UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Trans World Music Corp.
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(NameEntertainment Corporation
(Name of Registrant as Specified In Itsin its Charter)
Paul A. Cardinal
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(Name
N/A
(Name of Person(s) Filing Proxy Statement)
Statement, if other than the Registrant)
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TRANS WORLD MUSIC CORP.
ENTERTAINMENT CORPORATION
38 Corporate Circle
Albany, New York 12203
(518) 452-1242
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the Annual Meeting of
Shareholders of Trans World Music Corp. (the "Company"), which will be
held at The Desmond, 660 Albany-Shaker Road, Albany, New York 12211, on
Friday, June 10, 1994, at 10:00 A.M., New York time, for the following
purposes:
1. To elect seven directors to serve until the next annual meeting
and until their successors are chosen and qualified;
2. To approve an amendment to the Restated Certificate of
Incorporation to change the corporate name to Trans World Entertainment
Corporation;
3. To approve the 1994 Stock Option Plan; and
4. To transact any such other business as may come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April
| Date and Time | Thursday, June 27, 2019, at 10:00 A.M., EDT | |||
| Place | Trans World Entertainment Corporation 38 Corporate Circle Albany, NY 12203 | |||
| Items of Business | (1) | To elect six Directors to serve one year terms and until their successors are chosen and qualified; | ||
| (2) | Advisory Vote to Approve Named Executive Officer Compensation; | |||
| (3) | Advisory Vote on Frequency of Holding Future Advisory Votes on Executive Compensation; | |||
| (4) | To grant authority to the Board of Directors, at any time or times for a period of up to six months from the date of the Annual Meeting, to adopt an amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect a reverse stock split at a ratio up to 1-for-20, such ratio to be determined by the Board, or conversely, to determine not to proceed with the reverse stock split (the “Reverse Stock Split”); and | |||
| (5) | To transact such other business as may properly come before the meeting or any adjournment or adjournments thereof. | |||
| Record Date | Shareholders of record as of May 10, 2019 are eligible to vote. | |||
| Proxy Voting | A proxy and return envelope, not requiring postage if mailed in the United States, are enclosed for your convenience. Please complete and return your proxy card as promptly as possible. All shareholders are cordially invited to attend the Annual Meeting. Whether or not you plan to attend the meeting, your vote is important. Prompt return of the proxy will assure a quorum is present at the annual meeting and save the Company expense. | |||
| By order of the Board of Directors, | ||
| Edwin J. Sapienza, Secretary |
May 29, 1994, as the record date for determining shareholders entitled to notice
of and to vote at the meeting.
Your vote is important. A proxy and return envelope are enclosed
for your convenience. Please complete and return your proxy card as
promptly as possible.
By order of the Board of Directors,
/s/ Matthew H. Mataraso
Matthew H. Mataraso,
Secretary
May 17, 1994
IMPORTANT: Whether or not you plan to attend the meeting, a return
envelope, requiring no postage if mailed in the United States, is enclosed
for your convenience. Prompt return of the proxy will assure a quorum and
save the Company unnecessary expense.
TRANS WORLD MUSIC CORP.
ENTERTAINMENT CORPORATION
38 Corporate Circle
Albany, New York 12203
----------------------
(518) 452-1242
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Trans World Music Corp.,Entertainment Corporation, a New York corporation (the "Company"“Company”), in connection with the solicitation of proxies by the Board of Directors for use at the Annual Meeting of Shareholders of the Company to be held on June 10, 199427, 2019 (the “Annual Meeting”), and any adjournment or adjournments thereof. A copy of the notice of meeting accompanies this Proxy Statement. It is anticipated that the mailing of this Proxy Statement and the form of proxy/voting instruction card will commence on May 17, 1994.
29, 2019.
As permitted by rules of the Securities and Exchange Commission (“SEC”), we are making our proxy material, which includes our notice of annual meeting, proxy statement and Annual Report on Form 10-K, available to our shareholders over the Internet. An electronic version of this proxy statement and the Company’s Annual Report on Form 10-K are available atwww.envisionreports.com/TWEC.
VOTING SECURITIES
The Company has only one class of voting securities, its Common Stock,common stock, par value $.01 per share (the "Common Stock"“Common Stock”). On April 29, 1994,May 10, 2019, the record date, 9,719,20836,258,839 shares of Common Stock were outstanding. Each shareholder of record at the close of business on April 29, 1994the record date will be entitled to one vote for each share of Common Stock owned on that date, as to each matter presented toat the meeting.
Annual Meeting.
QUORUM AND TABULATION OF VOTES
The By-Laws of the Company provide that a majority of the shares of our Common Stock issued and outstanding and entitled to vote at the Annual Meeting, present in person or by proxy, shall constitute a quorum at the annual meetingAnnual Meeting of shareholdersShareholders of the Company. Votes at the Annual Meeting will be tabulated by two inspectorsAn inspector from Chemical BankComputershare appointed by the Company.Company will determine the presence of a quorum and will certify and tabulate the votes. Shares of Common Stock represented by a properly signed and returned proxy are considered as present at the Annual Meeting for purposes of determining a quorum. BrokersShareholders of record who are present at the Annual Meeting, in person or by proxy, and who abstain from voting, including brokers holding customers’ shares of record who cause abstentions to be recorded at the Annual Meeting, will be included in the number of shareholders present at the Annual Meeting for purposes of determining whether a quorum is present. However, these shares will not be taken into account in determining the outcome of any of the proposals. A shareholder (including a broker) who does not give authority to a proxy to vote on a certain proposal will not be considered present and entitled to vote on that proposal. A broker non-vote occurs when a bank or broker holding shares of a beneficial shareholder does not vote on a particular proposal because it has not received instructions from the beneficial shareholder and the bank or broker does not have, or chooses not to exercise, discretionary voting power for that particular item.
If you are a beneficial owners mustowner and hold your shares in the name of a bank, broker or other holder of record and do not return the voting instruction card, the broker or other nominee may vote your shares on each matter at the Annual Meeting for which he or she has the requisite discretionary authority. If a shareholder does not give instructions to its broker as to how to vote the shares, the broker has authority under New York Stock Exchange rules to vote those shares accordingfor or against “routine” proposals without a
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voting registration card, brokers cannot vote on “non-routine” proposals. Under these rules, “Item 1—Election of Directors”, “Item 2—Advisory Vote on Executive Compensation” and “Item 3—Vote on the Frequency of Holding Future Advisory Votes on Executive Compensation” are considered “non-routine” proposals and “Item 4—Reverse Stock Split” is considered a “routine” proposal. We are subject to these rules even though shares of our common stock are traded on the specific instructions they receive from the owners.NASDAQ Global Select Market. If specific instructionsa broker votes shares that are not received, however, brokers may voteunvoted by its customers for or against a “routine” proposal, these shares in their discretion, depending uponare counted for the typepurpose of establishing a quorum and also will be counted for the purpose of determining the outcome of “routine” proposals. If a broker does not receive voting instructions as to a non-routine proposal, involved.
or chooses to leave shares unvoted on a routine proposal, a “broker non-vote” occurs and those shares will not be counted for determining the outcome of those proposals. Shares for which broker non-votes occur are considered not entitled to vote on the particular proposal, and effectively reduce the number of shares needed to approve that proposal.
Pursuant to the Company'sCompany’s By-Laws, directorselection of the Companynominees set forth under “Item 1—Election of Directors” will be electeddetermined by a favorablethe affirmative vote of a plurality of the shares of Common Stock
present and entitled to vote,votes cast at the Annual Meeting, in person or by proxy aton the Annual Meeting. Theproposal. With respect to the election of directors, votes may be cast “for” all nominees, “withheld” from all nominees, or “withheld” specifically from identified nominees. With respect to “Item 2—Advisory Vote on Executive Compensation”, the votes that shareholders cast “for” must exceed the votes that shareholders cast “against” to approve the advisory vote on compensation of our named executive officers. With respect to “Item 3—Vote on the Frequency of Holding Future Advisory Votes on Executive Compensation”, the frequency of the advisory vote on compensation of our named executive officers receiving the greatest number of votes - every three years, every two years or every one year - will be the frequency that shareholders approve. “Item 4—Reverse Stock Split” will be determined by the affirmative vote of a majority of the outstanding shares of Common Stock issued
and outstanding as of the record date is required for the approval of the
amendment to the Restated Certificate of Incorporation. All other matters
require for approval the favorable vote of a majority of shares votedvotes cast at the meetingAnnual Meeting, in person or by proxy.
Under New York law, abstentionsproxy on the proposal. Because your votes are advisory on Items 2 and broker non-votes, if applicable,3, they will havenot be binding on the effectBoard of a negativeDirectors or the Company. However, the Board of Directors and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding the named executive officers’ compensation or regarding the frequency of the advisory vote on the proposed amendmentnamed executive officers’ compensation.
Pursuant to the Restated Certificateadvance notice provision in our By-Laws, our Board of Incorporation, becauseDirectors has received a favorable vote of a majoritynotice from an individual shareholder of the outstanding shares entitledCompany of his intent to vote is required. Abstentionsnominate at the Annual Meeting four individuals for election to the Board of Directors, and broker
non-votes will have no effect on the outcomesuch shareholder has indicated his intent to furnish a proxy statement to shareholders of the Company.If any other matters toshall properly come before the Annual Meeting or any adjournments or postponements of the Annual Meeting and shall be voted on, at the annual meeting. Brokers haveproperly executed proxies will be deemed to confer discretionary authority on the individuals named as proxies therein to vote on the electionshares represented by such proxies as to any of directors. If a properly signed proxy form is returnedthose matters. The persons named as proxies intend to vote in accordance with the Company by a shareholderrecommendation of record and is not marked, it will be voted "FOR"
the proposals set forth herein as Items 1 through 3. The enclosedour Board of Directors or otherwise use their judgment.
A proxy may be revoked by a shareholder at any time before it is votedprior to the voting at the Annual Meeting by the submissionsubmitting a later dated proxy (including a proxy by telephone), by giving timely written notice of a writtensuch revocation to the Company, by the returnSecretary of a new proxy to the Company or by attending the Annual Meeting and voting in person. However, if you hold any shares of Common Stock in “street name” (that is through a bank, broker or other nominee) you may not vote these shares in person at the Annual Meeting.
The Company will pay the costs of soliciting, preparing, printing and mailing this Notice of Annual Meeting of Shareholders and Proxy Statement, the enclosed proxy card and the Company’s 2018 Annual Report to Shareholders. In accordance with the regulations of the SEC, we also reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses incurred in connection with their forwarding of proxies and proxy solicitation materials to beneficial owners of our Common Stock as of the record date. The solicitation of proxies will be conducted primarily by mail, but may also include
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the Internet, telephone, facsimile or oral communications by directors, officers or regular employees of the Company acting without special compensation. The Company will also request persons, firms and corporations holding shares in their names, or in the names of their nominees, which are beneficially owned by others, to send or cause to be sent proxy materials to, and obtain proxies from, such beneficial owners, and, on request, will reimburse such holders for their reasonable expenses in so doing.
PRINCIPAL SHAREHOLDERS
The only persons known byto the Board of Directors to be the beneficial owners of more than five percent of the outstanding shares of the Common Stock as of April 29, 1994,May 10, 2019, the record date, are indicated below:
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| The Robert J. Higgins TWMC Trust | 14,279,715 | (1) | 39.4 | % | ||||
| 38 Corporate Circle Albany, New York 12203 | ||||||||
| Neil S. Subin | 6,001,792 | (2) | 16.6 | % | ||||
| 3300 South Dixie Highway, Suite 1-365 West Palm Beach, 33405 | ||||||||
| Dimensional Fund Advisors LP | 2,022,043 | (3) | 5.8 | % | ||||
| Building One 6300 Bee Cave Road Austin, TX 78746 | ||||||||
| Josh Neblett | 1,933,513 | (4) | 5.3 | % | ||||
| 38 Corporate Circle Albany, NY 12033 | ||||||||
| (1) | Based on Form 5, filed February 21, 2017, by The Robert |
| (2) | Based on Form 13G/A, filed February 13, 2019, by |
| (3) | Based on Form 13G/A, filed February 8, 2019, by Dimensional Fund Advisors LP. |
| (4) | Based on Form 5, filed February 26, 2019, by Mr. Neblett. Includes |
Item 1.Election of Common Stock as
of the record date (approximately 55.6% of all outstanding shares), has advised
the Company that he presently intends to vote all of his shares for the
election of nominees for director named under "Item 1 - ELECTION OF DIRECTORS"
and the proposals set forth under Items 2 and 3. If Mr. Higgins votes his
shares for the director nominees, the amendment to the Restated Certificate of
Incorporation and the approval of the 1994 Stock Option Plan, no other votes
will be required to approve or adopt such actions.
Item 1. ELECTION OF DIRECTORS
Directors
The Board of Directors currently intends(also referred to present toherein as the meeting the“Board”) has nominated six candidates for election of sevenas directors each to hold office (subject to the Company's By-
Laws) untilCompany’s By-Laws) for a one-year term expiring at the next Annual Meeting2020 annual meeting of Shareholdersshareholders and until his or her
respective successor hastheir successors have been elected and qualified. Directors of the Company
The nominees will be elected by a plurality vote of the outstanding shares of Common Stock
present and entitled to votevotes cast at the meeting.
Annual Meeting in person or by proxy on the proposal.
If any nomineethe nominees listed below should become unavailable for any reason, which management does not anticipate, the proxy will be voted for any substitute nominee or nominees who may be selected by the ChairmanNominating and Corporate Governance Committee of the Board prior to or at the meetingAnnual Meeting or, if no substitute is selected prior to or at the meeting,Annual Meeting, for a motion to reduce the membership of the Board to the
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number of nominees available. The information concerning the nominees and their security holdings has been furnished by them to the Company.
The biographies of each of the Directors contain applicable information regarding the person’s service as a director, business and other professional experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that caused the Board to determine that the person should serve as a director for the Company. The Company believes that the backgrounds and qualifications of its Directors, considered as a group, should provide the Company and Board with diverse business and professional capabilities, along with the experience, knowledge and other abilities that will allow the Board to fulfill its responsibilities.
Nominees for Election as Directors
Robert J. Higgins, Chairman
Michael Feurer has been Chief Executive Officer of the Board, founded the Company in 1972since October 2014 and has participated in its operationsa Director since 1973.January 2016. Mr. Higgins hasFeurer most recently served as Chief Executive Officer and President of Vanity Stores from 2012 to 2014. Mr. Feurer’s prior experience includes nine years, from 2001 through 2010, at Coldwater Creek in various positions, including Senior Vice President Merchandising and Merchandise Operations and President, Strategic New Concepts. He also spent nine years at the Gap where he was responsible for Market Planning and Planning and Allocation for their Canadian, European, and Japanese markets. Mr. Feurer has extensive international and domestic retail experience gained through his positions at Coldwater Creek and Gap Inc., combined with the leadership skills developed as the Chief Executive Officer at Vanity Stores.
Martin Hanaka, has been the Operating Chairman at Rens PetsDepot since August 2016. Previously, Mr. Hanaka served as Operating Partner at Highland Consumer Fund from August 2014 to August 2016 and as the Interim Chief Executive Officer and a Director of Guitar Center, Inc. from January 2013 to April 2013. Previously, Mr. Hanaka served as the Chairman of Golfsmith International Holdings, Inc. from April 2007 to November 2012 and was the Chief Executive Officer from June 2008 to November 2012. From September 1998 to August 2003, Mr. Hanaka served as the Chief Executive Officer of The Sports Authority Inc. and served as Chairman from November 1999 through June 2004. From August 1994 to October 1997, he served as the President and Chief Operating Officer of Staples Inc. and served as a member of the Board of Directors. He has served on a dozen public and private boards of directors, including the Company’s from 1998 through 2009. In addition to significant experience providing oversight as a director in various capacities, Mr. Hanaka contributes substantial experience in the retail sector.
Robert E. Marks has been the President of Marks Ventures, LLC, a private equity investment firm, since 1994. Mr. Marks is currently a director of the Company for more than
the past five years. He is also the Company's principal shareholder. See
"PRINCIPAL SHAREHOLDERS". Mr. Higgins isTerra Income Fund 6 and Denny’s Corporation (“Denny’s”) and served as Chairman of the Board of the Albany
Medical Center (Albany, New York).
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Charlotte G. Fischer is the Vice ChairmanDirectors of Denny’s from 2004 to 2006; a member of the Board and Chief
Executive Officer-designate of Paul Harris Stores, Inc., a publicly-held
specialty retailerTrustees of women's apparel, effective April 29, 1994. Mrs. Fischer
has been, since November 1992, Chairman of C.G.F. Inc., which operates Hearts,
Int., a specialty retailer, and also served as a consultant to retail
organizations, inclding the Company. Mrs. Fischer was, until October 1991,
President and Chief Executive Officer of Claire's Boutiques, Inc., beginning
in September 1989, and was on the Board of Directors of Claire's Stores, Inc.,
the publicly-held parent company. Mrs. Fischer began with Claire's Boutiques
as Vice President and General Merchandise Manager in April 1986 and was elected
President and Chief Operating Officer in October 1986.
George W. Dougan has been Chief Executive OfficerGreenwich, Connecticut Public Library, and a member of the Board of DirectorsTrustees of Evergreen Bancorp Inc. since March 7, 1994. Before
acceptingThe International Rescue Committee. Mr. Marks has extensive finance, investment and executive compensation experience to share with the position at Evergreen Bancorp,Board.
Michael Nahlis the retired Executive Vice President and Chief Financial Officer of Albany International Corp. Mr. DouganNahl joined Albany International Corp. in 1981 as Group Vice President, Corporate, served as Senior Vice President and Chief Financial Officer from 1983 to 2005 and was theappointed as Executive Vice President in 2005. Mr. Nahl retired as Executive Vice President and Chief Financial Officer of Albany International Corp. in September 2009. Mr. Nahl has been Chairman of the Board of Lindsay Corporation since January 2015 and Chiefwas a member of JPMorgan Chase and Company’s Regional Advisory Board from 1996 through 2010. Mr. Nahl has broad and extensive knowledge on accounting, disclosure, risk management, auditing and finance matters, as well as operational and strategic experience to share with our Board.
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W. Michael Reickert, has been the managing member of Independent Family Office, LLC since 2005. Prior to founding Independent Family Office in 2005, Mr. Reickert was employed by The Ayco Company, LP. from 1986 to 2004 in various positions, including Executive Vice President. Mr. Reickert currently serves on the board of Albany Medical Center since 2011. Mr. Reickert provides the Board with financial and investment expertise. Mr. Reickert is a trustee of the Robert J. Higgins TWMC Trust, which is our largest shareholder, and is also trustee of various other trusts.
Michael B. Solow is a partner with Arnold & Porter Kaye Scholer LLP. Prior to its merger with Arnold and Porter LLP in 2016, Mr. Solow was the Co-Chairman and Managing Partner of Kaye Scholer LLP, an international law firm based in New York City, where he has practiced since January 2001 and was a member of the firm’s Executive Committee. Prior to joining Kaye Scholer LLP, Mr. Solow was a Partner and Practice Manager for the Financial Services Practice at Hopkins & Sutter, a Chicago, Illinois law firm. Mr. Solow has previously served on other corporate boards, including Camelot Music, Inc. Mr. Solow provides the Board with extensive legal and management experience, particularly his expertise in corporate finance and his experience in law firm management.
Item 2.Advisory Vote to Approve Named Executive Officer Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) allows our shareholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules.
The objectives of our compensation programs are to attract, motivate, retain and reward executives and employees who will make substantial contributions toward the Company’s meeting the financial, operational and strategic objectives that we believe will build substantial value for the Company’s shareholders.
We are requesting shareholder approval of the Bankcompensation of Boston-Florida from June 1992our named executive officers pursuant to March 1994, was the Senior Vice Presidentcompensation disclosure rules of the SEC, including the “Compensation Discussion and DirectorAnalysis,” the compensation tables and any related material disclosed in this Proxy Statement. This vote is not intended to address any one specific item of Retail Bankingcompensation, but instead the overall compensation of The Bankour named executive officers and the policies and practices described in this Proxy Statement.
This vote is advisory and therefore not binding on the Company, the Compensation Committee of Boston Massachusetts from February 1990 to June 1992, and a
Regional President of The Bank of Boston from August 1988 to February 1990.
Before that, he was the Country Manager of The Chase Manhattan Bank, N.A.,
Virgin Islands, from March 1985 to August 1988.
Arnold S. Greenhut is an Executive Consultant. Mr. Greenhut was a
director of Rowe International, Inc. from August 1989 through June 1991, and
from February 1990 was its Chairman and Chief Executive Officer. Rowe
International is a privately-held manufacturer and distributor of juke boxes
and vending equipment. For the past five years, Mr. Greenhut has been
President of Regas, Inc., a management consulting firm in which he is the
principal. Mr. Greenhut is a licensed Professional Engineer.
Isaac Kaufman has been an Executive Vice President of Merry-Go-Round
Enterprises, Inc. ("Merry-Go-Round"), a publicly-held specialty retailer, and
on its Board of Directors since April 3, 1991,or the Board. The Board and the Compensation Committee value the views of our shareholders and, to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns and will evaluate whether any actions are necessary to address those concerns.
Item 3.Advisory Vote on Frequency of Holding Future Advisory Votes on Executive Compensation
The Dodd-Frank Act also allows our shareholders to vote, on an advisory (non-binding) basis, on how frequently they would like to cast an advisory vote on the compensation of our named executive officers as disclosed in accordance with the compensation disclosure rules of the SEC. By voting on this proposal, shareholders may indicate whether they would prefer an advisory vote on named executive officer compensation every year, every other year or every third year.
After careful consideration of the alternatives, the Board believes that conducting an advisory vote on executive compensation on a three year basis is appropriate for the Company and its shareholders at this time. The Board will carefully consider the outcome of the vote when making future decisions regarding the frequency of advisory votes on executive compensation. However, because this vote is advisory and not binding, the Board may decide that it is in the best interests of the Company and its shareholders to
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hold an advisory vote more or less frequently than the alternative that has been selected by our shareholders.
Executive Officers
The Company’s current executive officers (other than Mr. Michael Feurer whose biographical information is included under “Item 1—Election of Directors” herein) are identified below.
Edwin Sapienzahas been Chief Financial Officer Secretary and Treasurer of the Company since 1983.October 2019. Prior to being named Chief Financial Officer, Mr. KaufmanSapienza was the Company’s Vice President – Strategy, Secretary and Treasurer since 2012, and has held various finance positions with Merry-Go-Round forcontinued in those roles, in addition to serving as Chief Financial Officer. Mr. Sapienza joined the past 18 years.
Merry-Go-Round filed for protection from its creditors under Chapter 11 of the
U.S. Bankruptcy Code on January 11, 1994, and continues to operate under such
protectionCompany in 1993 as of the date of this Proxy Statement.a staff accountant.
Bruce J. Markham Green was elected to the Board of Directors effective July
15, 1993. Mr. GreenEisenberg has been a limited partner of The Goldman Sachs Group,
L.P., an affiliate of Goldman, Sachs & Co., since November 1992, and he was a
General Partner and aExecutive Vice President with Goldman, Sachs & Co., the New York
investment firm, for more than five years before becoming a limited partner
in November 1992. Mr. Green serves on the Board of Directors of Park
Communications, Inc., a publicly-held communications company. Mr. Green stands
for election as a director for the first time.
Matthew H. Mataraso has served as Secretary and a director ofReal Estate since May 2001. He joined the Company in August of 1993 as Vice President of Real Estate and was named Senior Vice President of Real Estate in May 1995. Prior to joining the Company, Mr. Eisenberg was responsible for more than the past five years,leasing, finance and has practiced law in Albany, New
York during the same period.
Equity Ownershipconstruction of Directors and Executive Officers
new regional mall development at The Pyramid Companies.
EQUITY OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common stockStock as of April 29, 1994May 10, 2019, by each directorDirector and named executive officer of the Company and all directorsDirectors and executive officers as a group. All shares listed in the table are owned directly by the named individuals, unless otherwise indicated therein. Except as otherwise stated or as to shares owned by spouses, theThe Company believes that the beneficial owners have sole voting and investment power over their shares.
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| Name | Positions With the Company | Age | Year First Elected as Director/ Officer | Direct Ownership | Shares that may be acquired within 60 days of May 10, 2019 | Total Shares Beneficially Owned | Percent of Class | |||||||||||||||
| Michael B. Solow | Chairman of the Board | 60 | 1999 | 16,294 | 12,408 | 28,702 | * | |||||||||||||||
| Martin Hanaka | Director | 70 | 2013 | 13,774 | 15,000 | 28,774 | * | |||||||||||||||
| Robert E. Marks | Director | 67 | 2012 | 99,602 | 15,000 | 50,602 | * | |||||||||||||||
| Michael Nahl | Director | 76 | 2011 | 14,747 | 15,000 | 28,263 | * | |||||||||||||||
| W. Michael Reickert | Director | 55 | 2016 | 64,000 | (1) | 7,500 | 71,500 | * | ||||||||||||||
| Michael Feurer | Chief Executive Officer, Director | 49 | 2014 | 171,054 | 607,164 | 778,218 | 2.1 | % | ||||||||||||||
| Edwin J. Sapienza | Chief Financial Officer | 49 | 2018 | 1,250 | 57,750 | 59,000 | * | |||||||||||||||
| Bruce J. Eisenberg | Executive Vice President—Real Estate | 59 | 1995 | — | 348,000 | 348,000 | * | |||||||||||||||
| All Directors and Executive Officers as a group (8 persons) | 380,721 | 1,077,822 | 1,458,533 | 3.9 | % | |||||||||||||||||
| * | Less than 1% | |
| (1) | Excludes 14,279,715 shares |
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CORPORATE GOVERNANCE
The Board of Directors
Meetings and Its Committees
Attendance
The Board of Directors held fiveseven meetings during the 19932018 fiscal year,
and also acted on three occasions by unanimous written consent. During the last
fiscal year, noneyear. All of the directorsDirectors attended fewergreater than 75% of the aggregate of: (i) the total number of meetings of the Board of Directors, and (ii) the total number of meetings held by all committees of the Board on which such Director served.
It is the policy of the Board that all Directors should be present at Company’s Annual Meeting of Shareholders. All of the Directors then in office and standing for election attended the 2018 Annual Meeting of Shareholders.
Board Leadership Structure
The Board does not have a policy regarding whether the roles of the Chairman and Chief Executive Officer should be separate, but rather makes this determination on the basis of what is best for our Company at a given point in time. Our current Chairman, Mike Solow, was appointed as non- executive chairman as of April 21, 2017. As non-executive Chairman, Mr. Solow presides at all meetings of shareholders and the Board, as well as all executive sessions of the non-employee directors. We believe the Board leadership structure is appropriate for us at this time.
Code of Ethics
The Board of Directors has adopted a Code of Ethics applicable to the Company’s officers, employees, Directors and consultants. The Code of Ethics is available on the Company’s website, www.twec.com. A copy of the Code of Ethics is available in print to any shareholder who requests it in writing to the Company’s Corporate Secretary, Trans World Entertainment Corporation, 38 Corporate Circle, Albany, NY, 12203.
Guidelines for Evaluating Independence of Directors
The Board has determined that all of the Directors, other than Mr. Feurer and Mr. Reickert, are independent directors in accordance with the standards of the NASDAQ Stock Market and as described below. The Nominating and Corporate Governance Committee as well as the Board annually reviews relationships that Directors may have with the Company to make a determination of whether there are any material relationships that would preclude a Director from being independent.
The standards relied upon by the Board in affirmatively determining whether a director served.is “independent,” in compliance with the rules of the NASDAQ Stock Market, are comprised of those objective standards set forth in the NASDAQ rules. The Board is responsible for ensuring that independent directors do not have a material relationship with the Company or its affiliates or any executive officer of the Company or his or her affiliates.
Committees of the Board of Directors
The Audit Committee
The Board of Directors has an Audit Committee whose current members are: Robert Marks (Chairman), Martin Hanaka, and Michael Nahl. These Directors are, in the opinion of the Board of Directors, consisting“independent” (as defined under the standards of a majoritythe NASDAQ Stock Market) of management and free of any relationship that would interfere with their exercise of independent directors, whosejudgment as members are: Isaac Kaufman
(Chairman), Charlotte G. Fischer, J. Markham Green, Arnold S. Greenhut and
George W. Dougan. During 1993, Mrs. Fischer served as a consultant to the
Company, andof the Audit Committee. The Board of Directors has determined that Robert Marks is both independent
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and qualified as an Audit Committee waived its requirement that each member be
independent,financial expert as providedsuch term is defined under the Audit Committee's charter.rules and regulations promulgated by the Securities and Exchange Commission and applicable to this Proxy Statement. The Audit Committee held twofour meetings during the 19932018 fiscal year. The Audit Committee'sCommittee’s responsibilities consist of recommending the selection, appointment and authorization of independent accountants, reviewing the scope of the audit conducted by such auditors,accountants, as well as the audit itself, and reviewing the Company'sCompany’s audit activities and activities and matters concerning financial reporting, accounting and audit procedures, related party transactions and policies generally. The CompanyAudit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is attached as Appendix A to the 2018 Proxy Statement.
The Compensation Committee
The Board of Directors has a Compensation Committee, of the Board of Directors,
consisting solely of independent directors,Directors, whose current members are: Arnold S.
GreenhutMartin Hanaka (Chairman), George W. Dougan, J. Markham Green, Isaac KaufmanMichael Nahl and until January 1, 1994, Charlotte G. Fischer.Mike Solow. The Compensation Committee held six meetings during the 19932018 fiscal year, and acted by unanimous written
consent on one occasion.year. The Compensation Committee formulates and gives effect to policies concerning salary, compensation, stock options and other matters concerning employment with the Company. The processes and procedures used for the consideration and determination of executive compensation are described in the section of this Proxy Statement captioned “Compensation Discussion and Analysis.” The Board of Directors has adopted a written charter for the Compensation Committee, a copy of which is attached as Appendix B to this Proxy Statement.
The Nominating and Corporate Governance Committee
The Board of Directors has a Nominating and Corporate Governance Committee, consisting solely of independent Directors, whose current members are: Michael Nahl (Chairman), Martin Hanaka, Robert Marks and Michael Solow. The Nominating and Corporate Governance Committee held two meetings during the 2018 fiscal year. The Nominating Committee develops qualification criteria for Board members; interviews and screens individuals qualified to become Board members in order to make recommendations to the Board; and oversees the evaluation of executive management. The Committee seeks to select a Board that is strong in its collective knowledge of and diversity of skills and experience concerning retail operations, accounting and finance, management and leadership, vision and strategy, risk assessment and corporate governance. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee, a copy of which is attached as Appendix C to this Proxy Statement.
The Nominating and Corporate Governance Committee will consider nominations submitted by shareholders. To recommend a nominee, a shareholder should write to the Company’s Secretary. See “Submission of Shareholder Proposals” in this Proxy Statement. Any recommendation must include (i) the name and address of the candidate, (ii) a brief biographical description, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification requirements summarized above, and (iii) the candidate’s signed consent to be named in the Proxy Statement and to serve as a Director if elected. The Nominating and Corporate Governance Committee may seek additional biographical and background information from any candidate which, to be considered, must be received on a timely basis.
The process followed by the Nominating and Corporate Governance Committee to identify and evaluate candidates includes requests to Board members and others for recommendations, including a search firm or outside consultant, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and the Board. Assuming the appropriate biographical and background material is provided for candidates submitted by shareholders, the
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Nominating and Corporate Governance Committee will evaluate those candidates by following substantially the same process, and applying substantially the same criteria, as for candidates submitted by Board members. While the Company does not have a formal diversity policy for Board of Director membership, the Nominating and Corporate Governance Committee and the Board of Directors, as a whole, seeks nominees or candidates to serve as directors that represent a variety of backgrounds and experience that will enhance the quality of the Board of Director’s deliberations and decisions. The Nominating and Corporate Governance Committee considers, among other factors, diversity with respect to viewpoint, skills and experience in its evaluation of candidates for Board of Director membership. Such diversity considerations are discussed by the Nominating and Corporate Governance Committee in connection with the general qualifications of each potential nominee. Our Board of Directors has received a notice from an individual shareholder of the Company of his intent to nominate at the June 27, 2019 Annual Meeting four individuals for election to the Board of Directors, and such shareholder has indicated his intent to furnish a proxy statement to shareholders of the Company. This same shareholder submitted the same four individuals to the Nominating and Corporate Governance Committee for nomination at the Annual Meeting.
Board’s Role in Risk Oversight
The Board has an active role, as a whole and also at the committee level, in overseeing management of the Company’s risks. The Board regularly reviews information regarding the Company’s credit, liquidity, and operations (including cybersecurity and data protection), as well as the risks associated with each. The Compensation Committee is currently
comprisedresponsible for overseeing the management of independent directors only.risks relating to the Company’s executive compensation plans and arrangements. The CompanyAudit Committee oversees management of financial and operational (including cybersecurity and data protection) risks and potential conflicts of interest. The Nominating and Corporate Governance Committee manages risks associated with the independence of the Board. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks.
Communications with the Board of Directors
The Board has no standing nominating committee. Mr. Higgins,established a process for shareholders to communicate with members of the 4
Board, Chief Executive OfficerNominating and majority shareholder, was
actively involved inCorporate Governance Committee, with the recruitment of allassistance of the current directors.
Company’s Secretary, will be primarily responsible for monitoring communications from shareholders and providing copies or summaries of such communications to the other Directors, as he or she considers appropriate. Communications will be forwarded to all Directors if they relate to appropriate matters and may include suggestions or comments from the Chairman of the Nominating and Corporate Governance Committee. Any such communication must state the number of shares beneficially owned by the shareholder making the communication. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances and matters as to which the Company tends to receive repetitive or duplicative communications. Shareholders who wish to send communications to the Board may do so by writing to:
Chairman of the Nominating and Corporate Governance Committee
c/o the Company’s Secretary
Trans World Entertainment Corporation
38 Corporate Circle
Albany, New York 12203
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Compensation of Directors
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total Compensation ($) | ||||||||||||||||||||
| Martin Hanaka | 119,000 | — | — | — | 119,000 | ||||||||||||||||||||
| Robert Marks | 48,000 | 80,000 | — | — | 128,000 | ||||||||||||||||||||
| Michael Nahl | 121,144 | 1,856 | — | — | 123,000 | ||||||||||||||||||||
| W. Michael Reickert | 28,500 | 80,000 | — | — | 108,500 | ||||||||||||||||||||
| Michael B. Solow | 165,500 | — | — | — | 165,500 | ||||||||||||||||||||
| (1) | Fees earned reflect the amount of cash received for the annual retainer, Board and committee meeting fees and cash received in lieu of Deferred Shares. Fees earned for Mr. Solow reflect an annual retainer of $50,000 for his role as Chairman of the Board. |
| (2) | Amount represents the grant date fair value as computed in accordance with Accounting Standards Codification Topic 718, relating to the grant of deferred shares to a director in 2018. See Note 9 to the Consolidated Financial Statements in the Company’s 2018 Annual Report on Form 10-K for the assumptions made in determining the value. Effective May 1, 2018, 64,000 deferred shares were awarded to Mr. Marks and Mr. Reickert and 1,484 deferred shares were awarded to Mr. Nahl. |
Cash Compensation. The annual retainer and meeting fees were, prior to
July 1, 1993, $10,000 and $500, respectively. Effective July 1, 1993, each
director Each Director who is not a salaried employee of the Company receives $15,000a $12,500 retainer per annum plus a $2,000 attendance fee for each Board meeting attended and a $1,000 attendance fee for each committee meeting and
board meeting attended, except that the compensation for telephone conference meetings is $500.$1,000 and $500 for board and committee telephone conference meetings, respectively. A committee chairperson receives an additional $5,000 retainer per year and the Audit Committee chairperson now earns an additional $1,000
retainer per year. Before July 1, 1993, Messrs. Higgins and Mataraso, who are
employee directorsreceives a $15,000 annual retainer. The Chairman of the Board receives an annual retainer of $50,000. The Company were also entitledmay, in its discretion, determine to pay all or a portion of any annual retainer in shares of Common Stock in lieu of cash and to make discretionary grants of Common Stock to non-employee Directors from time to time. The Company has not elected to pay the annual retainer and meeting fees.
Matthew Matarasoin shares or make discretionary grants during the past three years.
Additional Compensation. Currently, each Director is the only director who is a participant in the
Company's 1986 Incentive and Non-Qualified Stock Option Plan, as amended and
restated (the "1986 Plan"). Mr. Mataraso received $58,000 in cash compensation
from the Company in fiscal 1993 for his services as Secretary of the Company
and as counsel. Messrs. Higgins and Mataraso are both eligible to participate in the Company's 1994 Stock Option Plan, being presentedAmended and Restated 2005 Long Term Incentive Plan. During the 2018 fiscal year, no options were granted to members of the shareholders
for approval. See "Item 3 - APPROVAL OF 1994 STOCK OPTION PLAN". During 1993,
Charlotte Fischer was engaged as a consultantBoard. As of May 10, 2019, Mr. Hanaka, Mr. Nahl, Mr. Reickert and Mr. Marks each held options to the Company, reporting
directly to the Chief Executive Officer, Mr. Higgins. The payments earned bypurchase 15,000 shares.
On or paid to Mrs. Fischer as a consultant aggregated $89,850 in fiscal 1993.
Director Stock Option Plan. Each outside Director isabout May 1 of each year, non-employee Directors have been entitled to participate in the Company's 1990 Stock Option Plan for Non-Employee Directors
(the "Director Stock Option Plan"). Currently, Mrs. Fischer and Messrs. Dougan,
Green, Greenhut and Kaufman participate in the Director Stock Option Plan. A
totalreceive grants of 250,000 shares of the Common Stock are reserved for issuance pursuant
to non-qualified stock options (the "Director Options") issued under such plan,
and Director Options covering 71,000vested shares of Common Stock have been granted.representing $80,000 in market value of stock on the grant date for service over the prior twelve months. They were entitled to elect to receive cash instead of shares of Common Stock options issuable underto the Director Stock Option Plan are grantedextent they met a share ownership requirement (shares having a value at an
exercise priceleast equal to 85%4x the annual retainer). During our last fiscal year, each non-employee Director elected to receive cash in lieu of shares, with the exception of Mr. Marks and Mr. Reickert who received the entire award in stock and Mr. Nahl who received shares have a value of $1,856 on the date of grant.
Effective for amounts otherwise payable on or about May 1, 2019 and thereafter, in lieu of annual grants of shares having a fair market value of the Common Stock$80,000 on the date of grant.
grant, each non-employee Director will be entitled to receive annual payments of $80,000 in cash, provided they are serving as a director on the applicable payment date. Except to the extent a timely deferral election was made by the non-employee Director, the amount payable in May of 2019 will be made in a single lump sum in May of 2019. Payments to non-employee Directors for periods beginning after May 1, 2019 will generally be made in $20,000 increments paid quarterly in arrears on or about August 1, November 1, February 1 and
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May 1, provided they are serving as a Director on the payment date and they did not make a timely deferral election. To the extent a non-employee Director made a timely election to defer payments until separation from service with the Company, such payments will be made upon separation from service, together with interest on the deferred amounts computed at a rate equal to 120% of the applicable long-term federal rate (within the meaning of Section 1274(d) of the Internal Revenue Code of 1986, as amended) as in effect from time to time.
An initial grant of 10,000 Director Options15,000 stock options is made to each new director.non-employee Director. The Board of Directors is also authorized, in its discretion, to grant additional stock options or Common Stock awards to non-employee Directors.
COMPENSATION OVERVIEW
Introduction
This section describes the material elements of compensation for the Company’s executive officers identified in the Summary Compensation Table below (who are referred to below as the “named executive officers” or “NEOs”), the process by which such elements are determined and established by the Compensation Committee for the respective individuals and the principles and considerations underlying such determinations.
The compensation decisions for the named executive officers relating to fiscal year 2018 took into account the Company’s consolidated financial results. Discussions relating to the Company’s consolidated financial results and operating performance for the year are contained in the Management’s Discussion and Analysis section of the Company’s 2018 Annual Report on Form 10-K.
Compensation Objectives and Approach
The objectives of our compensation programs are to attract, motivate, retain and reward executives and employees who will make substantial contributions toward the Company meeting the financial, operational and strategic objectives that we believe will build value for the Company’s shareholders. In an effort to achieve these objectives, the key elements of such programs consist of base salary, annual performance-based cash bonuses and share-based compensation.
The Compensation Committee’s compensation determinations regarding the named executive officers are reviewed by the full Board. Generally, these determinations are made annually and occur at the Compensation Committee’s regular meeting of each fiscal year occurring in April, at which cash bonuses and share-based awards, if any, relating to the named executive officers’ performance during the preceding fiscal year are granted, and any base salary adjustments for the current year are implemented. In preparation for these meetings, the Chief Executive Officer meets with the Compensation Committee Chairman to present his preliminary compensation proposals relating to the named executive officers to be addressed in the April meeting, based on the planned full-year financial results for the Company and its subsidiaries.
The Compensation Committee reviews and approves each element of compensation for the named executive officers. In establishing the levels and components of compensation for the named executive officers, the Compensation Committee, as a threshold matter, evaluates the overall performance of the Company for the year.
Key elements considered in the Compensation Committee’s performance evaluations include corporate performance, the officer’s contributions to such performance and the officer’s other accomplishments for the benefit of the Company during such period. In these evaluations, the
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Compensation Committee does not apply rigid formulas with respect to amount of compensation paid or the allocation between cash and non-cash compensation, and reviews long-term financial performance, as well as financial performance for the previous year. Such evaluations also take into account the nature, scope and level of the named executive officer’s responsibilities and the officer’s level of experience, past levels of compensation and changes in such levels, tenure with the Company and other opportunities potentially available to such officer. In addition, Director Options to purchase 1,500 sharesthe members of the Company's Common StockCompensation Committee interact with each of the named executive officers in connection with regular meetings of the Company’s Board of Directors, which provides the Committee with an additional basis for evaluating such officer and his performance. Based on all of these general evaluative factors and the additional factors described below, the Compensation Committee makes its assessments and determines the components and levels of compensation for each such officer.
Management meets with members of the Compensation Committee to assist the Committee in making compensation decisions regarding our named executive officers and also to discuss with the Compensation Committee its recommendations for other executives. We believe that since our management has extensive knowledge regarding our business, they are granted annuallyin a position to provide valuable input. Specifically, our Chief Executive Officer provides input relevant to setting performance goals and certifies to the Compensation Committee the level of achievement of our performance targets under our Executive Officer Bonus Plan and The Trans World Entertainment 2005 Long Term Incentive and Share Award Plan (As Amended and Restated on May 1 (or, if May 1 is notApril 5, 2017) (the “2005 Plan”).
Compensation Committee-Assessment of Risk
Each year, the Compensation Committee reviews the Company’s compensation programs to assess risk in the Company’s compensation programs. As part of its consideration, the Committee considers any potential risks that could arise from the Company’s compensation policies and practices and the extent to which any of those risks would be reasonably likely to have a NASDAQ National Market System trading day,material adverse effect on the next succeeding trading day)Company. The Committee considers all facets of the compensation programs, their underlying assumptions and the objectives those programs were designed to achieve. Some of the factors the Committee considers to minimize potential risks are the balance between cash and stock awards, the various time frames associated with earning of awards (seasonal, annual and multi-year vesting) and the different performance metrics associated with the incentive awards for each of the Company’s businesses and corporate associates. After that review, the Committee has determined that the Company’s compensation programs for fiscal 2018 did not incentivize its associates, including senior executives, to take unnecessary and excessive risks that could jeopardize the future of the Company and would be adverse to the best interests of its shareholders.
The Company has sought to structure its overall compensation program to contain an appropriate mix of long-term and short-term incentives that balance risk and potential reward in a manner that is appropriate to the circumstances and in the best interest of the Company’s shareholders. In particular, equity-based awards are structured to vest generally over a number of years, which encourages employees to focus on long-term results. Moreover, both annual incentive bonus and performance-based equity awards are subject to discretionary reduction if determined appropriate by the Compensation Committee. The Company believes that these factors reduce any incentive that employees may have to take inappropriate risks. Accordingly, the Company believes that its compensation policies and practices encourage and incentivize the employees to improve results in a disciplined, focused manner, with a view toward long-term success.
Cash Compensation
The Company pays base salaries at levels it believes will attract and retain key employees and ensure that our compensation program is competitive. Base salaries for the named executive officers are
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established by the Compensation Committee, and reviewed by such Committee for potential adjustment on an annual basis, based on the considerations described in the preceding section. The base salary amounts paid to the named executive officers during the 2018 fiscal year are shown in the “Summary Compensation Table”.
The annual incentive bonus plan, the results of which are shown in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column, provides for a cash bonus, dependent upon the level of achievement of the stated corporate goals, calculated as a percentage of the officer’s base salary, with higher ranked executive officers being compensated at a higher percentage of base salary. The Compensation Committee approves the target annual incentive award for the Chief Executive Officer and, for each officer below the Chief Executive Officer level, bases the target in part on the Chief Executive Officer’s recommendations. At the target level of bonus, the Chief Executive Officer receives 100% of his salary and the other NEOs receive 60% of their salary. For the 2018 fiscal year, the performance goal adopted for annual bonuses was based on limiting losses before interest, taxes, depreciation and amortization (“EBITDA”) to any eligible director. All Director Options vest ratably over
four years. During fiscal 1993, an initial grantnot more than $2.8 million or achieving sales of 10,000 Director Options was
made to Mr. Green at an exercise priceleast $485 million. The Company’s loss before interest, taxes, depreciation and amortization and sales did not achieve the target threshold, therefore incentives were not earned.
Share-Based Compensation
The Company believes that a component of $12.65 per share, comparedits officers’ compensation should consist of share-based incentive compensation, which appreciates or depreciates in value in relation to the market price of our Common Stock. Accordingly, the Compensation Committee has in recent years made, and intends in the future to continue to make, grants of share-based awards to the named executive officers and other key employees in such amounts as the Committee believes will accomplish the objectives of our compensation programs. As discussed below, the holder’s ability to realize any financial benefit from these awards typically requires the fulfillment of substantial vesting requirements that are performance contingency-related in some cases and time-related in others. Accordingly, the Company believes that these awards provide substantial benefit to the Company in creating appropriate performance incentives and in facilitating the long-term retention of employees who add significant value. During fiscal year 2018, the Company granted a total 380,000 time vested options to the named executive officers in recognition of their individual performance in fiscal 2017. During fiscal year 2018, the Company also granted a total of 90,000 time vested restricted stock units to the named executive officers.
Retirement and Other Benefits
The Company’s benefits program includes retirement plans and group insurance plans. The objective of the program is to provide named executive officers with reasonable and competitive levels of protection against the four contingencies (retirement, death, disability and ill health) which could interrupt their employment and/or income received as an active employee. Retirement plans, including the supplemental executive retirement plan, are designed to provide a competitive level of retirement income to named executive officers and to reward them for continued service with the Company. The retirement program consists of a supplemental executive retirement plan and the 401(k) plan. Mr. Eisenberg is the only active participant in the supplemental executive retirement plan.
The group insurance program consists of life, disability and health insurance benefit plans that cover all full-time management and administrative employees and the supplemental long-term disability plan, which covers the named executive officers and other officers.
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Other Compensation
The Company continues to maintain modest executive benefits and perquisites for officers; however, the Compensation Committee in its discretion may revise, amend or add to the officer’s executive benefits and perquisites if it deems it advisable. See the Summary Compensation Table for a summary of such benefits.
Deductibility of Compensation Expenses
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public corporation for annual compensation over $1 million for each of its “covered employees” (i.e., the chief executive officer, chief financial officer and certain other current or former executive officers). Prior to the amendment of Section 162(m) in December of 2017, the deductibility of some types of compensation for named executive officers (other than the chief financial officer) depended upon whether the named executive officer’s receipt of compensation was deferred until after the executive terminated employment with the Company or on whether such compensation qualified as “performance-based compensation” under Section 162(m). In general, the dateexceptions for deferred compensation and performance-based compensation were repealed effective for years beginning after December 31, 2017. The Committee has generally sought to satisfy the requirements necessary to allow the compensation of grantits named executive officers to be deductible under Section 162(m) of $14.88the Internal Revenue Code, but it has retained the discretion to approve compensation that is not deductible under Section 162(m). In making future compensation decisions, the Committee intends to take into account any available grandfather provisions under the amendments to Section 162(m). However, the Committee believes that its primary responsibility is to provide a compensation program that will attract, retain and reward the executive talent necessary to the success of the Company. Consequently, the Committee recognizes that the loss of a tax deduction could be necessary or advisable in some circumstances due to the restrictions of Section 162(m).
Summary Compensation Table
The following table sets forth information regarding compensation earned by our Chief Executive Officer and two other most highly compensated Executive Officers:
| Name | Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($)(6) | Total Compensation ($) | |||||||||||||||||||||||||
| Michael Feurer | Chief Executive Officer | 2018 | 700,000 | — | 49,000 | 73,500 | — | 15,361 | 837,861 | |||||||||||||||||||||||||
| 2017 | 700,000 | 350,000 | 92,500 | 111,000 | 260,890 | 14,328 | 1,528,718 | |||||||||||||||||||||||||||
| John N. Anderson | Chief Financial Officer until October 10, 2018 | 2018 | 249,038 | — | 14,700 | 58,680 | — | 142,837 | 465,255 | |||||||||||||||||||||||||
| 2017 | 350,000 | 105,000 | 27,750 | 88,800 | 78,267 | — | 649,817 | |||||||||||||||||||||||||||
| Bruce J. Eisenberg | Executive Vice | 2018 | 425,000 | — | — | 17,115 | — | — | 442,115 | |||||||||||||||||||||||||
| President—Real Estate | 2017 | 425,000 | — | — | 25,900 | 95,039 | — | 545,939 | ||||||||||||||||||||||||||
| Edwin J. Sapienza | Chief Financial Officer | 2018 | 224,615 | — | 4,900 | 12,275 | — | 2,403 | 244,193 | |||||||||||||||||||||||||
| Josh Neblett | Chief Executive Officer – etailz until March 11, 2019 | 2018 | 285,000 | — | — | — | — | 5,522 | 290,522 | |||||||||||||||||||||||||
| (1) | Salary represents amounts earned during fiscal year. |
| (2) | Bonus represents the earned bonus for each NEO for fiscal 2017. |
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| (3) | Amounts represent the grant date fair value, as computed in accordance with Accounting Standards Codification Topic 718, relating to restricted share units awarded to Mr. Feurer, Mr. Anderson during fiscal years 2018 and 2017 and Mr. Sapienza in fiscal year 2018. See Note 9 to the Consolidated Financial Statements in the Company’s 2018 Annual Report on Form 10-K for the assumptions made in determining the value. |
| (4) | Amount represents the grant date fair value as computed in accordance with Accounting Standards Codification Topic 718, relating to the grant of stock options to the named executive officer in fiscal years 2018 and 2017. See Note 9 to the Consolidated Financial Statements in the Company’s 2018 Annual Report on Form 10-K for the assumptions made in determining the value. |
| (5) | Represents annual incentive compensation for each NEO for fiscal 2017. |
| (6) | Includes the following payments made by the Company to the named executive officers: |
| Name | Year | Perquisites and Other Personnel Benefits ($) | Insurance Premiums ($) | Company Contributions to Retirement and 401(K) Plans ($) | Death Benefits to Survivor ($) | Total ($) | ||||||||||||||||||
| Michael Feurer | 2018 | 11,700 | — | 3,661 | — | 15,361 | ||||||||||||||||||
| 2017 | 11,925 | — | 2,403 | — | 14,328 | |||||||||||||||||||
| John N. Anderson | 2018 | — | — | 1,481 | 141,356 | 142,837 | ||||||||||||||||||
| 2017 | — | — | 2,263 | — | 2,263 | |||||||||||||||||||
| Bruce J. Eisenberg | 2018 | — | — | — | — | — | ||||||||||||||||||
| 2017 | — | — | — | — | — | |||||||||||||||||||
| Edwin J. Sapienza | 2018 | — | — | 2,403 | — | 2,403 | ||||||||||||||||||
| Josh Neblett | 2018 | — | — | — | — | — | ||||||||||||||||||
Employment Agreements
Mr. Feurer
Mr. Feurer’s employment agreement with the Company, as amended and restated on February 26, 2019, provides that Mr. Feurer serves as the Company’s Chief Executive Officer with a base salary equal to $700,000 per share.annum (“Base Salary”). His employment is on an at will basis. Mr. Feurer will be eligible for an annual bonus under the Company’s bonus plan, with a target determined by the Compensation Committee, after consultation with the Executive, in an amount that provides the Executive with an opportunity to earn total compensation at or above a median total compensation benchmark for the Executive’s position as deemed appropriate by the Compensation Committee.
Mr. Feurer is eligible to participate in the Company’s group health insurance, group life insurance, and 401(k) plans in accordance with their terms. Please see the “Severance Benefits” section below for information on Mr. Feurer’s severance benefits.
Mr. Feurer also agreed to confidentiality and non-compete covenants.
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Outstanding Equity Awards at Fiscal Year-End
The table below summarizes the named executive officers’ equity awards that were unvested or unexercised, as applicable, as of February 2, 2019.
| Option Awards | ||||||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | ||||||||||||||||||
| Michael Feurer | 10/13/2014 | 300,000 | — | 3.50 | 10/13/2024 | — | ||||||||||||||||||
| 4/14/2016 | 157,164 | — | 3.85 | 4/14/2026 | — | |||||||||||||||||||
| 5/6/2016 | (2) | 75,000 | 25,000 | 3.81 | 5/6/2026 | — | ||||||||||||||||||
| 5/1/2017 | (2) | 75,000 | 75,000 | 1.85 | 5/1/2027 | 50,000 | (3) | |||||||||||||||||
| 6/27/2018 | (2) | — | 150,000 | 0.98 | 6/27/2028 | 50,000 | (3) | |||||||||||||||||
| John N. Anderson | 3/1/2011 | 20,000 | — | 1.73 | 3/1/2021 | — | ||||||||||||||||||
| 5/7/2012 | 20,000 | — | 2.53 | 10/10/2021 | — | |||||||||||||||||||
| 6/21/2013 | 20,000 | — | 4.87 | 10/10/2021 | — | |||||||||||||||||||
| 6/3/2014 | 35,000 | — | 3.36 | 10/10/2021 | — | |||||||||||||||||||
| 4/1/2015 | 100,000 | — | 3.72 | 10/10/2021 | — | |||||||||||||||||||
| 5/6/2016 | 135,000 | — | 3.81 | 10/10/2021 | — | |||||||||||||||||||
| 5/1/2017 | 120,000 | — | 1.85 | 10/10/2021 | — | |||||||||||||||||||
| 6/27/2018 | 120,000 | — | 0.98 | 10/10/2021 | — | |||||||||||||||||||
| Bruce J. Eisenberg | 5/6/2010 | 200,000 | — | 2.11 | 5/6/2020 | — | ||||||||||||||||||
| 6/21/2013 | 50,000 | — | 4.87 | 6/21/2023 | — | |||||||||||||||||||
| 6/3/2014 | (1) | 28,000 | 7,000 | 3.36 | 6/21/2023 | — | ||||||||||||||||||
| 5/15/2015 | (2) | 26,250 | 8,750 | 3.88 | 5/15/2025 | — | ||||||||||||||||||
| 5/6/2016 | (2) | 26,250 | 8,750 | 3.81 | 5/6/2026 | — | ||||||||||||||||||
| 5/1/2017 | (2) | 17,500 | 17,500 | 1.85 | 5/1/2027 | — | ||||||||||||||||||
| 6/27/2018 | (2) | — | 35,000 | 0.98 | 6/27/2028 | — | ||||||||||||||||||
| Edwin J. Sapienza | 3/1/2011 | 8,000 | — | 1.73 | 3/1/2021 | — | ||||||||||||||||||
| 5/7/2012 | 10,000 | — | 2.53 | 5/7/2022 | — | |||||||||||||||||||
| 6/21/2013 | 10,000 | — | 4.87 | 6/21/2023 | — | |||||||||||||||||||
| 6/3/2014 | (1) | 6,000 | 1,500 | 3.36 | 6/21/2023 | — | ||||||||||||||||||
| 4/1/2015 | (2) | 5,625 | 1,875 | 3.72 | 4/1/2026 | — | ||||||||||||||||||
| 5/6/2016 | (2) | 5,625 | 1,875 | 3.81 | 5/6/2026 | — | ||||||||||||||||||
| 5/1/2017 | (2) | 12,500 | 12,500 | 1.85 | 5/1/2027 | 3,750 | (3) | |||||||||||||||||
| 6/27/2018 | (2) | — | 25,000 | 0.98 | 6/27/2028 | 5,000 | (3) | |||||||||||||||||
| 10/23/2018 | (2) | — | 50,000 | 1.04 | 10/23/2028 | 20,000 | (3) | |||||||||||||||||
| Josh Neblett | — | — | — | — | — | — | ||||||||||||||||||
| (1) | Mr. Sapienza’s and Mr. Eisenberg’s options vest based on service with 60% vesting after the third year of service and 20% vesting after the each of fourth and fifth year of service. |
| (2) | Mr. Feurer’s, Mr. Eisenberg’s and Mr. Sapienza’s, options vest based on service ratably over four years. |
| (3) | Mr. Feurer’s and Mr. Sapienza’s Restricted Stock Units vest ratably over 4 years. |
16 |
Pension Benefits
The Company maintains a non-qualified Supplemental Executive Retirement Plan (the “SERP”) for certain current and former executive officers of the Company. Mr. Eisenberg is the only one of our NEOs who participates in the SERP. The SERP, which is a nonqualified plan, provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements. The annual benefit amount is equal to 50% of the average of the participant’s base compensation for the five years prior to retirement plus the average of the three largest bonus payments for the last five years prior to retirement, to the extent vested. Participants vest 35% after 10 years, 75% after 20 years and 100% upon retirement at age 65 after 20 years of service. The bonus portion of the benefit vests only if the participant is employed until age 65. In addition, annual
grants to other outside Directorsthe benefits become vested in full upon a change in control of 1,500 Director Options were made at an
exercise price of $13.82 per share, comparedthe Company prior to the market value onparticipant’s termination of employment or a termination of employment due to the date of grant of $16.25. Accordingly, compensation expenseparticipant’s death or disability. Additionally, all benefits under the SERP will be forfeited in the aggregateevent of $36,880any of the following: competitive conduct or solicitation for employment or employment of company employees, in any case during the 5 years following termination or at any time while in receipt of benefits (these restrictions are waived in the event of a change in control); disclosure or use of confidential information; or termination for cause. Payments are made in equal installments over 20 years. The Company has established a rabbi trust whose purpose is to be a source of funds to pay benefits to participants in the SERP.
Potential Payments Upon Termination or Change of Control
Employment Agreement with Mr. Feurer
The employment agreement entered into between the Company and Mr. Feurer provides severance benefits upon a termination of employment as described below.
Mr. Feurer’s employment agreement provides that, in the event of his termination by reason of death or disability (as defined in the agreement), the he will be amortized overentitled to receive earned but unpaid base salary and payment for accrued but unused vacation. Mr. Feurer also will be entitled to any benefits mandated under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or required under the terms of any death, insurance, or retirement plan, program, or agreement provided by the Company and to which Mr. Feurer is a 48-month periodparty or in which he is a participant.
In the event of his termination by the Company for any reason other than cause (as defined in the 1993
grants.employment agreement), death or disability or by the Mr. Feurer for good reason (as defined in the employment agreement), Mr. Feurer will be entitled to receive: (i) earned but unpaid base salary and accrued but unused vacation; and (ii) provided he executes a release of claims, continuation of his base salary for 18 months and continuation of medical benefits for up to 18 months. To the extent the base salary continuation payments do not constitute deferred compensation for purposes of Section 409A of the Code, such payments shall be made in a lump sum on the first day following the date on which the release of claims becomes final and binding.
Agreements with Mr. Sapienza and Mr. Eisenberg
On February 26, 2019 we entered into Severance, Retention and Restrictive Covenant Agreements with Mr. Sapienza and Mr. Eisenberg. The Director Stock Option PlanSeverance, Retention and Restrictive Covenant Agreements provide for retention bonuses payable to each of them in the amount of $200,000. In the case of Mr. Sapienza, one third of his retention bonus will be payable to him on each of June 1, 2019, October 1, 2019, and March 1, 2020. In the case of Mr. Eisenberg, twenty-five percent of his retention bonus will be
17 |
payable to him on each of June 1, 2019 and October 1, 2019, and the remaining fifty percent will be payable to him on March 1, 2020. In order to receive the payments, except as described below, they are required to remain employed with the Company through the applicable payment dates. However, upon consummation of a change of control of the Company (as defined in the agreements) at a time when the executive remains employed by the Company, any unpaid portion of the retention bonus will be paid to him in full.
The Severance, Retention and Restrictive Covenant Agreements also provide that if their employment is administeredterminated by a committee of three
non-participating directorsthe Company without cause or officers whoby them for good reason (as those terms are authorized to interpretdefined in the Director Stock Option Plan but have no discretion with respectagreements), Mr. Sapienza or Mr. Eisenberg, as applicable, will be entitled to the selectionfollowing: (i) the continuation of directorshis base salary for a period of six (6) months from the date of termination, (ii) any unpaid portion of his retention bonus, (iii) any unpaid annual bonus that was earned (as determined by the Board of Directors of the Company in accordance with the applicable annual bonus plan) for the year preceding the year in which termination occurs, and (iv) payment for health insurance coverage for up to six months following termination at the same rate as the Company pays for health insurance coverage for its active employees (with the executive required to pay for any employee-paid portion of such coverage). Payment of these amounts is contingent on the executive signing (and not revoking within any statutory revocation period) a release of claims reasonably acceptable to the Company.
Mr. Sapienza’s agreement provides that his annual bonus for our fiscal year ending in 2020 will not be less than $100,000. It also provides that he will receive the minimum bonus if his employment is terminated by the Company without cause or by him for good reason prior to payment of the bonus.
The agreements also include restrictive covenants under which Mr. Sapienza and Mr. Eisenberg agree to confidentiality provisions, non-competition and non-solicitation covenants that apply for six months after any termination of employment, and certain non-disparagement and cooperation covenants.
Equity Award Provisions
Pursuant to the terms of our 2005 Long Term Incentive and Share Award Plan and applicable award agreements, unvested equity awards vest upon death, disability or a change of control of the Company.
Supplemental Executive Retirement Plan
Under the provisions of our SERP, Mr. Eisenberg would become fully vested in his pension benefit in the event of death, disability or a change of control of the Company.
Other Executives
Mr. Neblett’s employment was terminated by etailz, effective on March 11, 2019. Under our severance agreement with Mr. Neblett, he received a lump sum payment in the amount of $142,500 and medical benefits for up to six months following termination. Mr. Neblett reaffirmed his covenants relating to non-competition, non-solicitation, confidentiality and intellectual property. He also executed a release and agreed to non-disparagement and cooperation covenants.
Following Mr. Anderson’s death on October 10, 2019, his stock options and restricted stock units vested in full as provided in the applicable award agreements and we paid death benefits to his widow in the amount of $141,356.
18 |
CEO Pay Ratio
The Dodd–Frank Wall Street Reform and Consumer Protection Act requires companies to disclose the pay ratio of their Chief Executive Officer to their median employee. We identified our median employee taking into account all full-time, part-time, seasonal and temporary employees.
To identify the median employee from the Company’s employee population, we compared the amount of salary and wages paid to employees as reflected in payroll records for the 2017 calendar year as reported to the Internal Revenue Service on Form W-2 who receive Director Options,were employed on February 3, 2018, excluding Mr. Feurer. We annualized compensation for employees hired in 2017 and employees who took an unpaid leave of absence during the year, but we did not annualize compensation for seasonal or temporary employees. No cost-of-living adjustments were made in identifying the median employee.
The 2018 annual total compensation of our Chief Executive Officer was $837,861 million, and the 2018 annual total compensation for the median employee was $17,346. The resulting ratio of our Chief Executive Officer’s pay to the pay of our median employee for fiscal year 2018 is 48.3 to 1. We believe it is noteworthy that given the nature of our business, a significant number of shares subject to the
Director Stock Option Planour employees are part-time, seasonal or to each grant thereunder, or the purchase price
for shares subject to Director Option. The committee has no authority to
materially increase the benefits under the Director Stock Option Plan. The
Director Stock Option Committee held one meeting in 1993 and acted on one
occasion by unanimous written consent.
5
Certain Transactions
temporary employees.
RELATED PARTY TRANSACTIONS
The Company leases its 159,000181,300 square foot distribution center/office facility in Albany, New York from an entity controlled by the estate of Robert J. Higgins, its former Chairman Chief
Executive Officer and principal shareholder, under two capitalized leases that
expire in the year 2015.largest shareholder. The original distribution center/office facility was constructedoccupied in 1985. A 77,135 square foot distribution center expansion (the
"Expansion")The Company paid rent under the leases of $1.2 million in fiscal years 2017 and 2016 and $2.1 million in fiscal year 2015.
Sara Neblett, the wife of Josh Neblett, the former Chief Executive Officer of etailz, was completed in October 1989 on real property adjoiningemployed with the existing facility (the real property comprising the entire distribution center
and office facility, including the Expansion, is collectively referred toCompany as the "Premises").
Under the original lease, dated asVice President- Partner Care of April 1, 1985, as amended (the
"Original Lease"),etailz. Ms. Neblett received $169,125 in compensation in fiscal year 2018.
The Board has assigned responsibility for reviewing related party transactions to its Audit Committee. The Audit Committee has adopted a written policy pursuant to which all transactions between the Company paid Mr. Higgins in fiscal 1993 an annual
rentalor its subsidiaries and any Director or Officer of $703,443 (of which $499,443 is allocableany affiliate of a Director or Officer must be submitted to the Premises and $204,000
is allocableAudit Committee for consideration prior to personal property). The portionthe consummation of the Original Lease allocabletransaction. The transaction will then be evaluated by the Audit Committee to personal property expires in 1995, when title passes todetermine if the Company. In
1989, the Company entered into a new lease, dated as of November 1, 1989 (the
"Expansion Lease"), for the Expansion, at an annual rental rate of $606,948.
The aggregate annual rental paid to Mr. Higgins under the Original Lease and
the Expansion Lease was $1,310,391 in fiscal 1993. On January 1, 1994, the
aggregate rental under the Original Lease and the Expansion Lease increased to
$1,373,787 in accordance with the biennial increasetransaction is in the Consumer Price
Index, pursuant toCompany’s best interests and whether, in the provisions of each lease. Neither lease contains any
real property purchase option at the expiration of its term. UnderCommittee’s judgment, the terms of both leases,such transaction are at least as beneficial to us as the Company pays property taxes, insuranceterms we could obtain in a similar transaction with an independent third party. In order to meet these standards, the Committee may conduct a competitive bidding process, secure independent consulting advice, engage in its own fact-finding, or pursue such other investigation and other operating
costs with respectfact-finding initiatives as may be necessary and appropriate in the Committee’s judgment. The Audit Committee reports to the Premises. Mr. Higgins' obligation for principal and
interest on his underlying indebtedness relating to the Premises approximates
$70,000 per month.
The Company leases two of its retail stores from Mr. Higgins under
long-term leases, each at an annual rental of $35,000 per year, plus property
taxes, maintenance and a contingent rental if a specified sales level is
achieved. In fiscal 1993 the Company paid Mr. Higgins $30,000 for a 1-year
lease, expiring on October 31, 1993, for certain parking facilities contiguous
to the Premises. The lease was renewed through October 31, 1994, after approval
by the Audit Committee. Although no commitments have been made by the Company,
the contiguous parcel containing such parking facilities is being evaluated by
the Company for a new office building. If approved by the Company's Audit
Committee, such an office building would be constructed by Mr. Higgins and
leased to the Company on terms and conditions believed to be competitive with
those offered in an arms' length transaction.
The Company regularly utilizes privately-chartered aircraftBoard, for its executives, primarily those owned or partially owned by Mr. Higgins. During
fiscal 1993, the Company chartered an airplane from Quail Aero Services of
Syracuse, Inc., in which Mr. Higgins is a one-third shareholder. Payments made
by the Company for the period were $63,000. The Company also chartered an
aircraft from Crystal Jet Aviation, Inc., a corporation wholly owned by Mr.
Higgins. During fiscal 1993 payments to Crystal Jet aggregated $253,189. The
Company believes that the charter rate and terms are as favorable to the
Company as those generally available to it from other commercial charterers.review, on all related party transactions considered. The transactions that were entered into with an "interested director"“interested Director” were approved by a majority of disinterested directorsDirectors of the Board of Directors, either by the Audit Committee or at a meeting of the Board of Directors. The Board of Directors believes that the leases and other provisions
are at rates and on terms that are at least as favorable as those that would
have been available to the Company from unaffiliated third parties under the
circumstances.
6
Employment Agreements
As founder and Chief Executive Officer of the Company, Robert J. Higgins
has been instrumental in the operations of the Company. The Company entered
into an employment agreement (the "Employment Agreement") with Mr. Higgins,
effective February 1, 1989, pursuant to which Mr. Higgins has agreed to serve
as President and Chief Executive Officer of the Company until January 31, 1994
for a minimum annual salary of $550,000. The salary was increased each fiscal
year by the Consumer Price Index-W (New York City) pursuant to the terms of
the Employment Agreement. The Company has agreed to pay or reimburse Mr.
Higgins for the life insurance premiums (aggregating approximately $100,000
per year) on insurance policies for the benefit of persons designated by Mr.
Higgins. In addition, Mr. Higgins was eligible to earn incentive compensation
for each of the Company's fiscal years during the term of the Employment
Agreement. The amount of such compensation equaled 2.5% of the Company's
Pre-Tax Profits (as defined in the Employment Agreement) in each fiscal year,
provided that the Pre-Tax Profits exceed $24,000,000 during the fiscal year
ended January 29, 1994. For the fiscal year ended January 29, 1994, Mr. Higgins
earned no incentive compensation under the Employment Agreement.
In the event of a change in control of the Company, Mr. Higgins may
elect to serve as a consultant to the Company at his then current compensation
level for the remainder of the term of the Employment Agreement or elect to
receive two and one-half times his annual compensation in the most recently
completed fiscal year. The Employment Agreement provides for no further
compensation to Mr. Higgins if he is terminated for cause, as defined therein.
Subsequent to year end the Compensation Committee approved in principle
a three year employment agreement between the Company and Mr. Higgins, to
succeed the expired agreement. See "EXECUTIVE COMPENSATION - Compensation
Committee Report on Executive Compensation".
Edward W. Marshall has a severance agreement in effect that provides,
under certain conditions, payment of one and one-half years of his annual
compensation upon his termination following severance without cause (as
defined) after a change in control of the Company.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Composition and Purpose of the Compensation Committee. The Company's
Compensation Committee (the "Committee") is currently comprised of four non-
employee directors of the Company. It is the Company's policy to constitute
the Committee with directors that qualify as outside directors under the 1993
amendments to the federal income tax law.
The Committee's purpose is to hire, develop and retain the highest
quality of managers possible. It is principally responsible for establishing
and administering the executive compensation program of the Company. These
duties include approving salary increases for the Company's key executives and
administering both the annual incentive plan and the stock option plans.
Compensation Philosophy and Overall Objectives. The components of the
executive compensation program are salary, annual incentive awards and stock
options. The program is designed to: (1) attract and retain competent people
with competitive salaries; (2) provide incentives for increased profitability;
and (3) align the long-term interests of management with the interests of
shareholders by encouraging executive ownership of common stock of the Company.
7
Salary and Annual Incentive Compensation
Salaries. The Committee believes that it is necessary to pay salaries
that are competitive within the industry and geographic region in order to
attract the types of executives needed to manage the business. In 1993, the
Compensation Committee engaged KPMG Peat Marwick, a nationally known
compensation consulting firm, to assist the Committee in evaluating and
modifying its executive compensation program and in developing a peer group
of specialty retailers that are comparable to the Company in terms of annual
revenues. A majority of the 14 companies in such peer group are traded on the
NASDAQ National Market System, and are incorporated into the peer index used
in the performance graph. See "FIVE YEAR PERFORMANCE GRAPH".
Annual salary recommendations for the Company's executive officers
(other than the Chief Executive) are made to the Committee by the Chief
Executive. The Committee reviews and then approves, with any modifications it
deems appropriate, such recommendations. Factors such as increased management
responsibility and achievement of operational objectives are considered, but
not formally weighted, in determining an increase. The Committee also used the
compensation study prepared by KPMG Peat Marwick and the Committee members'
experience in the retail industry, in evaluating the executive salary levels.
The compensation study indicated that 1993 salaries for the named executive
officers, other than the Chief Executive, were at or above the median range of
base salaries paid to comparable executives of the peer group. The Committee
believes that it must keep the base pay component at or above the median range
to remain competitive in attracting competent management.
The Committee has held salary increases in the past three fiscal years
below 4% annually. The Company's earnings and stock performance was the most
significant factor leading to the restraint on salary increases for the named
executive officers. The Committee reviews the salaries of newly hired or
promoted executives based upon the executive's prior compensation, the
Committee's understanding of competitive salary rates in the retail industry,
and the relative responsibilities and internal relationships of the positions
within the Company.
Annual Performance Incentives. Key executives, including the named
executive officers other than the Chief Executive, were eligible for annual
incentive (bonus) awards based on the performance of the Company against
predetermined targets. The annual incentive program provides for payment
shortly after the fiscal year being measured.
For 1993, the Committee established as the principal goal a threshold
level of earnings per share before bonuses would be paid to the named executive
officers. Earnings per share was used as the primary corporate performance
measure for bonuses because it is a key measure of success for the Company and
its shareholders. The earnings per share target represented a meaningful
increase over 1992's earnings per share, and was considered by the Committee
to be acceptable considering the costs and efforts in implementing a new
merchandise replenishment system while attempting to improve the Company's
short-term earnings performance. Each named executive officer was eligible to
earn from 10% to a maximum of 30% of their salary if the target of earnings per
share was achieved by the Company. If the targets were not achieved then the
incentives would be reduced to lower levels. Below a certain earnings per
share level no incentives were to be paid.
Because the threshold was not achieved in fiscal 1993, and the Company's
earnings fell significantly below the lowest target, no annual incentive
payments were awarded to the named executive officers.
8
Long Term Incentives
The Committee uses a broad-based stock option plan, with over 150
participants, as the principal long term incentive for executives. The stock
option plan is designed to encourage executive officers to become shareholders
and to achieve meaningful increases in shareholder value. The Committee
normally grants stock options to executive officers annually.
The size of option grants in 1993 were determined using a matrix that
considers the executive's position, salary level, and the performance of the
executive as measured by the individual's performance rating. Factors
considered in the performance rating include, but are not limited to, the
achievement of operating objectives, expense control, and Company profits. In
determining an individual executive's performance rating, a formal weighing
system was not used. In March 1993, the Committee granted a total of 30,000
stock options to the named executive officers out of a total grant of 136,500
stock options. The exercise price of all options was set at 100% of fair market
value on the date the option was granted, with a term of ten years, and vesting
over a four year period. Since the value of the stock options depends on the
future market price of the Company's stock, the option grants were intended to
promote identification with shareholder interests.
In October 1993, the Committee granted the named executive officers,
other than the Chief Executive, a special stock option award, ranging in size
from 10,000 to 30,000, out of a total grant of 238,000 stock options. This
special grant to the named executives and other participants vests in a single
installment four years from the date of grant. It was designed to provide a
significant incentive to improve the earnings performance and equity value of
the Company, as well as aid in the retention of senior executives and
strengthen their long-term commitment to the Company. The total number of
stock options granted in 1993 to plan participants, including the special
grant, was 354,500, which would comprise approximately 3.5% of the outstanding
shares of Common Stock if all such options became vested and were exercised. In
setting this amount, the Committee primarily considered that vesting periods
are relatively long, and that the grants would provide additional incentives to
increase shareholder value and improve the retention of senior executives.
The Committee proposes to continue its use of a stock option program to
align the interests of management with those of shareholders. Therefore, the
Committee recommends the adoption of the 1994 Stock Option Plan, which the
Board of Directors has submitted for shareholder approval at this meeting.
See "Item 3 - APPROVAL OF 1994 STOCK OPTION PLAN".
The Committee has never made any grants of restricted stock under the
Company's 1990 Restricted Stock Plan.
Chief Executive Officer's Compensation
The Chief Executive was compensated in 1993 according to a five year
employment agreement approved by the Board of Directors in January 1989 that
continued in effect through January 31, 1994. The agreement provided for
annual salary adjustments according to the Consumer Price Index. Accordingly,
in February 1993, the Chief Executive received an increase in annual salary
from $530,882 to $550,000.
The Chief Executive's employment agreement also provided for an
incentive payment for each fiscal year of the term of the employment agreement.
The incentive was based upon the Company's pre-tax profit before the accrual
for the cost of the incentive. The amount of incentive is equal to 2.5% of the
Company's pre-tax profit in any fiscal year, provided that the pre-tax profit
exceeds a specified threshold level. The threshold increased each year by
$2,000,000, to $24,000,000 in 1993. The $24,000,000 threshold was not achieved
in 1993 and, accordingly, the Chief Executive earned no incentive payment for
9
the fiscal year ended January 29, 1994.
The Chief Executive Officer waived his eligibility to participate in the
1986 Incentive and Non-Qualified Stock Option Plan, as amended and restated,
from its inception through the expiration of his contract, January 31, 1994.
In January 1994, the Committee extended the Chief Executive's employment
agreement on a month-to-month basis, except for the bonus provisions, while a
new agreement was being negotiated. Beginning in 1994, the Chief Executive
will earn annual incentive awards as a participant in a bonus plan with the
Company's other executives, and he will participate in the 1994 Stock Option
Plan being submitted for shareholder approval.
Deductibility of Compensation Expenses
Regulations under Section 162(m) of the Internal Revenue Code, proposed
in December 1993, generally disallow a tax deduction to a public corporation
for tax years after 1993 for compensation over $1 million for its chief
executive officer or any of its four other highest-paid officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. No named executive of the Company earned more
than $1 million in 1993. However, Mr. Higgins has earned in excess of $1
million in the past and may do so in the future.
The Committee intends to structure the performance-based portion of the
compensation paid to executives in a manner that complies with the proposed
regulations. The 1994 Stock Option Plan being presented for shareholder
approval has been designed to meet the proposed regulations so that stock
options made under such plans will be excluded from the deduction limit. The
Committee has adopted a new annual incentive plan for its executives, including
the Chief Executive and the other named executive officers. The Committee
believes that the annual incentive plan adopted generally follows the
requirements of the proposed regulations. However, because final regulations
have not been issued and because management believes that the likelihood is
small that any of the named executive officers will earn over $1 million in
cash compensation during 1994 under the new annual incentive plan, the
Committee will review the annual incentive plan during 1994 to determine what
changes are necessary or appropriate so that awards under the plan will be
excluded from the deduction limit.
Compensation Committee Interlocks and Insider Participation
During fiscal 1993, for the period up to January 1, 1994, Charlotte G.
Fischer served on the Committee while she served as a consultant to the
Company. Mrs. Fischer was engaged by the Company as a consultant in fiscal
1993, for which she received an aggregate of $89,850 in compensation. Before
her resignation from the Committee on January 1, 1994, Mrs. Fischer did not
vote on any action that: (a) established the financial hurdles for annual
incentive compensation for the named executives, or (b) established a new
employment agreement for the Chief Executive.
The foregoing report on executive compensation is provided by the
following Directors who comprised the Compensation Committee of the Board of
Directors during fiscal 1993: Messrs. Greenhut (Chairman), Dougan, Green and
Kaufman and Mrs. Fischer (until January 1, 1994).
Compensation Committee
of the Board of Directors
Arnold S. Greenhut, Chairman
George W. Dougan, Charlotte G. Fischer,
J. Markham Green and Isaac Kaufman
10
Executive Officers And Compensation
The Company's executive officers are identified below. At year end,
only two officers met the definition of "executive officer" under applicable
regulations for fiscal year 1993, including the Chief Executive. Executive
officers of the Company currently hold the same respective positions with
Record Town, Inc., the Company's wholly-owned subsidiary through which all
retail operations are conducted. The Summary Compensation Table sets forth the
compensation paid by the Company and its subsidiaries for services rendered in
all capacities during the last three fiscal years to each of the most highly
compensated executive officers of the Company whose cash compensation for that
year exceeded $100,000.
Summary Compensation Table
Long Term
Compen-
sation
-----------
Annual Compensation Awards
--------------------------------------------------------
Securities
Other Annual Underlying All Other
Salary Bonus Compensation Options/ Compensation
Name and Principal Position Year ($) ($) ($) SARs (#) ($)
- - -----------------------------------------------------------------------------------------------------------
ROBERT J. HIGGINS 1993 550,000 0 91,027 (1) 0 45,255 (1)
Chairman, President and Chief 1992 530,882 553,462 83,424 (1) 0 65,631 (1)
Executive Officer 1991 515,922 500,000 98,992 0 63,000 (1)
EDWARD W. MARSHALL, JR. 1993 190,751 0 -- (2) 45,000 3,854 (3)
Senior Vice President - 1992 183,806 55,200 -- (2) 5,000 3,850 (3)
Operations 1991 176,211 20,000 -- 60,000 0
JEFFREY A. JONES (4) 1993 125,833 0 -- (2) 5,000 108,891 (4)
Former Senior Vice President - 1992 182,695 55,600 -- (2) 5,000 3,777 (3)
Finance & Chief Financial Officer 1991 77,667 (6) 40,000 -- 60,000 0
EDWARD E. SZYDLIK (5) 1993 190,000 0 -- (2) 0 49,560 (5)
Former Senior Vice President - 1992 193,798 57,000 -- (2) 0 1,740 (3)
Merchandising 1991 37,981 (6) 9,500 -- 60,000 0
- - ---------------------------
(1) "Other Annual Compensation" in fiscal 1993 for Mr. Higgins consists in
part of $82,208 in payments for or reimbursement of life insurance
premiums made on behalf of Mr. Higgins or his beneficiaries, pursuant to
his employment agreement. Substantially all of the "Other Annual
Compensation" in 1992 and 1991 was for similar life insurance payments.
"All Other Compensation" in fiscal 1993 for Mr. Higgins consists of $6,500
for director's fees, and the balance is equal to the maximum dollar value
of premiums paid by the Company with respect to split dollar life
insurance policies that the Company owns on the lives of Mr. Higgins and
his wife. The Company will recoup most or all of such premiums upon
maturity of the policies, but the maximum potential value is calculated in
line with current SEC instructions as if the 1993 premiums were advanced
without interest until the time that the Company expects to recover the
premium.
(2) "Other Annual Compensation" for the named executive was less than $50,000
and also less than 10% of the total of annual salary and bonus reported.
(3) "All Other Compensation" for the named executive consists of matching
contributions for the 401(k) Savings Plan.
(4) Mr. Jones separated from the Company effective August 27, 1993. Included
in "All Other Compensation" for 1993 is severance compensation of
$101,158, moving expenses of $4,208 and the Company's 401(k) contribution
of $3,525. Mr. Jones was originally awarded options execisable into 15,000
shares. As part of Mr. Jones' severance package, the vesting of 5,000
11
shares of the 15,000 share grant was accelerated; the remaining 10,000
options were canceled. The Company also extended the exercise period for
his vested stock options for an additional 18 months.
(5) Mr. Szydlik separated from the Company effective January 29, 1994.
Included in "All Other Compensation" for 1993 is severance compensation
equal to $47,500, and the Company's 401(k) contribution of $2,060. The
Compensation Committee extended the exercise period for stock options
exercisable into 5,000 shares of Common Stock under the 1986 Stock Option
Plan.
(6) Cash compensation under "Salary" was for partial year employment.
Stock Option Plans
The Trans World Music Corp. 1986 Incentive and Non-Qualified Stock
Option Plan, as amended and restated (the "1986 Plan"), has an aggregate of
1,100,000 shares authorized for issuance. On April 29, 1994, the Board of
Directors adopted the 1994 Stock Option Plan (the "1994 Plan"), which
authorizes the issuance of up to an additional 1,000,000 shares, subject to
approval by the Company's shareholders. See "Item 3 - APPROVAL OF 1994 STOCK
OPTION PLAN". The following tables set forth, as to each of the named executive
officers, certain information with respect to all options granted or exercised
for the fiscal year ended January 29, 1994 under the 1986 Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR (1)
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (4)
-------------------------------------------------------------------------------------------
Number of
Securities Percent of
Underlying Total Options Exercise
Options Granted to or Base
Granted (#) Employees in Price Expiration
Name (1)(2) Fiscal Year ($/share) Date 5% ($) 10% ($)
- - ----------------------------------------------------------------------------------------------------------
Mr. Higgins 0 N/A -- -- -- --
Mr. Marshall 15,000 4.2% 15.00 3/19/03 141,750 357,750
30,000 8.5% 13.75 10/4/03 259,875 655,875
Mr. Jones (3) (5) 5,000 (4) 4.2% 15.00 3/19/03 47,250 119,250
Mr. Szydlik (5) 0 N/A -- -- -- --
- - --------------------------------
(1) No SARs were granted.
(2) Stock Options are exercisable annually in 4 equal installments, commencing
on the first anniversary of the date of grant, and vest earlier upon the
officer's death or disability. The stock options have a term of ten years.
The grant to Mr. Marshall of options exercisable into 30,000 shares on
October 4, 1993 vests in one installment on the fourth anniversary of the
date of grant. All options granted under the 1986 Plan may become
immediately exercisable upon the occurrence of certain business
combinations. The Compensation Committee of the Board of Directors may
accelerate or extend the exercisability of any options subject to such
terms and conditions as the Committee deems appropriate. The option
exercise price was set at the fair market value (last reported sale
price) on the date of grant.
(3) Mr. Jones was originally awarded options exercisable into 15,000 shares.
As part of Mr. Jones' severance package, the vesting of 5,000 shares of
the 15,000 share grant was accelerated; the remaining 10,000 options were
canceled.
(4) These amounts are based on assumed appreciation rates of 5% and 10% as
prescribed by Securities and Exchange Commission rules, and are not
intended to forecast possible future appreciation, if any, of the
Company's stock price.
(5) Former executive officer of the Company.
12
AGGREGATED STOCK OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES (1)
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End (#) at Fiscal Year-End ($)
Shares ----------------------------------------------------
Acquired
on Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (2)
- - ---------------------------------------------------------------------------------------------------
Mr. Higgins --- --- --- --
Mr. Marshall --- --- 19,750/95,250 0/0
Mr. Jones (3) --- --- 31,250/0 0/0
Mr. Szydlik (3) --- --- 5,000/0 0/0
- - ----------------------------------
(1) There have been no SARs issued and there are no SARs outstanding.
(2) Calculated on the basis of the fair market value of the underlying
securities as of January 29, 1994 minus the exercise price.
(3) Former executive officer of the Company.
FIVE-YEAR PERFORMANCE GRAPH
The following line graph reflects a comparison of the cumulative total
return of the Company's Common Stock from January 31, 1989 through January 31,
1994 with the NASDAQ Index (U.S. Stocks) and with a NASDAQ Retail Trade Stocks
index. Because only one of the Company's leading competitors has been an
independent publicly traded company over the period, the Company has elected
to compare shareholder returns with the published index of retail companies
compiled by NASDAQ. All values assume $100 invested on January 31, 1989, and
that all dividends were reinvested.
Trans World Music Corp.
Comparison of Five Year Cumulative Total Return
1989 1990 1991 1992 1993 1994
- - ----------------------------------------------------
Trans World
Music Corp. 100 88 64 88 55 51
- - ----------------------------------------------------
NASDAQ (U.S.) 100 105 108 166 187 208
- - ----------------------------------------------------
NASDAQ Retail
Trade Stocks 100 103 124 216 195 210
- - ----------------------------------------------------
Item 2. APPROVAL OF AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors proposes to change the Company's name to "Trans
World Entertainment Corporation". The change of the Corporate name from Trans
World Music Corp. to Trans World Entertainment Corporation was adopted by the
Board of Directors to reflect the changing nature of the Company's business.
Prerecorded video, books, electronic and other entertainment games now
represent, together, nearly 15% of the Company's revenues and business, and
that share is expected to grow in the future. In addition, the Board believes
that the broader image portrayed by the name may make it more attractive to a
broader spectrum of investors.
13
If the proposed amendment is approved by shareholders, it is expected
that the name of the Company will officially become "Trans World Entertainment
Corporation" effective July 1, 1994. There will be no change to the ticker
symbol for the Company's Common Stock, "TWMC", on the National NASDAQ National
Market System. If the proposed amendment is approved, stock certificates
representing the Company's Common Stock issued prior to the effective date of
the change of corporate name will continue to represent the same number of
shares, will remain authentic, and will not be required to be returned to the
Company for reissuance. Delivery of existing stock certificates will continue
to be accepted in a sale transaction made by a shareholder after the corporate
name is changed.
The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock is required for approval of the proposed amendment.
Your Board of Directors requests your vote for the following proposal:
RESOLVED, that the Company's Article First of the Restated Certificate
of Incorporation be amended to change the name of the corporation from
"Trans World Music Corp." to "Trans World Entertainment Corporation".
The Board of Directors unanimously recommends that shareholders vote FOR
the amendment to the Restated Certificate of Incorporation.
Item 3. APPROVAL OF
1994 STOCK OPTION PLAN
Introduction
The Board of Directors is seeking shareholder approval of the 1994 Stock
Option Plan (the "1994 Plan"), which will succeed the existing stock option
plan. The new plan was drafted to comply with the proposed regulations issued
under Section 162(m) of the Internal Revenue Code of 1986, as amended, to
ensure the tax deductibility of compensation paid. The 1994 Plan is set forth
as Annex A.
The purpose of the Company's stock option programs is to provide a
flexible mechanism to permit key employees to obtain significant equity
ownership in the Company, giving them a permanent stake in the Company's growth
and success, and encouraging the continuation of their involvement with the
Company. The Compensation Committee (the "Committee") has recommended to the
Board of Directors that a stock option program should be continued. On April
29, 1994, the Board of Directors adopted, subject to shareholder approval, the
1994 Plan.
Discussion
On May 5, 1986, the Company's Board of Directors adopted the existing
stock option program, the 1986 Incentive and Non-Qualified Stock Option Plan,
as amended and restated (the "1986 Plan"). The 1986 Plan expires by its term
in May 1996. Through April 29, 1994, 1,100,000 shares have been authorized by
the shareholders for issuance under the 1986 Plan. As of April 29, 1994,
131,297 stock options have been exercised, 953,831 stock options have been
granted and are unexercised, and 14,872 remain available for future grant.
The 1986 Plan terminates on, and no further options or awards will be made or
granted thereunder after, May 4, 1996.
The following summary describes the principal features of the 1994 Plan.
The principal differences between the 1994 Plan and the 1986 Plan are discussed
at the end of this summary under the heading "Principal Differences." This
summary is qualified in its entirety by reference to specific provisions of the
1994 Plan set forth as Annex A.
14
The 1994 Plan
Committee. The 1994 Plan will be administered by the Committee or such
other committee appointed by the Board of Directors, consisting of three or
more outside, independent directors. Each member of the Committee will meet the
requirements set forth in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the proposed regulations
issued under Section 162(m) of the Internal Revenue Code of 1986, as amended.
No member of the Committee will be eligible to participate in the 1994 Plan or
shall have been eligible to participate in the 1994 Plan or shall have been
eligible to participate in the 1994 Plan or the 1986 Plan during a one-year
period prior to appointment.
Eligibility. Key executive and managerial employees (including officers
and employees who may be directors) of the Company and of any subsidiary shall
be eligible to participate in the 1994 Plan. Selection of employees eligible to
participate in the 1994 Plan is within the discretion of the Committee. It is
expected that the 1994 Plan will be administered in a manner similar to the
1986 Plan, under which approximately 150 employees currently participate.
Common Stock Issuable upon Exercise. Under the 1994 Plan, up to
1,000,000 shares of the Company's Common Stock may be optioned or granted to
eligible employees, and no more than 300,000 stock options may be granted to
any one employee during the term of the plan. Shares of the Company's Common
Stock that are optioned or awarded under the 1994 Plan may be either treasury
shares or authorized but unissued shares. Shares reserved for issuance pursuant
to expired or terminated options under the 1994 Plan will be made available for
future option grants under the 1994 Plan.
The 1994 Plan provides for appropriate adjustments in the aggregate
number of shares of Common Stock subject to such plan and in the number of
shares and the price per share, or either, of outstanding options in the case
of changes in the capital stock of the Company resulting from any
recapitalization, stock or unusual cash dividend, stock split or any other
increase or decrease effected without receipt of consideration by the Company,
or merger or consolidation in which the Company is the surviving company. The
1994 Plan also provides that in any merger or consolidation in which the
Company is not the survivor and in which suitable stock options are not granted
in substitution of stock options outstanding under the 1994 Plan, or the
predecessor option plan approved in 1986, the Company will deliver to each
optionee in cash an amount equal to the difference between the purchase price
of stock options then outstanding and the fair market value of the Company's
Stock at the effective date of such merger or consolidation.
Grants of Stock Options and Stock Appreciation Rights. Under the 1994
Plan, the Committee may grant to eligible employees either non-qualified or
incentive stock options, or both, to purchase shares of the Company's Common
Stock. The Committee may also provide that options may not be exercised in
whole or in part for any period or periods of time; provided, however, that
no option shall be exercisable by a participant who is subject to the
provisions of Section 16 of the Exchange Act, until the lapse of at least six
months from the date of grant. The number of shares covered by incentive stock
options which may be first exercised by an optionee in any year cannot have an
aggregate fair market value in excess of $100,000, measured at the date of
grant. All options shall expire not more than ten years from the date of grant.
The Committee may provide that in the event the employment of an employee is
terminated, the right to exercise options held under the 1994 Plan may continue
through its original expiration date or for such shorter period of time after
such event as the Committee may determine appropriate. Options are generally
not assignable or transferable other than by will or the laws of descent and
distribution, or by a qualified domestic relations order and, during the
optionee's lifetime, the stock option may only be exercised by such optionee.
The price at which shares of Common Stock may be purchased pursuant to
stock options granted by Committee will be determined by the Committee, but in
no event will such price be less than the fair market value of the shares at
15
the time that the option is granted. "Fair market value" is defined as the
closing price of the Common Stock on the NASDAQ National Market System or
principal stock exchange that the shares may be traded on as of the date of
grant, or if such day is not a trading day, the next succeeding trading day.
Generally, each stock option will become exercisable in increments of 25% of
the total number of shares subject to option on the one year anniversary of
the date of grant and annually thereafter. The Committee may, in its
discretion, provide at the date of grant for another time or times of
exercisability of any such option subject to the terms and conditions of the
1994 Plan. The Committee may, at any time prior to the expiration or
termination of a stock option previously granted, extend the term of such
option for such additional period (up to a total exercise period of not more
than ten years) as it shall, in its discretion, deem necessary or appropriate.
The option price must be paid to the Company by the optionee in full
prior to delivery of the Common Stock. If the optionee intends to obtain a
permissible broker loan or simultaneously sell the exercised shares, the
exercise shall not be deemed to have occurred until the Company receives the
proceeds. The optionee may pay the option price in cash or with shares of the
Company's Common Stock owned by him. The optionee has no rights as a
shareholder with respect to the shares subject to option until shares of Common
Stock are issued upon exercise of the option.
The Committee may, in its discretion, grant a stock option together with
a stock appreciation right. In the case of such grant the optionee may either
exercise the option and receive Common Stock, or receive cash or other property
equal to the difference between the exercise price of the underlying option and
the fair market value of the Common Stock at the time of exercise. Upon
exercise of a stock appreciation right the underlying stock option is deemed to
have been exercised, and those shares will no longer be available under the
1994 Plan.
Amendment and Termination. The 1994 Plan has a term of ten years and
no shares may be optioned and no rights to receive shares may be granted after
the expiration of the plan. The Committee has full and final authority to
determine the employees to be granted stock options, to determine the number of
shares subject to each option (up to a maximum of 300,000 stock options to any
one employee during the term of the 1994 Plan), to determine the option price
within the prescribed limits, to determine the time or times when each stock
option will be issued and exercisable, and to adopt rules and regulations for
carrying out the 1994 Plan. The Board of Directors is authorized to terminate
or amend the 1994 Plan, except that it may not increase the number of shares
available thereunder, decrease the minimum price at which options may be
granted, or extend the term of the Plan, without shareholder approval. To the
extent any provision of the 1994 Plan fails to comply with any condition of
Rule 16b-3 of the Exchange Act, such provisions shall be null and void to the
extent permitted by law.
In the event shareholders do not approve the 1994 Plan, the 1994 Plan
will not become effective. On April 29, 1994, 195,000 stock options were
granted as part of the Committee's annual review program, subject to approval
of the 1994 Plan by the Company's shareholders. Included in such grant were
65,000 stock options to the named executive officers .
Principal Differences. The 1994 Plan is basically a continuation of the
1986 Plan. However, it does differ from the 1986 Plan in the following
principal respects: (i) Under the 1994 Plan a total of 1,000,000 shares of
Common Stock may be optioned to eligible employees, while the 1986 Plan covered
1,100,000 shares authorized for issuance thereunder; (ii) under the 1994 Plan
no options may be granted with an exercise price below the fair market value of
the Company's Common Stock on the date of grant, while under the 1986 Plan
stock options could be granted at any exercise price that was greater than
the par value of the Common Stock; (iii) under the 1994 Plan, the vesting of
outstanding stock options is accelerated automatically upon a "Change in
Control" (as defined) of the Company; and (iv) under the 1994 Plan, no more
than 300,000 stock options can be granted to any one participant during the
term of the plan, while under the 1986 Plan there was no such limitation.
16
The following table sets forth certain information with respect to stock
options granted under the 1994 Plan as of April 29, 1994:
EXERCISE NUMBER OF SECURITIES
NAME AND POSITION PRICE UNDERLYING OPTIONS GRANTED
- - -----------------------------------------------------------------------------------
Robert J. Higgins
Chairman, President and Chief $13.00 50,000
Executive Officer
Edward W. Marshall, Jr.
Senior Vice President - Operations $13.00 15,000
All executive officers as a group,
including persons named above $13.00 65,000
All other employees, as a group $13.00 130,000
To be adopted, this proposal requires the affirmative vote of the
majority of the shares present in person or represented by proxy at the 1994
Annual Meeting of Shareholders.
The Board of Directors unanimously recommends that shareholders vote FOR
the approval of the 1994 Stock Option Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 generally requires the Company's directors andCompany’s Directors, executive officers and persons who own more than ten percent of the Company's Common Stock,registered class of the Company’s equity securities to file reports of beneficial ownership and changes in beneficial ownership with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company, and copies of all
Section 16(a) reports they file are required to be furnished to the Company.
To the Company's knowledge, basedCommission. Based solely onupon its review of the copies of such reports furnished toreceived by it, or upon written representations obtained from certain reporting persons, the Company and written representationsbelieves that no other
reports were required, during the two-year period ended January 29, 1994,
there were no violations ofall Section 16(a) filing requirements applicable to directors, executiveits officers, Directors, and greater than ten percent shareholders were complied with.
19 |
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Company’s financial reporting process on behalf of the Board of Directors and monitors the Company’s efforts to comply with certain aspects of the Sarbanes-Oxley Act of 2002. The Audit Committee of the Board has reviewed and discussed the Company’s audited financial statements with the Company’s Management and its independent accountants, KPMG LLP. Management is responsible for the financial statements and the underlying financial reporting processes, including the system of internal controls. The Audit Committee has discussed with KPMG LLP the matters required to be discussed under professional standards. The Audit Committee also has received the written disclosures and the letter from the independent accountants required by applicable standards of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with KPMG LLP the independence of such independent accounting firm. The Committee has also considered whether the independent accountants’ other non-audit services to the Company is compatible with the accountants’ independence.
The Audit Committee also discussed with the Company’s internal auditors and with KPMG LLP the overall scope and plans for their respective audits. The Audit Committee meets periodically with the Company’s internal auditors and with KPMG LLP, with and without management present, to discuss the results of their examinations, the evaluation of the Company’s internal controls and the overall quality and transparency of the Company’s financial reporting. Based on its review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements for the fiscal year ended February 2, 2019 be included in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended February 2, 2019.
Audit Committee of the Board of Directors
Robert Marks (Chairman)
Martin Hanaka
Michael Nahl
The appointment of independent accountants by the Audit Committee is ratified annually by the Board of Directors. The decision of the Board is based on the recommendation of the Audit Committee, which reviews and approves in advance the audit scope, the types of non-audit services, and the estimated fees for the coming year. The Audit Committee also reviews and approves non-audit services to ensure that they will not impair the independence of the accountants.Our Audit Committee may, in its discretion, appoint a new independent registered public accounting firm at any time during the year if it believes that such change would be in the Company’s best interest and the best interest of our shareholders.
Set forth below is a description of the fees billed to the Company by KPMG for fiscal years 2018 and 2017.
Fees Paid to Independent Public Accounting Firms
Audit Fees. Audit fees include fees paid by the Company to KPMG LLP in connection with the annual audit of the Company’s consolidated financial statements and KPMG LLP’s review of the Company’s interim financial statements. Audit fees also include fees for services performed by KPMG LLP that are closely related to the audit and in many cases could only be provided by an independent public accounting firm. Such services include comfort letters related to SEC registration statements and certain reports relating to the Company’s regulatory filings. The aggregate fees billed to the Company by KPMG LLP for audit services rendered to the Company and its subsidiaries for fiscal years 2018 and 2017 totaled $810,000 and $930,000, respectively.
20 |
Audit-Related Fees. Audit related fees include fees paid by the Company to KPMG LLP in connection with audit related services, including audit services related to employee benefit plan audits. The aggregate fees billed to the Company by KPMG LLP for audit related services rendered to the Company and its subsidiaries were $22,000 and $21,500 for fiscal years 2018 and 2017, respectively.
Other Fees. There were no other fees paid to KPMG LLP in fiscal year 2018. Other fees paid to KPMG LLP in fiscal year 2017 included $5,000 related to the consent for a Form S-8.
Tax Fees. Tax fees include corporate tax compliance and counsel and advisory services. SAXBST LLC was the Company’s primary tax advisor in fiscal year 2018. During fiscal year 2018 and 2017, tax fees paid to KPMG LLP were $89,000 and $8,000, respectively.
Each year, the Company reviews its existing practices regarding the use of its independent accountants to provide non-audit and consulting services to ensure compliance with recent SEC proposals. The Company has a policy which provides that the Company’s independent public accounting firm may provide certain non-audit services which do not impair the firm’s independence. In that regard, the Audit Committee must pre-approve all audit services and non-audit services provided to the Company. This policy is administered by the Company’s senior financial management, which reports throughout the year to the Audit Committee.
Item 4.Reverse Stock Split
Our Board of Directors has unanimously approved and declared advisable an amendment to the Company’s Certificate of Incorporation, as amended, to effect a reverse stock split of all issued and outstanding shares of our Common Stock, in a ratio of up to 1-for-20, in order to, among other things, assist the Company in its effort to regain compliance with the NASDAQ Listing Rules, which require the Company to maintain a minimum bid price of $1.00 per share.
The precise ratio of the proposed Reverse Stock Split shall be a whole number within this range, determined in the sole discretion of our Board of Directors. It is expected that such determination, if any, shall occur at some time on or prior to October 15, 2019. By approving this proposal, shareholders will give our Board of Directors authority, but not the obligation, to effect the Reverse Stock Split and full discretion to approve the ratio at which shares of Common Stock will be automatically reclassified up to and including a ratio of 1-for-20. Our Board of Directors believes that providing our Board of Directors with this grant of authority with respect to setting the reverse split ratio, rather than approval of a pre-determined reverse stock split ratio, will give our Board of Directors the flexibility to set the ratio in accordance with current market conditions and, therefore, allow our Board of Directors to act in the best interests of the Company and our shareholders.
In determining the ratio following the receipt of shareholder approval, our Board of Directors may consider, among other things, factors such as:
| · | the historical trading price and trading volume of our Common Stock; | ||
| · | the then-prevailing trading price and trading volume of our Common Stock and the anticipated impact of the Reverse Stock Split on the trading market for our Common Stock; | ||
| · | the number of shares of our Common Stock then outstanding, and the number of shares of Common Stock issuable upon exercise of options and warrants then outstanding; |
21 |
| · | the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; | ||
| · | prevailing general market and economic conditions; and | ||
| · | NASDAQ Listing Rules, which require the Company to maintain a minimum bid price of $1.00 per share. |
If our shareholders approve this proposal and our Board of Directors does not otherwise abandon the amendment contemplating the Reverse Stock Split, we will file a Certificate of Amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of New York (the “New York Secretary of State”) to effect the proposed Reverse Stock Split, in the form attached to this proxy statement as Appendix A to this Proxy Statement. Our Board of Directors has approved and declared advisable the proposed amendment to the Company’s Amended and Restated Certificate of Incorporation as set forth in the Certificate of Amendment, in the form attached to this proxy statement as Appendix A to this Proxy Statement. If the proposed Reverse Stock Split is effected, then the number of issued and outstanding shares of our Common Stock would be reduced. Our Board of Directors has reserved the right to abandon the amendment at any time before the effectiveness of the filing of the Certificate of Amendment with the New York Secretary of State, even if the adoption of the amendment is approved by the shareholders. If the Certificate of Amendment is not filed with the New York Secretary of State prior to December 27, 2019, our Board of Directors will abandon the amendment and the Reverse Stock Split will not be effected. Thus, the Board of Directors, at its discretion, may cause the filing of the Certificate of Amendment (following shareholder approval) to effect the Reverse Stock Split or abandon the amendment and not effect the Reverse Stock Split if it determines that any such action is or is not in the best interests of our Company and shareholders.
Prior to filing the amendment to the Certificate of Amendment reflecting the Reverse Stock Split, we must first notify NASDAQ of the anticipated record date of the Reverse Stock Split. Our failure to provide such notice may constitute fraud under Section 10 of the Exchange Act.
Purpose of Proposed Reverse Stock Split
Each securities exchange has its own listing criteria. NASDAQ Listing Rules require the Company to maintain a minimum bid price of $1.00 per share to maintain its listing on the NASDAQ. On May 10, 2019, the sale price of our Common Stock on the NASDAQ was $0.34 per share. A decrease in the number of issued and outstanding shares of our Common Stock resulting from the Reverse Stock Split should, absent other factors, assist in ensuring that our per share market price of our Common Stock trades above the required price. However, we cannot provide any assurance that (i) we will regain compliance with NASDAQ Listing Rules, or other listing requirements, and in effect the NASDAQ or (ii) even if we do, our minimum bid price would remain over the minimum bid price requirement of the NASDAQ following the Reverse Stock Split.
Some investors prefer to invest in stocks that trade at a per share price range more typical of companies listed on the NASDAQ. Also, some brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in stocks priced below a certain level (for example, $5.00 per share) or tend to discourage individual brokers from recommending lower-priced stocks to their customers. As a result, we believe that the Reverse Stock Split may make our Common Stock more attractive to certain investors.
Reducing the number of outstanding shares of our Common Stock through the Reverse Stock Split is intended, absent other factors, to increase the per share trading price of our Common Stock. However,
22 |
other factors, such as our financial results and financial outlook and investor perception of our future prospects, as well as general market and economic conditions, among many factors, may positively or negatively affect the trading price of our Common Stock. Therefore, even if the Reverse Stock Split is effected, the trading price of our Common Stock may not increase to a level we may have expected following the Reverse Stock Split or, if it does, the trading price of our Common Stock may decrease in the future. Additionally, the trading price per share of our Common Stock after the Reverse Stock Split may not increase in proportion to the reduction in the number of shares of our Common Stock outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our Common Stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.
We believe increasing the trading price of our Common Stock will assist in meeting the continued listing criteria of NASDAQ or any other such national securities exchange and is our best option to meet the bid price criteria to comply with the continued listing requirements. Accordingly, we believe that the Reverse Stock Split is in our shareholders’ best interests.
In addition, an increase in the per share trading value of our Common Stock would be beneficial owners.
to us because it would:
| · | improve the perception of our Common Stock as an investment security; | ||
| · | reset our stock price to more normalized trading levels in the face of potentially extended market dislocation; | ||
| · | appeal to a broader range of investors to generate greater investor interest in us; and | ||
| · | reduce shareholder transaction costs because investors would pay lower commission to trade a fixed dollar amount of our stock if our stock price were higher than they would if our stock price were lower. |
Potential Effects of the Proposed Reverse Stock Split
If this proposal is approved and the Reverse Stock Split is effected, the Reverse Stock Split will be realized simultaneously and in the same ratio for all of our issued and outstanding shares of Common Stock. The immediate effect of a reverse stock split would be to reduce the number of shares of our Common Stock outstanding and to increase the trading price per share of our Common Stock.
However, we cannot predict the effect of any reverse stock split upon the market price of our Common Stock over an extended period, and in many cases, the market value of a company’s common stock following a reverse stock split declines, in many cases, because of variables outside of a company’s control (such as market volatility, investor response to the news of a proposed reverse stock split and the general economic environment). We cannot assure you that the trading price of our Common Stock after the Reverse Stock Split will rise in inverse proportion to the reduction in the number of shares of our Common Stock outstanding as a result of the Reverse Stock Split. Also, we cannot assure you that a reverse stock split would lead to a sustained increase in the trading price of our Common Stock. The trading price of our Common Stock may change due to a variety of other factors, including our operating results and other factors related to our business and general market conditions. You should also keep in mind that the implementation of a reverse stock split does not have an effect on the actual or intrinsic value of our business or a shareholder’s proportional ownership in our Company. However, should the overall value of our Common Stock decline after the proposed Reverse Stock Split, then the actual or
23 |
intrinsic value of the shares of our Common Stock held by you will also proportionately decrease as a result of the overall decline in value.
Examples of Potential Reverse Stock Split at Various Ratios.The table below provides examples of reverse stock splits at various ratios up to 1-for-20, without giving effect to the treatment of fractional shares. The actual number of shares outstanding after giving effect to the Reverse Stock Split, if effected, will depend on the actual ratio that is determined by our Board of Directors in accordance with the amendment to the Company’s Certificate of Incorporation.
| Shares outstanding at May 10, 2019 | Reverse Stock Split Ratio | Shares outstanding after Reverse Stock Split | Reduction in Shares Outstanding | |||
| 36,258,831 | 1-for-10 | 3,625,883 | 32,632,948 | |||
| 36,258,831 | 1-for-15 | 2,417,255 | 33,841,576 | |||
| 36,258,841 | 1-for-20 | 1,812,942 | 34,445,889 |
The resulting decrease in the number of shares of our Common Stock outstanding could potentially adversely affect the liquidity of our Common Stock, especially in the case of larger block trades.
Effects on Ownership by Individual Shareholders. If we implement a reverse stock split, the number of shares of our Common Stock held by each shareholder would be reduced by multiplying the number of shares held immediately before the Reverse Stock Split by the appropriate ratio and then rounding up to the nearest whole share. The Reverse Stock Split would not affect any shareholder’s percentage ownership interest in our Company or proportionate voting power, except to the extent that interests in fractional shares would be rounded up to the nearest whole share.
Effect on RSUs and Stock Options. In addition, as a result of the Reverse Stock Split we would proportionally adjust the number of shares subject to outstanding restricted stock units and stock options and the exercise price of outstanding stock options, to reduce the number of shares and increase the exercise price per share based on the Reverse Stock Split Ratio (i.e., the number of shares subject to the restricted stock units and stock options would be multiplied by the Reverse Stock Split Ratio (rounding down to the nearest whole number of shares in the case of stock options) and the exercise price per share of the stock options would be divided by the Reverse Stock Split Ratio (rounding up to the next penny)). Additionally, the number of shares reserved for issuance under our 2005 Long Term Incentive and Share Award Plan (as amended and restated on April 5, 2017) would be reduced by multiplying the number of such shares by the Reverse Stock Split Ratio (rounding down to the nearest whole number of shares).
Other Effects on Issued and Outstanding Shares. If we implement a reverse stock split, the rights pertaining to the issued and outstanding shares of our Common Stock would be unchanged after the Reverse Stock Split. Each share of our Common Stock issued following the Reverse Stock Split would be fully paid and nonassessable.
The Reverse Stock Split would result in some shareholders owning “odd-lots” of less than 100 shares of our Common Stock. Brokerage commissions and other costs of transactions in odd-lots are generally higher than the costs of transactions in “round-lots” of even multiples of 100 shares.
After the effective time, our Common Stock will have a new Committee on Uniform Securities Identification Procedures (CUSIP) number, which is a number used to identify our equity securities, and stock certificates with the older CUSIP number will need to be exchanged for shares of Common Stock with the new CUSIP number by following the procedures described below. However, until such exchange
24 |
is made, the old stock certificates will automatically represent the new, post-split number of shares. After the Reverse Stock Split, we will continue to file periodic reports and comply with other requirements of the Exchange Act. Our Common Stock will continue to be listed on NASDAQ under the symbol “TWMC”.
Authorized Shares of Stock
The Reverse Stock Split would affect all issued and outstanding shares of Common Stock and outstanding rights to acquire Common Stock. We will not change the number of shares of Common Stock currently authorized. However, upon the effectiveness of the reverse stock split, the number of authorized shares of Common Stock that are not issued or outstanding would increase due to the reduction in the number of shares of Common Stock issued and outstanding as a result of the reverse stock split.
As of May 10, 2019, we have 200,000,000 shares of authorized Common Stock, of which 36,258,839 shares of Common Stock, par value $0.01 per share, were issued and outstanding. If we issue additional shares, the ownership interest of holders of Common Stock will be diluted.
We will reserve for issuance any authorized but unissued shares of Common Stock that would be made available as a result of the proposed Reverse Stock Split.
We do not have any plans, arrangements or understandings for the remaining portion of the authorized but unissued shares that will be available following the Reverse Stock Split.
Procedure for Effecting the Proposed Stock Split and Exchange of Stock Certificates
If shareholders approve this proposal and our Board of Directors does not otherwise abandon the amendment contemplating the reverse stock split, we will file with the New York Secretary of State a Certificate of Amendment to our Certificate of Incorporation, in the form attached to this proxy statement as Appendix A to this Proxy Statement. The Reverse Stock Split will become effective at the time and on the date of filing of, or at such later time as is specified in, the Certificate of Amendment, which we refer to as the “effective time.” Beginning at the effective time, each certificate representing shares of Common Stock will be deemed for all corporate purposes to evidence ownership of the number of whole shares into which the shares previously represented by the certificate were combined pursuant to the Reverse Stock Split.
Upon the Reverse Stock Split, we intend to treat shareholders holding our Common Stock in “street name,” through a bank, broker or other nominee, in the same manner as registered shareholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding our Common Stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered shareholders for processing the reverse stock split. If you hold your shares with a bank, broker or other nominee and if you have any questions in this regard, we encourage you to contact your nominee.
Following the Reverse Stock Split, shareholders holding physical certificates must exchange those certificates for new certificates.
Our transfer agent will advise registered shareholders of the procedures to be followed to exchange certificates in a letter of transmittal to be sent to shareholders. No new certificates will be issued to a shareholder until the shareholder has surrendered the shareholder’s outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the transfer agent. Any old shares submitted for transfer, whether pursuant to a sale, other disposition or otherwise, will automatically be
25 |
exchanged for new shares.Shareholders should not destroy any stock certificate(s) and should not submit any certificate(s) until requested to do so.
No Issuance of Fractional Shares
No fractional shares of Common Stock will be issued as a result of the Reverse Stock Split. Instead, shareholders who otherwise would be entitled to receive fractional shares, upon surrender to the exchange agent of such certificates representing such fractional shares, will be entitled to receive a certificate representing the number of shares they would otherwise be entitled to rounded up to the next whole share.
No Appraisal Rights
No appraisal rights are available under the New York Business Corporation Law or under our Certificate of Incorporation, as amended, or our By-Laws with respect to the Reverse Stock Split. There may exist other rights or actions under state law for shareholders who are aggrieved by reverse stock splits generally.
Accounting Consequences
The par value of our Common Stock would remain unchanged at $0.01 per share after the Reverse Stock Split. Also, our capital account would remain unchanged, and we do not anticipate that any other accounting consequences would arise as a result of the Reverse Stock Split.
Potential Anti-Takeover Effect
Securities and Exchange Commission (“SEC”) rules require disclosure and discussion of the effects of any proposal that could be used as an anti-takeover device. This proposal, if adopted and implemented, will result in a relative increase in the number of authorized but unissued shares of our Common Stock vis-à-vis the outstanding shares of our Common Stock and could, under certain circumstances, have an anti-takeover effect, although that is not the purpose or intent of the proposal. A relative increase in the number of authorized but unissued shares of Common Stock could have other effects on our shareholders, depending upon the exact nature and circumstances of any actual issuances of authorized shares. A relative increase in our authorized but unissued shares of Common Stock could potentially deter takeovers, including takeovers that our Board of Directors determines are not in the best interest of our shareholders, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover more difficult. Our Board of Directors is not aware of any attempt to take control of our business and has not considered the Reverse Stock Split to be a tool to be utilized as a type of anti-takeover device. We currently have no plans, proposals or arrangements to issue any shares of Common Stock that would become newly available for issuance as a result of the Reverse Stock Split.
Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of certain U.S. federal income tax consequences of the reverse stock split applicable to U.S. Shareholders (as defined below). It does not purport to be a complete discussion of all of the possible U.S. federal income tax consequences of the reverse stock split applicable to U.S. Shareholders and is included for general information only. Further, it does not address any state, local or foreign tax consequences or any U.S. federal tax consequences other than income tax consequences (such as estate and gift tax consequences). Also, it does not address the U.S. federal income tax consequences to U.S. Shareholders that are subject to special tax rules, such as banks, insurance
26 |
companies, regulated investment companies, partnerships or other pass-through entities for U.S. federal income tax purposes (and investors in such entities), persons subject to the alternative minimum tax, persons subject to the Medicare tax on investment income, personal holding companies, broker-dealers, U.S. expatriates, and tax-exempt entities. This summary does not address shareholders that are not U.S. Shareholders, and such shareholders should consult their tax advisors regarding the tax consequences of the reverse stock split.
The discussion is based on the provisions of the U.S. federal income tax law as of the date hereof, which is subject to change retroactively as well as prospectively. This summary also assumes that the pre-reverse stock split shares were, and the post-reverse stock split shares will be, held as “capital assets,” as defined in the Internal Revenue Code of 1986, as amended (i.e., generally, property held for investment). The tax treatment of a U.S. Shareholder may vary depending upon the particular facts and circumstances of such shareholder. Each shareholder should consult with such shareholder’s tax advisor with respect to the tax consequences of the reverse stock split. As used herein, the term U.S. Shareholder means a shareholder that is, for U.S. federal income tax purposes: an individual who is a citizen or resident of the United States; a corporation created or organized under the laws of the United States, any state of the United States or the District of Columbia; an estate the income of which is subject to federal income tax regardless of its source; or a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or such trust has a valid election in effect to be treated as a U.S. person.
Other than with respect to any cash payments for fractional shares discussed below, no gain or loss should be recognized by a U.S. Shareholder upon such shareholder’s exchange of pre-reverse stock split shares for post-reverse stock split shares pursuant to the reverse stock split. The aggregate tax basis of the post-reverse stock split shares received in the reverse stock split (including any fraction of a post-reverse stock split share for which you received cash in lieu of such fractional share) will be the same as the shareholder’s aggregate tax basis in the pre-reverse stock split shares exchanged therefor. The U.S. Shareholder’s holding period for the post-reverse stock split shares will include the period during which the shareholder held the pre-reverse stock split shares surrendered in the reverse stock split.
In general, U.S. Shareholders who receive cash in lieu of fractional share interests in the post-reverse stock split shares will recognize taxable gain or loss based on the difference between the amount of cash received by such U.S. Shareholder and such shareholder’s adjusted basis allocated to the fractional share interests redeemed. Any such gain or loss will constitute a capital gain or loss and will constitute long-term capital gain or loss if the holder’s holding period is greater than one year as of the effective date.
EACH SHAREHOLDER SHOULD CONSULT WITH HIS OR HER TAX ADVISOR WITH RESPECT TO ALL OF THE POTENTIAL TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE STOCK SPLIT.
Board Discretion to Implement the Reverse Stock Split
Our Board of Directors has reserved the right to abandon the amendment at any time before the effectiveness of the filing of the Certificate of Amendment with the New York Secretary of State, even if the adoption of the amendment is approved by the shareholders.
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Required Vote
The affirmative vote of holders of a majority of the outstanding shares of Common Stock as of the Record Date, is required for approval of this proposal. Therefore, abstentions and broker non-votes will have the same effect as votes against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” ITEM 4.
OTHER MATTERS
Other Items. Management knows of no other items or matters that are expected to be presented for consideration at the meeting. If other matters
properly come before the meeting, however, the persons named in the
accompanying proxy intend to vote thereon in their discretion.
Proxy Solicitation. The Company will bear the cost of the meeting and the cost of soliciting proxies, including the cost of mailing the proxy materials. In addition to solicitation by mail, directors,Directors, officers, and regular employees of the Company (none of whom will be specifically compensated for such services) may solicit proxies by telephone or otherwise. Arrangements will be made with brokerage houses and other custodians, nominees, and fiduciaries to forward proxies and proxy materialmaterials to their principals, and the Company will reimburse them for their ordinary and necessary expenses.
Independent Auditors.
Financial Statements. The Board of Directors currently intends to
select Ernst & Young as independent auditors for the Company for the fiscal
year ending January 28, 1995. Ernst & Young has acted as auditors for the
Company since 1985. Representatives of Ernst & Young will be present at the
Annual Meeting of Shareholders and available to make statements to and
respond to appropriate questions of shareholders.
17
Financial Statements. The Company's 1993Company’s 201 the Shareholders (which does not form a part of the proxy solicitation material), including financial statements for the fiscal year ended January 29, 1994, areFebruary2, 2019, is being sent concurrently to shareholders. If you have not received or had access to the 19932018 Annual Report to Shareholders, or you would like to receive
quarterly shareholder reports from the Company, please write to the Company to
the attention of:may request a copy by writing to: Trans World Entertainment Corporation, Attention: Treasurer, 38 Corporate Circle, Albany, New YorkNY 12203, and a copy or copies will be sent to you free of charge.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders of the Company wishing to include proposals in the proxy material in relationrelating to the annual meetingAnnual Meeting of the Company to be held in 19952020 must submit the same in writing so as to be received at the executive offices of the Company on or before January 17, 1995.30, 2020. Such proposals must also meet the other requirements of the rules of the Securities and Exchange Commission relating to shareholders'shareholder proposals. NoProposals should be addressed to Edwin J. Sapienza, Secretary, Trans World Entertainment Corporation, 38 Corporate Circle, Albany, NY 12203. Two such proposals were received with respect to the annual meetingAnnual Meeting scheduled for June 10, 1994.
By Order of the Board of Directors,
/s/ Matthew H. Mataraso
Matthew H. Mataraso,
Secretary
May 17, 1994
18
ANNEX A
TRANS WORLD ENTERTAINMENT CORPORATION
1994 STOCK OPTION PLAN
1. PURPOSE
(a) The purpose of this 1994 Stock Option Plan (the "Plan"), is to
encourage and enable selected management and other key employees of Trans World
Entertainment Corporation (the "Company") or a parent or subsidiary of27, 2019; however, the Company is permitted to acquire a proprietary interest in the Company through the ownership
of stock in the Company. Pursuantexclude such proposals pursuant to the Plan, eligible employees will be
offered the opportunity to acquire such common stock through the grant of
Incentive Stock Options,other statutory options and Non-Qualified Stock Options
(Incentive Stock Options and Non-Qualified Stock Options granted under the Plan
are collectively referred to herein as "Options"), with or without tandem
Stock Appreciation Rights ("SARs").
(b) As used herein, the term "parent" or "subsidiary" shall mean any
present or future corporation which is or would be a "parent corporation" or
"subsidiary corporation" of the Company as the term is defined in Section 424
of the Internal Revenue Code of 1986, as amended (the "Code") (determined as if
the Company were the employer corporation).
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee of the Board
of Directors, or such other committee appointed by the Board of Directors (the
"Committee"), consisting of three or more disinterested, independent directors.
Each member of the Committee will meet the requirements set forth in Rule 16b-3
promulgated14a-8(i) under the Securities Exchange Act of 1934, as amended, and the SEC’s Office of Chief Counsel, Division of Corporation Finance, has confirmed that it will not recommend enforcement action to the SEC regarding such omissions in reliance on Rule 14a-8(i).
For any proposal that is not submitted for inclusion in next year’s proxy statement (as described in the preceding paragraph) but is instead sought to be presented directly at next year’s annual general meeting, the rules of the SEC permit management to vote proxies in its discretion if we do not receive notice of the proposal on or before the deadline for advance notice set forth in our By-Laws as described below.
Our By-Laws provide that any shareholder desiring to make a proposal or nominate a director at an annual meeting must provide written notice of such proposal or nomination to the Secretary of the Company not later than April 28, 2020 nor earlier than March 29, 2020. Any such proposal or nomination must include the information required under our By-Laws with respect to each proposal or nomination and the shareholder making such proposal or nomination. Notices of intention to present proposals at next year’s annual general meeting should be addressed to Edwin J. Sapienza, Secretary,
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Trans World Entertainment, 38 Corporate Circle, Albany, NY 12203. Pursuant to the By-Laws provision described above, our Board of Directors has received a notice from an individual shareholder of the Company of his intent to nominate at the June 27, 2019 Annual Meeting four individuals for election to the Board of Directors, and such shareholder has indicated his intent to furnish a proxy statement to shareholders of the Company.
By Order of the Board of Directors,
Edwin J. Sapienza, Secretary
May 29, 2019
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Appendix A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
Trans World Entertainment Corporation
Under Section 805 of the Business Corporation Law
FIRST: The name of the corporation is Trans World Entertainment Corporation (the "Exchange Act"“Corporation”). The name under which it was originally formed is: Trans-World Music Corp.
SECOND: The certificate of incorporation of the Corporation (such certificate of incorporation, as amended or restated and in effect thereafter, the “Certificate of Incorporation”) was filed by the New York State Department of State on February 7, 1972.
THIRD: The Certificate of Incorporation is hereby amended as follows:
Paragraph FOURTH of the Certificate of Incorporation relating to capitalization of the corporations and designations of classes of preferred stock is amended to include the following as new paragraph l., following the final paragraph thereof:
“Upon the filing of this Certificate of Amendment to the Certificate of Incorporation, each _________ (___) shares of Common Stock of the Corporation issued and outstanding immediately prior to this Certificate of Amendment to the Certificate of Incorporation, without further action, will be automatically combined into and become one (1) share of fully paid and nonassessable Common Stock of the Corporation (the “Reverse Stock Split”). No fractional shares shall be issued upon the Reverse Stock Split; rather, each fractional share resulting from the Reverse Stock Split shall be rounded up to the nearest whole number. Each outstanding stock certificate of the Corporation, which prior to the filing of this Certificate of Amendment to the Certificate of Incorporation represented one or more shares of Common Stock, shall immediately after such filing represent that number of shares of Common Stock equal to the product of (x) the number of shares of Common Stock represented on such certificates divided by (y) _____ (_____) (such adjusted shares, the “Reclassified Shares”), with any resulting fractional shares rounded up to the nearest whole share as set forth above. Any options, warrants or other purchase rights, which prior to the filing of this Certificate of Amendment represented the right to acquire one or more shares of the Corporation’s Common Stock, shall immediately after such filing represent the right to acquire _________ (_____) of one (1) share of the Corporation’s Common Stock for each share of the Corporation’s Common Stock that such option, warrant or other purchase right previously represented the right to acquire. The exercise price of such options, warrants and purchase rights shall be adjusted by multiplying the existing exercise price by ______ (____).
The number of authorized shares of Common Stock of the Corporation and the par value of such shares will not be affected by this Certificate of Amendment.
The Corporation shall, upon the request of each record holder of a certificate representing shares of Common Stock issued and outstanding immediately prior to the filing of this Certificate of Amendment to the Certificate of Incorporation, issue and deliver to such holder in exchange for such certificate a new certificate or certificates representing the Reclassified Shares.”
[Remainder of Page Intentionally Left Blank]
A-1 |
FOURTH: The certificate of amendment was authorized by: the vote of the board of directors followed by a vote of a majority of all outstanding shares entitled to vote thereon at a meeting of shareholders.
| Name: Michael N. Feurer Title: Chief Executive Officer |
[Certificate of Amendment to Certificate of Incorporation of Trans World Entertainment Corporation]
A-2 |
Appendix B
TRANS WORLD ENTERTAINMENT CORPORATION
CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
| A. | FORMATION OF THE COMPENSATION COMMITTEE |
There shall be a committee of the Board of Directors (the “Board”) of Trans World Entertainment Corporation, a New York corporation (the “Company”)tobeknown as the“Compensation Committee” (the “Committee”). The Committee shall be composed of directors who are independent of the management of the Company and are free of any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a committee member. Without limiting the generality of the preceding sentence, the directors appointed to the Committee shall satisfy (i) the independence criteria of the NASDAQ Stock Market and (ii) the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and shall not be an “affiliated person” of the proposed regulations issuedissuer or any subsidiary as defined under the Sarbanes-Oxley Act of 2002. In determining whether a director is eligible to serve on the Committee, the Board shall also consider whether the director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company to determine whether such affiliation would impair the director’s judgment as a member of the Committee. In addition, if deemed appropriate from time to time, each director appointed to the Committee shall meet the definition of “non-employee director” under Rule 16b-3 under the Securities Exchange Act of 1934, and “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986,1986. Committee members shall not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any subsidiary thereof. The Committee shall
B-1 |
consist of no fewer than three independent directors, for a term of appointment at the discretion of the Board, considering the recommendation of the Nominating & Governance Committee, and further considering the views of the Chairman of the Board and the Chief Executive Officer (the “CEO”), as amended. No memberappropriate., usually for one year. The members of the Committee will be eligible to participate inshall serve until their successors are appointed and qualify, and shall designate the Plan orChairman of the Committee. The Board shall have been eligiblethe power at any time to participate inchange the Plan during a one-year period prior to appointment. Themembership of the Committee is authorized: (a) to adopt, alter and repeal administrative rules,
guidelines and regulations for carrying out the Plan; (b) to select the
employees eligible for participation under the Plan; (c) to determine whether and to what extent Optionsfill vacancies in it, subject to such new member(s) satisfying the above requirements and SARs are to be granted underany other corporate legislation in effect at that time. Except as expressly provided in this Charter or the Plan; (d) to
substitute new Options for previously granted Options, including previously
granted Options having higher exercise prices; (e) to determineby-laws of the other
terms, conditions and provisions of grants under the Plan; and (f) to interpret
the Plan, in all cases in the Committee's sole discretion consistent with the
Plan provisions. The interpretation of and decisions with regard to any
questions arising under the Plan made byCompany, the Committee shall be finalfix its own rules of procedure.
| B. | RESPONSIBILITIES OF THE COMMITTEE |
The Committee shall:
| (a) | discharge the Board’s responsibilities relating to compensation of the Company’s executives (including the CEO and all other executive officers, as defined under Section 16 of the Securities Exchange Act of 1934, and related rules) and | |
| (b) | prepare an annual report on executive compensation for inclusion in the Company’s proxy statement in accordance with applicable rules and regulations. | |
| C. | DUTIES OF THE COMMITTEE |
In carrying out its responsibilities, the Committee shall:
| 1. | Review and approve all executive compensation.The Committee shall review and approve corporate goals and objectives relevant to all executive officer compensation, |
B-2 |
| evaluate each executive officer’s performance in light of those goals and objectives, and set the executive compensation level based on this evaluation. In determining the long-term incentive component of executive officers compensation, the Committee should consider the Company’s performance and relative shareholder return, the value of similar incentive awards to executive officers at comparable companies, and the awards given to the Company’s executive officers in past years. The Company’s CEO may not be present during any deliberations or voting regarding his or her compensation. | ||
| 2. | Conduct an Annual Review.TheCommitteeshall annually review and make recommendations to the Board with respect to the compensation of all officers and other key executives. | |
| 3. | Make Recommendations to the Board.The Committee shall make recommendations to the Board with respect to incentive compensation plans and equity-based plans. | |
| 4. | Have sole authority to retain and oversee external advisors.The Committee shall have the sole authority to appoint, retain, oversee and terminate any internal or outside legal counsel, external auditor, accountants, financial consultant and other advisors (each a “compensation advisor”) as it determines necessary or appropriate to assist in the execution of its duties and responsibilities set forth in this charter, including the evaluation of director,Chief Executive Officer and senior executive compensation. The Committee shall have sole authority to approve the compensation advisor’s compensation, fees and other retention terms. The Company shall provide |
B-3 |
| appropriate funding, as determined by the Committee, for the payment of reasonable compensation to compensation advisers retained by the Committee. | ||
| 5. | Have sole authority in the selection of external advisors.The Committee may select, or receive advice from, any compensation adviser it prefers, including ones that are not independent. However, the Committeemay select, or receive advice from, a compensation adviser other than in-house legal counsel, only after taking into consideration the following six independence factors: |
| (i) | The provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser; | |
| (ii) | The amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser; | |
| (iii) | The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest; | |
| (iv) | Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee; | |
| (v) | Any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and |
B-4 |
| (vi) | Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company. |
Notwithstanding the foregoing, the Committee is not required to conduct an independence assessment for a compensation adviser that acts in a role limited to the following activities for which no disclosure is required under the requirements of the SEC: (a) consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the Company, and conclusive.
3. SHARESthat is available generally to all salaried employees; and/or (b) providing information that either is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser, and about which the adviser does not provide advice.
For the avoidance of doubt, the Committee is not required to implement or act consistently with the advice or recommendations of any compensation adviser to the Committee. The retention of any outside advisers shall not affect the ability or obligation of the Committee to exercise its own judgment in fulfillment of its duties.
| 6. | Administer awards and incentives.The Committee shall adopt, administer, approve and ratify awards under incentive compensation and stock plans, including amendments to the awards made under any such plans, and review and monitor awards under such plans. |
B-5 |
| 7. | Make periodic reports.The Committee shall make periodic reports to the Board. | |
| 8. | Review the Charter.The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. | |
| 9. | Review Committee performance.The Committee shall annually review its own performance. | |
| 10. | Delegation of authority.The Committee may form and delegate authority to subcommittees when appropriate. | |
| 11. | Review overall compensation for officer employees.The Committee shall review the overall compensation structure of the Company to determine that it establishes appropriate incentives for officer employees at all levels. All incentives, while industry-dependent and different for different categories of officers should further the Company’s long-term strategic plan and be consistent with the culture of the Company and the overall goal of enhancing shareholder value. |
April 2017
B-6 |
Appendix C
TRANS WORLD ENTERTAINMENT CORPORATION
CHARTER OF STOCK SUBJECT TO THE PLAN
(a) Shares Subject to Issuance. NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS
A.FORMATION OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
There shall be 1,000,000 sharesa committee of the Company's common stock, par value $.01 per shareBoard of Directors (the "Common Stock"“Board”) authorized for issuance under the Plan. Such shares may be authorized and
unissued shares or previously issued shares acquired orof Trans World Entertainment Corporation, a New York corporation (the “Company”), to be acquired byknown as the “Nominating and Corporate Governance Committee” (the “Committee”). The Committee shall be composed of directors who are independent of the management of the Company and heldare free of any relationship that, in the treasury. Any sharesopinion of the Board, would interfere with the exercise of independent judgment as a Committee member. Without limiting the generality of the preceding sentence, the directors appointed to the Committee shall satisfy the independence requirements of the NASDAQ National Market and shall not be an affiliated person of the issuer or any subsidiary as defined under the Sarbanes-Oxley Act of 2002. The Committee shall consist of no fewer than three independent directors, for a term of appointment at the discretion of the Board of Directors, considering the views of the Chairman of the Board and the Chief Executive Officer, as appropriate, usually for one year. The members of the Committee shall serve until their successors are appointed and qualify, and shall designate the Chairman of the Committee. The Board shall have the power at any time to change the membership of the Committee and to fill vacancies in it, subject to an Option which forsuch new member(s) satisfying the above requirements and any reason expires or is terminated unexercisedother corporate legislation in effect at that time. The Committee may again by subjectform and delegate authority to an
Option undersubcommittees when appropriate, and shall meet as necessary, but at least once each year, in order to enable it to fulfill its responsibilities and duties as set forth herein. Except as expressly provided in this Charter, the Plan. The aggregate fair market value (determined at the
time the Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plansby-laws of the Company and any parent or
subsidiary of the Company which plans provide for granting of Incentive Stock
Options within the meaning of Section 422 of the Code) shall not exceed
$100,000.
(b) Antidilution Adjustments. In the event of a reorganization,
recapitalization, stock split, reverse stock split, stock dividend, combination
of shares, merger, consolidation, reclassification or other change inapplicable corporate structure, there shall be an appropriate adjustment to the number of shares
authorized for issuance under the Plan pursuant to the provisions of Section 8
hereof.
4. ELIGIBILITY
Options may be granted only to executive officers, management and other
key employees who are employed by the Company or a parent of subsidiary of the
Company, in each case as designated by the Committee. An Option may be granted
to a director of the Company or a parent or subsidiary of the Company who is
not also a member of the Committee, provided that the director is also an
officer or key employee.
5. GRANTING OF INCENTIVES
(a) Term of Plan and Option Grants. All Options granted pursuant to this
Plan shall be granted within 10 years from April 29, 1994. The date of the
grant of any Option shall be the effective date on which the Committee
authorizes the grant of such Option. In no event, however, shall any Option
be exercisable beyond 10 years from the date it is granted.
(b) Limits Applicable to any one Employee. The maximum number of Options
that may be granted to any one employee from this Plan is the greater of
300,000 or than 30% of the total number of shares of Common Stock authorized
for issuance under the Plan, subject to adjustment in accordance with the
provisions of Section 8 hereof. For Incentive Stock Options, except as
otherwise permitted by the Code, the Committee shall not, in the aggregate,
grant any employee Incentive Stock Options that are first exercisable in any
calendar year to the extent that the aggregate fair market value of the Common
Stock, at the time that the Incentive Stock Options are granted, exceeds
$100,000.
(c) Executive Officers. Options granted to any executive officer or
employee governed by the provisions of Section 16 under the Exchange Act,
shall not be exercisable earlier than six months from the date of grant.
(d) Stock Appreciation Rights. The Committee may in its sole discretion
grant an Option together with a SAR. In the case of such a grant the employee
may either (i) exercise the Option and receive Common Stock of the Company or
(ii) receive in cash or other property, in the sole discretion of the
Committee, the difference between the exercise price of the underlying option
and the fair market value of the Common Stock at the time the SAR is exercised.
An Incentive Stock Option granted together with a SAR shall be subject to the
limitations of the Plan and such additional limitations as may be imposed under
Section 422 of the Code which limitations are necessary or appropriate to cause
such Incentive Stock Option or another Incentive Stock Option to qualify as an
"incentive stock option" within the meaning of Section 422 of the Code. Upon
exercise of a SAR, the underlying option shall be deemed to have been
exercised to the extent of the Shares with respect to which the SAR is
exercised and such Shares shall no longer be available for issuance pursuant to
the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Option Price. The purchase price under each Option shall be at least
100% of the fair market value of the Common Stock at the time the Option is
granted but not less than the par value of such Common Stock. In the case of
an Incentive Stock Option granted to an employee owning more than 10% of the
total combined voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company, actually or constructively under Section
424(d) of the Code, the option price shall not be less than 110% of the fair
market value of the Common Stock subject to the Option at the time of its
grant. The fair market value of the Common Stock on such date shall be
determined in a manner consistent with the requirements of the Code.
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(b) Medium and Time of Payment. Common Stock purchased pursuant to the
exercise of an Option shall at the time of purchase be paid for in full in
cash, or with shares of Common Stock, or a combination of cash and such Common
Stock, to be valued at the fair market value thereof on the date of such
exercise. Common Stock to be used by executive officers and other employees
subject to the reporting provisions of Section 16 of the Exchange Act must have
been held by such optionee for a minimum of 6 months. If the optionee intends
to obtain a permissible broker loan or a simultaneous order to sell the shares
issuable upon exercise of any Options, upon the giving of at least 48 hours
prior written notice to the Company, exercise thereof shall not be deemed to
occur until the Company receives the proceeds of the recipient's broker loan or
other permitted transaction. Upon receipt of payment the Company shall,
without stock transfer tax to the optionee or other person entitled to exercise
the Option, deliver to the person exercising the Option a certificate or
certificates for such shares. It shall be a condition to the performance of
the Company's obligation to issue or transfer Common Stock upon exercise of an
Option or Options that the optionee pay, or make provision satisfactory to the
Company for the payment of, any withholding taxes which the Company is
obligated to collect with respect to the issuance or transfer of Common Stock
upon such exercise.
(c) Vesting and Exercise Period. The vesting period of time before
exercising an Option shall be prescribed by the Committee in each particular
case, in the Committee's sole discretion except that the vesting period shall
be at least 6 months from the date of grant for executive officers and other
employees subject to the reporting provisions of Section 16 of the Exchange
Act. No Option may be exercised more than 10 years from the date it is
granted. Unless otherwise specified by the Committee, Options shall vest and
become exercisable with respect to 25% of the shares subject thereto on each
of the first, second, third and fourth anniversaries of the date of the grant.
In the event of the death or permanent disability of an optionee, all
outstanding Options shall immediately vest and become exercisable, except for
those Options granted within six months of such date. Unless otherwise
specified, all Options shall be for a term of ten years from the date of grant.
However, in the case of an Incentive Stock Option granted to a 10% shareholder
(as defined in Section 6(a) hereof), such option, by its terms, shall be
exercisable only within five years from the date of grant.
(d) No Rights to Employment or as a Shareholder. Nothing in the Plan or
in any Option shall confer any right to continue in the employ of the Company
or any parent or subsidiary of the Company or interfere in any way with the
right of the Company or any parent or subsidiary of the Company to terminate
the employment of the optionee at will at any time in accordance with the
provisions of applicable law. An optionee shall have no rights as a
shareholder of the Company with respect to any shares issuable or transferable
upon exercise thereof until the date a stock certificate is issued to him for
shares of Common Stock.
7. EXERCISE AFTER SEPARATION OF EMPLOYMENT OR DEATH
(a) Retirement, Death or Disability. In the event of the retirement with
the consentgovernance guidelines of the Company, the Options or unexercised portions thereof that
were otherwise exercisableCommittee shall fix its own rules of procedure.
B.RESPONSIBILITIES OF THE COMMITTEE
The Committee shall (1) assist the Board in identifying individuals qualified to become Board members and recommend to the Board the director nominees for the next annual meeting of shareholders; (2) recommend members of the Board to serve on the date of retirement shall be exercisable
during their specified terms but prior to three years after the date of
retirement, whichever occurs earlier. In the eventcommittees of the death or permanent
disability (as that term is defined in Section 22(e)Board; (3) recommend to the Board individuals qualified to be elected as officers of the Code, as nowCompany; (4) recommend to the Board the corporate governance and business ethics policies, principles, guidelines and codes of conduct applicable to the Company; and (5) lead the Board in effect or as subsequently amended),its annual review of the recipient, all Options other than
those granted within six monthsBoard’s performance.
C.DUTIES OF THE COMMITTEE
NOMINATING. The Committee shall:
C-1 |
| to insure that the Board is comprised of members reflecting the proper expertise, skills, attributes and personal and professional backgrounds for service as a director of the Company and who have sufficient time available to devote to the affairs of the Company; | ||
| • | Actively seek, interview and screen individuals qualified to become Board members for recommendation to the Board; | |
| • | Receive suggestions concerning possible candidates for election to the Board, including self-nominations, nominations from shareholders in accordance with the Company’s by-laws and other third-party nominations; | |
| • | Recommend to the Board individuals for vacancies occurring from time to time on the Board, including vacancies resulting from an increase in the size of the Board; | |
| • | Recommend the slate of nominees to be proposed for election at each annual meeting of shareholders; | |
| • | Recommend members of the Board to serve on the committees of the Board; and | |
| • | Recommend to the Board individuals qualified to be elected as officers of the Company. |
CORPORATE GOVERNANCE. The Committee shall:
| • | Develop and recommend to the Board a set of corporate governance and business ethics policies, principles, guidelines and codes of conduct applicable to the Company and its directors, officers and employees; | |
| • | Review and reassess at least annually the adequacy of the Company’s corporate governance and business ethics policies, principles, guidelines and codes of conduct in light of emerging issues and developments related to corporate governance and other factors and formulate and recommend any proposed changes to the Board for approval; | |
| • | Generally advise the Board as a whole on corporate governance matters; | |
| • | Review and reassess at least annually the adequacy of this Charter and recommend any proposed changes to the Board for approval; | |
| • | Annually review its own performance; and | |
| • | Review and assess the management succession plan for the Chief Executive Officer position. |
OTHER. The Committee shall become vested and
immediately exercisablehave the authority to:
| • | Request reports from internal or external sources on matters related to its authority and duties as described in this Charter and on any subject that it deems related to its responsibilities; | |
| • | Retain and terminate any search firm to be used to identify director or officer candidates and to approve the search firm’s fees and other retention terms; |
C-2 |
| • | Receive communications from shareholders and provide copies or summaries of such communications to the other Directors, as the Chairman of the Committee considers appropriate; | |
| • | Retain and terminate outside accountants, legal counsel and other advisors to advise the Committee with respect to Committee matters as it may deem appropriate in its sole discretion and approve related fees and retention terms; and | |
| • | Perform such other activities as the Committee or the Board may from time to time deem necessary or appropriate. |
D. PROCEDURE FOR SHAREHOLDER NOMINATIONS
(A) The Committee will consider nominations submitted by shareholders. To recommend a nominee, a shareholder must write to the Company’s Secretary. To be considered by the optionee,Committee for nomination and inclusion in the Company’s proxy statement for its annual meeting of shareholders, a shareholder recommendation for a director must be received by the Company’s Secretary no later than the deadline for submitting shareholder proposals pursuant to Rule 14a-8(e) of the Securities Exchange Act of 1934. Any recommendation must include (i) the name and address of the candidate, (ii) a brief biographical description, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification requirements summarized above, and (iii) the candidate’s signed consent to be named in the proxy statement and to serve as a director if heelected. The
Committee may seek additional biographical and background information from any candidate that must be received on a timely basis to be considered by the Committee.
(B) Assuming the appropriate biographical and background material is not living,provided for candidates submitted by his heirs,
legatees or legal representatives (as the case may be), during their specified
terms but prior to the expiration of three years after the date of death or
permanent disability, whichever occurs earlier.
A-3
(b) Separation of Employment. With respect to any separation of
employment from the Company, other than by reason of retirement, death or
permanent disability, Options, if vested on the date of termination, may be
exercised during their specified terms but prior to the expiration of three
months after separation of employment with the Company, whichever occurs
earlier, or, for Non-Qualified Stock Options, such longer period up to the
expiration date originally scheduled for such Option, asshareholders, the Committee may,
in its sole and absolute discretion, determine and provide.
(c) Leavewill evaluate those candidates by applying substantially the same criteria, as for candidates submitted by Board members.
April 2013
C-3 |
| Trans World Entertainment Corporation |  | |
| Using ablack ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. |  |
| Your vote matters – here’s how to vote! | |
| You may vote online or by phone instead of mailing this card. | |
 | Votes submitted electronically must be received by 1:00 a.m., Eastern Standard Time, on June 27, 2019. |
 | Online Go towww.envisionreports.com/TWMC or scan the QR code – login details are located in the shaded bar below. |
 | Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada |
 | Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/TWMC |
| Annual Meeting Proxy Card |
▼ IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
| A | Proposals – The Board of Directors recommends a voteFOR all the nominees listed andFOR Proposals 2 and 4,and every3 YEARS on Proposal 3. |
| 1. | Election of Directors: |  |
| 01 - Michael Feurer | 02 - Martin Hanaka | 03 - Robert Marks | |
| 04 - Michael Nahl | 05 - Michael Reickert | 06 - Michael Solow |
 | Mark here to voteFOR all nominees | | Mark here toWITHHOLD vote from all nominees |
| 01 | 02 | 03 | 04 | 05 | 06 | ||||
| For AllEXCEPT - To withhold a vote for one or more nominees, mark the box to the left and the corresponding numbered box(es) to the right. | | | | | | |
| For | Against | Abstain | |||||||
| 2. | Advisory vote to approve Named Executive Officer compensation. | | | | |||||
| 1 Year | 2 Years | 3 Years | Abstain | ||||||
| 3. | Advisory vote on frequency of holding future advisory votes on Executive compensation. | | | | | ||||
| For | Against | Abstain | |||||
| 4. | To grant authority to the Board of Directors, at any time or times for a period of up to six months from the date of the Annual Meeting, to adopt an amendment to the Company’s Certificate of Incorporation, as amended, to effect a reverse stock split at a ratio up to 1 for 20, such ratio to be determined by the Board, or conversely, to determine not to proceed with the reverse stock split. | | | | |||
| 5. | In their discretion, the Proxies are authorized to vote upon all other matters that properly may be presented at the meeting. |
| B | Authorized Signatures – This section must be completed for your vote to be counted. – Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
| Date (mm/dd/yyyy) – Please print date below. | Signature 1 – Please keep signature within the box. | Signature 2 – Please keep signature within the box. | ||
| / / |
 | 1 U P X | | |||||
032LAB
| | Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/TWMC |  |
▼ IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
| Proxy – Trans World Entertainment Corporation |
|
Notice of Absence. If an optionee takes an approved leave2019 Annual Meeting of absence,
the Committee may, if it determines that to do so would be in the best
interest of the Company, provide in a specific case for continuation of Options
during such leave of absence, such continuation to be on such terms and
conditions as the Committee determines to be appropriate.
(d) Certain Investment Restrictions. Each Option granted under the Plan
shall be subject to the requirement that, if at any time theShareholders
Trans World Entertainment
38 Corporate Circle
Albany, NY 12203
Proxy Solicited by Board of Directors shall determine, in its discretion, that the listing, registration or
qualification of the shares issuable or transferable upon exercise thereof upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such Option or the issue,
transfer or purchase of shares thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. The Company shall not be obligated to
sell or issue any shares of Common Stock in any manner in contravention of the
Securities Act of 1933, as amended,for Annual Meeting – June 27, 2019
Michael Solow and Edwin J. Sapienza, or any state securities law.
8. ADJUSTMENTS
(a) Recapitalization. The number of shares subject tothem (each, a “Proxy” and together the Plan shall be
increased or decreased proportionately, as the case may be, in the event that
dividends payable in Common Stock during any fiscal year of the Company exceed
in the aggregate five percent of the Common Stock issued and outstanding at the
beginning of the fiscal year, or in the event there is during any fiscal year
of the Company one or more splits, reverse splits, subdivisions, or
combinations of shares of Common Stock resulting in an increase or decrease by
more than five percent of the shares outstanding at the beginning of the year.
Common Stock dividends, splits, reverse splits, subdivisions, or combinations
during any fiscal year that are equal or are less than, in the aggregate, five
percent of the Common Stock issued and outstanding at the beginning of such
fiscal year, shall be ignored for purposes of the Plan. In the event of any
such adjustment the number of underlying shares and the purchase price per
share applicable to options previously granted shall be proportionately
adjusted. All adjustments shall be made as of the date such action
necessitating such adjustment becomes effective.
(b) Sale or Reorganization. In case the Company is merged or
consolidated with another corporation, or in case substantially all of the
property, stock or assets of the Company is to be acquired by another
corporation, or in case of a separation, reorganization, or liquidation of the
Company, the Board of Directors of the Company, or the board of directors of
any corporation assuming the obligations of the Company hereunder, shall
either: (i) make appropriate provisions for the protection of any outstanding
Options by the substitution on an equitable basis of cash or comparable stock
or stock options of the Company, or cash or comparable stock or stock options
of the merged, consolidated, or otherwise reorganized corporation, or (ii)
make a cash payment equal to the difference between the exercise price of all
vested Options and the fair market value of the Common Stock on the date of
such transaction, as determined by the highest sale price of the Common Stock
quoted by the market or exchange on which the security is traded.
(c) Change in Control. Notwithstanding anything to the contrary in this
Plan, if there should be a "Change in Control" of the Company, all of the
Options granted under the Plan that are not currently exercisable shall become
A-4
immediately vested as of the date of such Change in Control. "Change in
Control" shall mean the occurrence of any of the following events that occur
after a date that fewer than twenty percent of the outstanding shares of Common
Stock in the aggregate are beneficially owned (as defined in Rule 13d-3 under
the Exchange Act) by Robert J. Higgins, members of his immediate family and one
or more trusts established for the benefit of such individual or family
members: (i) the sale of the Company substantially as an entirety (whether by
sale of stock, sale of assets, merger, consolidation or similar occurrence)
occurs, where the Company is not the surviving entity; (ii) any tender offer or
exchange offer is made by which any person or group, other than Robert J.
Higgins, members of his immediate family and one or more trusts established
for the benefit of such individual or family members, as "person" or "group"
is defined within the meaning of Section 13(d) of the Exchange Act, would
become the beneficial owner, directly or indirectly, of more than one-half of
the outstanding shares of Common Stock; or (iii) fifty percent or more of the
directors elected to the Board of Directors are persons who were not nominated
by management in the most recent proxy statement of the Company.
9. NON-TRANSFERABILITY OF OPTIONS
No Option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code. During the lifetime of a
recipient, Options shall be exercisable only by the optionee.
10. TERMINATION AND AMENDMENT OF THE PLAN
The Board of Directors shall have the right to amend, suspend, or
terminate the Plan; provided, however, that no such action shall affect or in
any way impair the rights of a recipient under any option right theretofore
granted under the Plan, and no amendment may be made increasing the number of
shares authorized for issuance under the Plan, except as provided in Section 8
hereof, without obtaining shareholder approval. Further, no such amendments or
discontinuance shall be made without obtaining the requisite shareholder
approval of the Company's shareholders if shareholder approval is required as
condition to the Plan continuing to comply“Proxies”), each with the provisions of Rule 16b-3
(or former 16b-3(e) to the extent that the Plan is governed by former Rule
16b-3(e)) promulgated under the Exchange Act or Section 162(m) of the Code.
11. EFFECTIVE DATE OF PLAN
The Plan shall become effective April 29, 1994, the date of its adoption
by the Board of Directors of the Company, subject to approval by the
shareholders of the Company within 12 months thereafter. The Plan shall, in
all events, terminate on April 29, 2004, or such earlier date as the Board of
Directors of the Company may determine. Any Option outstanding at the
termination date shall remain outstanding until it has either expired or
earlier if the optionee's employment has separated from the Company or the
Option has been exercised.
12. WRITTEN AGREEMENT
Each Option granted hereunder shall be embodied in a written agreement,
which shall be subject to the terms and conditions prescribed by the Plan, and
shall contain such other provisions as the Committee in its discretion shall
deem necessary or advisable. The agreements, which need not be identical,
shall be signed by the employee participant and by the Chairman of the Board,
the Vice Chairman, the President, the Secretary or any Vice President of the
Company for and in the name and on behalf of the Company.
13. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of New York, without reference to
A-5
its principles of conflict of laws, and shall be construed accordingly.
14. COMPLIANCE WITH SEC REGULATIONS
It is the Company's intent that the Plan comply in all respects with Rule
16b-3 promulgated under the Exchange Act, and any successor rule pursuant
thereto. If any provision of this Plan is later found not to be in compliance
with the Rule, the provision shall be deemed null and void. All grants of
Options and Common Stock and all exercises of Options under this Plan shall
be executed in accordance with the requirements of Section 16 of the Exchange
Act, and any regulations promulgated thereunder.
A-6
[FORM OF PROXY]
PRELIMINARY COPY
TRANS WORLD MUSIC CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints Robert J. Higgins and Matthew H. Mataraso, and
either of them, attorneys and proxies, with power of substitution, are hereby authorized to represent and vote the shares of the Company's common stock ofundersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of the CompanyTrans World Entertainment Corporation to be held on June 10, 1994 at The Desmond, 660
Albany-Shaker Road, Albany, New York 12211 at 10:00 a.m., and27, 2019 or at any adjournments thereof, uponpostponement or adjournment thereof.
Shares represented by this proxy will be voted as directed herein. If no such directions are indicated, the following matters:
The Board of Directors recommends a vote FOR the Nominees.
Item 1. ELECTION OF DIRECTORS ROBERT J. HIGGINS, MATTHEW H. MATARASO,
GEORGE W. DOUGAN, CHARLOTTE G. FISCHER, J. MARKHAM
GREEN, ISAAC KAUFMAN
FOR all nominees WITHHOLD AUTHORITY (INSTRUCTION: to withhold
authority (except as to vote for allProxies will have authority to vote FOR Item 1, For Item 2, every 3 YEARS for any
markedItem 3 and FOR Item 4.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the contrary) nominees listed above individual nominee listed
above, write that nominee's
name in space provided
below.)
[__] [__] ___________________________
___________________________
(Continued andmeeting.
(Items to be signedvoted appear on reverse side)
Item 2. APPROVAL OF AMENDMENT TO CERTIFICATE OF
INCORPORATION FOR NAME CHANGE
[__] For [__] Against [__] Abstain
ITEM 3. APPROVAL OF 1994 STOCK OPTION PLAN
[__] For [__] Against [__] Abstain
ITEM 4. Other matters that in their discretion that may come properly before
the meeting.
[__] For [__] Against [__] Abstain
Dated:______________________________, 1994
Signature:________________________________
__________________________________________
Signature if held jointly
Please sign exactly as name appears at
left. When shares are held by joint tenants,
both should sign. When signing as an
attorney, executor, administrator, trustee,
or guardian, please give full title as such.
If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
Differences between the Proxy Materials
Proposed for Circulation
and the Materials in Electronic Format
A. Proxy Statement
All headings in the Proxy Statement, including Annex A thereto, that are
centered are in boldface in large and small caps and are represented in
the EDGAR document by all caps.
All subheadings in the Proxy Statement, including Annex A thereto, on
the left margin are in boldface in the circulated document except for the
subheadings on pages 7 through 10 beginning after "Compensation
Committee Report on Executive Compensation", which are in italics.
The Notice of Annual Meeting, the cover page of the Proxy Statement
in the circulated document, and the form of the proxy are not numbered.
On the top of the Notice of Annual Meeting preceding the Proxy
Statement is the "Trans World Music Corp." logo.
On the bottom of the Notice of Annual Meeting preceding the Proxy
Statement the message marked "Important" is in boldface and bordered
by a box.
On the Notice of Annual Meeting preceding the Proxy Statement the sentence
"Your vote is important." is in boldface in the circulated document.
On pages 2 and 3 the names of the nominees for director are in boldface.
On page 5 the paragraph captions "Cash Compensation" and "Director
Stock Option Plan" are in italics in the circulated document.
On pages 7 through 10, the following subheadings and paragraph captions
are in italics in the circulated document: "Composition and Purpose of the
Compensation Committee", "Compensation Philosophy and Overall
Objectives", "Salary and Annual Incentive Compensation", "Salaries", "Annual
Performance Incentives", "Long Term Incentives", "Chief Executive
Officer's Compensation", "Deductibility of Compensation Expenses" and
"Compensation Committee Interlocks and Insider Participation".
On page 10 the phrase "Compensation Committee of the Board of
Directors" and the names "Arnold S. Greenhut, Chairman, George W.
Dougan, Charlotte G. Fischer, J. Markham Green and Isaac Kaufman"
are in boldface in the circulated document.
On page 13 the data points are used to create line graphs in the circulated
document.
On page 14 the sentence "The Board of Directors unanimously
recommends that shareholders vote FOR the amendment to the Restated
Certificate of Incorporation" is in bold face in the circulated document.
On pages 15 and 16 the paragraph captions "Committee", "Eligibility",
"Common Stock Issuable upon Exercise", "Grants of Stock Options and
Stock Appreciation Rights", "Amendment and Termination" and
"Principal Differences" are in italics in the circulated document.
On Page 17 the sentence "The Board of Directors unanimously
recommends that shareholders vote FOR the approval of the 1994 Stock
Option Plan" is in boldface in the circulated document.
On pages 17 and 18 the paragraph captions "Other Items", "Proxy Solicitation",
"Independent Auditors" and "Financial Statements" are in italics in the
circulated document.
On Annex A to the Proxy Statement the paragraph captions in Sections
3, 5, 6, 7 and 8 are underlined.
B. PROXY CARD
The language comprising the form of proxy is printed on reverse sides of
a white card with dimensions of approximately 7 3/4" x 5 1/4 ". The
language is printed so that it reads with the card's longest dimension held
horizontally.