assignments.
Election Concerning Receipt of Certain Compensation.
Under our Amended and Restated 2003 Non-Employee Director Equity Compensation Plan, (the “Plan”), a Directornon-employee director may elect to receive the Annual Retainer, the Chairman Retainer, Special Board Meeting Fees, Committee Meeting Fees, Committee Chairman Feesannual board retainer, chairman retainer, special board meeting fees, committee meeting fees, committee chairman retainer, and such other compensation as theour Board may deem appropriate asin the case may be, either (i) inform of: (1) restricted stock, deferred
stock units, cash, or a combination of restricted stock, deferred stock units and cash at the time that such compensation is earned,earned; or (ii)(2) in cash or restricted stock at a later date. Any issuance of restricted stock in lieu of cash will be made by us on such terms and conditions as theour Board may establish. In any event, in order to receive restricted stock, a Directordirector must, at a minimum, (i) notify us of his or her current election to receive restricted stock by executing an applicable Election Form,election form, and (ii) execute a Shareholder Agreementshareholder agreement by which the Directordirector agrees not to sell any of the restricted stock until the Directordirector leaves theour Board.
Director Compensation Table for 2014
Health Benefits. We have made arrangementsThe following table provides information concerning the compensation earned by each person who served as a non-employee director during 2014.
|
| | | | | | | | | | | | | | | | | | |
Name | | Fees Earned or Paid in Cash ($) (1) | | Stock Awards ($) (2) | | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | | All Other Compensation ($) | | Total ($) |
Alan J. Barocas | | 87,500 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 187,507 |
|
Elaine D. Crowley | | 50,500 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 150,507 |
|
Gabrielle E. Greene-Sulzberger | | 78,000 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 178,007 |
|
Diane M. Ellis | | 84,000 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 184,007 |
|
Earl J. Hesterberg | | 90,000 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 190,007 |
|
Lisa R. Kranc | | 75,000 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 175,007 |
|
William J. Montgoris | | 200,000 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 300,507 |
|
C. Clayton Reasor | | 75,000 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 175,007 |
|
David Y. Schwartz (3) | | 37,889 |
| | — |
| | — |
| | — |
| | — |
| | 37,889 |
|
Ralph P. Scozzafava | | 96,833 |
| | 100,007 |
| | — |
| | — |
| | — |
| | 196,840 |
|
_________
| |
(1) | The amounts shown in this column reflect the amount of cash compensation earned in 2014 for Board and committee service. Directors may elect to receive the board retainer, chair retainer, special board meeting fees, committee meeting fees, committee chairman fees and such other compensation as the Board may deem appropriate, as the case may be, as described above in the “Election Concerning Receipt of Certain Compensation” section. |
| |
(2) | The amounts shown in the column reflect the grant date fair value of stock awards granted in 2014 to the named directors valued in accordance with ASC 718 and is equal to the closing market price of 5,155 shares on the date of grant. |
| |
(3) | After seven years of dedicated service as a director, David Schwartz decided, for personal reasons, not to stand for reelection to our Board at the 2014 annual meeting of shareholders. |
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of January 31, 2015 relating to our: (1) Amended and Restated 2001 Equity Incentive Plan (“2001 Equity Plan”) and our medical providerSecond Amended and Restated 2008 Equity Incentive Plan (“2008 Equity Plan”), under both of which our common shares are authorized for issuance to offer medicaldirectors, officers and dental coverage to the Directors and their eligible family members. The cost to the Directors will be the same premiums our activeother key employees pay through their payroll deductions.
Stock Ownership by Directors
Our Board believes that Directors should be shareholders and have a financial stake in the Company in an amount that a Director deems appropriate. Each Director must develop and maintain aform of restricted stock, position in the Company with an original investment of at least four times the Annual Retainer, which is currently $50,000 for Independent Directors (the “Original Investment”), within three years of the date of the Director’s initial election to the Board. In determining whether the Director has achieved the Original Investment, the Director can include (i) a Director’s tax basis in any stock acquired by the Director in open market purchases, (ii) a Director’s tax basis in any stock acquired by the Director throughupon the exercise of Stock Options orstock options and SARs, and as the result of the vesting of Restricted Stockperformance shares; and (iii) the amount of any Director fees which the Director has designated to be used for the acquisition of Restricted Stock or Deferred Stock Units under our 2003(2) Amended and Restated 2003 Non-Employee Director Compensation Plan (“2003 Director Plan”), under which our common shares are authorized for issuance to non-employee directors in lieu of all or a portion of their cash compensation if they so elect. The 2001 Equity Compensation Plan. As of April 12, 2012, all of our Directors had met or exceeded the Original Investment requirement, with the exception of (i) Mr. Hesterberg, who was appointed to the BoardPlan expired on July 1, 2010 and has until July 1, 2013 to meet the Original Investment requirement, (ii) Ms. Greene, who was appointed to the Board on September 21, 2010 and has until September 21, 2013 to meet the Original Investment requirement and (iii) Mr. Scozzafava, who was appointed to the Board on February 21, 2012 and has until February 21, 2015 to meet the Original Investment requirement.
For additional information concerning the stock ownership of our Directors as of April 12, 2012, please see the table in “Security Ownership of Certain Beneficial Owners and Management-Security Ownership of Management” on page 16 of this Proxy Statement,
June 3, 2014.
|
| | | | | | |
Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) (1) | | Weighted-average exercise price of outstanding options, warrants and rights ($) (2) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (#) |
| (a) | | (b) | | (c) |
Equity compensation plans approved by security holders: | | | | | | |
2001 Equity Plan | | 38,000 | | 15.92 | | — |
2008 Equity Plan | | 380,525 | | 16.55 | | 2,700,985 |
2003 Director Plan (3) | | — | | — | | 225,000 |
Equity compensation plans not approved by security holders | | — | | — | | — |
Total | | 418,525 | | 16.49 | | 2,925,985 |
__________
| |
(1) | Amounts in this column represent stock options and SARs outstanding under the 2001 Equity Plan and the 2008 Equity Plan. In addition, we had 598,003 shares of unvested restricted stock outstanding under the 2001 Equity Plan and 80,601 shares of unvested restricted stock outstanding under the 2008 Equity Plan. We also had 902,422 unvested performance shares outstanding under the 2001 Equity Plan and 4,584 unvested performance shares outstanding under the 2008 Equity Plan, which in each case represents the maximum number of common shares that may be earned under the outstanding performance share awards. |
| |
(2) | The weighted average remaining contractual life of these outstanding stock options and SARs is 0.2 years for the 2001 Equity Plan and 2.4 years for the 2008 Equity Plan. The weighted average remaining contractual life for the 2001 Equity Plan and the 2008 Equity Plan together is 2.2 years. |
| |
(3) | Shares granted under the 2003 Director Plan are solely for non-employee directors who elect to receive retainers or fees in restricted stock or deferred stock units in lieu of cash. We do not match or apply a premium to non-employee director compensation received in the form of equity. |
ITEM 2 –3: ADVISORY RESOLUTIONVOTE TO APPROVE EXECUTIVE COMPENSATION
In GeneralSection 14A of the Securities Exchange Act of 1934 provides that not less frequently than once every 3 years we must provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our Named Executive Officers as disclosed in our Proxy Statement in accordance with the compensation disclosure rules of the SEC. This vote is often referred to as a “Say-on-Pay” vote.
Section 14A of the Securities Exchange Act of 1934 also provides that not less frequently than once every 6 years we must provide our shareholders with the opportunity to vote, on a nonbinding, advisory basis, for their preference as to how frequently (1, 2 or 3 years) we should seek future advisory votes on the compensation of our Named Executive Officers. This vote is often referred to as a “Frequency of Say-on-Pay” vote.
At the 2011 Annual Meeting of Shareholders, a majority of the votes cast by the shareholders voted, on an advisory basis, to hold an advisory vote to approve executive compensation every year. In line with this recommendation by the shareholders, the Board decided that it will include an advisory shareholder vote on executive compensation in its proxy materials every year until the next required advisory vote on the frequency of shareholder votes on executive compensation, which will occur no later than our 2017 Annual Meeting of Shareholders. Therefore, weWe are asking our shareholders to approve ana non-binding, advisory resolution on the Company’scompensation of our named executive compensationofficers as reporteddisclosed in this Proxy Statement.
Statement (commonly referred to as a “Say-on-Pay Vote”). Our Board has adopted a policy providing for an annual Say-on-Pay Vote. In accordance with this policy and Section 14A of the Exchange Act, and as a matter of good corporate governance, our Board recommends that you vote FOR the following resolution:
TableRESOLVED, that the compensation paid to the named executive officers of ContentsStage Stores, Inc., as disclosed in this Proxy Statement pursuant to Item 402 of SEC Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.As described above in the “Compensation Discussion and Analysis” section of this Proxy Statement (the “CD&A”), the Compensation Committee has structuredkey objectives of our executive compensation program are to:
Enable us to attract, motivate and retain the executive talent required to successfully drive and grow our business and to achieve our short-term and long-term business objectives;
Maximize the following key objectives:long-term commitment of our executive officers to our success by providing compensation elements that align their interests with the interests of our shareholders by linking compensation elements directly to financial metrics that the Committee believes influence the creation of long-term shareholder value; and
· | to enable us to recruit, motivate and retain the executive talent required to successfully manage and grow our business and to achieve our short and long-term business objectives; |
· | to maximize the long-term commitment of our executive officers to our success by providing compensation elements that align their interests and our shareholders in that the compensation elements are directly related to our stock performance and other financial metrics that the Committee believes influence the creation of long-term shareholder value; and |
· | to rewardReward our executive officers upon the achievement of short-term and long-term business objectives and enhanced shareholder value. |
We urge our shareholders to read the “Compensation Discussion and Analysis” beginning on page 19 of this Proxy Statement,CD&A, which describes in greater detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narratives, appearing on pages 40 through 58,narrative included in the “Executive Compensation” section of this Proxy Statement, which provide detailed information on the compensation of our Named Executive Officers.named executive officers. The Compensation Committee and theour Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis”CD&A are effective in achieving our goals and that the compensation of our Named Executive Officersnamed executive officers reported in this Proxy Statement has contributed to the Company’sour recent and long-term success.
Most Recent Say-On-Pay Vote
At the 2011 Annual Meeting of Shareholders, approximately 97% of the votes cast by the shareholders voted, on an advisory basis, to approve the compensation paid to the Company’s Named Executive Officers in Fiscal 2010 as disclosed in the 2011 Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion (the “2011 Say-on-Pay Vote”). The Committee and the Board believe that the 2011 Say-on-Pay Vote confirmed shareholder support for the Company’s executive officer compensation policies and decisions. As a result our approach to Fiscal 2011 policies and decisions remained consistent with our 2010 approach.
Fiscal 20112014 Overview
The Company’sOur strategy for Fiscal 20112014 was to build on its Fiscal 2010our prior year achievements and to pursue meaningful sales and earnings growth. Total sales forReflecting the fiscal year increased 2.8% to $1,512 million and comparable storesuccessful implementation of our business strategy, we achieved the following results in 2014:
Financial Highlights
Net sales increased 0.5%$29.1 million, or 1.8%, to $1.64 billion.
Comparable sales, including direct-to-consumer sales, increased 1.4%. SG&A expenses achieved
Direct-to-consumer sales increased $7.7 million, or 25.7%, to $38.8 million, the highest in our history.
Gross profit increased $13.3 million, or 3.1%.
Generated $102.2 million in cash from operating activities, a 50 basis point improvement in119.7% increase over the rate, while operating net 27 additional stores. The Company also managed inventory levels and ended the year with comparable store inventories up 1.7%. The Company’s strong balance sheet and cash flow allowed the Company to increase itsprior year.
In August 2014, we increased our quarterly dividend rate by 20%12.0% to $0.14 per common share.
Pre-tax earnings from continuing operations were $60.7 million, compared to pre-tax earnings from continuing operations of $40.6 million for 2013, including the impact of the South Hill Consolidation.
TSR, as calculated under the terms of our performance share awards, was 13.4% for 2014, and spend $110 millionwas 49.6% for the three year period ended January 31, 2015 (see the “Overview of 2014 Executive Compensation - Long-Term Incentives” section of the CD&A for additional information regarding the TSR calculation in connection with our performance share awards).
Strategic Highlights
To enhance our focus on our core specialty department store business, we completed the sale of our off-price concept Steele’s in the first quarter of 2014.
We continued to repurchase 6.8 million sharesgrow our cosmetics business with the installation of its common stock.Estee Lauder counters in 75 stores and Clinique counters in 76 stores, and we now have Estee Lauder and/or Clinique counters in over 300 stores.
We refined our assortments with updated styles, new brands, additional categories within existing brands, and extended existing brands to additional stores.
Operationally, the CompanyWe implemented store-level mark down optimization and continued to make progress on a number of its strategic initiatives during 2011. The Company opened 28 new Goody’s stores, rebranded 148 non-Goody’s stores with the Goody’s name and ended the year with 243 Goody’s stores. The Company added 10 Estee Lauder and 10 Clinique counters throughout the year, which helped drive a comparable store sales increase of 9% in cosmetics. During the year, the Company moved forward on the development of an off-price concept, with the goal to leverage its small market expertisesize pack optimization.
We re-launched our home category with a complementary formatfocus on offering a highly curated selection of kitchen, textile and gift assortments.
We continued to its department store model. Steele’s, its off-price concept, was launched November 1, 2011 withinstall new fixtures in our stores to improve product presentation and the openingshopping experience. New fixtures are now in approximately 20% of threeour stores. The Company also expanded its eCommerce business in 2011 as the number of offerings on the eCommerce website has grown from less than 1,000 products at the beginning of the year to approximately 13,200 products at January 28, 2012. Total eCommerce sales reached $8.6 million for 2011. The Company also completed the roll-out of its markdown optimization tool. The Company operated throughout the year as a financially sound company.
We opened 18 new stores.
Non-Binding Nature of Vote
This shareholder vote on executive compensation is advisory, and non-bindingwhich means that the vote is not binding on theour Board, or the Company in any way. Although non-binding, the Compensation Committee or us. Although non-binding, our Board and the BoardCompensation Committee will continue to consider the results
of the most recent shareholder advisory vote on executive compensationSay-on-Pay Votes in determining compensation policies and decisions concerning Named Executive Officers.future executive compensation.
Required Vote; Broker Discretionary Voting Not Permitted
The affirmative vote of a majority of the shares presented or represented and entitled to vote either in person or by proxyvotes cast is required to approve this advisory resolution. Broker discretionary voting of uninstructed shares is not permitted for a shareholder vote on executive compensation.
Approval of Compensation Paid to the Company’s Named Executive Officers
As required by Section 14A of the Exchange Act, we are asking shareholders to vote on the following advisory resolution at the Annual Meeting:
RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
Recommendation of the Board
Your Board of Directors recommends a vote “FOR” the advisory resolution.
At the 2008 Annual Meeting, our shareholders approved the material terms of performance goals to be used by the Compensation Committee for awarding certain compensation to executives from the date of that meeting until the date of the 2013 Annual Meeting. In this proposal, the Board is requesting that shareholders again approve the material terms of the performance goals to enable the Company to continue to have a shareholder-approved arrangement under which certain compensation awarded to executives until the date of the 2017 Annual Meeting may qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended.
Section 162(m) imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company’s Chief Executive Officer or any of the company’s three other most highly compensated executive officers (other than the Chief Financial Officer) who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria approved by shareholders). One of the requirements for compensation to qualify as performance-based under Section 162(m) is that the material terms of the performance goals for such compensation be disclosed to and approved by shareholders every five years. In accordance with Section 162(m), the material terms that the shareholders approve constitute the framework for the Compensation Committee (the “Committee”) to establish programs and awards under which compensation provided by the Company can qualify as performance-based compensation for purposes of Section 162(m); however, there can be no guarantee that amounts payable under these programs and awards will be treated as qualified performance-based compensation under Section 162(m).
The performance goals pertain to two specified forms of compensation that may be awarded to the executive officers of the Company during the next five years: (i) annual bonuses under the Company’s Senior Executive Incentive Bonus Plan (the “Bonus Plan”), and (ii) stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares or units, or other stock based awards granted under the Company’s Amended and Restated 2001 Equity Incentive Plan (the “2001 Plan”) and the Company’s Second Amended and Restated 2008 Equity Incentive Plan (the “2008 Plan”).
Material Terms of the Executive Officer Performance Goals
In General. For purposes of Section 162(m), the material terms of the performance goals include: (i) the group of employees whose compensation would be subject to the performance goals, (ii) the business criteria on which each of the performance goals is based; and (iii) the maximum amounts payable to any executive officer under each performance goal. Each of these aspects is discussed below and shareholder approval of this proposal constitutes approval of each of these aspects for purposes of the Section 162(m) shareholder approval requirements.
Employees Eligible to Receive Compensation. The group of employees whose compensation would be subject to the performance goals would include the Company’s executive officers, as defined in SEC rules. Currently the Company has seven executive officers. These executive officers are listed annually in the Company’s Form 10-K filed with the SEC. Although Section 162(m) only limits deductibility for compensation paid to the Chief Executive Officer or any of the Company’s three other most highly compensated executive officers (other than the Chief Financial Officer) who are employed as of the end of the year, we may apply the performance goals to all executive officers in the event that any of them becomes a covered employee under Section 162(m) during the time that they hold an award described in this proposal.
Business Criteria on Which Each of the Performance Goals is Based
Annual Incentive (Bonus) Compensation. The business criteria upon which the performance goals for annual incentive (bonus) compensation under the Bonus Plan are currently based are Company Pre-Tax Earnings Relative to Target and Comparable Store Sales Relative to Performance Group. However, with respect to future Bonus Plans, the Committee has the right to base performance goals on (a) those business criteria, (b) the following business criteria: (i) Earnings Per Share, (ii) earnings before interest, taxes, depreciation and amortization (EBITDA), (iii) earnings before interest and taxes (EBIT), or (iv) Pre-Tax Income, (c) other appropriate business goals and criteria on an executive officer by executive officer basis or otherwise, or (d) a combination thereof.
Long-Term Incentive Compensation. The business criteria upon which the performance goals for long-term performance (“LTI”) awards (stock options, stock appreciation rights, restricted stock, performance shares, or other stock based awards) under the 2001 Plan and the 2008 Plan are currently based on the total shareholder return of the Company as compared with the total shareholder return of a designated group of department store and apparel industry peers. The Committee will target an amount that brings the executive officers to approximately the 50th percentile of the market for total compensation (base salary and bonus and long-term incentives). Company performance better than the target will result in higher compensation levels. The Committee believes that long-term incentives should make up a significant portion of an executive officer’s total compensation.
While the business criteria upon which the performance goals for LTI are currently based is the total shareholder return of the Company as compared with the total shareholder return of a designated group of department store and apparel store industry peers, the Committee has the right to base LTI performance goals on (a) those business criteria, (b) the following business criteria: (i) Earnings Per Share, (ii) earnings before interest, taxes, depreciation and amortization (EBITDA), (iii) earnings before interest and taxes (EBIT), (iv) Pre-Tax Earnings, or (v) Pre-Tax Income, (c) other appropriate business goals, objectives and criteria on an executive officer by executive officer basis or otherwise, or (d) a combination thereof.
All of the business criteria described above, whether related to annual incentive (bonus) compensation or to LTI compensation, would be subject to adjustments by the Committee to remove or add the effect of unusual events.
Maximum Amounts Payable to Any Executive Officer Under Performance Goals. The aggregate maximum amount payable to any executive officer under the Bonus Plan during any one calendar year is $5,000,000. No executive officer may be granted awards under the 2001 Plan or the 2008 Plan that comprise more than 500,000 shares, restricted stock units and performance units in any calendar year.
The Committee has established business criteria and maximum amounts that it considers to be appropriate in light of foreseeable contingencies and future business conditions. If approved by the shareholders, this proposal would not limit the Company’s right to award or pay other forms of compensation (including, but not limited to, salary or other stock-based awards under the 2001 Plan and the 2008 Plan) to the Company’s executive officers, regardless of whether or not the performance goals for annual bonuses and LTI performance awards are achieved in any future year, and whether or not payment of such other forms of compensation would be tax deductible.
Background: Terms of Awards and Plans
The following sections describe both the general terms of the awards that will be subject to the performance goals and the material features of the plans under which the awards will be granted.
Annual Bonuses and Material Features of the Bonus Plan
Annual bonuses for executive officers and other key employees of the Company are determined and paid under a Bonus Plan established each year. The Bonus Plan is administered by the Committee. The Committee selects employees eligible to participate in the Bonus Plan.
In March of each year, the Committee evaluates the Company’s annual strategic plan to determine the business criteria that are appropriate to measure achievement of the Company’s objectives and to motivate our executives. Based on discussions with our Chief Executive Officer and our Executive Vice President, Human Resources, the Committee approves the business criteria to be included in the Bonus Plan for that year. In the case of Pre-Tax Earnings and Comparable Store Sales criteria or parameters, for example, an incentive matrix establishes threshold (minimum), target and maximum performance levels for each business criteria based on the level of perceived difficulty in achieving our financial plan. The incentive matrix clearly outlines a minimum level of performance below which no bonus will be paid and the relationship between the business criteria that will generate payouts at or between the minimum and maximum performance levels. In the case of an “Individual Objectives criteria or parameter, the bonus formula is weighted to determine a specified percentage of the year-end bonus amount earned and the measurement is based on four to six specific objectives related to the executive’s area of responsibility which supports the Company’s Financial Plan for that fiscal year.
Annual incentive compensation targets for each executive officer under the Bonus Plan are expressed as a percentage of each executive officer’s base salary with the target percentage increasing with job scope and complexity. Normal performance bonus amounts paid could range from 0% up to 200% of Base Salary based upon actual results, subject to certain adjustments specified by the Committee in writing, and will also be subject to the maximum annual limit indicated above.
The Committee can exercise discretion to reduce the amount of any awards under the Bonus Plan. For additional information on the 2011 Senior Executive Incentive Bonus Plan and the formula used to calculate annual bonus amounts, please see “Committee Actions in Fiscal 2011 Concerning Named Executive Officer Compensation-“Establishment of 2011 Senior Executive Incentive Bonus Plan” beginning on page 31 of this Proxy Statement.
At its March meeting, the Committee also reviews the Company’s stated financial results for the recently completed fiscal year, certifies the calculation of proposed bonus amounts, and reports them to the full Board.
The Board may amend, suspend, or terminate the Bonus Plan for a given year, including amending the Bonus Plan in a way that might increase the Company’s costs.
No bonuses were paid to the Named Executive Officers under the 2011 Bonus Plan. Please see “Committee Action in 2012 Concerning Named Executive Officer Compensation-2011 Bonus Plan Awards” on page 37 of this Proxy Statement. The amount of bonuses to be paid to Bonus Incentive Plan participants for the 2012 fiscal year, if this proposal is approved, cannot presently be determined.
For additional information concerning annual bonuses and material features of the Bonus Plan, please see “Annual Incentive (Bonus) Compensation” on page 27 of this Proxy Statement and “Establishment of 2011 Senior Executive Incentive Bonus Plan” on page 31 of this Proxy Statement.
Long-Term Performance Awards Under, and Material Features of, the Amended and Restated 2001 Equity Incentive Plan and the Second Amended and Restated 2008 Equity Incentive Plan
The Committee considers long-term incentive compensation (“LTI”) critical to the alignment of executive compensation with the creation of shareholder value and LTI awards are designed to focus executives on the long-term success of the Company, as reflected in increases to the Company’s stock price, growth in its earnings per share and other elements.
At its March meeting, the Committee reviews the portfolio of long-term incentive vehicles, the targeted award size and the performance measures associated with any awards. The Committee also reviews recommendations provided by management and the Committee’s compensation consultant regarding LTI design. The Board’s practice is to make annual grants of equity awards, including stock options, SARs, restricted stock and
performance shares, upon recommendation of the Committee at that time. However, the Committee and the Board have decided to discontinue SARs from the equity plan mix except in extraordinary circumstances. The Committee believes that the use of multiple equity vehicles balances a focus on equity-driven growth with the retention and performance aspects of restricted stock. The grant date is the same date that the Board approves the awards. The equity award is priced at the closing price on the NYSE (the “Fair Market Value”) of our common stock on that date. From time to time, the Board will consider making grants under other special circumstances, such as, recruiting new executive talent, upon the promotion of an executive and to retain key individuals. Any and all other grants (other than the March grants) are effective as of the date of the triggering event (e.g., new hire or promotion date) and are priced at the Fair Market Value of our common stock on that date.
A copy of the 2001 Plan is attached as Appendix B to the Company’s 2004 Proxy Statement filed with the SEC on April 16, 2004. A copy of the 2008 Plan is attached as Appendix A to the Company’s 2011 Proxy Statement filed with the SEC on April 18, 2011. The 2001 Plan and the 2008 Plan are administered by the Committee, which has the power to determine the appropriate business criteria for any awards, to select the key employees and non-employee Directors to be granted awards under the 2001 Plan and the 2008 Plan, to determine the size, type and terms of awards to be made to each individual selected, to modify the terms of any award that has been granted, to determine the time when awards will be granted, to establish performance objectives and to prescribe the form of the instruments embodying awards under the 2001 Plan and the 2008 Plan. Key employees and non-employee Directors are eligible to receive awards under the 2001 Plan and the 2008 Plan. Awards under the 2001 Plan and the 2008 Plan include, but need not be limited to, stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares or units, or other stock based awards. Nothing contained in the 2001 Plan and the 2008 Plan prevents the Company from adopting or continuing in effect other or additional compensation arrangements. The Committee’s determination and interpretations under the 2001 Plan and the 2008 Plan will be binding on all interested persons. Awards generally are granted for no cash consideration, and are generally not-transferable except upon the death of a participant.
The exercise price per share of stock purchasable under any stock option and the grant price of a SAR, if any are awarded, will not be less than the Fair Market Value of our stock on the date of grant. The Board may amend, alter, or discontinue the 2001 Plan or the 2008 Plan at any time, including amending it in ways that might increase the cost to the Company, provided that shareholder approval must be obtained for any amendment that would increase the number of shares available for awards.
Subject to adjustment as described below, a limited number of shares of the Company’s common stock including treasury shares as of the first day of each calendar year (including any partial year) during which the 2001 Plan and the 2008 Plan, are in effect are available for granting awards in such year.
As of April 12, 2012, approximately 867,569 shares remain available for issuance under the 2001 Plan and approximately 2,231,488 shares remain available for issuance under the 2008 Plan.
Under either the 2001 Plan or the 2008 Plan, all shares available for granting as awards in any year that are not used will be available for use in subsequent years. In the event of a stock split, stock dividend, or other change in corporate structure, the Committee will adjust the number and type of shares which may be made the subject of new awards or are then subject to outstanding awards and other award terms. The Committee is also authorized, for similar purposes, to make adjustments in performance award criteria or in the terms and conditions of other awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or of changes in applicable laws, regulations, or accounting principles.
The awards that will be granted under the 2001 Plan and the 2008 Plan following the 2012 Annual Meeting cannot presently be determined.
For additional information concerning long-term incentive awards and material features of our long-term incentive compensation, please see “Long-Term Incentive Compensation” on page 27 of this Proxy Statement, “Long-Term Incentive Compensation Awards” on page 32 of this Proxy Statement, “Performance Shares Earned in 2011 Upon Completion of the 2008 Performance Cycle” on page 33 of this Proxy Statement, the 2011 Grants of Plan-Based Awards Table on page 42 of this Proxy Statement, and the 2011 Outstanding Awards at Fiscal Year-End Table on page 44 of this Proxy Statement.
Conclusion
If the shareholders approve this proposal, the material terms of the executive officer performance goals described above will constitute the framework within which the Committee will establish specific performance goals for the forms of performance-based compensation to be paid and awarded to executive officers of the Company between the dates of the 2012 and 2017 Annual Meetings, and therefore preserve the Company’s ability to obtain tax deductions for such performance-based compensation.COMPENSATION.
Your Board of Directors recommends a vote FOR the following proposal:
RESOLVED, that the material terms of the executive officer performance goals are hereby approved.
ITEM 4 –: RATIFICATION OF THE SELECTIONAPPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2012
In General
2015
The Board has approved the Audit Committee’s selection of Deloitte & Touche LLP as our independent registered public accounting firm for our 2012 Fiscal Year (“Fiscal 2012”).2015. This selection is being presented to the shareholders for their ratification. Proxies solicited by the Board will, unless otherwise directed, be voted to ratify the selectionappointment by the Board of Deloitte & Touche LLP as our independent registered public accounting firm for Fiscal 2012. 2015.
Deloitte & Touche LLP has been our independent auditorregistered public accounting firm since our 2000 Fiscal Year.2001. The Board has been advised by Deloitte & Touche LLP that it is an independent registered public accounting firm with respect to the Companyus within the meaning of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
A representative of Deloitte & Touche LLP is expected towill be present at the Annual Meeting. He or she will have the opportunityMeeting to respond to appropriate questions and to make a statement if heso desired.
The affirmative vote of a majority of the shares present or she so desires,represented and will be availableentitled to respondvote either in person or by proxy is required to appropriate questions duringratify the meeting. For additional information regarding our relationship withselection of Deloitte & Touche LLP.
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE FOLLOWING RESOLUTION RATIFYING OUR APPOINTMENT OF AN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:
RESOLVED, that the appointment of Deloitte & Touche LLP, please refer toas the Audit Committee Report below.
The Audit Committee selected, and we retained, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, the “Deloitte Entities”), as our independent registered public accounting firm to audit our consolidated financial statements for Fiscal 2011 and Fiscal 2010 and to provide various advisory, auditing and consulting services in 2010 and 2009. We understand the needStage Stores, Inc. for the Deloitte Entities to maintain objectivity and independence in their audit of our financial statements and internal controls. We do not use the Deloitte Entities for internal audit work and will only use the Deloitte Entities for non-audit work when the Audit Committee concludes that the Deloitte Entities are the most appropriate provider of that service. The Audit Committee annually evaluates whether our use of the Deloitte Entities for non-audit services2015 is compatible with the Deloitte Entities’ independence.
hereby RATIFIED.AUDIT COMMITTEE MATTERS
The aggregate fees billed by the Deloitte Entities in 2011 and 2010 for these various services were as follows:
Description of Professional Service | Amount Billed |
| 2011 | 2010 |
Audit Fees are fees for (i) the audit of our annual financial statements, (ii) review of financial statements in our quarterly reports on Form 10-Qs, (iii) the audit of the effectiveness of our internal control over financial reporting, and (iv) for services that are provided by the independent registered public accounting firm in connection with statutory and regulatory filings. | | $976,200 | | $901,725 |
Audit-Related Fees are for professional services rendered in connection with the application of financial accounting and reporting standards, as well as acquisition related matters. | | - | | - |
Tax Fees are fees for compliance, tax advice, and tax planning. | | - | | - |
All Other Fees are fees for any service not included in the first three categories. Indicates fees for services related to the audit of the financial statements of our Nonqualified Deferred Compensation Plan (Senior Executives) (the “Plan”), which are included in the Plan’s Annual Report on Form 11-K. All services were approved by the Audit Committee. | | $17,800 | | $16,500 |
The Audit Committee has the direct responsibility to select, retain, terminate, determine compensation and oversee the work of our independent registered public accounting firm. Pre-approval by the Audit Committee is required for any engagement of our independent registered public accounting firm and the Audit Committee has established the following pre-approval policies and procedures. Annually, the Audit Committee pre-approves services to be provided by our independent registered public accounting firm. The Audit Committee also considers the engagement of our independent registered public accounting firm to provide other services during the year. Requests for approval are submitted to the Audit Committee by our management. Requests are required to include an adequate explanation of the services in sufficient detail for the Audit Committee to determine whether the request is consistent with the SEC’s rules on auditor independence. In determining whether to approve the engagement of our independent registered public accounting firm, the Audit Committee considers whether such service is consistent with the independence of the registered public accounting firm.SEC’s rules on auditor independence. The Audit Committee also considers the amount of audit related fees in comparison to all other fees paid to the registered public accounting firm and reviews such comparison each year.
Principal Accountant Fees and Services
|
| | | | | | |
($ in thousands) | | 2014 ($) | | 2013 ($) |
Audit Fees (1) | | 1,024 |
| | 1,044 |
|
Audit-Related Fees | | — |
| | — |
|
Tax Fees | | — |
| | — |
|
All Other Fees (2) | | 19 |
| | 24 |
|
Total Fees | | 1,043 |
| | 1,068 |
|
__________
| |
(1) | Audit fees for fiscal 2014 and fiscal 2013 consisted of fees for (a) the audit of our annual financial statements, (b) review of financial statements in our quarterly reports on Form 10-Qs, (c) the audit of the effectiveness of our internal control over financial reporting, and (d) services that are provided by the independent registered public accounting firm in connection with statutory and regulatory filings. |
| |
(2) | All other fees for fiscal 2014 and fiscal 2013 consisted of fees for services related to the audit of the financial statements of our nonqualified DC Plan, which are included in the DC Plan’s Annual Report on Form 11-K. All services were approved by the Audit Committee. |
Audit Committee Report
The Audit Committee has reviewed and discussed the Company’s audited financial statements for fiscal 2014 with management which has primary responsibility for the financial statements, and with the Company’sour independent registered public accounting firm, Deloitte & Touche LLP, which is responsible for expressing an opinion on whether the consolidated financial statements present fairly, in all material respects, the Company’s financial position, results of operations and the related cash flows in conformity with accounting principles generally accepted in the United States of America and whether the Company maintained, in all material respects, effective internal control over financial reporting based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
LLP. The Audit Committee met regularly with Deloitte & Touche LLP and the Company’s internal audit staff, with and without management present, to discuss the results of their audits, management’s assessment of the Company’s internal control over financial reporting, Deloitte & Touche LLP’s opinions regarding the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting. The Audit Committee also reviewed Management’s Report on Internal Control Over Financial Reporting contained in the Company’s Annual Report on Form 10-K for the year ended January 28, 2012 as filed with the SEC, as well as Deloitte & Touche LLP’s Report of Independent Registered Public Accounting Firm included in the same Annual Report on Form 10-K related to its audits of (i) the Company’s consolidated financial statements, and (ii) the effectiveness of internal control over financial reporting.
The Audit Committeehas discussed with Deloitte & Touche LLP the matters that are required to be discussed under AU Section 380, “Communication with Audit Committees”by Auditing Standard No. 61, as amended, as adopted by the Public Company Accounting Oversight Board. The Audit Committee also discussed with internal audit and management any significant matters as a result of the internal audit work.
Board Rule 3200T. The Audit Committee has received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and has discussed with Deloitte & Touche LLP its independence. The Audit Committee has concluded that Deloitte & Touche LLP did not provide any prohibited non-audit services to the Company and its affiliates.
Based on the reviewthese reviews and discussions, referred to above,the undersigned members of the Audit Committee recommended to the Board that the Company’sour audited financial statements for fiscal 2014 be included in our Form 10-K for filing with the Company’sSEC.
Members of the Audit Committee
Ralph P. Scozzafava, Chair
Elaine D. Crowley
Diane M. Ellis
Gabrielle E. Greene-Sulzberger
William J. Montgoris
ADDITIONAL INFORMATION
Annual Report on Form 10-K
A copy of our 2014 Annual Report on Form 10-K for Fiscal 2011 for filing with the SEC. The Audit Committee also selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for Fiscal 2012.
This Audit Committee Report is provided by the following Independent Directors, who constitute all of the members of the Audit Committee:
David Y. Schwartz (Chairman)
Alan J. Barocas
Gabrielle E. Greene
William J. Montgoris
Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm For Fiscal 2012
Deloitte & Touche LLP has been selected by the Audit Committee as the independent registered public accounting firm for the Company and its subsidiary for Fiscal 2012. Consequently, the Board has approved the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for Fiscal 2012.
Your Board of Directors recommends a vote FOR the following proposal:
RESOLVED that the selection of Deloitte & Touche LLP, as Independent Registered Public Accounting Firm for Fiscal 2012, is hereby ratified.
The following tables provide information as of January 28, 2012 concerning (i) our Amended and Restated 2001 Equity Incentive Plan (the “2001 Plan”) and our Second Amended and Restated 2008 Equity Incentive Plan (the “2008 Plan”), under both of which our common stock is authorized for issuance to officers, Directors and other key employees in the form of Restricted Stock, upon the exercise of Stock Options and Stock Appreciation Rights (SARs) granted to them, and as the result of performance shares granted to them, and (ii) our Amended and Restated 2003 Non-Employee Director Compensation Plan (the “2003 Director Plan”), under which our common stock is authorized for issuance to non-employee Directors in lieu of all or a portion of their cash compensation if they so elect.
AS OF JANUARY 28, 2012
Plan category | | Number of securities to be issued upon exercises of outstanding options, warrants and rights (a) | | Weighted-average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |
| | | | | | | | |
Equity compensation plans approved by security holders: | | | | | | | |
| 2001 Plan (1) | | 1,805,157 | (2) | $18.43 | | 840,755 | |
| 2008 Plan | | 2,199,100 | (2) | $14.19 | | 2,089,400 | |
| 2003 Director Plan | | 10,947 | (3) | (4) | | 204,511 | (5) |
| | | | | | | | |
Equity compensation plans not approved by security holders | | None | | None | | None | |
Total | | 4,015,204 | | $16.10 | | 3,134,666 | |
(1) | The number of securities remaining available for future issuance under the 2001 Plan has been reduced to reflect an aggregate of 278,725 shares at the Target Number that may be issued as a result of the grant of Performance Shares and 336,965 shares of restricted stock issued under the 2001 Plan and 40,000 shares of restricted stock under the 2008 Plan. |
(2) | The weighted average remaining contractual life of these outstanding options and SARs is 1.91 years for the 2001 Plan and 5.06 years for the 2008 Plan. The weighted average remaining contractual life for the 2001 Plan and the 2008 Plan together is 3.64 years. |
(3) | Reflects Deferred Stock Units (“DSUs”) issued under the 2003 Director Plan. The number of DSUs credited to a Director’s account is computed by dividing (i) the amount of compensation the Director has elected to defer by (ii) the average of the high and low prices of the Company's stock for the five trading days prior to the first day of the term of the Director during which the election has been made. An election, once made, is irrevocable for the applicable period to which it relates. The number of shares of common stock to be distributed to a Director will be equal to the number of DSUs credited to a Director’s account. |
(5) | Shares granted under the 2003 Director Plan are solely for non-employee Directors that elect to receive their fees or retainers in DSUs in lieu of cash. There is no Company match or premium applied to compensation received in the form of equity. |
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Directors and executive officers (“reporting persons”) to file reports with the SEC disclosing their ownership and changes in their ownership of our common stock. Copies of these reports must also be furnished without charge to us.
Based solely upon our review of the copies of reports furnished to us and written representations that no other reports are required, during 2012, we believe that all of our Directors and executive officers made all required filings on a timely basis except as described below.
On March 29, 2011, eight executive officers of the Company were granted Restricted Stock and/or SARs. On March 31, 2011, each of the eight executive officers filed a Form 4 with the SEC on a timely basis reporting those grants. However, due to a miscommunication, the shares of Restricted Stock and the SARs were incorrectly over reported. On April 11, 2011, each of the eight executive officers filed an amended Form 4 (a Form 4/A) with the SEC reporting the correct number of shares of Restricted Stock and SARs. The following table reflects the shares of Restricted Stock and SARs reported on the Form 4 and Form 4/A filings.
Reporting Person | Form 4 Restricted Stock (shares) Reported | Form 4/A Restricted Stock (shares) Reported | Form 4 SARs Reported | Form 4/A SARs Reported |
Andrew Hall | 39,000 | 36,000 | 74,500 | 68,500 |
Steven Hunter | 10,700 | 10,008 | 10,000 | 8,850 |
Ron Lucas | 5,000 | 4,700 | 10,000 | 8,850 |
Richard Maloney | 13,000 | 11,700 | 24,000 | 22,250 |
Edward Record | 13,000 | 11,700 | 24,000 | 22,250 |
Oded Shein | 5,000 | 4,700 | N/A | N/A |
Richard Stasyszen | 3,500 | 3,050 | 6,000 | 5,800 |
Joanne Swartz | 5,000 | 4,700 | 10,000 | 8,850 |
Voting Securities
Shareholders of recordshareholders at the close of business on April 12, 2012, will13, 2015, upon written request to Stage Stores, Inc., Attn: Investor Relations, 10201 Main Street, Houston, Texas 77025. Our 2014 Annual Report on Form 10-K may also be eligible to vote ataccessed in the Annual Meeting. The voting securities of the Company consist of its $0.01 par value common stock. On the Record Date, there were 30,658,294 sharesInvestor Relations section of our common stock, par value $0.01, outstandingwebsite (www.stagestoresinc.com) under the “SEC Filings” caption.
Electronic Access to Proxy Statement and entitledAnnual Report
This Proxy Statement, our Annual Report to voteShareholders for 2014 and our Annual Report on Form 10-K for 2014 are available to review at www.envisionreports.com/SSI for registered shareholders and at www.edocumentview.com/SSI for beneficial shareholders. This Proxy Statement and our Annual Report on Form 10-K for 2014 are also available on the Annual Meeting. SEC’s EDGAR database located at www.sec.gov.
Documents Available in Print
In addition onto being posted with printer friendly versions in the Record Date, holdersInvestor Relations section of 343,406 shares of unvested Restricted Stock are entitled to vote at the Annual Meeting. Each share outstanding and each share of unvested Restricted Stock on that date will be entitled to one vote. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual shareholder voting records is limited to the independent Inspector of Election and certain employees of the Company and its agents who must acknowledge in writing their responsibility to comply with this policy of confidentiality.
Vote Required for Approval
Item 1 – Election of Directors. Pursuant to our Amended and Restated ByLaws and Section 78.330 of the Nevada Revised Statutes, the nominees receiving the seven highest vote totals (a plurality) of the votes cast at the Annual Meeting in person or by proxy will be elected as Directors.
Item 2 – Advisory Resolution to Approve Executive Compensation. This shareholder vote on executive compensation is advisory and non-binding on the Board or the Company in any way. The affirmative vote of a majority of the shares presented or represented and entitled to vote either in person or by proxy is required to approve this advisory resolution.
Item 3 – Approval of Material Terms of Executive Officer Performance Goals. The affirmative vote of a majority of the shares presented or represented and entitled to vote either in person or by proxy is required to approve this proposal.
Item 4 – Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2012. The affirmative vote of a majority of the shares presented or represented and entitled to vote either in person or by proxy is required to approve this proposal.
Other Matters. All other matters require for approval the favorable vote of a majority of shares voted at the Annual Meeting in person or by proxy.
Abstentions. Abstentions, if any, will not be counted as votes cast. Therefore, they will have no effect on the outcome of the other matters to be voted on at the Annual Meeting.
Broker Discretionary Voting Not Permitted
Broker discretionary voting of uninstructed shares is not permitted for a shareholder vote on any matter other than Item 4 (Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2012).
Broker Non-Vote
If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is requiredwebsite (www.stagestoresinc.com) under the rules“Corporate Governance” caption, the charters of the NYSE.
If youour Audit Committee, Corporate Governance and Nominating Committee and Compensation Committee, our Governance Guidelines, our Code of Ethics for Senior Officers, and our Code of Ethics and Business Conduct are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under NYSE rulesavailable in print to vote your shares on Item 4 (Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2012) even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authorityany shareholder who requests them. Written requests should be made to vote on Items 1 (Election of Directors)Stage Stores, Inc., 2 (Advisory Resolution to Approve Executive Compensation) and 3 (Approval of Material Terms of Executive Officer Performance Goals) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on those matters. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.Attn: Investor Relations, 10201 Main Street, Houston, Texas 77025.
Manner for Voting Proxies
The shares represented by all valid proxies received by mail, or submitted by telephone or the Internet will be voted in the manner specified. Where specific choices are not indicated, the shares represented by all valid proxies received will be voted: FOR Items 1 (Election of Directors), 2 (Advisory Resolution to Approve Executive Compensation), 3 (Approval of Material Terms of Executive Officer Performance Goals) and 4 (Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2012). Should any matter not described above be properly presented at the Annual Meeting, the persons named in the Proxy Card will vote in accordance with their judgment.
Voting in Person at the Annual Meeting
We encourage shareholders to submit proxies in advance by telephone, by the Internet, or by mail. Shareholders may also vote in person at the Annual Meeting, or may execute a proxy designating a representative to vote for them at the meeting. If your shares are held in street name and you wish to have your shares voted for Items 1 (Election of Directors), 2 (Advisory Resolution to Approve Executive Compensation) and 3 (Approval of Material Terms of Executive Officer Performance Goals), you must either (i) instruct your broker how to vote your shares, (ii) vote your shares by phone or the Internet, or (iii) bring a brokerage statement, written proxy from your broker, or other proof of ownership of the Company’s common stock as of the Record Date with you to the Annual Meeting.
Other Matters to be Presented
The Board knows of no other matters which may be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, including any adjournment or adjournments thereof, proxies received in response to this solicitation will be voted upon such matters in the discretion of the person or persons named in the Proxy Card.
Solicitation of Proxies
Proxies will be solicitedThis solicitation of proxies is made by and on behalf of our Board. In addition to mailing the Board by mail or in person, and all solicitation costs will be paid by the Company. Upon written request,Notice of Internet Availability (or, if applicable, paper copies of this Proxy Statement, the Proxy CardNotice of Annual Meeting of Shareholders and the proxy card) to shareholders of record on the record date, the brokers and banks holding our Annual Reportcommon shares for Fiscal 2011beneficial holders must, at our expense, provide our proxy materials to persons for whom they hold our common shares in order that such common shares may be voted. Solicitation may also be made by our officers and regular employees personally or by telephone, mail or electronic mail. Officers and employees who assist with solicitation will not receive any additional compensation. The cost of the solicitation will be furnished to holders of record, as well as to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners, and we will reimburse such holders for their reasonable expenses. Phoenix Advisory Partnersborne by us. D.F. King & Co. has been retained to assist in soliciting proxies at aan estimated fee of $7,000 plus reasonable out-of-pocket costs.expenses.
Shareholder Proposals
ShareholdersShareholder proposals intended to be presented at our 2016 annual meeting of Record Requesting Copiesshareholders must be received by our corporate secretary at our principal executive offices on or before January 4, 2016 to be eligible for inclusion in our 2016 proxy statement and form of proxy. Such proposals must be submitted in accordance with Rule 14a-8 of the Company’s 2011 Annual ReportExchange Act. If a shareholder intends to present a proposal at our 2016 annual meeting of shareholders without inclusion of that proposal in our 2016 proxy materials and written notice of the proposal is not received by our corporate secretary at our principal executive offices on Form 10-K
A copyor before March 17, 2016, or if we meet other requirements of the SEC rules, proxies solicited by our 2011 Annual ReportBoard for our 2016 annual meeting of shareholders will confer discretionary authority on Form 10-K will be furnished without chargethe proxy holders named therein to shareholders beneficially or of recordvote on the proposal at the closemeeting. Proposals and notices of business on April 12, 2012, on written requestintention to Bob Aronson, Vice President, Investor Relations, atpresent proposals should be addressed to our corporate secretary as follows: Chadwick P. Reynolds, Secretary, Stage Stores, Inc., 10201 Main Street, Houston, TXTexas 77025.
OTHER MATTERS
Electronic Access toAs of the date of this Proxy Statement, the Board knows of no other matters that will be presented for consideration at the Annual Meeting other than Item 1, Item 2, Item 3 and Item 4 described above. If any other matter is properly brought before the Annual ReportMeeting, including any adjournment or adjournments thereof, common shares represented by proxies received in response to this solicitation will be voted on such matter in accordance with the recommendation of our Board.
By Order of the Board of Directors,
Chadwick P. Reynolds
Senior Vice President,
Chief Legal Officer and Secretary
May 1, 2015
Houston, Texas
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EXHIBIT A: STAGE STORES EXECUTIVE PERFORMANCE INCENTIVE BONUS PLAN
This Proxy Statement, our Annual Report1.EFFECTIVE DATE
Subject to Shareholders for Fiscal 2011approval by the Company’s shareholders, this Plan is effective as of the Effective Date.
2.PURPOSE
The Plan is designed to assist the Company and our Annual Report on Form 10-K for Fiscal 2011its Affiliates in attracting, retaining and motivating employees; align Participants’ interests with those of the Company’s shareholders; and qualify compensation paid to Participants who are available at Covered Associates as “qualified performance-based compensation” within the meaning of Section 162(m) of the IRC or a successor provision.
http://bnymellon.mobular.net/bnymellon/ssi.3. This Proxy Statement (DEF 14A)DEFINITIONS
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3.01. | “Affiliate” means any person with whom the Company would be considered a single employer under IRC Section 414(b) or (c). |
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3.02. | “APB” means Accounting Principles Board Opinion. |
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3.03. | “ASC” means the Accounting Standards Codification. |
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3.04. | “Base Salary” means a Participant’s actual annualized gross salary rate (currently known as regular pay) in effect on the Determination Date. Such salary shall be before: (a) deductions for taxes and benefits; and (b) deferrals of salary pursuant to Company-sponsored plans. |
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3.05. | “Beneficiary” means the person or persons entitled to receive the interest of a Participant in the event of the Participant’s death. |
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3.06. | “Board” means the Board of Directors of the Company. |
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3.07. | “Bonus” means a payment subject to the provisions of this Plan. |
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3.08. | “Change in Control” shall be deemed to have occurred: |
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(a) | on such date, within the 12-month period following the date that any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that represents twenty-five percent (25%) or more of the combined voting power of the Company’s then outstanding securities (the “Trigger Date”), that a majority of the individuals who, as of the Trigger Date, constitute the Board (the “Incumbent Board”) are replaced by new members whose appointment or election is not endorsed by a majority of the members of the Incumbent Board before the date of such appointment or election; |
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(b) | as of the date that any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires ownership of stock that, together with stock held by such person or group, constitutes more than 50% of either (1) the then outstanding shares of Common Stock of the Company or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, if any one person or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons shall not be considered to cause a Change in Control; or |
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(c) | on the date any one person, or more than one person acting as a group (as defined in §1.409A-3(i)(5)(v)(B) of the Treasury Regulations), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) all, or substantially all, of the assets of the Company, except for any sale, lease exchange or transfer resulting from any action taken by any creditor of the Company in enforcing its rights or remedies against any assets of the Company in which such creditor holds a security interest. Provided further, a transfer of assets by the Company shall not be treated as a Change in Control if the assets are transferred to: |
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(i) | A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; |
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(ii) | An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company; |
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(iii) | A person, or more than one person acting as a group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or |
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(iv) | An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (iii) herein. |
For purposes of subsection (c) and our Annual Report on Form 10-K for Fiscal 2011except as otherwise provided in paragraph (i), a person’s status is determined immediately after the transfer of the assets.
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3.09. | “Committee” means the Compensation Committee of the Board, which shall consist of not less than three (3) members of the Board each of whom is a “non-employee director” as defined in Securities and Exchange Commission Rule 16b-3(b)(3)(i), or as such term may be defined in any successor regulation under Section 16 of the Exchange Act. In addition, each member of the Committee shall be an “outside director” within the meaning of IRC Section 162(m). For any sections of this Plan that require action by the Committee, “Committee” means at least a majority of the members of the Compensation Committee of the Board. Any action taken by a majority (but not less than three (3)) of the “outside directors” (within the meaning of IRC Section 162(m)) of the Board to ratify or approve an action by the Committee shall be deemed to be an action by the Committee for purposes of this Plan. |
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3.10. | “Common Stock” means the common stock of the Company, its successors and assigns. |
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3.11. | “Company” means Stage Stores, Inc., a Nevada corporation, its successors and assigns and any corporation which shall acquire substantially all its assets. |
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3.12. | “Covered Associate” means any Participant who is expected to be a “covered employee” (in the Fiscal Year the Bonus is expected to be payable) as defined in IRC Section 162(m) and the regulations thereunder. |
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3.13. | “Determination Date” means as to a Requisite Service Period: (a) the first day of the Requisite Service Period; or (b) such other date set by the Committee provided such date will not jeopardize the Plan’s Bonus as qualified performance-based compensation under IRC Section 162(m). |
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3.14 | “Effective Date” means March 26, 2015. |
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3.15. | “Eligible Position” means an employment position with the Company or an Affiliate which provides the employee in the position the opportunity to participate in the Plan, subject to the Committee’s determination of Eligible Positions and Participants. |
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3.16. | “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. |
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3.17. | “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. |
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3.18. | “FASB” means the Financial Accounting Standards Board. |
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3.19. | “FIN” means the FASB Interpretations. |
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3.20. | “Final Pre-Establishment Date” means the last day a performance condition may be considered pre-established under IRC Section 162(m). As of the Effective Date, a performance objective shall be considered pre-established if the Committee establishes the performance goal in writing not later than 90 days after the commencement of the Requisite Service Period (or before 25% of the Requisite Service Period has elapsed) and when the outcome of the performance goal is substantially uncertain. |
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3.21. | “Fiscal Year” means the fiscal year of the Company (as of the Effective Date, comprised of a 52/53 week fiscal year which ends on the Saturday nearest to January 31). |
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3.22. | “Fiscal Year Bonus” means any Bonus relating to a period of service coextensive with one or more consecutive Fiscal Years, of which no amount is paid or payable during the Fiscal Year(s) constituting the period of service. |
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3.23. | “IRC” means the Internal Revenue Code of 1986, as amended from time to time, and any successor. |
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3.24. | “Participant” means an employee of the Company or an Affiliate who has been approved for participation in the Plan by the Committee (or its designee). |
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3.25. | “Performance Period” means the period (which, with respect to a Covered Associate, may be no shorter than a fiscal quarter of the Company) established by the Committee over which the Committee measures whether or not Bonuses have been earned. In most cases, the Performance Period will be a Fiscal Year. In the case of an inaugural Performance Period, the Performance Period may be less than a Fiscal Year. |
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3.26. | “Plan” means this Stage Stores Executive Performance Incentive Bonus Plan. |
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3.27. | “Requisite Service Period” means the period during which a Participant is required to provide service in exchange for a Bonus award. |
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3.28. | “SFAS” means the Statement of Financial Accounting Standards. |
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3.29. | “Tax” means any net income, alternative or add-on minimum tax, gross income, gross receipts, commercial activity, sales, use, consumer, transfer, documentary, registration, ad valorem, value added, franchise, profits, license, withholding, payroll, employment, unemployment insurance contribution, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty, unclaimed fund/abandoned property, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any governmental authority responsible for the imposition of any such tax. |
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3.30. | “Termination” or any form thereof means a “separation from service” as defined in Treasury Regulation §1.409A-1(h) by a Participant with the Company and all its Affiliates. |
4.ELIGIBILITY AND PARTICIPATION
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4.01. | Participation. The Participants for any Performance Period shall be those officers, executives and key employees who are selected for participation under the Plan by the Committee for such Performance Period. |
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4.02. | Termination of Participation. The Committee may withdraw its approval for participation for a Participant at any time. In the event of such withdrawal, the employee concerned shall cease to be an active Participant as of the date selected by the Committee. |
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4.03. | New Hires, Promotions and Other Changes After the Final Pre-Establishment Date. For individuals hired or promoted into Eligible Positions after the Final Pre-Establishment Date for a particular Performance Period, a Performance Period shorter than a full Fiscal Year may be established by the Committee. For Participants who are transferred (including promotions and demotions) between Eligible Positions or receive an increase in Base Salary after the Final Pre-Establishment Date for a particular Performance Period, multiple Performance Periods may be established by the Committee covering different portions of the same Fiscal Year. By way of example, a Participant who is promoted at the midpoint of the Fiscal Year and receives an increase in Base Salary may have a Performance Period covering the first half of the Fiscal Year based on the then-applicable Base Salary, and another Performance Period covering the second half of the Fiscal Year based on the then-applicable (increased) Base Salary. Section 5.02 governs irrespective of whether the Performance Period is the equivalent of a full Fiscal Year. |
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4.04. | Termination of Employment. A Participant shall forfeit all rights to a Bonus unless the Participant is employed by the Company or an Affiliate on the final day of the applicable Performance Period. Notwithstanding the foregoing, a Participant who Terminates by reason of retirement during a Performance Period shall be entitled to a pro-rated portion of any Bonus that the Participant would have been eligible to receive for the Performance Period in which his or her retirement occurred had his or her retirement not occurred at all. |
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4.05 | Proration Upon Retirement. Proration of a Bonus upon retirement will be determined by rounding the effective date of retirement as follows: (a) if the effective date of a Participant’s retirement occurs on or before the 14th day of a calendar month, then the Participant shall not receive credit for the calendar month in which the Participant’s retirement is effective; and (b) if the effective date of a Participant’s retirement occurs on or after the 15th day of a calendar month, then the Participant shall receive credit for the calendar month in which the Participant’s retirement is effective. |
5.DETERMINATION OF BONUSES
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5.01. | The material terms of the performance measure(s) must be disclosed to, and subsequently approved by, the shareholders before the Bonus payout is executed, unless the performance measures conform individually, alternatively or in any combination of the performance criteria and the application thereof in Appendix A. |
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5.02. | On or before the Final Pre-Establishment Date: |
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(a) | The Committee, in its sole discretion, shall either: (i) assign each Participant a target Bonus opportunity level expressed as a percentage of Base Salary or a whole dollar amount; or (ii) establish a payout table or formula for purposes of determining the Bonus (if any) payable to each Participant. With respect to Bonus opportunities expressed as a percentage of Base Salary, the |
Committee shall fix the Base Salary component of the Bonus formula prior to the establishment of the performance objectives.
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(b) | The Committee shall establish in writing the performance measure(s) (in accordance with Section 5.01) applicable to the Performance Period to any Participant. Such pre-established performance measures must state, in terms of an objective formula or standard, the method for computing the amount of the Bonus payable to the Participant if the objective(s) is (are) obtained. A formula or standard is objective if a third party having knowledge of the relevant performance results could calculate the amount to be paid to the Participant. The Committee may establish any number of Performance Periods, objectives and Bonuses for any Participant running concurrently, in whole or in part, provided, that in so doing the Committee does not jeopardize the Company’s deduction for such Bonuses under IRC Section 162(m). |
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5.03. | Each payout table or formula: |
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(b) | shall be based on a comparison of actual performance to the performance objectives; |
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(c) | may include a threshold which is the level of achievement of the performance objective in which payout begins; |
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(d) | shall include a maximum which is the level of achievement for the maximum Bonus payout percentage (subject to Section 5.06); and |
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(e) | shall provide for a formula for the actual Bonus attainment in relation to the Participant’s target Bonus, depending on the extent to which actual performance approached, reached or exceeded the performance criteria goal subject to Section 5.06. |
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5.04. | After the end of each Performance Period or such earlier date if the performance objective(s) are achieved, the Committee shall certify in writing, prior to the unconditional payment of any Bonus, which performance objective(s) for the Performance Period were satisfied and to what extent they were satisfied. The Committee shall determine the actual Bonus for each Participant based on the payout table/formula established in Section 5.03. |
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5.05. | The Committee, in its discretion, may cancel or decrease a Bonus calculated under this Plan, but may not under any circumstances increase such Bonus calculated under this Plan. |
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5.06. | Any other provision of the Plan notwithstanding, the maximum aggregate Bonus payable to a Participant for a particular Fiscal Year may not exceed $5,000,000. |
6.PAYMENT OF INCENTIVE BONUSES
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6.01 | In General. Once the amount of the Bonus is determined in accordance with Section 5.04, payment of the Bonus shall be made pursuant to Section 6.02. |
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6.02 | Current Payment. A Participant’s Bonus for a Performance Period shall be paid in a lump sum, less applicable withholding taxes, to the Participant, or his/her Beneficiary in the event of his/her death, before the later of (a) the 15th day of the third month following the Participant’s first taxable year in which such Bonus is no longer subject to a substantial risk of forfeiture (within the meaning of IRC Section 409A) or (b) the 15th day of the third month following the end of the first taxable year of the service recipient (within the meaning of IRC Section 409A) in which such Bonus is no longer subject to a substantial risk of forfeiture. |
7.RIGHTS OF PARTICIPANTS
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7.01. | No Participant or Beneficiary shall have any interest in any fund or in any specific asset or assets of the Company or an Affiliate by reason of any account under the Plan. It is intended that the Company has merely a contractual obligation to make payments when due hereunder and it is not intended that the Company hold any funds in reserve or trust to secure payments hereunder. No Participant may assign, pledge, or encumber his/her interest under the Plan, or any part thereof, except that a Participant may designate a Beneficiary as provided herein. |
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7.02. | Nothing contained in this Plan shall be construed to give any employee or Participant any right to receive any Bonus other than in the sole discretion of the Committee or any rights whatsoever with respect to the Common Stock of the Company. |
8.NO EMPLOYEE RIGHTS
Nothing in the Plan or participation in the Plan shall confer upon any Participant the right to be employed by the Company or an Affiliate or to continue in the employ of the Company or an Affiliate, nor shall anything in the Plan, or participation in the Plan amend, alter or otherwise affect any rights or terms of employment or other benefits arising from that employment.
9.ADMINISTRATION
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9.01. | Administration. The Committee shall have complete authority to administer the Plan, interpret the terms of the Plan, determine eligibility to participate in the Plan, and make all other determinations and take all other actions in accordance with the terms of the Plan. Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under this Plan. |
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9.02. | Liability of Committee, Indemnification. To the extent permitted by law, the Committee shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own bad faith or willful misconduct. |
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9.03. | Expenses. The costs of the establishment, the adoption, and the administration of the Plan, including but not limited to legal and accounting fees, shall be borne by the Company. |
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9.04. | Choice of Law. The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Texas, unless superseded by federal law, which shall govern correspondingly. |
10.AMENDMENT OR TERMINATION
The Committee may modify or amend, in whole or in part, any or all of the provisions of the Plan, except as to those terms or provisions that are also availablerequired by IRC Section 162(m) to be approved by the shareholders, or suspend or terminate the Plan entirely; provided, however, that no such modifications, amendment, suspension or termination may, without the consent of the Participant, or his Beneficiary in the case of his/her death, reduce the right of a Participant, or his/her Beneficiary, as the case may be, to any payment due under the Plan. For the avoidance of doubt, the Committee may amend the Plan as necessary to conform the Plan to the requirements of IRC Section 409A.
11.TAX WITHHOLDING
The Company or the employing Affiliate shall have the right to deduct from all cash payments any federal, state, or local taxes or other withholding amounts required by law or valid court order to be withheld with respect to such cash payments. The determination of the Company or the employing Affiliate regarding applicable income and employment tax withholding requirements shall be final and binding on the SEC’s EDGAR database at Participant.
www.sec.gov12.CLAIMS PROCEDURE
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12.01. | Any Participant (“claimant”) who believes that he or she is entitled to a benefit under the Plan or that wishes to resolve a dispute or disagreement which arises under, or in any way relates to, the interpretation or construction of the Plan may file a claim with the Committee. |
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12.02. | If the claim is wholly or partially denied, the Committee will within ninety (90) days of the receipt of such claim provide the claimant with written notice of the denial setting forth in a manner calculated to be understood by the claimant: |
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(a) | The specific reason or reasons for which the claim was denied; |
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(b) | Specific reference to pertinent Plan provisions, rules, procedures or protocols upon which the Committee relied to deny the claim; |
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(c) | A description of any additional material or information that the claimant may file to perfect the claim and an explanation of why this material or information is necessary; and |
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(d) | An explanation of the Plan’s claims review procedure and the time limits applicable to such procedure and a statement of the claimant’s right to bring a civil action under §502(a) of ERISA, following an adverse determination upon review. |
If special circumstances require the extension of the ninety (90) day period described above, the claimant will be notified before the end of the initial period of the circumstances requiring the extension and the date by
which the Committee expects to reach a decision. Any extension for deciding a claim will not be for more than an additional ninety (90) day period.
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12.03. | Review Procedure. If a claim has been wholly or partially denied, the affected claimant, or such claimant’s authorized representative, may: |
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(a) | Request that the Committee reconsider its initial denial by filing a written appeal within sixty (60) days after receiving written notice that all or part of the initial claim was denied; |
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(b) | Review pertinent documents and other material upon which the Committee relied when denying the initial claim; and |
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(c) | Submit a written description of the reasons for which the claimant disagrees with the Committee’s initial adverse decision. |
An appeal of an initial denial of benefits and all supporting material must be made in writing within the time periods described above and directed to the Committee. The Committee is solely responsible for reviewing all benefit claims and appeals and taking all appropriate steps to implement its decision.
The Committee’s decision on review will be sent to the claimant in writing and will include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent Plan provisions, rules, procedures or protocols upon which the Committee relied to deny the appeal. The Committee will consider all information submitted by the claimant, regardless of whether the information was part of the original claim. The decision will also include a statement of the claimant’s right to bring an action under ERISA §502(a).
The Committee’s decision on review will be made not later than sixty (60) days after his or her receipt of the request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered as soon as possible, but not later than one-hundred-twenty (120) days after receipt of the request for review. This notice to the claimant will indicate the special circumstances requiring the extension and the date by which the Committee expects to render a decision and will be provided to the claimant prior to the expiration of the initial period.
To the extent permitted by law, the decision of the Committee will be final and binding on all parties. No legal action for benefits under the Plan will be brought unless and until the claimant has exhausted such claimant’s remedies under this Section 12.01.
13.CLAWBACKS
Documents AvailableBonuses made pursuant to the Plan are subject to recovery pursuant to the Company’s compensation recovery policy then in Print
effect or as it may be amended from time to time. To the extent required by applicable laws, rules, regulations or securities exchange listing requirements and the Company’s compensation recovery policy then in effect, the Company shall have the right, and shall take all actions necessary, to recover any amounts paid to any individual under this Plan.
In addition14.IRC SECTION 162(m)
It is the intent of the Company that the Plan comply fully with and meet all the applicable requirements of IRC Section 162(m) and the regulations thereunder with respect to being postedBonuses. If any provision of the Plan or if the award of a Bonus would otherwise conflict with printer friendly versionsthe intent expressed in this Section 14, that provision, to the extent possible, shall be interpreted so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, such provision shall be deemed void as applicable to Covered Employees. Nothing herein shall be interpreted to preclude a Participant who is or may be a Covered Employee form receiving any remuneration from the Company that is awarded not pursuant to the Plan or does not comply with IRC Section 162(m).
15.IRC SECTION 409A
The Plan and all Bonuses granted hereunder are intended to comply with, or otherwise be exempt from, IRC Section 409A. The Plan and all Bonuses shall be administered, interpreted, and construed in a manner consistent with IRC Section 409A or an exemption therefrom. Should any provision of the Plan, any Bonus hereunder, or any other agreement or arrangement contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions of IRC Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Committee, and without the consent of the Participant, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, IRC Section 409A. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in
order to avoid accelerated taxation or tax penalties under IRC Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six-month period immediately following the Participant’s separation from service shall instead be paid on the Investor Relations/Corporate Governance sitefirst business day after the date that is six months following the Participant’s Termination date (or death, if earlier). Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Plan comply with IRC Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on our website (account of non-compliance with IRC Section 409A.
APPENDIX A
www.stagestoresinc.com)I.PERFORMANCE CRITERIA
Performance criteria imposed on Bonus opportunities will be derived using the accounting principles generally accepted in the United States of America and will be reported or appear in the Company’s filings with the Securities Exchange Commission (including, but not limited to, Forms 8-K, 10-Q and 10-K) or the Company’s proxy statement or annual report to shareholders and will be derived from one or more (or any combination of one or more) of the following:
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(a) | Earnings (loss) per common share from continuing operations; |
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(b) | Earnings (loss) per common share; |
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(c) | Operating profit (loss), operating income (loss), or income (loss) from operations (as the case may be); |
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(d) | Income (loss) from continuing operations before unusual or infrequent items; |
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(e) | Income (loss) from continuing operations; |
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(f) | Income (loss) before income taxes; |
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(g) | Income (loss) from continuing operations before income taxes; |
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(h) | Income (loss) from continuing operations before extraordinary item and /or cumulative effect of a change in accounting principle (as the case may be); |
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(i) | Income (loss) before extraordinary item and/or cumulative effect of a change in accounting principle (as the case may be); |
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(k) | Income (loss) before other comprehensive income (loss); |
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(l) | Comprehensive income (loss); |
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(m) | Income (loss) before interest and income taxes (sometimes referred to as “EBIT”); |
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(n) | Income (loss) before interest, income taxes, depreciation and amortization (sometimes referred to as “EBITDA”); |
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(o) | Any other objective and specific income (loss) category or non-GAAP financial measure that appears as a line item in the Company’s filings with the Securities and Exchange Commission or the annual report to shareholders; |
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(p) | Any of items (c) through (o) on a weighted average Common Stock outstanding basis; |
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(q) | Either of items (a) or (b) on a basic basis and any of items (c) through (o) on a basic earnings per share basis, as basic earnings per share is defined in FASB ASC 260, Earnings Per Share, including authoritative interpretations or amendments thereof which may be issued from time to time as long as such interpretations or amendments are utilized on the consolidated statements of operations or statement of operations, as applicable, or in the notes to the consolidated financial statements; |
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(r) | Either of items (a) or (b) on a diluted basis and any of items (c) through (o) on a diluted earnings per share basis, as diluted per share is defined in the FASB ASC 260 - Earnings Per Share including authoritative interpretations or amendments thereof which may be issued from time to time as long as such interpretations or amendments are utilized on the consolidated statements of operations or statement of operations, as applicable, or in the notes to the consolidated financial statements; |
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(t) | Total shareholder return expressed on a dollar or percentage basis as is customarily disclosed in the proxy statement accompanying the notice of annual meetings of shareholders; |
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(u) | Percentage increase in comparable sales, whether on an absolute basis or relative to those publicly held companies in the Company’s peer group as established by the Committee prior to the Final Pre-Establishment Date or such later date as permitted under the IRC; |
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(v) | Gross profit (loss) or gross margin (loss) (as the case may be); |
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(x) | Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue); |
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(z) | Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); |
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(cc) | Customer satisfaction; |
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(dd) | Working capital targets and change in working capital; |
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(ee) | Any of items (a) through (dd) with respect to any subsidiary, Affiliate, business unit, business group, business venture or legal entity, including any combination thereof, or controlled directly or indirectly by the Company whether or not such information is included in the Company’s annual report to shareholders, proxy statement or notice of annual meeting of shareholders; |
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(ff) | Any of items (a) through (dd) above may be determined before or after a minority interest’s share as designated by the Committee; |
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(gg) | Any of items (a) through (dd) above with respect to the period of service to which the performance goal relates whether or not such information is included in the Company’s SEC filings, annual report to shareholders, proxy statement or notice of annual meetings of shareholders; |
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(hh) | Total shareholder return ranking position meaning the relative placement of the Company’s total shareholder return [as determined in (t) above] compared to those publicly held companies in the Company’s peer group as established by the Committee prior to the Final Pre-Establishment Date or such later date as permitted under the IRC; or |
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(ii) | With respect to items (a), (b), (p), (q) and (r) above, other terminology may be used for each such performance criteria (including, but not limited to, “Basic EPS,” “income (loss) per common share,” “diluted EPS,” or “earnings per common share-assuming dilution”) as contemplated by ASC 260 - Earnings Per Share, as amended, revised or superseded. |
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(jj) | To avoid a circular reference, the Committee may establish any of the performance measures above computed without taking into account an amount reflected therein related to Bonuses awarded the under Plan. The Committee shall explicitly state such exclusion of the Bonuses when establishing the material terms of the performance measure. If the performance measure (considered without this exclusion of the Bonuses) reflects an income tax effect of the Bonuses, this exclusion should reflect the corresponding income tax effects attributable thereto. |
The Committee, in its sole discretion, in setting the performance objectives in the time prescribed in Section 5, may provide for the making of equitable adjustments (including the income tax effects attributable thereto), our Audit Committee, Corporate Governancesingularly or in combination, to the performance criteria (in Section I of this Appendix) in recognition of unusual or non-recurring events, transactions and Nominating Committee and Compensation Committee Charters, our Corporate Governance Guidelines, our Codeaccruals, including, without limitation, for the effect of Ethics for Senior Officers, and our Code of Ethics and Business Conduct are available in print tothe following qualifying objective items (or any shareholder who requests them. Written requests should be made to Bob Aronson, Vice President, Investor Relations, at 10201 Main Street, Houston, TX 77025.particular item(s) within the following items or portion(s) thereof):
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(a) | Asset impairments as described in ASC 360 - Property, Plant, & Equipment, as amended, revised or superseded; |
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(b) | Costs associated with exit or disposal activities as described by ASC 420 - Exit or Disposal Cost Obligations, as amended, revised or superseded; |
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(c) | Impairment charges (excluding the amortization thereof) related to goodwill or other intangible assets, as described by ASC 350 - Intangibles - Goodwill and Other, as amended, revised or superseded; |
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(d) | Integration costs related to all merger and acquisition activity of the Company and/or its Affiliates, including, without limitation, any merger, acquisition, reverse merger, triangular merger, tender offer, consolidation, amalgamation, arrangement, security exchange, business combination or any other purchase or sale involving the Company and/or its Affiliates (or foreign equivalent of any of the foregoing); |
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(e) | Transaction costs related to all merger and acquisition activity of the Company and/or its Affiliates, including, without limitation, any merger, acquisition, reverse merger, triangular merger, tender offer, consolidation, amalgamation, arrangement, security exchange, business combination or any other purchase or sale involving the Company and/or its Affiliates (or foreign equivalent of any of the foregoing); |
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(f) | Any profit or loss attributable to the business operations of a specified segment as described in ASC 280 - Segment Reporting, as amended, revised or superseded; |
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(g) | Any profit or loss attributable to a specified segment as described in ASC 280 - Segment Reporting, as amended, revised or superseded, acquired during the Performance Period or an entity or entities acquired during the Performance Period to which the performance goal relates; |
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(h) | Any Tax settlement(s) with a Tax authority; |
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(i) | The relevant Tax effect(s) of Tax laws or regulations, or amendments thereto, that become effective after the beginning of the Performance Period; |
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(j) | Any extraordinary item, event or transaction as described in ASC 225-20 - Income Statement - Extraordinary and Unusual Items, as amended, revised or superseded; |
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(k) | Any unusual in nature, or infrequent in occurrence items, events or transactions (that are not “extraordinary” items) as described in ASC 225-20 - Income Statement - Extraordinary and Unusual Items, as amended, revised or superseded; |
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(l) | Any other non-recurring items, any events or transactions that do not constitute ongoing operations, or other non-GAAP financial measures (not otherwise listed); |
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(m) | Any change in accounting principle as described in ASC 250-10 Accounting Changes and Error Corrections, as amended, revised or superseded; |
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(n) | Unrealized gains or losses on investments in debt and equity securities as described in ASC 320 - Investments - Debt and Equity Securities, as amended, revised or superseded; |
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(o) | Any gain or loss recognized as a result of derivative instrument transactions or other hedging activities as described in ASC 815 - Derivatives and Hedging, as amended, revised or superseded; |
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(p) | Shares-based compensation charges as described in ASC 718 - Compensation - Stock Compensation and ASC 505-50 Equity-Based Payments to Non-Employees, as amended, revised or superseded; |
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(q) | Any gain or loss as reported as a component of other comprehensive income as described in ASC 220 - Comprehensive Income, as amended, revised or superseded; |
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(r) | Any expense (or reversal thereof) as a result of incurring an obligation for a direct or indirect guarantee, as described in ASC 460 - Guarantees, as amended, revised or superseded; |
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(s) | Any gain or loss as the result of the consolidation of a variable interest entity as described in ASC 810 - Consolidation, as amended, revised or superseded; |
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(t) | Any expense, gain or loss (including, but not limited to, judgments, interest on judgments, settlement amounts, attorneys’ fees and costs, filing fees, experts’ fees, and damages sustained as a result of the imposition of injunctive relief) as a result of claims, litigation, judgments or lawsuit settlement (including collective actions or class action lawsuits); or |
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(u) | Any charges associated with the early retirement of debt obligations. |