SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To our knowledge, and except as set forth below, based solely on a review of the copies of the reports required pursuant to Section 16(a) of the Exchange Act that have been furnished to us and written representations that no other reports were required, during the fiscal year ended February 3, 2007, all Section 16(a) filing requirements applicable to our directors, executive officers and greater than 10% beneficial owners have been met, except that (i) Rinaldo Brutoco inadvertently failed to timely file Form 4s related to sales of 500 shares and 2,250 shares, respectively, (ii) Neill Davis, Douglas Ewert, William Silveira and Christopher Zender inadvertently failed to timely file Form 4s related to the withholding of shares to satisfy the tax obligations upon vesting of their respective deferred stock units and (iii) Carole Souvenir inadvertently failed to timely file a Form 4 related to the sale of shares under the Employee Stock Discount Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of the Record Date (except as noted below), with respect to the beneficial ownership of Common Stock by (i) each director, (ii) each nominee for director, (iii) each executive officer named in the Summary Compensation Table below, (iv) each shareholder known by the Companyus to be the beneficial owner of more than 5% of the Common Stock and (v) all of our executive officers and directors of the Company as a group. Unless otherwise indicated, each person has sole voting power and investment power with respect to the shares attributed to him or her.
| | | | | | | | | |
| | | | % of | |
| | Number | | | Outstanding | |
Name | | of Shares | | | Shares | |
| | | | | | |
PRIMECAP Management Company | | | 4,625,632 | (1) | | | 8.6 | |
| 225 South Lake Avenue #400 | | | | | | | | |
| Pasadena, California 91101 | | | | | | | | |
FMR Corp. | | | 3,740,210 | (2) | | | 7.1 | |
| 82 Devonshire Street | | | | | | | | |
| Boston, Massachusetts 02109 | | | | | | | | |
Vanguard HorizonFunds-Vanguard Capital Opportunity Fund | | | 3,600,000 | (3) | | | 6.8 | |
| 100 Vanguard Blvd. | | | | | | | | |
| Malvern, Pennsylvania 19355 | | | | | | | | |
George Zimmer(4) | | | 4,312,865 | (5)(6)(7) | | | 8.1 | |
David H. Edwab | | | 115,793 | (6)(7)(8)(9) | | | * | |
Rinaldo S. Brutoco | | | 6,750 | (10) | | | * | |
Sheldon I. Stein | | | 34,500 | (11) | | | * | |
Michael L. Ray, Ph.D. | | | 9,000 | (12) | | | * | |
Kathleen Mason | | | 21,000 | (13) | | | * | |
Deepak Chopra, M.D. | | | 7,500 | (14) | | | * | |
William B. Sechrest | | | 7,500 | (14) | | | * | |
Charles Bresler, Ph.D. | | | 53,343 | (7)(15) | | | * | |
Douglas S. Ewert | | | 70,747 | (7)(16) | | | * | |
Neill P. Davis | | | 28,940 | (7)(17) | | | * | |
All executive officers and directors as a group (19 Persons) | | | 5,722,122 | (5)(6)(7)(8)(18) | | | | |
| | | | (19)(20)(21) | | | 10.7 | |
| | | | | | | | |
| | | | | % of
| |
| | Number
| | | Outstanding
| |
Name | | of Shares | | | Shares | |
|
PRIMECAP Management Company | | | 4,565,982 | (1) | | | 8.6 | |
225 South Lake Avenue #400 Pasadena, California 91101 | | | | | | | | |
Vanguard HorizonFunds-Vanguard Capital Opportunity Fund | | | 3,565,600 | (2) | | | 6.7 | |
100 Vanguard Blvd. Malvern, Pennsylvania 19355 | | | | | | | | |
George Zimmer(3) | | | 3,820,185 | (4)(5)(6) | | | 7.1 | |
David H. Edwab | | | 79,832 | (5)(6)(7) | | | * | |
Rinaldo S. Brutoco | | | 7,000 | (8) | | | * | |
Sheldon I. Stein | | | 33,000 | (9) | | | * | |
Michael L. Ray, Ph.D. | | | 1,500 | (10) | | | * | |
Kathleen Mason | | | 24,000 | (11) | | | * | |
Deepak Chopra, M.D. | | | 10,500 | (12) | | | * | |
William B. Sechrest | | | 10,500 | (12) | | | * | |
Larry R. Katzen | | | 1,500 | (10) | | | * | |
Charles Bresler, Ph.D. | | | 42,849 | (6)(13) | | | * | |
Douglas S. Ewert | | | 53,367 | (6)(14) | | | * | |
Neill P. Davis | | | 13,674 | (6)(15) | | | * | |
Pasquale De Marco | | | 2,500 | (16) | | | * | |
All executive officers and directors as a group (19 Persons) | | | 4,899,516 | (4)(5)(6)(17)(18) | | | | |
| | | | (19)(20)(21) | | | 9.0 | |
| | |
(1) | (1) | Based on a Schedule 13G filed on February 14, 2006,13, 2007, PRIMECAP Management Company has sole voting power with respect to 967,582938,232 of these shares, neither sole nor shared voting power with respect to the remainder of these shares and sole dispositive power with respect to all of these shares.shares. |
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| | |
|
(2) | (2) | Based on a Schedule 13G filed on February 14, 2006, FMR Corp. has sole voting power with respect to 325,610 of these shares. Edward C. Johnson 3d and FMR Corp., through its control of Fidelity, and the funds each have sole power to dispose of the 3,583,810 shares owned by the Funds, but neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity Management Trust Company, awholly-owned subsidiary of FMR Corp., is the beneficial owner of 155,700 of these shares or 0.0295% of the outstanding common stock of the Company. Edward C. Johnson 3d and FMR Corp., through its control of Fidelity Management Trust Company, each has sole dispositive power over 155,700 of these shares and sole power to vote or to the direct the voting of 155,700 of these shares. Fidelity International Limited (“FIL”) is the beneficial owner of 700 of these shares or .001% of the outstanding common stock of the Company. A partnership controlled predominantly by members of the family of Edward C. Johnson 3d, Chairman of FMR Corp. and FIL, or trusts for their benefit, owns shares of FIL voting stock with the right to cast approximately |
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| | |
| | 38% of the total votes which may be cast by all holders of FIL voting stock. FMR Corp. and FIL are separate and independent corporate entities, and their Boards of Directors are generally composed of different individuals. |
|
| (3) | Based on a Schedule 13G filed on February 13, 2006,2007, VanguardHorizonFunds-Vanguard Capital Opportunity Fund has sole voting power with respect to all of these shares and neither sole nor shared dispositive power with respect to any of these shares. |
|
(3) | (4) | The business address of the shareholder is 40650 Encyclopedia Circle, Fremont, California94538-2453. |
|
(4) | (5) | Includes 4,246,9253,754,225 shares held by George Zimmer in his capacity as trustee for the George Zimmer 1988 Living Trust. |
|
(5) | (6) | Excludes 91,03559,629 shares held by The Zimmer Family Foundation with respect to which this officer and director has shared voting and dispositive power but with regard to which such officer and director disclaims beneficial ownership. |
|
(6) | (7) | Includes 65,94065,960 shares, 2,3722,392 shares, 843864 shares, 464484 shares, 330350 shares and 119,566120,014 shares, respectively, allocated to The Men’s Wearhouse, Inc. Employee Stock Ownership Plan (the “ESP”) accounts of Messrs. George Zimmer, David Edwab, Charles Bresler, Douglas Ewert and Neill Davis and to certain executive officers included in all executive officers and directors of the Company as a group, under the ESP. The ESP provides that participants have voting power with respect to these shares but do notand in certain circumstances may have investmentdispositive power over thesewith respect to a portion of the shares allocated to the participant’s account. |
|
(7) | | Includes 77,440 restricted shares. |
|
(8) | (8) | Includes 1,622 shares held by David H. Edwab in his capacity as trustee of the David H. Edwab and Mary Margaret Edwab Family Trust and 96,800 restricted stock shares. |
|
| (9) | Includes 15,000 shares that may be acquired within 60 days upon exercise of stock options. |
| |
(10) | Includes 1,500 restricted shares and 1,500 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(11) | Includes 4,500 restricted shares and 30,000 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(12) | Includes 1,500 restricted shares and 7,500 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(13) | Includes 4,500 restricted shares and 16,500 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(14) | Includes 4,500 restricted shares and 3,000 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(15) (9) | | Includes 45,000 restricted shares. |
|
(16) | Includes 55,0001,500 restricted shares 9,000and 27,000 shares that may be acquired within 60 days upon the exercise of stock optionsoptions. |
|
(10) | | Represents 1,500 restricted shares. |
|
(11) | | Includes 1,500 restricted shares and 1,46618,000 shares that may be acquired within 60 days upon the exercise of stock options. Ms. Mason has chosen not to stand for re-election as a director of the Company in order to reduce the number of boards of directors on which she serves as a director. |
|
(12) | | Includes 1,500 restricted shares and 4,500 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(13) | | Includes 37,500 restricted shares. |
|
(14) | | Includes 45,000 restricted shares and 1,462 shares allocated to the account of Mr. Ewert under The Men’s Wearhouse, Inc. 401(k) Savings Plan. |
|
(17) (15) | | Includes 3,000 restricted shares, 8,999 shares that may be acquired within 60 days upon the exercise of stock options and 156183 shares allocated to the account of Mr. Davis under The Men’s Wearhouse, Inc. 401(k) Savings Plan. |
|
(18) (16) | | Includes 173,7512,000 shares that may be acquired within 60 days upon the exercise of stock options and 500 shares allocated to the account of Mr. De Marco under Employee Stock Discount Plan (the “ESDP”). |
|
(17) | | Includes an aggregate of 97,257 shares that may be acquired within 60 days upon the exercise of stock options. |
|
(19) (18) | | Includes 4,1504,333 shares allocated to the 401(k) Savings Plan accounts of certain of our executive officers of the Company.officers. The 401(k) Savings Plan provides that participants have voting and investment power over these shares. |
|
(20) (19) | | Includes 500 shares allocated to the Employee Stock Discount Plan (the “ESDP”)ESDP accounts of certain executive officers of the Company. The ESDP provides that participants have voting power with respect to these shares and investment power over these shares. |
|
(21) (20) | | Includes 6,6754,098 shares held by family members of certain of our executive officers and directorsdirectors. |
|
(21) | | Includes an aggregate of the Company.221,741 restricted shares. |
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EXECUTIVE OFFICERS
The following table lists the name, age, current position and period of service with the Company of each executive officer. Each executive officer of the Company was elected by the Board of Directors of the Company and will hold office until the next annual meeting of the Board of Directors or until his or her successor shall have been elected and qualified.
| | | | | | | | | | |
| | | | | | Executive | |
| | | | | | Officer | |
Name | | Age | | | Position with the Company | | Since | |
| | | | | | | | |
George Zimmer | | | 57 | | | Chairman of the Board and Chief Executive Officer | | | 1974 | |
David H. Edwab | | | 51 | | | Vice Chairman of the Board | | | 1991 | |
Charles Bresler, Ph.D. | | | 57 | | | President | | | 1993 | |
Neill P. Davis | | | 49 | | | Executive Vice President, Chief Financial Officer, Treasurer and Principal Financial Officer | | | 1997 | |
Douglas S. Ewert | | | 42 | | | Executive Vice President and Chief Operating Officer | | | 2000 | |
Pasquale De Marco | | | 45 | | | President — Moores Retail Group Inc. | | | 2003 | |
Christopher M. Zender | | | 42 | | | President — K&G Men’s Company | | | 2004 | |
Gary G. Ckodre | | | 56 | | | Senior Vice President — Chief Compliance Officer | | | 1992 | |
James E. Zimmer | | | 54 | | | Senior Vice President — Merchandising | | | 1975 | |
Diana M. Wilson | | | 58 | | | Senior Vice President — Chief Accounting Officer and Principal Accounting Officer | | | 2003 | |
Scott K. Waltz | | | 42 | | | Senior Vice President — Chief Marketing Officer | | | 2004 | |
William C. Silveira | | | 48 | | | Executive Vice President — Manufacturing | | | 2006 | |
Jerry L. Lovejoy | | | 52 | | | Vice President and General Counsel | | | 2003 | |
| | | | | | | | | | |
| | | | | | Executive
|
| | | | | | Officer
|
Name | | Age | | Position with the Company | | Since |
|
George Zimmer | | | 58 | | | Chairman of the Board and Chief Executive Officer | | | 1974 | |
David H. Edwab | | | 52 | | | Vice Chairman of the Board | | | 1991 | |
Charles Bresler, Ph.D. | | | 58 | | | President | | | 1993 | |
Neill P. Davis | | | 50 | | | Executive Vice President, Chief Financial Officer, Treasurer and Principal Financial Officer | | | 1997 | |
Douglas S. Ewert | | | 43 | | | Executive Vice President and Chief Operating Officer | | | 2000 | |
Pasquale De Marco | | | 46 | | | President — Moores Retail Group Inc. | | | 2003 | |
Christopher M. Zender | | | 43 | | | President — K&G Men’s Company | | | 2004 | |
Gary G. Ckodre | | | 57 | | | Senior Vice President — Chief Compliance Officer | | | 1992 | |
James E. Zimmer | | | 55 | | | Senior Vice President — Merchandising | | | 1975 | |
Diana M. Wilson | | | 59 | | | Senior Vice President — Chief Accounting Officer and Principal Accounting Officer | | | 2003 | |
William C. Silveira | | | 49 | | | Executive Vice President — Manufacturing | | | 2006 | |
Carole L. Souvenir | | | 46 | | | Chief Legal Officer and Executive Vice President — Employee Relations | | | 2006 | |
See the table under “Election of Directors” for the past business experience of Messrs. George Zimmer and David Edwab.
Charles Bresler, Ph.D. joined the Company in 1993. From 1993 to 1998, he served as Senior Vice President — Human Development. In February 1998, he was named Executive Vice President. In March 2003, he was renamed Executive Vice President — Stores, Marketing and Human Development. Effective as of January 31, 2005, he was named President of the Company.
Neill P. Davisjoined the Company in 1997 as Vice President and Treasurer. In November 2000, he was named Senior Vice President, Chief Financial Officer and Treasurer, and in March 2001 he was named Principal Financial Officer. In March 2002, he was promoted to Executive Vice President and remained Chief Financial Officer, Treasurer and Principal Financial Officer. In March 2003, he was named Executive Vice President, Chief Financial Officer and Principal Financial Officer. In April 2006, he was again named to the additional office of Treasurer.
Douglas S. Ewertjoined the Company in 1995. From 1996 to 1999, he served as General Merchandise Manager. From 1999 to 2000, he served as Vice President — Merchandising and General Merchandise Manager. In April 2000, he was named Senior Vice President — Merchandising, and in March 2001 he was named Executive Vice President and Chief Operating Officer, K&G Men’s Company. In March 2002, he was named Executive Vice President and General Merchandise Manager. Effective as of January 31, 2005, he was named Executive Vice President and Chief Operating Officer.
Pasquale De Marcojoined the Company as the Chief Financial Officer of Moores Retail Group Inc. (“Moores”) following the closing of the merger of a wholly owned subsidiary of the Company with Moores on February 10, 1999. Prior to the merger, Mr. De Marco had been the Chief Financial Officer of Moores since its inception. In March 2003, Mr. De Marco was named President — Moores Retail Group Inc.
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Christopher M. Zenderjoined the Company in September 2001 as Vice President of Store Operations of the Company’s Twin Hill Corporate Sales Division. In November 2002, he was named Vice President of Store Operations for K&G Men’s Company. In February 2005, he was named President — K&G Men’s Company. Prior to joining the Company, he was the Chief Operating Officer of Value City Department Stores from1999-2001.
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Gary G. Ckodrejoined the Company in 1992. In February 1997, he was named Vice President — Finance and Principal Financial and Accounting Officer, and in March 2001 he was named Senior Vice President and Principal Accounting Officer. In March 2003, he was named Senior Vice President — Finance. In March 2004, he was named Senior Vice President — Chief Compliance Officer.
James E. Zimmerhas served as Senior Vice President — Merchandising since 1975. Mr. J. Zimmer served as a director of the Company until June 2002 when he chose not to seek re-election.
Diana M. Wilsonjoined the Company in March 1999 as Corporate Controller. In March 2001, she was named Vice President and Corporate Controller, and, in March 2002, she was named Vice President — Finance. In March 2003, she was named Vice President — Principal Accounting Officer. In March 2005, she was named Senior Vice President — Principal Accounting Officer. In April 2006, her title was changed to Senior Vice President — Chief Accounting Officer and Principal Accounting Officer.
Scott K. Waltzjoined the Company as Senior Vice President, Chief Marketing Officer in November 2004. Prior to joining the Company, Mr. Waltz was a Partner at 360 Group, a leading independent database marketing firm and agency partner to Men’s Wearhouse from 2002 to 2004. Prior to his joining 360 Group, he served as Senior Vice President, Chief Marketing Officer for AllBusiness from 1999 to 2002.
William C. Silveirajoined the Company in July 1997 as Director — Manufacturing. In March 2000, he was named Vice President — Manufacturing. In March 2001, he was named Senior Vice President — Manufacturing, and, in March 2005, he was named Executive Vice President — Manufacturing.
JerryCarole L. LovejoySouvenirjoined the Company in January 2003April 1998 as Vice President — Employee Relations. In March 2002, she was named Senior Vice President — Employee Relations. In August 2006, she was promoted to Chief Legal Officer and General Counsel. Prior to joining the Company, Mr. Lovejoy was the Division Counsel of the West Division of McDonald’s Corporation, the Oak Brook, Illinois fast food chain, from 1999 to 2003.Executive Vice President — Employee Relations.
George Zimmer and James E. Zimmer are brothers.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Compensation Program
Objectives of Compensation Program
The primary objective of our compensation program, including our executive compensation program, is to retain and incentivize qualified employees who are enthusiastic about and committed to our culture and mission. In doing so, we design competitive total compensation and rewards programs to enhance our ability to attract and retain knowledgeable and experienced executives. Promotion from within is a key principle at the Company and a majority of our executive officers have reached their current career positions through an average career development tenure in excess of 10 years with us. The same compensation philosophy is applied to all levels of exempt employees, including executive officers. While the amounts may be different, each of the components of the compensation package is the same and is applied using similar methodology as further discussed below under “Elements of Compensation.” Exceptions to this principle are generally due to local market requirements.
Executive officers generally receive the same benefits as other employees. Any differences are generally due to position, seniority, or local requirements. In line with this philosophy, executive officers receive minimal perquisites and we do not provide employment agreements for executive officers, except in connection with phased retirement or other circumstances as the Compensation Committee deems warranted and as further discussed below under “Elements of Compensation.”
Finally, we endeavor to ensure that our compensation program is perceived as fundamentally fair to all stakeholders.
What Our Compensation is Designed to Reward
Our compensation program is designed to reward teamwork and each individual’s contribution to the Company as well as to produce positive long-term results for our shareholders and employees. All of our executive officers participate in a non-equity incentive compensation plan two-thirds of which is based on attainment of certain financial metrics. The remaining one third is based on individual performance. The maximum average non-equity incentive compensation program, as a percentage of base salary, for fiscal 2006 for named executive officers
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was 36% and for all other officers was 29%. Fiscal year 2006 incentive compensation for the named executive officers that participate in the non-equity incentive compensation program averaged approximately 31% of base salary and for all other officers averaged 18% of base salary. For comparison purposes, for fiscal year 2005, the maximums for the two groups was 58% and 32%, respectively and the averages were 44% and 19%, respectively.
Administration
The Compensation Committee is composed entirely of independent, non-management members of the Board of Directors. No Compensation Committee member participates in any of our employee compensation programs. The Compensation Committee (i) reviews and approves annual compensation for officers whose annual base salary plus maximum estimated future payout under non-equity incentive plan awards is equal to or in excess of $500,000 (for fiscal 2006 those officers included the Chairman and Chief Executive Officer, President, Executive Vice President and Chief Operating Officer, and the Executive Vice President and Chief Financial Officer), (ii) reviews the compensation program for all other executive officers as recommended to the Committee by the Chairman and Chief Executive Officer, and (iii) reviews and approves the annual awards under equity incentive plans to all employees as recommended to the Committee by management. Individual recommendations other than for the named executive officers are made by an executive group comprised of the President, Executive Vice President and Chief Operating Officer, and Executive Vice President and Chief Financial Officer and approved by the Chief Executive Officer. Recommendations for the named executive officers are made by the Chief Executive Officer.
The Committee does not currently engage any consultant related to executive compensation matters.
EXECUTIVE COMPENSATIONElements of Compensation
General
The primary elements of the executive compensation program consist of (1) base salary, (2) annual cash bonuses pursuant to a non-equity incentive program, and (3) equity awards. In prior years, equity awards included non-qualified stock options, restricted stock awards and restricted stock units. In recent years, restricted stock units have been the key component of equity compensation. Each executive’s current and prior compensation is considered in setting future compensation and consideration is given to the vesting and value of previously granted equity awards. In addition, the Chief Executive Officer focuses on relative compensation throughout the organization in recommending his own compensation and that of other executive officers.
Base Salaries
Level of responsibility and experience, company performance, competitive market conditions, retention concerns and individual performance are all factored into the determination of base salary. In addition, the Chief Executive Officer focuses on his level of base salary and indirectly the level of all other executive base salary relative to compensation throughout the organization. Increases to base salaries, if any, are driven by the foregoing factors.
Annual Cash Bonuses
To align executive pay with our annual performance, our executives receive annual cash bonuses pursuant to a non-equity incentive program. Each year, our executives are eligible for a maximum cash bonus payout. The program establishes a set of three metrics for each executive. The two financial metrics are predetermined sales targets and income targets. The non-financial metric consists of a qualitative assessment of the executive’s performance. Each metric carries equal weight and accounts for one third of the possible payout. Two different thresholds exist for each of the three metrics — good and excellent. An executive receives one-sixth of the payout if the “good” threshold of a particular metric is met and receives the entire one-third payout if the “excellent” threshold is achieved. The maximum annual bonus payout possible for a named executive officer under our non-equity performance program was $200,000 for fiscal 2006. The qualitative assessment of each named executive officer’s individual performance is made by the Compensation Committee primarily based on the views and recommendations of the Chief Executive Officer in the case of the named executive officers other than himself.
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Threshold levels for “good” financial metrics are based on minimum performance objectives that the Chief Executive Officer sets at the beginning of a year and take into consideration the Company’s operating and growth plans for the coming year and are generally considered to be obtainable that year. The “excellent” threshold targets are typically representative of a substantial increase over the “good” threshold and, in recent years, these thresholds have often been achieved with respect to one or more of the metrics.
Equity Awards
Our compensation structure also includes an equity incentive plan that provides for awards of stock options, restricted stock awards and restricted stock units.
Nonqualified stock options provide executives with the opportunity to purchase our common stock at a price fixed on the grant date regardless of future market prices. Since a stock option becomes valuable only if our common stock price increases above exercise price and the holder of the option remains employed during the period required for the option to “vest,” stock options provide the incentive for an option holder to remain employed by us and links a portion of the employee’s compensation to shareholders’ interests by providing an incentive to make decisions designed to increase the market price of our stock. However, since early in fiscal 2004 we have not granted stock options as part of our equity compensation.
Restricted stock awards (“RSAs”) are intended to retain executives through vesting periods. RSAs provide the opportunity for capital accumulation and more predictable long-term incentive value. RSAs are shares of our common stock that are awarded with the restriction that the executive remain with us until the date of vesting. The purpose of granting RSAs is to encourage ownership of our Common Stock by, and retention of, our executives. Any unvested RSAs are generally forfeited once the executive terminates employment.
In the last few years restricted stock units (“RSUs”) have been the key component of equity compensation. An RSU is a commitment by us to issue a share of our Common Stock for each RSU at the time the restrictions in the award agreement lapse. RSUs are generally forfeited upon termination of employment with us if the restrictions outlined in the awards are not met. Any vested shares are fully owned. Historically, we would grant stock options, RSAs and RSUs to executive officers in larger numbers, in intervals of several years and vesting over lengthy periods of time. Based on the recommendation of our Chief Executive Officer, the Compensation Committee currently intends to transition to primarily single year grants. During fiscal 2006, an award of 10,000 RSUs was granted to Douglas Ewert; no other named executive officer received any grants.
Relative Size of Major Compensation Elements
Except in the case of certain insurance related benefits discussed below, the combination of base salary, annual non-equity incentive awards and equity incentive awards comprise total direct compensation. In setting named executive officer compensation, the Compensation Committee considers the aggregate compensation payable to the executive and the form of the compensation. The Committee seeks to achieve the appropriate balance between immediate cash rewards and incentives for the achievement of both annual and long-term financial and non-financial objectives. The number of shares granted under equity awards to each executive is made on a discretionary, rather than formula, basis, by taking into consideration the executive’s position, responsibilities and tenure with the Company.
The Committee may decide, as appropriate, to modify the mix of base salary, annual and long-term awards to best fit a named executive officer’s specific circumstances. For example, the Chief Executive Officer, who holds significant ownership interests in the Company, does not participate in any equity incentive award plan. It is the belief of the Compensation Committee that incentives through equity awards at this time for the Chief Executive Officer would not significantly affect his annual or long-term perspective with respect to equity performance of the Company. However, the Compensation Committee also believes that participation by Mr. Zimmer in our equity incentive award plan would be reasonable and appropriate. Nevertheless, Mr. Zimmer has voluntarily chosen not to do so. Similarly, we have entered into an employment agreement for another executive officer — the Vice Chairman — to reflect that individual’s reduced role in the general management of the Company. In the case of this executive officer, both as a result of our recruiting him from a position with an investment banking firm and a
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later joint decision to reduce his role in the day to day management of the Company, we entered into an employment agreement.
Timing of Compensation Decisions
All elements of executive officer compensation are reviewed and approved on an established schedule, which may vary from year to year, but generally occurs over a 90-day period following our fiscal year end and after a review of financial, operating and personal objectives with respect to the prior year’s results. By way of example, at the end of fiscal 2006, the Committee reviewed results and management recommendations and approved base compensation and the annual non-equity incentive bonus in March, and concluded with final details and approvals of the equity awards in April. The Compensation Committee may, however, review salaries or equity awards at other times as the result of new appointments or promotions during the year.
Benefits
We offer a variety of health and welfare and retirement programs to all eligible employees. Executives generally are eligible for the same benefit programs on the same basis as the rest of the broad-based employees. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, wellness, pharmacy, dental, vision, life insurance and accidental death and disability.
We maintain an employee stock profit sharing plan. Under the plan, generally each year we make a voluntary contribution to the plan either in our common stock or in cash that is used to acquire our common stock. The common stock is then allocated to employees based on their level of compensation.
We maintain a defined contribution plan pursuant to the provisions of Section 401(k) of the Internal Revenue Code. The plan covers all full-time employees who meet age and service requirements. The plan provides for pre-tax, elective employee contributions with a matching contribution from us.
Perquisites
Split-Dollar Life Insurance Agreements
As discussed below in this Proxy Statement, we have entered into certain agreements with Mr. Zimmer and Mr. Edwab pursuant to which we reimburse them for premiums paid on certain life insurance policies and make additional payments to offset the income taxes owed as a result of such payments.
Originally, we only advanced the premiums and retained a security interest in the policies to secure repayment of the premiums advanced by us. In light of the provisions of the Sarbanes-Oxley Act of 2002 which prohibit us from making loans to our officers and directors (which may encompass the advancement of premiums for life insurance policies even though secured by the cash payable pursuant to such policies), we determined that we should cease making premium payments as loans to Messrs. Zimmer and Edwab. At that time the Compensation Committee concluded that it was appropriate to pay Messrs. Zimmer and Edwab the amount of the premiums and the related taxgross-up. In determining annual compensation, the Compensation Committee takes this into consideration.
Airplane Use
Mr. Zimmer is provided with the benefit of using our aircraft for personal air transportation from time to time. The Compensation Committee considers the benefit of Mr. Zimmer’s airplane use in Mr. Zimmer’s total compensation package.
Impact of Accounting and Tax Treatment
SFAS No. 123(R) issued by the Financial Accounting Standards Board requires a public company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair
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value of the award. Equity awards we grant are structured to comply with the requirements of SFAS No. 123R to maintain the appropriate equity accounting treatment.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), places a limit of $1,000,000 on the amount of compensation paid to the CEO and the four other most highly compensated executive officers that may be deducted by us in any year unless the compensation is performance-based compensation as described in Section 162(m) and the related regulations. The Committee believes the compensation payable in excess of this amount for the five named executive officers will not result in any material loss of tax deductions.
Section 409A of the Code, as amended, provides that deferrals of compensation under a nonqualified deferred compensation plan for all taxable years are currently includible in gross income to the extent not subject to a substantial risk of forfeiture and not previously included in gross income, unless certain requirements are met. We structure any deferred compensation items to be in compliance with Section 409A.
Summary Compensation Table
The following table sets forth certain information regarding cash compensation paid for services rendered during the last three fiscal yearsyear ended February 3, 2007 to each of the Company’sour five most highly compensated executive officers, including the Chief Executive Officer:Officer and Chief Financial Officer (collectively, the “Named Executive Officers”):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Long Term | | | |
| | | | Annual Compensation | | | Compensation Awards | | | |
| | | | | | | | | | |
| | | | | | Other Annual | | | Restricted | | | Securities | | | All Other | |
| | | | | | Compensation | | | Stock Unit | | | Underlying | | | Compensation | |
Name and Principal Position | | Year | | | Salary($)(1) | | | Bonus($)(2) | | | ($)(3) | | | Awards($)(7) | | | Options(11) | | | ($)(12) | |
| | | | | | | | | | | | | | | | | | | | | |
George Zimmer | | | 2005 | | | | 420,000 | | | | 166,000 | | | | 789,595 | (4) | | | — | | | | — | | | | 662 | |
| Chairman of the Board and | | | 2004 | | | | 428,077 | | | | 166,000 | | | | 693,157 | (4) | | | — | | | | — | | | | 403 | |
| Chief Executive Officer | | | 2003 | | | | 420,000 | | | | 80,000 | | | | 687,947 | (5) | | | — | | | | — | | | | 363 | |
David H. Edwab | | | 2005 | | | | 560,000 | | | | — | | | | 106,194 | (6) | | | 2,904,000 | (8) | | | — | | | | 1,062 | (13) |
| Vice Chairman of the Board | | | 2004 | | | | 570,769 | | | | 300,000 | | | | 108,126 | (6) | | | — | | | | — | | | | 803 | (13) |
| | | 2003 | | | | 560,000 | | | | 300,000 | | | | 149,233 | (6) | | | — | | | | — | | | | 363 | |
Charles Bresler, Ph.D. | | | 2005 | | | | 408,461 | | | | 200,000 | | | | — | | | | 1,457,925 | (9) | | | — | | | | 1,062 | (13) |
| President | | | 2004 | | | | 339,565 | | | | 166,000 | | | | — | | | | — | | | | — | | | | 803 | (13) |
| | | 2003 | | | | 335,458 | | | | 120,000 | | | | — | | | | — | | | | — | | | | 763 | (13) |
Douglas S. Ewert | | | 2005 | | | | 384,615 | | | | 200,000 | | | | — | | | | 1,457,925 | (9) | | | — | | | | 1,062 | (13) |
| Executive Vice President | | | 2004 | | | | 302,692 | | | | 72,745 | | | | — | | | | — | | | | 36,000 | | | | 803 | (13) |
| and Chief Operating Officer | | | 2003 | | | | 279,135 | | | | 72,250 | | | | — | | | | — | | | | 15,000 | | | | 763 | (13) |
Neill P. Davis | | | 2005 | | | | 344,615 | | | | 205,739 | | | | — | | | | 166,620 | (10) | | | — | | | | 1,062 | (13) |
| Executive Vice President, | | | 2004 | | | | 319,500 | | | | 170,131 | | | | — | | | | — | | | | 60,000 | | | | 803 | (13) |
| Chief Financial Officer and | | | 2003 | | | | 304,962 | | | | 143,190 | | | | — | | | | — | | | | 52,500 | | | | 763 | (13) |
| Principal Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Change in
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | Pension Value
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | and
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | Nonqualified
| | | | | | | |
| | | | | | | | | | | | | | | | | Non-Equity
| | | Deferred
| | | | | | | |
| | | | | | | | | | | Stock
| | | Option
| | | Incentive Plan
| | | Compensation
| | | All Other
| | | | |
| | | | | Salary
| | | Bonus
| | | Awards
| | | Awards
| | | Compensation
| | | Earnings
| | | Compensation
| | | Total
| |
Name and Principal Position | | Year | | | ($)(1) | | | ($) | | | ($) | | | ($) | | | ($)(2) | | | ($) | | | ($)(5) | | | ($) | |
|
George Zimmer Chairman of the Board and Chief Executive Officer | | | 2006 | | | | 428,077 | | | | — | | | | — | | | | — | | | | 134,000 | | | | — | | | | 814,747 | (6)(7) | | | 1,376,824 | |
Neill P. Davis Executive Vice President, Chief Financial Officer, Treasurer and Principal Financial Officer | | | 2006 | | | | 368,576 | | | | 6,958 | (3) | | | — | | | | — | | | | 134,000 | | | | — | | | | 1,745 | (8)(9) | | | 511,279 | |
Douglas S. Ewert Executive Vice President and Chief Operating Officer | | | 2006 | | | | 424,616 | | | | — | | | | 352,700 | (4) | | | — | | | | 134,000 | | | | — | | | | 11,870 | (8)(9) | | | 923,186 | |
Charles Bresler Ph.D. President | | | 2006 | | | | 428,077 | | | | — | | | | — | | | | — | | | | 134,000 | | | | — | | | | 10,370 | (8)(9) | | | 572,447 | |
Pasquale De Marco President — Moores Retail Group Inc. | | | 2006 | | | | 324,271 | (11) | | | — | | | | — | | | | — | | | | 85,750 | (11) | | | — | | | | 19,314 | (10)(11) | | | 429,335 | |
| | |
(1) | | Represents salary for 52 weeks in fiscal years 2003 and 2005 and 53 weeks in 2006 fiscal year 2004.year. |
|
(2) | | Represents bonus paid relating to services performed in the indicated2006 fiscal year. |
|
(3) | Unless otherwise set forth, excludes perquisites and other benefits because the aggregate amount of such compensation was the lesser of $50,000 or 10% of the total annual salary and | Represents special bonus reported for the named executive officer.paid to Mr. Davis. |
|
(4) | | Represents value of 10,000 deferred stock units granted to Mr. Ewert on April 13, 2006. The award vests in annual increments of 2,500 units on April 13, 2007, 2008, 2009 and 2010. |
|
(5) | | Includes $608,133 and $605,337 paid in 2005 and 2004, respectively,the Company’s $595 contribution to the ESP allocated to the account of each Named Executive Officer except Mr. De Marco. |
|
(6) | | Includes $360,943 in connection with insurance premiums (see “Split-Dollar Life Insurance Agreements”Agreement”), $266,780 in related tax gross up payments and $181,462 and $87,820 in 2005 and 2004, respectively, in incremental cost$182,929 associated with Mr. Zimmer’s personal use of the corporate aircraft. |
|
(5) (7) | Represents amount paid in connection with insurance premiums (see “Split-Dollar Life Insurance Agreements”). |
|
(6) | Includes $62,466, $62,466$3,500 associated with usage of a Company facility by family and $113,159 paid tofriends of Mr. Edwab in 2005, 2004 and 2003, respectively, in connection with insurance premiums (see “Split-Dollar Life Insurance Agreements”) and $43,728, $45,660 and $36,074 paid in 2005, 2004 and 2003, respectively, as perquisites under his employment agreement. |
|
(7) | Represents the dollar value of the award of restricted stock or deferred stock units issued to the named executive officer. The dollar value is calculated by multiplying the closing market price of the Company’s common stock on the date of grant by the number of shares or units awarded.Zimmer. |
|
(8) | During 2005 and in connection with the amendment of his Employment Agreement, Mr. Edwab was issued an award of 96,800 shares of restricted stock valued as of the end of the fiscal year at $3,353,152. The award vests with respect to 20% of the shares initially covered thereby on each of February 6, 2007, 2008, 2009, 2010 and 2011. At the same time, Mr. Edwab agreed to the cancellation of options to purchase 165,000 shares of Common Stock that had been granted to him in 2000 and 2002 (see “Employment Agreement”). |
11
| |
(9) | During 2005, Mr. Bresler and Mr. Ewert were each issued an awardIncludes amount of 52,500dividend paid on unvested deferred stock units valued as ofto the end of the fiscal year at $1,818,600. The awards vest with respect to 7,500 of the units initially covered thereby on each of April 13, 2006, 2007, 2008, 2009, 2010, 2011 and 2012. |
| |
(10) | During 2005, Mr. Davis was issued an award of 6,000 deferred stock units valued as of the end of the fiscal year at $207,840. The award vests with respect to 50% of the units initially covered thereby on each of April 13, 2006 and 2007.Named Executive Officer. |
|
(11) (9) | Represents number of options granted to the named executive officer. |
|
(12) | Represents the amount of the Company’s contribution to the ESP allocated in the indicated year to the account of the named executive officer. |
|
(13) | Also includes $400, $400 andIncludes $400 of the Company’s matching contributions to the 401(k) Savings Plan allocated in 2005, 2004 and 2003, respectively, to the account of the named executive officer.Named Executive Officer. |
15
Employment Agreement
The Company entered into a Second Amended and Restated Employment Agreement (the “Employment Agreement”) effective as of February 3, 2005, with David H. Edwab, Vice Chairman of the Company, for a term extending through February 6, 2011. Under the Employment Agreement the Company agreed, among other things, to:
| | |
(10) | • | for the period toRepresents amounts paid in connection with automobile benefits (i.e., lease car and including February 6, 2006, pay Mr. Edwab an annual base salary of $560,000 plus $40,000 per year for reimbursement of various business related expenses, including automobilecar repairs and club membership expenses, and, thereafter, pay Mr. Edwab an annual base salary of $300,000;car insurance). |
|
(11) | • | provide disability and medical insurance coverage and certain other benefits providedCompensation paid to other employees, excluding, however, (i) the Company’s annual cash bonus program for executive officers and (ii) grants and awards under the Company’s key employee equity incentive plans, awards under which, if any, shall be whollyor on behalf of Mr. De Marco is translated from Canadian dollars to US dollars at the discretion ofexchange rate in effect at the Company; and |
|
| • | make the premium payments on the insurance policies referredtime each such payment was made or attributed to and covered by the split-dollar life insurance agreement between the Company and Mr. Edwab (see discussion of “Split-Dollar Life Insurance Agreements” below) as additional compensation with an additional payment to cover the taxes due on such compensation.De Marco. |
The Company may terminate Mr. Edwab’s employment under the Employment Agreement for “cause” (as defined in the Employment Agreement), in which event the Company will pay all amounts owed to Mr. Edwab under the Employment Agreement through the date of termination, which will satisfy all of the Company’s obligations under the Employment Agreement. If the Company terminates Mr. Edwab’s employment without “cause” or Mr. Edwab terminates his employment for “good reason” (as defined in the Employment Agreement), then (i) the Company will be required to pay Mr. Edwab all amounts owed through the date of termination, (ii) Mr. Edwab will continue to receive his base salary at the then current rate and all benefits to which Mr. Edwab is entitled under the Employment Agreement until the earlier of February 6, 2011 or two years following the date of termination and (iii) the Company will continue to maintain the split dollar life insurance policies, including the transferability provisions thereof, maintained by the Company for the benefit of Mr. Edwab until the earlier of February 6, 2011 or two years following the date of termination. If Mr. Edwab’s employment is terminated because of death or permanent disability, then (A) the Company will pay to Mr. Edwab or his estate, if applicable, all amounts owed to Mr. Edwab through the date of termination and all other benefits to which he would have been entitled under the Employment Agreement if his employment had continued until the earlier of February 6, 2011 or two years following the date of termination and (B) the Company shall continue to maintain the split dollar life insurance policies, including the transferability provisions thereof, maintained by the Company for the benefit of Mr. Edwab until February 6, 2011.
Under the Employment Agreement, Mr. Edwab has agreed not to compete with the Company during the term thereof and for a period of one year thereafter. However, Mr. Edwab may render services for compensation and engage in other business activities; provided, that (i) rendering such services or engaging in
12
such activities does not violate the non-competition provisions of the Employment Agreement and (ii) Mr. Edwab must continue to devote more of his working time to the Company than to any other single business or group of related businesses.
Upon the execution of the Employment Agreement, the Company granted to Mr. Edwab 96,800 restricted shares of Common Stock under the Company’s 1996 Long-Term Incentive Plan, which shall vest with respect to 19,360 shares initially covered thereby on February 6th of each year from 2007 through 2011. In the event of termination of Mr. Edwab’s employment, other than for cause or by reason of voluntary termination, a portion of the unvested shares of restricted stock will immediately vest. In connection with the amendment to the Employment Agreement, Mr. Edwab agreed to the cancellation of certain options to purchase an aggregate of 165,000 shares of Common Stock.
Split-Dollar Life Insurance AgreementsAgreement
The George Zimmer 1988 Living Trust is presently the owner of 4,246,9253,754,225 shares of Common Stock. The Company hasWe have been advised that in the event of the death of George Zimmer, absent other sources of cash, his estate may be required to publicly sell all or substantially alla substantial portion of such shares to satisfy estate tax obligations. The public sale of such number of shares may destabilize the market for the Company’sour publicly traded stock. Accordingly, in November 1994, an agreement was entered into (commonly known as a split-dollar life insurance agreement) under the terms of which the Company makeswe made advances of the premiums for certain life insurance policies on the life of George Zimmer with an aggregate face value, as amended, of $25,500,000 purchased by a trust established by Mr. Zimmer. To secure the repayment of the advances, the trust has assigned the policies to the Companyus as collateral. Further, a second split-dollar life insurance agreement with essentially the same terms as the existing agreement was entered into relating to a life insurance policy on the life of George Zimmer with a face value of $1,000,000 purchased by a second trust established by Mr. Zimmer. The trusts have assigned the additional policies to the Companyus as collateral. The proceeds of these policies are intended to provide Mr. Zimmer’s estate with enough liquidity to avoid destabilizing sales of Common Stock.
The Company has also entered into split-dollar life insurance agreements with Mr. Edwab under the terms of which the Company made advances of the premiums on $3,000,000 in life insurance policies owned by a trust established by Mr. Edwab and payable to beneficiaries designated by him (subject to certain split-dollar provisions in favor of the Company). To secure the repayment of the premiums, the Trust has assigned the policies to the Company as collateral.
In light of the provisions of the Sarbanes-Oxley Act of 2002 which prohibit the Companyus from making loans to itsour officers and directors (which may encompass the advancement of premiums for life insurance policies even though secured by the cash payable pursuant to such policies), the Company haswe have ceased making premium payments as loans to Messrs. Zimmer and Edwab. The Company hasMr. Zimmer. We have elected to pay the premiums on behalf of Messrs.Mr. Zimmer and Edwab as additional compensation with an additional increase in compensation to cover the taxes due on such compensation.
In June 2006, we entered into an additional split-dollar life insurance agreement with Mr. Zimmer pursuant to which we granted to Mr. Zimmer the right to select the settlement option for payment of the death benefits and the beneficiaries to receive certain of the proceeds to be paid upon Mr. Zimmer’s death under a $4,000,000 policy which we maintain on Mr. Zimmer’s life. We will continue to pay the premiums due on this policy, a portion of which is additional compensation to Mr. Zimmer. We are the sole owner of the policy and at the time of Mr. Zimmer’s death we have the right to receive a portion of the death benefit equal to the greater of the total amount of the premiums paid under the policy or the cash value of the policy (excluding certain charges and reductions, including but not limited to indebtedness outstanding against such policy and interest related thereto). The balance of the death benefit, if any, will be provided to the beneficiaries named by Mr. Zimmer.
Employee Equity Incentive Plans
The Company maintains
We maintain The Men’s Wearhouse, Inc. 1996 Long-Term Incentive Plan (formerly known as the 1996 Stock Option Plan, the “1996 Plan”), 1998 Key Employee Stock Option Plan (the “1998 Option Plan”) and the 2004 Long-Term Incentive Plan (the “2004 Plan”) (collectively, the “Plans”) for the benefit of itsour full-time key employees. The Company also maintained The Men’s Wearhouse, Inc. 1992 Stock Option Plan which expired in February 2002. Under the 1996 Plan, awards covering up to 2,775,000 shares of Common Stock may be granted. Under the 1998 Option Plan, options to purchase up to 3,150,000 shares of Common Stock may be granted. Under the 2004 Plan, awards covering up to 900,000 shares of Common Stock may be granted.
The 1998 Plan is administered by the Stock Option Committee of the Company’s Board of Directors which currently consists of George Zimmer andPlan, the 1996 Plan and the 2004 Plan are administered by the Compensation Committee. The individuals eligible to participate in the Plans are such of our full-time key
13
employees, including officers and employee directors, of the Company as the respective committees may determine from time to time. However:
| | |
| • | George Zimmer and James E. Zimmer are not eligible to participate in the 1996 Plan and the 1998 Option Plan; and |
|
| • | nonone of our executive officers of the Company may participate in the 1998 Option Plan. |
Under the 1996 Plan and the 2004 Plan, the Compensation Committee may grant options (both incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, deferred stock units,
16
performance stock awards, performance units, cash-based awards, and other stock-based awards. Under the 1998 Option Plan, the Stock OptionCompensation Committee may only grant nonqualified stock options. Under the 1998 Option Plan, the purchase price of shares subject to an option granted under the 1998 Option Plan is determined by the Stock OptionCompensation Committee at the date of grant. Generally, the price at which a nonqualified stock option may be granted may not be less than 50% of the fair market value of the shares of Common Stock on the date of grant. Under the 1996 Plan and the 2004 Plan, the purchase price of shares subject to an option granted under such plans is determined by the Compensation Committee and may not be less than 100% of the fair market value of the shares of Common Stock on the date of grant. Options granted under the Plans must be exercised within ten years from the date of grant. Unless otherwise provided by the respective committee,Compensation Committee, the options vest with respect to one-third of the shares covered thereby on each of the first three anniversaries of the date of grant. In the case of any eligible employee who owns or is deemed to own stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiaries, (i) the option price of any incentive stock option granted may not be less than 110% of the fair market value of the Common Stock on the date of grant and (ii) the exercisable period may not exceed five years from date of grant. Stock appreciation rights (freestanding or tandem), restricted stock, deferred stock units, performance stock awards, performance units, other stock-based awards and cash-based awards may be granted under the 1996 Plan or the 2004 Plan in such number and upon such terms and conditions as determined by the Compensation Committee.
Generally, awards granted under the Plans are not transferable by the holder other than by will or under the laws of descent and distribution. Options granted under the Plans terminate on the earlier of (i) the expiration date of the option or (ii) one day less than one month after the date the holder of the option terminates his or her employment with the Companyus for any reason other than the death, disability or the retirement of such holder. During such one-month period, the holder may exercise the option in respect of the number of shares that were vested on the date of such severance of employment. In the event of severance because of the death, disability or retirement of a holder before the expiration date of the option, the option terminates on the earlier of such (i) expiration date or (ii) one year following the date of severance. During this period the holder, or his or her heirs, as the case may be, generally may exercise the option in respect of the number of shares that were vested on the date of severance because of death, disability or retirement. With regard to other awards under the 1996 Plan and the 2004 Plan, the Compensation Committee shall determine the extent to which a holder shall have the right to receive or exercise such award following termination of the holder’s employment with the Company.us.
14
Option Grants of Plan-Based Awards Table
There were no option grants to the named executive officers during the last fiscal year.
Option Exercises
The following table sets forth the aggregate option exercisescertain information regarding grants made during the last fiscal year ended February 3, 2007 to each of the Named Executive Officers under any of the Plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | All Other
| | | All Other
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Stock
| | | Option
| | | | | | Grant
| |
| | | | | | | | | | | | | | | | | | | | | | | Awards:
| | | Awards:
| | | Exercise
| | | Date Fair
| |
| | | | | Estimated Future Payouts
| | | Estimated Future Payouts
| | | Number
| | | Number
| | | or Base
| | | Value of
| |
| | | | | Under Non-Equity
| | | Under Equity
| | | of Shares
| | | of Securities
| | | Price of
| | | Stock and
| |
| | | | | Incentive Plan Awards | | | Incentive Plan Awards | | | of Stock
| | | Underlying
| | | Option
| | | Option
| |
| | Grant
| | | Threshold
| | | Target
| | | Maximum
| | | Threshold
| | | Target
| | | Maximum
| | | or Units
| | | Options
| | | Awards
| | | Awards
| |
Name | | Date | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | (#) | | | (#) | | | ($/Sh) | | | ($/sh) | |
|
George Zimmer | | | 4/8/2006 | | | | (1 | ) | | | — | | | | 200,000 | (1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Neill P. Davis | | | 4/8/2006 | | | | (1 | ) | | | — | | | | 200,000 | (1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Douglas S. Ewert | | | 4/13/06 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,000 | (2) | | | — | | | | — | | | | 35.27 | |
| | | 4/8/2006 | | | | (1 | ) | | | — | | | | 200,000 | (1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Charles Bresler, Ph.D. | | | 4/8/2006 | | | | (1 | ) | | | — | | | | 200,000 | (1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Pasquale De Marco | | | 4/8/2006 | | | | (1 | ) | | | — | | | | 85,750 | (1) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | |
(1) | | Relates to our ongoing bonus program in which executive officers participate annually. The criteria for determining the amount of each Named Executive Officer’s bonus is based on: (i) the Company attaining sales goals, (ii) the Company attaining net income goals, and (iii) the officer attaining personal goals. Each of the first two criteria are quantitative, while the third criterion is subjective. Each criterion carries equal weight and accounts for one third of the possible payout. Two different thresholds exist for each of the three criteria — good and excellent. An executive receives one-sixth of the payout if the “good” threshold of a particular |
17
| | |
| | criterion is met and receives the entire one-third payout if the “excellent” threshold is achieved. The qualitative assessment of each Named Executive Officer’s individual performance is made by the Compensation Committee primarily based on the views and recommendations of the Chief Executive Officer in the case of the Named Executive Officers other than himself. Threshold levels for “good” financial criteria are based on minimum performance objectives that the Chief Executive Officer sets at the beginning of a year and take into consideration the Company’s operating and growth plans for the coming year and are generally considered to be obtainable that year. The “excellent” threshold targets are typically representative of a substantial increase over the “good” threshold and, in recent years, these thresholds have often been achieved with respect to one or more of the metrics. |
| | |
(2) | | Represents deferred stock units granted to Mr. Ewert. The award vests as follows: 2,500 units annually on April 13, 2007, 2008, 2009 and 2010. |
Outstanding Equity Awards at Fiscal Year-End Table
The following table summarizes certain information regarding unexercised options, vested stock and equity incentive plan awards outstanding as of the end of the fiscal year ended February 3, 2007 for each of the Named Executive Officers:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | | Stock Awards | |
| | | | | | | | Equity Incentive
| | | | | | | | | | | | | | | | | | Equity Incentive
| |
| | | | | | | | Plan Awards:
| | | | | | | | | | | | | | | Equity Incentive
| | | Plan Awards:
| |
| | Number of
| | | Number of
| | | Number of
| | | | | | | | | Number
| | | Market Value
| | | Plan Awards:
| | | Market or
| |
| | Securities
| | | Securities
| | | Securities
| | | | | | | | | of Shares
| | | of Shares
| | | Number of
| | | Payout Value of
| |
| | Underlying
| | | Underlying
| | | Underlying
| | | | | | | | | or Units
| | | or Units
| | | Unearned Shares,
| | | Unearned Shares,
| |
| | Unexercised
| | | Unexercised
| | | Unexercised
| | | Option
| | | | | | of Stock
| | | of Stock
| | | Units or Other
| | | Units or Other
| |
| | Options
| | | Options
| | | Unearned
| | | Exercise
| | | Option
| | | That Have
| | | That Have
| | | Rights That Have
| | | Rights That Have
| |
| | Exercisable
| | | Unexercisable
| | | Options
| | | Price
| | | Expiration
| | | Not Vested
| | | Not Vested
| | | Not Vested
| | | Not Vested
| |
Name | | (#) | | | (#) | | | (#) | | | ($) | | | Date | | | (#) | | | ($) | | | (#) | | | ($) | |
|
George Zimmer | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Neill P. Davis | | | — | | | | 30,004 | (1) | | | — | | | | 14.24 | | | | 2/11/2012 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | 22,500 | (2) | | | — | | | | 7.97 | | | | 2/26/2013 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | 60,000 | (3) | | | — | | | | 15.88 | | | | 2/13/2014 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Douglas S. Ewert | | | — | | | | 4,500 | (4) | | | — | | | | 15.75 | | | | 2/01/2010 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | 1,500 | (5) | | | — | | | | 16.63 | | | | 2/22/2011 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | 3,000 | (6) | | | — | | | | 7.97 | | | | 2/26/2013 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | 36,000 | (7) | | | — | | | | 15.88 | | | | 2/13/2014 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | 37,500 | (8) | | | 1,643,250 | (13) | | | — | | | | — | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,500 | (9) | | | 328,650 | (13) | | | — | | | | — | |
Charles Bresler, Ph.D. | | | — | | | | 150,000 | (10) | | | — | | | | 14.24 | | | | 2/11/2012 | | | | — | | | | — | | | | — | | | | — | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | 37,500 | (11) | | | 1,643,250 | (13) | | | — | | | | — | |
Pasquale De Marco | | | 2,000 | | | | 36,000 | (12) | | | — | | | | 9.80 | | | | 9/30/2012 | | | | — | | | | — | | | | — | | | | — | |
| | |
(1) | | The award vests as follows: 7,501 options annually on January 27, 2008, 2009, 2010 and 2011. |
|
(2) | | The award vests as follows: 7,500 options annually on February 26, 2007, 2008, 2009 and 2010. |
|
(3) | | The award vests as follows: 7,500 options annually on February 13, 2008, 2009 and 2010; 15,000 options on February 13, 2011; 22,500 options on February 13, 2012. |
|
(4) | | The award vests on February 1, 2008. |
|
(5) | | The award vests as follows: 1,500 options annually on February 22, 2007 and 2008. |
|
(6) | | The award vests as follows: 3,000 options annually on February 26, 2007 and 2008. |
|
(7) | | The award vests as follows: 9,000 options annually on February 13, 2009, 2010, 2011 and 2012. |
|
(8) | | The award vests as follows: 7,500 units on April 13, 2008, 2009, 2010, 2011 and 2012. |
|
(9) | | The award vests as follows: 2,500 units annually on April 13, 2008, 2009 and 2010. |
|
(10) | | The award vests as follows: 30,000 options annually on January 27, 2008, 2009, 2010 and July 27, 2011. |
|
(11) | | The award vests as follows: 7,500 units on April 13, 2008, 2009, 2010, 2011 and 2012. |
18
| | |
(12) | | The award vests as follows: 6,000 options annually on September 30, 2007, 2008, 2009, 2010, 2011 and 6,000 options on March 31, 2012. |
|
(13) | | Based on the closing price per share for our common stock on the New York Stock Exchange on February 2, 2007, which was the last trading day of our fiscal year. |
Option Exercises and Stock Vested Table
The following table summarizes certain information regarding the exercise of options and the valuevesting of outstanding options at year-end held bystock during the named executive officers:fiscal year ended February 3, 2007 for each of the Named Executive Officers:
| | | | | | | | | | | | | | | | |
| | Option Awards | | | Stock Awards | |
| | Number of
| | | | | | Number of
| | | | |
| | Shares
| | | Value
| | | Shares
| | | Value
| |
| | Acquired
| | | Realized
| | | Acquired
| | | Realized
| |
| | on Exercise
| | | on Exercise
| | | on Vesting
| | | on Vesting
| |
Name | | (#) | | | ($) | | | (#) | | | ($) | |
|
George Zimmer | | | — | | | | — | | | | — | | | | — | |
Neill P. Davis | | | 16,499 | | | | 414,801.22 | | | | 3,000 | | | | 105,810.00 | |
Douglas S. Ewert | | | 9,000 | | | | 207,931.05 | | | | 7,500 | | | | 264,525.00 | |
Charles Bresler, Ph.D. | | | 26,250 | | | | 530,181.75 | | | | 7,500 | | | | 264,525.00 | |
Pasquale De Marco | | | 8,000 | | | | 240,831.00 | | | | — | | | | — | |
Aggregate Option Exercises in Fiscal 2005 and Option Values at January 28, 2006
| | | | | | | | | | | | | | | | |
| | | | | | Number of Securities | | | Value of Unexercised | |
| | Shares | | | | | Underlying Unexercised | | | In-the-Money | |
| | Acquired on | | | Value | | | Options at Year End | | | Options at Year End($) | |
Name | | Exercise | | | Realized($) | | | Exercisable/Unexercisable | | | Exercisable/Unexercisable | |
| | | | | | | | | | | | |
George Zimmer | | | — | | | | — | | | | — | | | | — | |
David H. Edwab | | | 247,500 | | | | 5,607,833 | | | | 0/15,000 | | | | 0/283,350 | |
Charles Bresler, Ph.D. | | | 77,625 | | | | 793,050 | | | | 0/202,500 | | | | 0/4,051,725 | |
Douglas S. Ewert | | | 36,375 | | | | 518,242 | | | | 0/63,000 | | | | 0/1,251,466 | |
Neill P. Davis | | | 21,745 | | | | 388,550 | | | | 1,499/139,506 | | | | 30,580/2,987,955 | |
Compensation of DirectorsPension Benefits
Employee directors
We currently have no defined benefit pension plans.
Nonqualified Deferred Compensation
We currently have no defined contribution plans which provide for the deferral of compensation on a basis that is not tax qualified.
Potential Payments upon Termination orChange-in-Control
The Named Executive Officers will receive the same benefits as our other employees upon termination of their employment. None of the CompanyNamed Executive Officers havechange-in-control agreements with us.
DIRECTOR COMPENSATION
Our employee directors do not receive fees for attending meetings of the Board of Directors. Each of our non-employee director of the Companydirectors receives an annual retainer of $24,000. In addition, members of the Audit Committee receive an annual retainer of $2,000, or $10,000 for the Chairman of the Audit Committee, as well as an additional $1,000 for each meeting attended in person and $500 for each meeting held telephonically. Members of the Compensation Committee and the Nominating and Corporate Governance Committee each receive an annual retainer of $1,000, or $2,000 for the Chairman of each committee, as well as an additional $1,000 for each meeting attended in person and $500 for each meeting held telephonically. Further, under the Company’s 1992 Non-Employee Director Stock Option Plan (the “Director Plan”) each person who is a non-employee director on the last business day of each of our fiscal year of the Companyyears is granted 1,500 shares of restricted stock and an option to acquire an additional 1,500 shares of Common Stock. All options granted permit the non-employee director to purchase the option shares at the closing price on the date of grant and become exercisable one year after the date of grant. All options granted under the Director Plan must be exercised within 10 years of the date of grant. Such options terminate on the earlier of the date of the expiration of the option or one day less than one month after the date the director ceases to serve as a director of the Company for any reason other than death, disability or retirement as a director. All restrictions on the restricted stock lapse one year after the date of grant.
19
During
The following table summarizes compensation paid to each non-employee director during the fiscal year ended January 28, 2006, Messrs. Brutoco, Chopra, Ray, Sechrest, Stein and Ms. Mason earned $34,500, $27,500 $28,000, $42,000, $28,000 and $33,500, respectively, as compensation for their service on the Board of Directors. February 3, 2007:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Change in
| | | | | | | |
| | | | | | | | | | | | | | Pension
| | | | | | | |
| | | | | | | | | | | | | | Value and
| | | | | | | |
| | Fees Earned
| | | | | | | | | Non-Equity
| | | Nonqualified
| | | | | | | |
| | or Paid
| | | Stock
| | | Option
| | | Incentive Plan
| | | Deferred
| | | All Other
| | | | |
| | in Cash
| | | Awards
| | | Awards
| | | Compensation
| | | Compensation
| | | Compensation
| | | Total
| |
Name | | ($) | | | ($)(2) | | | ($)(3) | | | ($) | | | Earnings | | | ($) | | | ($) | |
|
Rinaldo S. Brutoco | | | 35,000 | | | | 65,730 | | | | 28,022 | | | | — | | | | — | | | | — | | | | 128,752 | |
Michael L. Ray, Ph.D. | | | 28,000 | | | | 65,730 | | | | 28,022 | | | | — | | | | — | | | | — | | | | 121,752 | |
Sheldon I. Stein | | | 28,000 | | | | 65,730 | | | | 28,022 | | | | — | | | | — | | | | — | | | | 121,752 | |
Kathleen Mason(1) | | | 35,000 | | | | 65,730 | | | | 28,022 | | | | — | | | | — | | | | — | | | | 128,752 | |
Deepak Chopra, M.D. | | | 26,000 | | | | 65,730 | | | | 28,022 | | | | — | | | | — | | | | — | | | | 119,252 | |
William B. Sechrest | | | 43,500 | | | | 65,730 | | | | 28,022 | | | | — | | | | — | | | | — | | | | 137,252 | |
| | |
(1) | | Ms. Mason has chosen not to stand for re-election as a director of the Company in order to reduce the number of boards of directors on which she serves as a director. |
|
(2) | | Represents value of 1,500 restricted shares granted to director on February 2, 2007. The award vests on February 2, 2008. |
|
(3) | | Represents value of 1,500 stock options granted to director on February 2, 2007 with a weighted average option value of $18.68 per share. The fair value of the options is estimated on the date of grant using the Black Scholes option pricing model. The following weighted average assumptions were used for the grant: expected volatility of 42.68%, risk-free interest rate (U.S. Treasury five year notes) of 4.82%, dividend yield of 0.58% and an expected life of six years. |
In addition, on January 27, 2006,April 10, 2007, pursuant to the Companyterms of the Director Plan, Mr. Katzen was granted each of Messrs. Brutoco, Chopra, Ray, Sechrest and Stein and Ms. Mason 1,500 shares of restricted stock and an option to purchaseacquire an additional 1,500 shares of Common Stock at $34.64 per share pursuanta purchase price of $47.18 in connection with his initial election to the Director Plan.
15
Performance Graph
The following graph compares, as of each of the dates indicated, the percentage change in the Company’s cumulative total shareholder return on the Common Stock with the cumulative total return of the NYSE Composite Index and the Retail Specialty Apparel Index. The graph assumes that the value of the investment in the Common Stock and each index was $100 at February 3, 2001 and that all dividends paid by those companies included in the indices were reinvested.
Measurement Period (Fiscal Year Covered)
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | 02/03/01 | | | 02/02/02 | | | 02/01/03 | | | 01/31/04 | | | 01/29/05 | | | 01/28/06 | |
| |
Company | | | 100.00 | | | | 67.96 | | | | 43.54 | | | | 72.37 | | | | 100.84 | | | | 161.47 | |
Dow Jones US Apparel Retailers | | | 100.00 | | | | 86.87 | | | | 75.37 | | | | 100.72 | | | | 121.87 | | | | 139.03 | |
NYSE Composite Index | | | 100.00 | | | | 85.03 | | | | 68.01 | | | | 87.78 | | | | 100.47 | | | | 129.82 | |
The foregoing graph is based on historical data and is not necessarily indicative of future performance. This graph shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulations 14A and 14C under the Exchange Act, or to the liabilities of Section 18 under the Exchange Act.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Board of Directors of the Company was, during fiscal 2005, an officer or employee of the Company or any of its subsidiaries, or was formerly an officer of the Company or any of its subsidiaries, or had any relationships requiring disclosure by the Company under Item 404 of Regulation S-K.Directors.
During fiscal 2005, no executive officer of the Company served as (i) a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served on the Compensation Committee of the Board of Directors, (ii) a director of another entity, one of whose executive officers served on the Compensation Committee, or (iii) a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of the Company.
16
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of the Company is pleased to present its 2005 report on executive compensation. This Compensation Committee report documents components of the Company’s executive officer compensation programs and describes the basis on which 2005 compensation determinations were made by the Compensation Committee with respect to the executive officers of the Company, including the executive officers that are named in the compensation tables. The Compensation Committee is comprised entirely of non-employee directors.
| |
| Compensation Philosophy and Overall Objectives of Executive Compensation Programs |
It is the philosophy of the Company to ensure that executive compensation be directly linked to continuous improvements in corporate financial performance and increases in shareholder value. The following objectives, which were adopted by the Compensation Committee, serve as the guiding principles for all compensation decisions:
| | |
| • | Provide a competitive total compensation package that enables the Company to retain key executives. |
|
| • | Integrate pay programs with the Company’s annual and long-term business objectives and strategy, and focus executive behavior on the fulfillment of those objectives. |
|
| • | Provide variable compensation opportunities that are directly linked to the performance of the Company and that align executive remuneration with the interests of shareholders. |
The Compensation Committee believes that the Company’s current executive compensation program is consistent with these objectives.
| |
| Executive Compensation Program Components |
The Company uses cash- and equity-based compensation to achieve itspay-for-performance philosophy and to reward short- and long-term performance.
Base Salary. The Company’s compensation philosophy is to control compensation costs and to place greater emphasis on incentive compensation based on results. Accordingly, the Compensation Committee believes that the Company’s base salaries are well within the industry norms for companies of similar size. Salaries for executives are reviewed periodically and revised, if appropriate, based on a variety of factors, including individual performance, level of responsibility, prior experience, breadth of knowledge, external pay practices and overall financial results.
Incentive Compensation. The Company’s philosophy is to use a combination of annual and long-term compensation methods for the Company’s management other than the Chief Executive Officer who holds significant ownership interests in the Company and has declined the opportunity to participate in equity compensation arrangements. It is the belief of the Compensation Committee that incentives through stock option or restricted stock participation at this time for the Chief Executive Officer would not significantly affect the short-term or long-term perspective of this individual with respect to the equity performance of the Company. The Compensation Committee does believe that the opportunity for increased compensation through equity incentives would be appropriate for the Chief Executive Officer. However, he has declined to accept such additional compensation.
The Compensation Committee adopted a bonus program for 2005 in which executive officers participate. The maximum bonus set for each of the named executive officers is based upon the total compensation package of the officer relative to his duties and is $205,739, except for Mr. Edwab who is not entitled to participate in the program under the terms of his Employment Agreement.
The criteria for determining the amount of bonus participation is based on: (i) the Company attaining sales goals, (ii) the Company attaining net income goals, and (iii) the officer attaining personal goals. Each of the first two criteria are quantitative, while the third criterion is subjective. The Company’s bonus program for the majority of the work force is based on attaining similar goals as well as shrinkage goals.
17
| |
| Discussion of 2005 Compensation for the Chief Executive Officer |
George Zimmer, Chairman of the Board and Chief Executive Officer of the Company, is a significant shareholder in the Company, as well as one of the Company’s founders.
In determining Mr. Zimmer’s compensation for 2005, the Compensation Committee considered the Company’s financial performance and corporate accomplishments, individual performance and salary data for chief executive officers of other publicly held apparel companies having a size and focus that the Compensation Committee believed comparable to the Company’s. The Compensation Committee also reviewed more subjective factors, such as development and implementation of the corporate strategies to enhance shareholder value and the Company’s overall corporate philosophy. The Compensation Committee also took into consideration the amount paid by the Company to Mr. Zimmer to pay the premiums on the split-dollar life insurance policies. The Compensation Committee feels that Mr. Zimmer’s compensation program for 2005 and 2006 is conservative in light of his contributions to the Company and the Company’s success.
Base Salary. Mr. Zimmer’s base salary for fiscal 2005 was $420,000. While the Compensation Committee believes that the performance of Mr. Zimmer and the Company would justify a substantial increase in Mr. Zimmer’s base salary and that Mr. Zimmer’s base salary is substantially below the median base salary for chief executive officers of other publicly held companies similar in size to the Company, Mr. Zimmer has advised the Compensation Committee that he is satisfied with his current base salary and therefore no change has been approved for fiscal 2006.
Annual Incentive. Mr. Zimmer was paid a $166,000 bonus under the 2005 bonus program. Mr. Zimmer will be eligible for a bonus of up to $200,000 in 2006 based on: (i) the Company attaining sales goals, (ii) the Company attaining net income goals, and (iii) Mr. Zimmer attaining certain personal goals. Each of the first two criteria are quantitative, while the third criterion is subjective. The Compensation Committee believes the Company’s cash incentive bonus program for Mr. Zimmer is conservative compared to other publicly held companies similar in size to the Company.
Split-dollar Life Insurance Premiums. In the past the Company paid the premiums on a split-dollar life insurance policy owned by Mr. Zimmer under an arrangement where the Company would be reimbursed for the aggregate amount of such premiums from the cash proceeds of the policy before any payment was made thereunder to Mr. Zimmer or the policy’s beneficiaries. Because of changes in law, it became uncertain as to whether the Company could continue to make such premium payment advances under the split-dollar insurance arrangement. Because Common Stock represents a substantial portion of Mr. Zimmer’s estate, in the event of his death, his estate might be forced to sell Common Stock under circumstances that would be adverse to the Company and its shareholders unless the estate had other significant sources of liquidity. The split-dollar life insurance policy creates a significant source of liquidity to the estate. As a result of this factor, and the fact that the Compensation Committee believed that otherwise Mr. Zimmer’s total compensation package was substantially below the median market level, the Compensation Committee approved the continued payment of the split-dollar life insurance premiums by the Company as additional compensation to Mr. Zimmer and approved the payment to Mr. Zimmer of an additional amount to reimburse him for taxes he would owe as a result of the additional compensation and the tax reimbursement payment.
18
It is the opinion of the Compensation Committee that the total compensation program for 2005 for the executive officers relative to the Company’s performance was reasonable and that the compensation to George Zimmer, including that associated with the payments with respect to the split-dollar life insurance, remains modest in light of the Company’s achievements and the total compensation packages provided to chief executive officers by other publicly held clothing retailers.
| |
| COMPENSATION COMMITTEE |
|
| Sheldon I. Stein,Chairman |
| William B. Sechrest |
| Kathleen Mason |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 20, 2004, we purchased a 1980 Gulfstream III aircraft from Regal Aviation L.L.C. (“Regal Aviation”) for $5.0 million. Regal Aviation, operateswhich operated a private air charter service, and is a limited liability company of which George Zimmer, Chairman and Chief Executive Officer of the Company, owns 99%. In addition, on August 20, 2004, we entered into a leasing arrangement with Regal Aviation under which Regal Aviation operates, managesoperated, managed and marketsmarketed the aircraft as well as providesprovided the appropriate flight personnel and services. The aircraft is utilized to provide air transportation from time to time for Mr. Zimmer as well as leased to third parties for charter. Prior to the purchase of the aircraft from Regal Aviation, the Companywe utilized the services of Regal Aviation to provide air transportation from time to time for employeesour employees. On August 31, 2006, Regal Aviation sold substantially all of its assets (the “Sale”) to an unrelated third party who now provides to us those services previously provided by Regal Aviation. In fiscal 2006, prior to the Company. During 2005, the CompanySale, we paid approximately $400,000$319,100 to Regal Aviation for all such services.
Based on the results of recent appraisals and review of the terms of other Regal Aviation leasing arrangements with unrelated third parties, we believe that the terms of the aircraft purchase and leasing agreement are comparable to what would have been available to us from unaffiliated third parties at the time such agreements were entered into.
In April 2002, the Companywe advanced $220,750 to Mr. Davis, Executive Vice President, Chief Financial Officer, Treasurer and Principal Financial Officer of the Company, to enable him to purchase a residence. At the beginning of fiscal 2005,2006, Mr. Davis had a balance of $186,440.$166,440. During 2005,2006, Mr. Davis repaid $20,000 of this advance and paid the Company $3,703us $6,958 in interest. The average interest rate on the loan during fiscal 20052006 was 2.2%4.7% per annum. As of January 28, 2006,February 3, 2007, the outstanding loan balance was $166,440.$146,440.
20
Section 16(a) Beneficial Ownership Reporting Compliance
ToJames E. Zimmer, George Zimmer’s brother, is and has been the Company’s knowledge, and except as set forth below, based solely on a reviewSenior Vice President — Merchandising of the copiesCompany since 1975 and is compensated in line with other similarly situated employees of the reports required pursuant to Section 16(a) of the Exchange ActCompany, except that have been furnished to the Companyhistorically he has not received awards under our equity plans. James Zimmer’s base salary and written representations that no other reports were required, duringbonus equaled $377,846 for the fiscal year ended January 28, 2006, all Section 16(a) filing requirements applicableFebruary 3, 2007.
Policies and Procedures for Approval of Related Person Transactions
In April 2007, the Board of Directors formally adopted a written policy with respect to its directors, executive officers and greater than 10% beneficial owners have been met, except that (i) David Edwab inadvertently failedrelated person transactions to timely file a Form 4 related to the cancellation of certain options and the grant of restricted stockdocument procedures pursuant to which such transactions are reviewed, approved or ratified. The policy applies to any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which (i) we or any of our subsidiaries are a participant, (ii) any related person has a direct or indirect interest and (iii) the termsamount involved exceeds $25,000. The Compensation Committee is responsible for reviewing, approving and ratifying any related person transaction. The Compensation Committee intends to approve only those related person transactions that are in, or are not inconsistent with, the best interests of his Second Amendedthe Company and Restated Employment Agreement and (ii) James Zimmer inadvertently failed to timely file a Form 4 related to the settlement of a variable pre-paid forward contract in 2004.its shareholders.
INDEPENDENT AUDITORS
The Audit Committee has approved the appointment of the firm of Deloitte & Touche LLP (“D&T”) as independent auditors for the fiscal year ending February 3, 2007.2, 2008. Representatives of D&T are expected to attend the Annual Meeting, will be afforded an opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions by shareholders.
19
Fees for professional services provided by D&T in each of the last two fiscal years in each of the following categories are:
| | | | | | | | |
| | Fiscal Year | |
| | | |
| | 2005 | | | 2004 | |
| | | | | | |
Audit Fees(1) | | $ | 996,000 | | | $ | 1,360,800 | |
Audit Related Fees(2) | | | 41,000 | | | | 39,700 | |
Tax Fees(3) | | | 108,000 | | | | 740,400 | |
All Other Fees(4) | | | 75,100 | | | | 22,200 | |
| | | | | | |
| | $ | 1,220,100 | | | $ | 2,163,100 | |
| | | | | | |
| | | | | | | | |
| | Fiscal Year | |
| | 2006 | | | 2005 | |
|
Audit Fees(1) | | $ | 1,017,200 | | | $ | 996,000 | |
Audit Related Fees(2) | | | 60,000 | | | | 41,000 | |
Tax Fees(3) | | | 179,200 | | | | 108,000 | |
All Other Fees(4) | | | 16,400 | | | | 75,100 | |
| | | | | | | | |
| | $ | 1,272,800 | | | $ | 1,220,100 | |
| | | | | | | | |
| | |
(1) | | Audit fees consist of audit work performed in connection with the annual financial statements, assessment of the Company’sour internal control over financial reporting, the reviews of unaudited quarterly financial statements as well as work generally only the independent auditor can reasonably provide, such as consents, comfort letters and review of documents filed with the Securities and Exchange Commission. |
|
(2) | | Audit related services represent fees for audits of the Company’sour employee benefit plans. |
|
(3) | | Tax services include fees for a variety of federal, state and international tax consulting projects and tax compliance services, including fixed fee payments for certain previously contingent fee arrangements. |
|
(4) | | These fees for other services consist of general tax compliance software licensing. |
The Audit Committee has considered whether non-audit services provided by D&T to the Companyus are compatible with maintaining D&T’s independence.
The Audit Committee has implemented pre-approval policies and procedures for all audit and non-audit services. Generally, the Audit Committee requires pre-approval of any services to be provided by the Company’sour independent public accountants to the Companyus or any of itsour subsidiaries. The pre-approval procedures include the designation of such pre-approval responsibility to one individual on the Audit Committee, currently Mr. Sechrest. There were no services approved by the Audit Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) ofRule 2-01 ofRegulation S-X during fiscal 2005.2006.
21
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of shareholders intended to be presented at theour annual meeting of shareholders of the Company to be held in 20072008 must be received by the Companyus at itsour corporate offices, 5803 Glenmont Drive, Houston, Texas77081-1701, attention: Investor Relations, or via facsimile at(713) 592-7060, no later than January 19, 2007,10, 2008, in order to be considered for inclusion in the proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The
Our management of the Company knows of no other matters which may come before the meeting. However, if any matters other than those referred to above should properly come before the meeting, it is the intention of the persons named in the enclosed proxy to vote such proxy in accordance with their best judgment.
The cost of solicitation of proxies in the accompanying form will be paid by the Company.us. In addition to solicitation by use of the mails, certain of our directors, officers or employees of the Company may solicit the return of proxies by telephone, telegram or personal interview.
22
20
THE MEN’S WEARHOUSE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 200613, 2007
The undersigned shareholder of The Men’s Wearhouse, Inc. (the “Company”) hereby appoints George Zimmer and David Edwab, or either of them, attorneys and proxies of the undersigned, with full power of substitution to vote, as designated on the reverse side,below, the number of votes which the undersigned would be entitled to cast if personally present at the Annual Meeting of Shareholders of the Company to be held at 11:3000 a.m., Pacific daylight time, on Wednesday, June 21, 2006,13, 2007, at the Company’s executive offices, 40650 Encyclopedia Circle, Fremont,The Westin St. Francis, 335 Powell Street, San Francisco, California, and at any adjournment or adjournments thereof.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
THE MEN’S WEARHOUSE, INC.
June 21, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
êPlease detach along perforated line and mail in the envelope provided.ê
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
1. | |
1. | Election of Directors: |
| | | | | | |
| | | | NOMINEES: |
o | | FOR ALL NOMINEESall nominees listed, except as indicated to the contrary below | | m
m
m | | George Zimmer
David H. Edwab
Rinaldo S. Brutoco |
o | | WITHHOLD AUTHORITY
FOR ALL NOMINEES | | m
m
m | | Michael L. Ray, Ph.D.
Sheldon I. Stein
Kathleen Mason |
o | | FOR ALL EXCEPT
(See instructions below) | | m
m | | Deepak Chopra, M.D.
William B. Sechrest |
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INSTRUCTION:
| | To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:lelection of all nominees |
Nominees: George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Deepak Chopra, M.D., William B. Sechrest and Larry R. Katzen.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.)
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | o |
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2. | | In their discretion, the above-named proxies are authorized to vote upon such other matters as may properly come before the meeting or any adjournment thereof and upon matters incident to the conduct of the meeting. |
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This Proxy will be voted as directed. IF NOT OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR EACH OF THE NOMINEES LISTED HEREIN. As noted in the accompanying proxy statement, receipt of which is hereby acknowledged, if any of the listed nominees becomes unavailable for any reason and authority to vote for election of directors is not withheld, the shares will be voted for another nominee or other nominees to be selected by the Nominating and Corporate Governance Committee. |
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PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY. |
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Signature of Shareholder | | | | | | Date: | | | | | | Signature of Shareholder | | | | | | Date: | | | | |
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Note:
| | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
(Continued, and to be signed on reverse side)
This Proxy will be voted as directed. IF NOT OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR EACH OF THE NOMINEES LISTED HEREIN. As noted in the accompanying proxy statement, receipt of which is hereby acknowledged, if any of the listed nominees becomes unavailable for any reason and authority to vote for election of directors is not withheld, the shares will be voted for another nominee or other nominees to be selected by the Nominating and Corporate Governance Committee.
Dated _ _ , 2007
Signature of Shareholder
Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY
THE MEN’S WEARHOUSE, INC.
PROXY VOTING INSTRUCTIONS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 200613, 2007
The Board of Directors of The Men’s Wearhouse, Inc. (the “Company”) recommends a vote “FOR” each of the nominees listed below. Please provide voting instructions by marking your choices below.
1. Election of Directors:
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o | | FOR all nominees listed, except as indicated to the contrary below | | o | | WITHHOLD AUTHORITY to vote for election of all nominees |
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Nominees: | George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Kathleen Mason, Deepak Chopra, M.D. and William B. Sechrest. |
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| (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.) |
Nominees: George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Deepak Chopra, M.D., William B. Sechrest and Larry R. Katzen.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.)
(Continued, and to be signed on reverse side)
The shares allocated to your account in the Company’s 401(k) Savings Plan will be voted as directed. IF NOT OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR EACH OF THE NOMINEES. As noted in the accompanying proxy statement, receipt of which is hereby acknowledged, if any of the listed nominees becomes unavailable for any reason and authority to vote for election of directors is not withheld, the shares will be voted for another nominee or other nominees to be selected by the Nominating and Corporate Governance Committee.
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| | Dated | | | | , 2006 |
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| | Signature of Shareholder |
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| | Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon. |
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| | PLEASE MARK, SIGN, DATE AND |
| | RETURN IMMEDIATELY |
Dated _ _ , 2007
Signature of Shareholder
Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY
THE MEN’S WEARHOUSE, INC.
PROXY VOTING INSTRUCTIONS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 200613, 2007
The Board of Directors of The Men’s Wearhouse, Inc. (the “Company”) recommends a vote “FOR” each of the nominees listed below. Please provide voting instructions by marking your choices below.
1. Election of Directors:
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1. | Election of Directors: |
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o | | FOR all nominees listed, except as indicated to the contrary below | | o | | WITHHOLD AUTHORITY to vote for election of all nominees |
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Nominees: | George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Kathleen Mason, Deepak Chopra, M.D. and William B. Sechrest. |
| |
| (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.) |
Nominees: George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Deepak Chopra, M.D., William B. Sechrest and Larry R. Katzen.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.)
(Continued, and to be signed on reverse side)
The shares allocated to your account in the Company’s Employee Stock Ownership Plan will be voted as directed. IF NOT OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR EACH OF THE NOMINEES LISTED HEREIN. As noted in the accompanying proxy statement, receipt of which is hereby acknowledged, if any of the listed nominees becomes unavailable for any reason and authority to vote for election of directors is not withheld, the shares will be voted for another nominee or other nominees to be selected by the Nominating and Corporate Governance Committee.
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| | Dated | | | | , 2006 |
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| | Signature of Shareholder |
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| | Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon. |
|
| | PLEASE MARK, SIGN, DATE AND |
| | RETURN IMMEDIATELY |
Dated _ _ , 2007
Signature of Shareholder
Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY
THE MEN’S WEARHOUSE, INC.
PROXY VOTING INSTRUCTIONS
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 200613, 2007
The Board of Directors of The Men’s Wearhouse, Inc. (the “Company”) recommends a vote “FOR” each of the nominees listed below. Please provide voting instructions by marking your choices below.
1. Election of Directors:
| | | | | | |
o | | FOR all nominees listed, except as indicated to the contrary below | | o | | WITHHOLD AUTHORITY to vote for election of all nominees |
| |
Nominees: | George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Kathleen Mason, Deepak Chopra, M.D. and William B. Sechrest. |
| |
| (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.) |
Nominees: George Zimmer, David H. Edwab, Rinaldo S. Brutoco, Michael L. Ray, Ph.D., Sheldon I. Stein, Deepak Chopra, M.D., William B. Sechrest and Larry R. Katzen.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT PERSON’S NAME IN THE SPACE PROVIDED BELOW.)
(Continued, and to be signed on reverse side)
The shares allocated to your account in the Company’s Employee Stock Discount Plan will be voted as directed. IF NOT OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR EACH OF THE NOMINEES LISTED HEREIN. As noted in the accompanying proxy statement, receipt of which is hereby acknowledged, if any of the listed nominees becomes unavailable for any reason and authority to vote for election of directors is not withheld, the shares will be voted for another nominee or other nominees to be selected by the Nominating and Corporate Governance Committee.
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| | Dated | | | | , 2006 |
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| | Signature of Shareholder |
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| | Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon. |
|
| | PLEASE MARK, SIGN, DATE AND |
| | RETURN IMMEDIATELY |
Dated _ _ , 2007
Signature of Shareholder
Your signature should correspond with your name as it appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as it appears hereon.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY