UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
(Amendment No. 2)
Filed by the Registrant ☐
Filed by a Party other than the Registrant ☒
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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BED BATH & BEYOND INC.
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(Name of Registrant as Specified in Its Charter)
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LEGION PARTNERS HOLDINGS, LLC
LEGION PARTNERS, L.P. I
LEGION PARTNERS, L.P. II
LEGION PARTNERS SPECIAL OPPORTUNITIES, L.P. XII
LEGION PARTNERS, LLC
LEGION PARTNERS ASSET MANAGEMENT, LLC
CHRISTOPHER S. KIPER
RAYMOND T. WHITE
MACELLUM HOME FUND, LP
MACELLUM MANAGEMENT, LP
MACELLUM ADVISORS GP, LLC
JONATHAN DUSKIN
ANCORA CATALYST INSTITUTIONAL, LP
ANCORA CATALYST, LP
MERLIN PARTNERS INSTITUTIONAL, LP
ANCORA MERLIN, LP
ANCORA SPECIAL OPPORTUNITY FUND
ANCORA/THELEN SMALL-MID CAP FUND
ANCORA ADVISORS, LLC
FREDERICK DISANTO
THERESA R. BACKES
JOHN E. FLEMING
SUE ELLEN GOVE
JANET E. GROVE
JEFFREY A. KIRWAN
JEREMY I. LIEBOWITZ
CYNTHIA S. MURRAY
HUGH R. ROVIT
ALEXANDER W. SMITH
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(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
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REVISED PRELIMINARY COPY SUBJECT TO
COMPLETION
DATED MAY 10, 2019
LEGION PARTNERS HOLDINGS, LLC
___________________, 2019
It is Time for the Current Board to
be Held Accountable for Years of Poor Performance, Failed Initiatives, and Self-Enriching Executive Compensation Packages
Wholesale Board and Leadership Change
is Necessary to Address the Magnitude of Value Destruction and Shareholders’ Serious Concerns
We Believe Bed Bath Has Significant
Value and Can Thrive Under New Leadership
Vote the WHITE Proxy Card Today to
Support Our Highly Qualified Slate of Directors Who Are Committed to Implementing a Comprehensive Turnaround Plan
Dear Fellow Bed Bath Shareholder:
Legion Partners
Holdings, LLC and the other participants in this solicitation (collectively, the “Investor Group” or “we”)
beneficially own a total 6,914,939 shares of Bed Bath & Beyond Inc., a New York corporation (“Bed Bath” or the
“Company”), including 1,419,500 shares underlying currently exercisable call options, or approximately 5.2% of the
outstanding common stock, par value $0.01 per share (the “Common Stock”), making us one of the Company’s largest
shareholders.
Bed Bath is a great
company with tremendous potential and a dedicated workforce of approximately 62,000 employees that we believe can thrive under
the right leadership. Unfortunately, CEO Steven Temares and the board of directors (the “Board”) have presided over
an extended period of poor stock price performance, poor operating performance, poor corporate governance, and substantial destruction
of shareholder value. Since early 2015, the stock has lost over 80% of its value. Moreover, Bed Bath’s CEO Steven Temares
has overseen the destruction of more than $8 billion in market value over his 15-year tenure, with total shareholder returns of
negative 58%, while receiving, together with Co- Chairmen Emeriti of the Board, Warren Eisenberg and Leonard Feinstein, over $300
million in total compensation over the past 15 years. Notwithstanding four consecutive failed say-on-pay votes, the Board failed
to hold itself accountable and even unanimously voted to reject the resignation of a member of the compensation committee after
she received more “Against” votes than “For” votes at last year’s 2018 annual meeting of shareholders.
Not until faced with
stockholder pressure, did the Board take steps to change its composition. We do not believe the recent Board changes go far enough
to address the prolonged underperformance of the Company and destruction of shareholder value. The recent board changes were not
announced with a strategic plan developed by the newly constructed Board. Instead, the Company announced it would continue the
status quo - implementing its strategic initiatives that we do not believe have shown evidence of the transformational change needed
to save this business, as indicated by management’s 2019 guidance of a 4.0% sales decline at the midpoint and flat sales
in 2020. We continue to believe that CEO Steven Temares must be replaced and new, independent directors with deep retail experience
must be added to the Board. We fully appreciate that asking for control, let alone the removal of an entire Board, is no trivial
matter. However, in our view, there is an urgent need for wholesale Board and leadership changes at Bed Bath before the Company’s
failures become irreparable.
The upcoming
2019 annual meeting of shareholders of Bed Bath (the “2019 Annual Meeting”) represents a critical juncture for shareholders
at Bed Bath to elect a new Board comprised of all-star executives who are both highly qualified and excited to significantly improve
the operating performance, oversight, and value of the Company for the benefit of all shareholders. We have gone to great lengths
to carefully select ten director nominees who will bring substantial skills directly relevant to Bed Bath’s business and
current challenges, including: sourcing, supply chain and private label; retail operations; marketing, branding and e-commerce;
and investments, governance, real estate, and turnarounds. Notably, among our slate of director nominees are several highly accomplished
executives with direct experience successfully leading some of the most well-known brands in the world or overseeing similar turnarounds
at competing home furnishing companies such as Chico’s, Ellery Homestyles, Macy’s, Pier 1 Imports, Target, The Gap,
Walmart and Zales.
Our slate of director
nominees is committed to executing on a comprehensive strategic plan that we released, which includes a quantified time and action
plan that prioritizes the following initiatives: launching an immediate search for
a top-flight
CEO to lead the Company, addressing the Company’s weak sales, improving gross margins, adopting cost-cutting measures, creating
an incentive compensation structure that better aligns pay-for-performance, optimizing inventory levels, and reviewing all non-core
businesses and assessing their value as part of the business or their potential value to other parties. Shareholders can see our
full strategic plan at www.restorebedbath.com.
We hope that you share
our excitement to seize the opportunity Bed Bath represents with a newly constituted and extraordinarily capable board of directors
at the helm. We believe that shareholders have suffered long enough at Bed Bath. Fortunately, shareholders finally have the opportunity
to choose a much better alternative at the 2019 Annual Meeting.
The Company may try
to argue that we are seeking a level of Board representation that is disproportionate to our 5.2% ownership interest in the Company.
It is important to understand, however, that this election is not about the Investor Group versus the current Board. This election
is about what is best for the Company and its shareholders. We strongly believe that anything short of a full change in the Board
at the 2019 Annual Meeting will be wholly inadequate to rectify the magnitude of value destruction, operational underperformance
and governance issues at Bed Bath. We have gone to great lengths to identify ten highly credible director candidates who are independent-thinking
business leaders who are committed to putting the best interests of Bed Bath’s shareholders first. Therefore, while the election
of a majority of our director candidates may be sufficient to ensure that the changes we are seeking are implemented at Bed Bath
following the 2019 Annual Meeting, we have nevertheless nominated a full slate because we believe that each of the director nominees
that we have identified is more qualified than the Company’s nominees and that each will bring more relevant skills and experiences
to the different aspects of Bed Bath’s business and current challenges than the incumbent nominees the shareholders would
otherwise be forced to accept. We believe shareholders deserve to have the best possible Board, comprised of the most talented
and experienced individual directors.
Each of our director
nominees is committed to the implementation of our comprehensive turnaround plan for Bed Bath. Therefore, in the event that our
director nominees comprise a majority of the Board following the 2019 Annual Meeting, we expect that the Board, consistent with
its fiduciary duties, will implement our comprehensive turnaround plan for Bed Bath. While we have confidence that our director
nominees’ plans for Bed Bath will put the Company on the right path towards substantial shareholder value creation, there
can be no assurance that the implementation of our comprehensive turnaround plan will ultimately enhance shareholder value. In
the event that our director nominees comprise less than a majority of the Board following the 2019 Annual Meeting, there can be
no assurance that any actions or changes proposed by our director nominees, including the implementation of our turnaround plan,
will be adopted or supported by the Board.
We urge you to carefully
consider the information contained in the attached Proxy Statement and then support our efforts by signing, dating and returning
the enclosed
WHITE
proxy card today. The attached Proxy Statement and the enclosed
WHITE
proxy card are first being
furnished to the shareholders on or about ____________, 2019.
If you have already voted for the incumbent
management slate, you have every right to change your vote by signing, dating and returning a later dated
WHITE
proxy card
or by voting in person at the 2019 Annual Meeting.
If you have any questions or require any
assistance with your vote, please contact Saratoga Proxy Consulting LLC, which is assisting us, at its address and toll-free number
listed below.
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Thank you for your support,
Christopher S. Kiper
Legion Partners Holdings, LLC
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If you have any questions, require
assistance in voting your
WHITE
proxy card,
or need additional copies of
the Investor Group’s proxy materials,
please contact:
Shareholders call toll-free
at (888) 368-0379
Email: info@saratogaproxy.com
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REVISED PRELIMINARY COPY SUBJECT TO
COMPLETION
DATED MAY 10, 2019
2019 ANNUAL MEETING OF SHAREHOLDERS
OF
Bed
Bath & Beyond Inc.
_________________________
PROXY STATEMENT
OF
LEGION PARTNERS HOLDINGS, LLC
_________________________
PLEASE SIGN, DATE AND MAIL THE ENCLOSED WHITE PROXY CARD TODAY
Legion Partners Holdings,
LLC, a Delaware limited liability company (“Legion Partners Holdings”), and the other participants in this solicitation
(collectively, the “Investor Group” or “we”) are significant shareholders of Bed Bath & Beyond Inc.,
a New York corporation (“Bed Bath” or the “Company”), who beneficially own, in the aggregate, approximately
5.2%
1
of the outstanding shares of
common stock, $0.01 par value per share (the “Common Stock”), of the Company, including approximately 1.0% of shares
underlying call options that are currently exercisable. We are furnishing this proxy statement and accompanying
WHITE
proxy
card to holders of common stock, par value $0.01 per share (the “Common Stock”) of Bed Bath in connection with the
solicitation of proxies in connection with the Company’s 2019 annual meeting of shareholders (including any and all adjournments,
postponements, continuations or reschedulings thereof, or any other meeting of shareholders held in lieu thereof, the “2019
Annual Meeting”). The 2019 Annual Meeting will be held on a date, and at a time and place, to be determined by the Company.
2
We are seeking your
support at the Company’s 2019 Annual Meeting of Shareholders for the following:
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1.
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To elect Legion Partners Holdings’
ten (10) director nominees, Theresa R. Backes, Jonathan Duskin, John E. Fleming, Sue
Ellen Gove, Janet E. Grove, Jeffrey A. Kirwan, Jeremy I. Liebowitz, Cynthia S. Murray,
Hugh R. Rovit, and Alexander W. Smith (each a “Nominee” and, collectively,
the “Nominees”) to hold office until the 2020 Annual Meeting of Shareholders
(the “2020 Annual Meeting”) and until their respective successors have been
duly elected and qualified;
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2.
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To vote on a non-binding, advisory resolution to approve the compensation of the Company’s
named executive officers;
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___________________________
1
Because the Company has not yet publicly disclosed how many shares of Common Stock are outstanding as of [ ], 2019,
the record date for the Annual Meeting, the percentages of ownership reported throughout this Proxy Statement are based upon 132,089,269
shares outstanding, as of March 30, 2019, which is the total number of shares outstanding as reported in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2019.
2
The Company has not yet publicly disclosed the date, time and place of the 2019 Annual Meeting. Once the Company
publicly discloses such date, time and place, Legion Partners Holdings intends to supplement this Proxy Statement with such information
and file revised definitive materials with the Securities and Exchange Commission.
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3.
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To ratify the appointment of KPMG LLP as the independent registered public accounting firm of the
Company for the fiscal year ending February 29, 2020; and
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4.
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To transact such other business, if any, as may properly come before the 2019 Annual Meeting and
any adjournment thereof.
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The Investor Group
is seeking to elect a full slate of nominees to the Company’s Board of Directors (the “Board”) because we believe
that the magnitude of value destruction, gravity of corporate governance issues and deterioration in operational performance necessitates
wholesale change in the boardroom. Legion Partners Holdings has nominated a slate of highly qualified and capable candidates with
relevant backgrounds and industry experience. If elected, the nominees will bring fresh perspectives, talented leadership, and
responsible oversight in implementing a much-needed turnaround at Bed Bath.
Legion Partners Holdings
believes the terms of all ten (10) directors currently serving on the Board expire at the 2019 Annual Meeting. This Proxy Statement
is only soliciting proxies to elect the Nominees. Accordingly, the enclosed
WHITE
proxy card does not confer voting power
with respect to any of the Company’s director nominees. You can only vote for the Company’s director nominees by signing
and returning a proxy card provided by the Company. Shareholders should refer to the Company’s proxy statement for the names,
backgrounds, qualifications, and other information concerning the Company’s director nominees.
As of the date
hereof, Legion Partners Holdings, together with Legion Partners, L.P. I, a Delaware limited partnership (“Legion Partners
I”), Legion Partners, L.P. II, a Delaware limited partnership (“Legion Partners II”), Legion Partners Special
Opportunities, L.P. XII, a Delaware limited partnership (“Legion Partners Special XII”), Legion Partners, LLC, a Delaware
limited liability company (“Legion LLC”), Legion Partners Asset Management, LLC, a Delaware limited liability company
(“Legion Partners Asset Management”), Christopher S. Kiper, Raymond T. White (collectively, the “Legion Group”),
Macellum Advisors GP, LLC, a Delaware limited liability company (“Macellum GP”), Macellum Home Fund, LP, a Delaware
limited partnership (“Macellum Home”), Macellum Management, LP, a Delaware limited partnership (“Macellum Management”),
Jonathan Duskin (collectively, the “Macellum Group”), Ancora Catalyst Institutional, LP, a Delaware limited partnership
(“Ancora Catalyst Institutional”), Ancora Catalyst, LP, a Delaware limited partnership (“Ancora Catalyst”),
Merlin Partners Institutional, LP, a Delaware limited partnership (“Merlin Institutional”), Ancora Merlin, LP, a Delaware
limited partnership (“Ancora Merlin”, and together with Ancora Merlin Institutional, Ancora Catalyst Institutional
and Ancora Catalyst, the “Ancora Funds”), Ancora Special Opportunity Fund, a series of the Ancora Trust, an Ohio business
trust (“Ancora Special Opportunity”), Ancora/Thelen Small-Mid Cap Fund, a series of the Ancora Trust, an Ohio business
trust (“Ancora/Thelen”), Ancora Advisors, LLC, a Nevada limited liability company (“Ancora Advisors”),
Frederick DiSanto (together with the Ancora Funds, the “Ancora Group”), and each of the other Nominees (each a “Participant”)
collectively beneficially own 6,914,939 shares of Common Stock (the “Investor Group Shares”), including 1,419,500
shares of Common Stock underlying call options that are currently exercisable. We intend to vote the Investor Group Shares
FOR
the election of the Nominees,
AGAINST
the approval of the non-binding advisory resolution on the compensation of the
Company’s named executive officers, and
FOR
the ratification of the selection of KPMG LLP as the independent registered
public accounting firm of the Company for the fiscal year ending February 29, 2020, as described herein.
The Company has set
the close of business on [_____] [__], 2019 as the record date for determining shareholders entitled to notice of and to vote at
the 2019 Annual Meeting (the “Record Date”). The mailing address of the principal executive offices of the Company
is 650 Liberty Avenue, Union, New Jersey 07083. Shareholders of record at the close of business on the Record Date will be entitled
to vote at the 2019 Annual Meeting. The Company has not yet publicly disclosed how many shares of Common Stock are outstanding
as the Record Date. As of March 30, 2019, there were 132,089,269 shares of Common Stock outstanding, which is the total number
of shares outstanding as reported in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission
(“SEC”) on April 30, 2019. Once the Company publicly discloses the number of shares of Common Stock outstanding as
of the Record Date, Legion Partners Holdings intends to supplement this Proxy Statement with such information and file revised
definitive materials with the SEC.
THIS SOLICITATION IS
BEING MADE BY THE INVESTOR GROUP AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OR MANAGEMENT OF THE COMPANY. WE ARE NOT AWARE OF
ANY OTHER MATTERS TO BE BROUGHT BEFORE THE 2019 ANNUAL MEETING OTHER THAN AS SET FORTH IN THIS PROXY STATEMENT. SHOULD OTHER MATTERS,
WHICH THE INVESTOR GROUP IS NOT AWARE OF A REASONABLE TIME BEFORE THIS SOLICITATION, BE BROUGHT BEFORE THE 2019 ANNUAL MEETING,
THE PERSONS NAMED AS PROXIES IN THE ENCLOSED
WHITE
PROXY CARD WILL VOTE ON SUCH MATTERS IN OUR DISCRETION.
THE INVESTOR GROUP
URGES YOU TO SIGN, DATE AND RETURN THE
WHITE
PROXY CARD IN FAVOR OF THE ELECTION OF THE NOMINEES.
IF YOU HAVE ALREADY
SENT A PROXY CARD FURNISHED BY COMPANY MANAGEMENT OR THE BOARD, YOU MAY REVOKE THAT PROXY AND VOTE ON EACH OF THE PROPOSALS DESCRIBED
IN THIS PROXY STATEMENT BY SIGNING, DATING, AND RETURNING THE ENCLOSED
WHITE
PROXY CARD. THE LATEST DATED PROXY IS THE ONLY
ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE 2019 ANNUAL MEETING BY DELIVERING A WRITTEN NOTICE OF REVOCATION
OR A LATER DATED PROXY FOR THE 2019 ANNUAL MEETING OR BY VOTING IN PERSON AT THE 2019 ANNUAL MEETING.
Important Notice Regarding the Availability
of Proxy Materials for the 2019 Annual Meeting—This Proxy Statement and our WHITE proxy card are available at
www.restorebedbath.com
IMPORTANT
Your vote is important,
no matter how few shares of Common Stock you own. The Investor Group urges you to sign, date, and return the enclosed WHITE proxy
card today to vote FOR the election of the Nominees and in accordance with the Investor Group’s recommendations on the other
proposals on the agenda for the 2019 Annual Meeting.
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If your shares of Common Stock are registered in your own name, please sign and date the enclosed
WHITE
proxy card and return it to the Investor Group, c/o Saratoga Proxy Consulting LLC (“Saratoga”) in the
enclosed postage-paid envelope today.
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If your shares of Common Stock are held in a brokerage account or bank, you are considered the
beneficial owner of the shares of Common Stock, and these proxy materials, together with a
WHITE
voting form, are being
forwarded to you by your broker or bank. As a beneficial owner, you must instruct your broker, trustee or other representative
how to vote. Your broker cannot vote your shares of Common Stock on your behalf without your instructions.
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Depending upon your broker or custodian, you may be able to vote either by toll-free telephone
or by the Internet. Please refer to the enclosed voting form for instructions on how to vote electronically. You may also vote
by signing, dating and returning the enclosed voting form.
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Since only your latest
dated proxy card will count, we urge you not to return any proxy card you receive from the Company. Even if you return the Company’s
proxy card marked “withhold” as a protest against the incumbent directors, it will revoke any proxy card you may have
previously sent to us. Remember, you can vote for our ten (10) Nominees only on our
WHITE
proxy card. So please make certain
that the latest dated proxy card you return is the
WHITE
proxy card.
If you have any questions, require
assistance in voting your
WHITE
proxy card,
or need additional copies of
the Investor Group’s proxy materials,
please contact:
Shareholders call toll-free
at (888) 368-0379
Email: info@saratogaproxy.com
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BACKGROUND OF THE
SOLICITATION
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From September 2016 to January 2019, the Macellum Group regularly reached out to Janet M. Barth,
Vice President of Investor Relations, to discuss the Company’s business and quarterly results.
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In November and December 2018, the Legion Group and Macellum Group began to discuss their shared
concerns with the Company’s prolonged underperformance, sustained shareholder value destruction and egregious corporate governance
practices, including the Board’s disregard for the shareholder vote at the 2018 Annual Meeting of Shareholders (the “2018
Annual Meeting”), in which Victoria Morrison received 56% of the votes cast against her but the Board unanimously reappointed
her to the Board, notwithstanding four consecutive failed say-on-pay votes.
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On January 10, 2019, the Legion Group called Ms. Barth, to discuss questions related to the Company’s
performance and to try to set up a meeting with Chief Executive Officer (CEO) Steven H. Temares.
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On January 11, 2019, the Legion Group and Macellum Group formally agreed to work together as a
group and to engage with the Company regarding their concerns. The Legion Group and Macellum Group subsequently reached out to
the Company to try to schedule a meeting with CEO Temares but were largely ignored.
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On February 27, 2019, the Legion Group and Macellum Group sent a letter to Mr. Temares expressing
their frustration that their prior requests to meet were ignored. In the letter, the Legion Group and Macellum Group noted their
serious concerns with the Company’s prolonged underperformance and requested a meeting within two weeks to discuss their
concerns and to better understand his plans for improving Bed Bath and stopping what the Legion Group and Macellum Group believed
was a downward spiral of results that has led to the significant destruction of shareholder value.
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On March 14, 2019, representatives of the Legion Group and Macellum Group met with Mr. Temares,
Chief Financial Officer and Treasurer, Robyn M. D'Elia, Chief Operating Officer and President, Eugene A. Castagna, Chief Administrative
Officer, Susan E. Lattmann and Ms. Barth at the Company’s headquarters in New Jersey to discuss their concerns with the Company’s
underperformance, poor shareholder returns, and executive compensation.
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On March 15, 2019, the Legion Group requested from the Company the forms of director questionnaire
(the “Questionnaire”) and representation agreement (the “Representation Agreement”) required under the
Company’s Amended By-laws (the “Bylaws”) to be completed by each nominee nominated by a shareholder in order
to nominate directors at the 2019 Annual Meeting.
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On March 18, 2019, representatives of the Legion Group and Macellum Group, along with their legal
counsel, Olshan Frome Wolosky LLP (“Olshan”), met with former Executive Chairmen, Warren Eisenberg and Leonard Feinstein,
member of the Board, Patrick Gaston, Ms. Barth and the Company’s legal counsel, Wachtell, Lipton, Rosen & Katz (“Wachtell”).
At the meeting, representatives of the Legion Group and Macellum Group repeated their concerns with the Company’s underperformance
and executive compensation and expressed the need for a change of a majority of the Board. The Company advised that they believed
their strategy was working and initiatives adopted to address the Company’s performance were “ahead of plan.”
The Company argued that results would come in 2020. Messrs. Eisenberg, Feinstein and Gaston also informed the Legion Group and
Macellum Group that they had kept Victoria Morrison on the Board despite shareholders having voted to unseat her at the 2018 Annual
Meeting due to her past contributions and legal skills.
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Between March 19, 2019 and March 25, 2019, Olshan and Wachtell spoke and communicated via email
on behalf of their respective clients to discuss the March 18, 2019 meeting as well as certain problematic provisions in the Questionnaire
and Representation Agreement, which Olshan believed were not valid under New York law in order to nominate directors for election
at a company’s annual meeting.
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On March 20, 2019, Olshan sent a letter to Wachtell requesting an affirmative waiver to the requirement
in the Questionnaire that each Nominee consent to being named in the Company’s proxy statement (the “Nominee Consent
Requirement”). Olshan also noted that the Representation Agreement required the Nominating Shareholder to become a party
thereto which was inconsistent with the Bylaws that only required each Nominee to execute a Representation Agreement.
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Also on March 20, 2019, the Legion Group, the Macellum Group, the Ancora Funds, Ancora Advisors
and Frederick DiSanto entered into a group agreement, pursuant to which the members agreed to, among other things, work together
to nominate directors and solicit proxies for their election (the “Group Agreement”).
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On March 21, 2019, Wachtell communicated to Olshan a proposal from the Company to add two (2) new
directors to the Board to replace two (2) independent directors. Olshan indicated it would speak with its clients and requested
a response to its March 20, 2019 letter.
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On March 25, 2019, Olshan and Wachtell spoke about the Company’s proposal. Olshan communicated
to Wachtell that the Investor Group believed more meaningful change was warranted at the Company and the replacement of two independent
directors would not be sufficient. Olshan and Wachtell also discussed the issues set forth in Olshan’s March 20, 2019 letter.
Wachtell communicated that it did not interpret the Nominee Consent Requirement to permit the Company to name any of the Nominees
on the Company’s proxy card. Olshan requested written confirmation of the same.
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On March 25, 2019, each of Ancora Special Opportunity Fund, Ancora/Thelen Small-Mid Cap Fund, Victor
Herrero Amigo, Theresa R. Backes, Joseph Boehm, David A. Duplantis, John E. Fleming, Sue Ellen Gove, Janet E. Grove, Jeffrey A.
Kirwan, Jeremy I. Liebowitz, Jon Lukomnik, Cynthia S. Murray, Martine M. Reardon, Hugh R. Rovit, Joshua E. Schechter and Alexander
W. Smith entered into a Joinder Agreement with the other parties to the Group Agreement pursuant to which they agreed, among other
things, to become parties to the Group Agreement and be bound by the terms and conditions thereof.
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On
March 26, 2019, Legion Partners Holdings delivered a 1,035 page letter (the “Nomination
Letter”) to Bed Bath nominating Victor Herrero Amigo, Theresa R. Backes, Joseph
Boehm, David A. Duplantis, Jonathan Duskin, John E. Fleming, Sue Ellen Gove, Janet E.
Grove, Jeffrey A. Kirwan, Jeremy I. Liebowitz, Jon Lukomnik, Cynthia S. Murray, Martine
M. Reardon, Hugh R. Rovit, Joshua E. Schechter and Alexander W. Smith for election to
the Board at the 2019 Annual Meeting. Accompanying the Nomination Letter was a cover
letter from Olshan to Wachtell relaying a verbal communication by Wachtell that the consents
the Nominees were providing under the Questionnaires would not be interpreted by the
Company to give the Company the right to include any of the Nominees in their proxy card
in connection with the 2019 Annual Meeting.
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Later
on March 26, 2019, the Investor Group issued a press release announcing the nomination
of sixteen highly-qualified independent candidates for election to the Board at the Annual
Meeting. In the press release, the Investor Group noted that given the magnitude of value
destruction at the Company, wholesale Board and leadership changes were warranted, including
a search to replace CEO Steven Temares. The Investor Group noted that the Company has
lost more than $8 billion in market value over Mr. Temares’ 15-year tenure as CEO,
with total shareholder returns of negative 58% and, since early 2015, the stock has lost
over 80% of its value. The Investor Group also noted issues with the Board’s lengthy
average tenure of 19 years, the Company’s excessive executive pay packages, certain
governance issues, among other things. The Investor Group also announced that it intended
to deliver a detailed plan to turn the Company around in the near term that would focus
on, among other things, recruiting a highly qualified CEO to lead the Company going forward,
addressing the Company’s weak sales, improving gross margins, adopting cost-cutting
measures, creating an incentive compensation structure that better aligns pay for performance,
and reviewing all non-core businesses and assessing their value as part of the business
or their potential value to other parties.
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Also on March 26, 2019, Bed Bath issued a press release confirming receipt of the Nomination Letter
from Legion Partners Holdings. The Company also publicly disclosed its intent to accelerate its Board refreshment program with
investor input and repeated its belief that its strategy to transform the Company was ahead of plan.
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|
·
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On March 28, 2019, Legion Partners Holdings delivered a letter (the “Change-in-Control Letter”)
to the Board explaining its concerns that following the Annual Meeting, should Legion Partners Holdings’ candidates constitute
a majority of the Board, their appointment could trigger certain change in control provisions under certain of the Company’s
material contracts and agreements unless they have been certified by the current Board as “continuing directors” in
advance of such election. Accordingly, in order to maintain a level playing field, and to allow shareholders to make their voting
decisions based solely on the merits, the letter requested written confirmation from the Company that, prior to the Annual Meeting,
the Board will take all necessary steps to use its discretionary authority under such agreements to certify Legion Partners Holdings’
candidates as “continuing directors” and otherwise approve of their nomination such that the change in control provisions
would not be triggered by the election of Legion Partners Holdings’ candidates to serve on the Board. Legion Partners Holdings
requested to receive a response from the Company no later than April 3, 2019.
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|
·
|
On March 29, 2019, Legion Partners Holdings delivered to Bed Bath a demand to inspect the Company’s
books and records under Section 624 of the New York Business Corporation Law. The parties subsequently discussed and entered into
a customary confidentiality agreement with respect to the information to be provided to Legion Partners Holdings.
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|
·
|
On
March 29, 2019, the Investor Group filed a Schedule 13D disclosing it had nominated sixteen
candidates for election at the Annual Meeting and a collective beneficial ownership of
approximately 5.0% of the Common Stock.
|
|
·
|
Also on March 29, 2019, Wachtell delivered a letter to Legion Partners Holdings identifying certain
purported deficiencies in the Nomination Letter and alleging the nomination was not made in good faith because Legion Partners
Holdings nominated more persons for election than vacancies expected at the 2019 Annual Meeting.
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|
·
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On March 31, 2019, Olshan, on behalf of Legion Partners Holdings, delivered a response letter (the
“Response Letter”) to Wachtell’s March 29
th
letter refuting its claims that the Nomination Letter
was deficient and addressing the Company’s concerns on a point-by-point basis. Olshan reiterated Legion Partners Holdings’
firm belief that its nomination constituted a good faith nomination, that the Bylaws didn’t prohibit the ability to nominate
more persons than vacancies expected, that Legion Partners Holdings would only solicit votes for the number of vacancies actually
existing and that the information provided in the Nomination Letter was more than sufficient according to the Company’s Bylaws
and applicable governing law. Nevertheless, in addition to the Response Letter, Legion Partners Holdings provided to the Company
a voluntary 474 page supplement (the “Supplemental Notice”) and supplements to each of the Questionnaires in order
to address any purported inconsistences and provide additional disclosures as requested by the Company. The Group Agreement and
Joinder Agreement were also amended as of such date to clarify that the Group Agreement will terminate immediately after the conclusion
of the activities contemplated therein, but no later than the final certification by the inspector of elections of the votes for
the 2019 Annual Meeting or earlier appoint by any Nominee to the Board, unless otherwise agreed to by the parties thereof.
|
|
·
|
On April 1, 2019, Wachtell delivered to Olshan a letter acknowledging receipt of the Response Letter
and the Supplemental Notice as well as reiterating certain allegations that Legion Partners Holdings’ Nomination Letter was
not submitted in good faith due to nominating more directors than expected vacancies.
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|
·
|
On April 1, 2019, Olshan responded by email to Wachtell that the Company’s claims that Legion
Partners Holdings’ Nomination Letter was not submitted in good faith were baseless because Wachtell admitted in its own letter
that the Bylaws did not prohibit nominating more persons than seats available, so long as Legion Partners Holdings did not solicit
in its definitive proxy statement more persons than vacancies existing at the 2019 Annual Meeting.
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|
·
|
On April 3, 2019, the Company delivered to Legion Partners Holdings a letter in response to the
Change-in-Control Letter claiming the Company would consider approving the Nominees for purposes of the change in control provisions
in the Company’s contracts but would need to interview the Nominees in order to assess whether they meet the standard for
approval.
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|
·
|
On April 5, 2019, Legion Partners Holdings delivered a letter to the Company noting that well over
1,400 pages of information was provided to the Company in connection with the nomination of the Nominees, providing more than sufficient
information to the Board to assess the qualifications of the Nominees. Legion Partners Holdings also noted that if shareholders
conclude that the Nominees should be elected to the Board, that determination alone should suffice. Legion Partners Holdings concluded
that the Board’s suggestion that it can override shareholder wishes and risk a default under its material agreements is improper
and unlawful. Legion Partners Holdings asked again for the Company to, no later than April 15, 2019, approve of the Nominees as
“continuing directors” in order to avoid any harm to shareholders’ inalienable rights to elect directors.
|
|
·
|
On April 5, 2019, Olshan delivered on Legion Partners Holdings’ behalf a letter to Wachtell
to follow up on certain open matters including (i) requesting written confirmation no later than April 15, 2019 that the Company
would not use the consents given pursuant to the Nominee Consent Requirement to name any Nominee in the Company’s proxy card,
and (ii) a supplement to Mr. Duskin’s Questionnaire, which provided updated ownership information of shares of common stock
of the Company beneficially owned by Mr. Duskin and certain other matters.
|
|
·
|
On April 8, 2019, the Investor Group issued a press release calling on the Board and management
team of Bed Bath to increase its level of disclosure and transparency when it reports fourth quarter results on April 10, 2019.
In its press release, the Investor Group compiled a list of ten questions for management to address that it believes shareholders
deserve to know.
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|
·
|
On April 10, 2019, Bed Bath announced its fourth quarter and full-year 2018 financial results,
which included annual sales decline. Additionally, the Company named Patrick Gaston as Lead Independent Director despite the fact
that he has been a director since 2007 and announced that it was accelerating its Board refreshment program and would anticipate
further changes to the Board in the near term.
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|
·
|
Later on April 10, 2019, the Investor Group issued a press release commenting on the Company’s
fourth quarter 2018 earnings and what it believed was evidence of an acceleration of the Company’s operating deterioration.
The Investor Group also expressed its deep concerns that management suggested they would reduce their coupon availability to improve
profitability. The Investor Group stated its view that it would not make sense to make any couponing adjustments prior to executing
on initiatives that would fundamentally improve the in-store experience for customers and drive retail traffic. The Investor Group
also announced it planned to release its detailed operational plan over the next two weeks.
|
|
·
|
On
April 12, 2019, Wachtell delivered a letter on behalf of the Board to Legion Partners
Holdings responding to Legion Partners Holdings’ letters sent April 5, 2019. Wachtell’s
letter did not respond to the request to confirm it would not name any Nominee in the
Company’s proxy statement or proxy card. Instead, the Board merely responded to
the request to approve the Nominees to avoid triggering certain change of control provisions
under the Company’s material agreements. In the letter, the Board claimed it was
not clear under New York law that the Board had the right to approve of potential director
candidates that it was not endorsing. The Board further argued it needed to interview
the Nominees in light of purported inaccuracies in the Questionnaires submitted by each
Nominee, without identifying what purported inaccuracies existed. The Board noted it
was “many weeks away” from filing its proxy statement and would continue
to consider the matters raised in Legion Partners Holdings’ prior letters.
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|
·
|
On April 17, 2019, Olshan delivered a letter to Wachtell to follow up on its letters dated March
26, 2019 and April 5, 2019 that sought to confirm the Company would not name any Nominee in the Company’s proxy statement
or proxy card. Given the lack of response from the Company to these letters, Olshan stated that Legion Partners Holdings would
expect the Company to either agree to (i) the use of a universal proxy card and to deliver to Legion Partners Holdings, written
consents of the Company’s director nominees to be named in Legion Partners Holdings’ proxy card or (ii) provide written
confirmation that the Company would not name any Nominee in the Company’s proxy statement or proxy card.
|
|
·
|
On April 19, 2019, Wachtell delivered a letter to Olshan on behalf of the Company in response to
Olshan’s letter dated April 17, 2019 to confirm that the Company would not name any of the Nominees in the Company’s
proxy card without their consent.
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|
·
|
Later on April 19, 2019, the Company’s advisor, The Goldman Sachs Group, Inc. (“Goldman
Sachs”), emailed Mr. Kiper to have a discussion regarding a potential settlement between the Company and Legion Partners
Holdings. Goldman Sachs and Mr. Kiper had several calls later that day whereby Goldman Sachs suggested the Investor Group enter
into a limited duration non-disclosure agreement to discuss potential changes at the Board level.
|
|
·
|
On
April 21, 2019, at the urging of the Company, the Investor Group entered into a non-disclosure
agreement with the Company and a proposal for settlement was delivered by Wachtell to
Olshan. Given it was Easter Sunday, Olshan advised Wachtell that it would respond back
to the proposal the next morning. The fact that the Investor Group had entered into a
non-disclosure agreement was deemed confidential until April 24, 2019.
|
|
·
|
On
April 22, 2019, less than 24 hours after entering into a non-disclosure agreement with
the Investor Group, for the purposes of discussing a potential settlement agreement and
without giving the Investor Group an opportunity to respond, the Company issued a press
release and investor presentation announcing that it had reconstituted the Board, effective
May 1, 2019, by having five current directors step down and appointing five new directors.
The Company also announced that Co-Founders and Executive Chairmen Warren Eisenberg and
Leonard Feinstein would transition to the role of Co-Founders, Co-Chairmen Emeriti and
would retire from the Board but be permitted to attend all Board meetings (and be paid
for their attendance) and that Patrick Gaston, who has been with the Board since 2007,
would be named the Current Lead Independent Director.
|
|
·
|
On April 22, 2019, the Investor Group released a statement responding to the Company’s Board
changes, stating that it believed the Board changes were not nearly enough when measured against what is needed to address the
issues with the current Board and management, including that CEO Steven Temares must be held accountable for the Company’s
prolonged poor performance and destruction of shareholder value. The Investor Group also noted that the Company’s announcement
lacked any detailed strategic vision for driving value creation at the Company and, as a result, the Investor Group would continue
to move forward with its campaign to install fresh, experienced and independent oversight and management at the Company. The Investor
Group could not publicly disclose the fact that it had entered into a non-disclosure agreement with the Company until April 24,
2019, since that fact was deemed confidential information.
|
|
·
|
Also on April 22, 2019, Olshan, on behalf of Legion Partners Holdings, sent a letter to Wachtell
requesting the use of a universal proxy card in light of the Board changes announced by the Company earlier that day. The letter
explained Legion Partners Holdings’ belief that the use of a universal proxy card was best corporate governance and would
provide shareholders the ability to elect the most qualified group of directors.
|
|
·
|
On April 24, 2019, Wachtell delivered a letter to Olshan indicating that the Company did not believe
there was a need for the use of a universal proxy card.
|
|
·
|
On April 26, 2019, the Investor Group released a comprehensive presentation outlining their strategic
plan for the Company. The strategic plan outlines a path forward to modernizing the Company’s retail practices and delivering
a significant earnings per share improvement, including to (i) revamp the executive management team by hiring a world class CEO,
(ii) reverse sales weakness by fixing the merchandise over-assortment problem through a detailed SKU rationalization process as
well as developing a merchandise architecture that will better resonate with customers, (iii) turnaround the Company’s culture
with an increased focus on employee training and education to improve motivation; (iv) significantly expand gross margins through
improved vendor relations and drive profits by establishing a direct sourcing strategy and private label program as well as fixing
mix issues created by the Company's shift to commoditized and lower margin products, (v) implement cost cutting measures, (vi)
improve inventory by increasing inventory turns and (vii) fix capital allocation by reviewing all non-core businesses and assessing
their value as part of the business or their potential value to other parties, among other things. The Investor Group also released
a statement in conjunction with the strategic plan. The Investor Group stated that the recent Board changes announced by the Company
are not nearly enough and appear hastily constructed. The Investor Group reiterated its belief that CEO Steven Temares must be
terminated as soon as possible and new directors must be added to the Board that have direct experience in the following areas:
customer-centricity, retail operations, sourcing, supply chain, private label, marketing, branding, e-commerce, and turnarounds.
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|
·
|
Later on April 26, 2019, the Company issued a statement in response to the Investor Group’s
comprehensive presentation, claiming it was executing on a comprehensive multi-year strategy that was “well underway and
delivering results”, despite little evidence of improvements to the business. The Company also falsely stated that it had
offered the Investor Group the opportunity to participate in the recent Board changes, when, in fact, the Investor Group had clearly
stated it would respond to the Company’s proposal within 24 hours. Rather than wait for a response and work towards a settlement
in good faith, the Company publicly announced its newly constructed board.
|
|
·
|
On
May 2, 2019, the Investor Group issued a press release responding to Bed Bath’s
recent Board changes and certain misleading claims. Specifically, the Investor group
noted that it had made a significant effort to negotiate a settlement by entering into
a non-disclosure agreement on Easter Sunday and was prepared to discuss the proposal
made by the Company on Monday morning but was preempted by the Company’s rush to
release its new director appointments. The Investor Group also outlined the Company’s
refusal to agree to a universal proxy card and approve of the Nominees for the limited
purpose of avoiding triggering a change of control that could result in the acceleration
of the Company’s $1.5 billion notes. The Investor Group also expressed its belief
that the newly constituted Board fell significantly short of the change needed for a
number of reasons, including that CEO Temares would remain at the helm and the former
Chairmen would continue to be paid to attend Board meetings. The Investor Group further
expressed concern with CEO Temares’ statements that elements of Bed Bath’s
turnaround plan were “substantially complete”, given the Investor Group’s
observations that the rate of deterioration of the business was accelerating, based on
the Company’s Q1 guidance. The Investor Group finally called upon Mr. Temares to
stop making what appears to be reactive and untested operational and strategic changes
to the business, particularly as it relates to the Company’s promotional stance,
until shareholders can vote at the 2019 Annual Meeting.
|
|
·
|
On
May 7, 2019, Wachtell delivered a letter to Olshan stating again that in order for the
Board to approve of the Nominees for purposes of the change in control provisions in
the Indenture, the Company would need to interview the Nominees. The letter also suggested
that if Legion Partners Holdings would not allow its Nominees to be interviewed by the
Board, the Investor Group should agree to indemnify the Company and the Board against
any risks and costs resulting from the Board’s approval.
|
|
·
|
On
May 10, 2019, Legion Partners Holdings filed a revised preliminary proxy statement confirming
the Nominees as its slate of directors.
|
REASONS FOR THE SOLICITATION
WE BELIEVE THE TIME FOR SUBSTANTIAL CHANGE
IS
NOW
For far too long, the
Board has presided over an extended period of poor stock price performance, decelerating operational performance, excessive compensation,
and poor corporate governance. Prior to the recent board changes, which we view as reactive and hastily constructed in response
to our active engagement, the average director tenure was approximately 19 years, which, in our view, hindered proper oversight
of management. Even with the recent Board changes, we believe the Board lacks sufficient retail expertise and has left CEO Temares
at the helm, implementing strategic initiatives that in our view have shown little evidence of success. Furthermore, we believe
the Board has failed at its basic duty to oversee the creation of a viable strategy, prioritize initiatives, measure success and
ensure management is held accountable for execution.
Until recently, the
Board was presided over by Co-Founders, Co-Chairmen Emeriti Warren Eisenberg and Leonard Feinstein who have both served on the
Board for 48 years, while the Company seems to be growing more out of touch with modern retail with every passing day. In our view,
the Company has not demonstrated an ability to appropriately respond to a changing retail landscape that demands a greater aptitude
for how to compete in an omnichannel world. While Messrs. Eisenberg and Feinstein have some very dated retail experience primarily
through their 48-year tenure at Bed Bath, the CEO and the rest of the independent directors have very minimal retail experience.
The recent Board changes are also equally troubling as only two of the five newly appointed directors have direct retail experience.
This lack of meaningful outside retail experience and relevant expertise may explain why more than $8 billion in market value has
been destroyed during CEO Temares’ 15-year tenure. While overseeing Mr. Temares’ reign of prolific shareholder value
destruction, Messrs. Eisenberg and Feinstein were each paid over $60 million over the past 15 years. For his part, CEO Steven Temares
has been paid over $180 million over this same period.
The problem with the
new Board is that it appears to have been constructed to perpetuate the status quo. While on the surface, the resignation of seven
(7) directors and the appointment of five (5) new directors looks like change, the new directors lack much in the way of retail
experience and they are faced with several challenges, including the following:
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·
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Steven Temares is still the CEO.
|
|
·
|
Co-Chairman Emeriti, Leonard Feinstein and Warren Eisenberg, will continue to be paid for attending
meetings and voicing their perspectives.
|
|
·
|
The newly appointed Chairman is Patrick Gaston, who has been on the Board for 12 years and has
overseen substantial value destruction while serving on the Audit Committee, Nominating and Governance Committee and the Compensation
Committee. Mr. Gaston does not appear to represent any new thinking.
|
|
·
|
The newly reconstituted Nominating and Governance Committee is comprised of three (3) of the four
(4) remaining legacy directors. This committee, which has no retail experience, will have a disproportionate influence over the
future of Mr. Temares.
|
We believe the Company’s
dramatic underperformance – when coupled with its poor corporate governance and excessive pay packages – necessitates
wholesale Board and management changes. Given the lack of a new strategic plan formulated by the recently constructed Board, we
fear the status quo will continue, as the same initiatives which haven’t driven shareholder value will continue to be pursued
under the helm of CEO Temares. We believe the Company has tremendous potential and a valuable and dedicated workforce of more than
62,000 employees that can thrive with the right board and management team in place.
We have nominated a
slate of ten (10) highly qualified Nominees for election to the Board at the Annual Meeting. Our Nominees were carefully selected
for their diverse skill sets in areas directly relevant to Bed Bath’s business, its current challenges, and importantly,
its opportunities. Our Nominees collectively bring decades of retail experience, leadership skills, operational execution, financial
acumen, a strong respect for proper corporate governance and an unequivocal commitment to represent the best interests of all shareholders.
Our Nominees, if elected, are prepared to begin executing on a strategic plan for Bed Bath that will seek to dramatically increase
margins, cash flow, and restore Bed Bath’s position as a dominant retailer while also holding management accountable. We
believe that our Nominees, if elected, will bring about the much needed change that is urgently required at Bed Bath.
The Current Leadership Team and Board
has Overseen Tremendous Value Destruction
Bed Bath’s stock
has significantly underperformed the S&P 500, Russell 2000, its proxy peer group and the Company’s closest retail peers
over a one, three, five and ten-year period as well as since April 2, 2003 when Steven Temares took the helm as the Company’s
CEO.
|
|
Share Price Performance (Total Shareholder Return Including Dividends)
|
|
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Since April 2, 2003
|
Bed Bath & Beyond
|
|
(33%)
|
(70%)
|
(78%)
|
(39%)
|
(58%)
|
S&P 500 Index
|
|
10%
|
46%
|
67%
|
328%
|
342%
|
Russell 2000 Index
|
|
1%
|
45%
|
37%
|
314%
|
397%
|
Proxy Peer Group
(1)
|
|
17%
|
1%
|
28%
|
471%
|
742%
|
Closest Retail Peers
(2)
|
|
11%
|
27%
|
51%
|
404%
|
592%
|
|
|
|
|
|
|
|
Relative Performance vs. S&P 500 Index
|
|
(43%)
|
(116%)
|
(145%)
|
(367%)
|
(400%)
|
Relative Performance vs. Russell 2000 Index
|
|
(34%)
|
(115%)
|
(115%)
|
(353%)
|
(455%)
|
Relative Performance vs. Proxy Peer Group
|
|
(50%)
|
(71%)
|
(106%)
|
(510%)
|
(801%)
|
Relative Performance vs. Closest Retail Peers
|
|
(45%)
|
(97%)
|
(129%)
|
(443%)
|
(651%)
|
Source: SEC Filings, Bloomberg, Capital
IQ as of 3/22/19
(1) Proxy Peer Group: AAP, AZO, DKS, DDS,
DG, DLTR, FL, GME, GPS, KSS, LB, M, JWN, ODP, ORLY, ROST, WSM
(2) Closest Retail Peers: FND, HD, TSCO, LOW, WMT, HOME, RH,
TGT, WSM, TTS, MIK, TCS, BBY, DKS, ODP, KIRK, JCP, KSS, JWN, M, BURL, ROST, TJX
Not only is the performance
of Bed Bath below its peers and indices, the performance is negative for all time periods noted. In our view, an engaged and properly
aligned Board would have recognized the need to take substantive action to address Bed Bath’s deteriorating performance long
ago.
Bed Bath’s Financial Results
Have Been in Constant Decline
Bed Bath’s financial
results have been in decline for many years. The decline is most clearly demonstrated in Bed Bath’s drop in return on invested
capital (“ROIC”). The ROIC of Bed Bath was roughly 25% five years ago and has now declined to 6.3% in FY 2018.
25.0% 25.2% 24.8% 23.7% 21.0% 17.0% 11.3% 6.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Return on Invested Capital %
Source: Company filings; CapitalIQ
In our view, the components
of the decline stems from a decrease in gross margin and rapidly rising selling, general and administrative (“SG&A”)
expenses. The results of this can most clearly be seen in Bed Bath’s EBITDA margins on the chart below:
16.8% 16.0% 15.1% 14.0% 11.7% 8.8% 6.3% 6.0% 4.0% 2.0% 0.0% 8.0% 10.0% 12.0% 14.0% 16.0% 20.0% 18.4 % 18.0% FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Adjusted EBITDA Margin %
Source: Company filings; Capital IQ
Under the Board’s
oversight and guidance, management has delivered a same-store sales compounded annual growth rate (“CAGR”) of 0.7%
over the last five years. The lack of growth seems to stem from the Company’s inability to deliver a compelling assortment,
experiential shopping environment and a viable omnichannel strategy. Further issues that appear to be causing market share erosion
include:
|
·
|
The merchandise architecture lacks a clearly defined “good, better, best” strategy
or sufficient presence of opening price point items.
|
|
·
|
Rather than offering a well-designed, thoughtfully curated product assortment, the stores contain
a dizzying array of too similar items and lack the experience customers demand.
|
|
·
|
The Company has failed to deliver on the promise of building a value-added interior design service
model despite acquiring promising building blocks such as Decorist, Inc. which was purchased in 2017.
|
|
·
|
The pricing message remains confusing to the customer. Despite price points that are below the
competition when considering the coupon or reward member discount (BEYOND+), the Company provides little clear messaging to allow
the customer to recognize the magnitude of the value proposition.
|
Gross margins have
materially contracted by approximately 730-basis points in the last eight years from 41% to 34% as demonstrated in the chart below.
41.4 % 40.2 % 39.7 % 38.9 % 38.2 % 37.5 % 36.0 % 34.1 % 34.0% 3 3 . 0% 3 2 . 0% 3 1 . 0% 3 0 . 0% 36.0% 3 5 . 0% 3 7 . 0% 38.0% 3 9 . 0% 4 0 . 0% 4 1 . 0% 4 2 . 0% FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Gross Margin %
Source: Company filings; CapitalIQ
We believe this is
a result of several factors including:
|
·
|
Heavy reliance on promotional activity in an attempt to drive store traffic because management
has failed to successfully implement initiatives that generate customer visits based on product or store experience.
|
|
·
|
A mix shift to lower margin products.
|
|
·
|
Failure to address the inadequacies of an expensive antiquated supply chain that has relied on
inefficient middlemen for as much as 90% of their products.
|
|
·
|
A lack of a comprehensive, margin enhancing private label program.
|
|
·
|
A planning and allocation system where over 1,000 individual store managers behave like buyers
and order 70% of their store’s assortment.
|
|
·
|
The Company’s inventory turns are very low and likely lead to more clearance.
|
|
·
|
Despite wielding more influence than store managers of nearly any other chain, store manager compensation
is not tied to profitability, margins, inventory levels or asset turns. A phenomenon that likely also impacts payroll and individual
store profit.
|
At the same time, SG&A
expenses have increased 27% in the last five years. As a percentage of sales, SG&A has gone from 25% to 31% as demonstrated
in the chart below.
$2,363 $2,75 1 $2,951 $3,065 $3,20 5 $3,441 $3,665 $3,681 24.9% 25.2% 25.7% 25.8% 26.5% 28.2% 29. 7% 30.6% 20.0% 2 2 . 5% 2 5 . 0% 27.5% 3 0 . 0% 3 2 . 5% $0 $ 5 0 0 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 SG&A % of Sales SG&A $'s
Source: Company filings; Capital IQ
The Company’s
lack of sufficient disclosure makes it difficult to understand the drivers of additional costs. However, the Investor Group believes
expense creep comes from a combination of higher advertising expenses, increasing head count, extensive use of consultants, and
excessive executive compensation.
Bed Bath’s Capital Allocation
Track Record is Troubling
While declining margins
have been part of the story, the Company’s track record of capital allocation has been deeply concerning. According to the
Company’s financial statements, capital expenditures have climbed from $243 million in fiscal 2011 to over $325 million in
fiscal 2018. In addition, poorly executed acquisitions of non-core businesses, some of which were purchased from the children of
the Co-Chairmen Emeriti (such as buybuy Baby and Chef Central) appeared to do little to improve any overall return or profit metrics
and we believe have added significant complexity to the business.
Further exacerbating
the problem, over the last 15 years, the Company has spent approximately $10.6 billion of cash to buy back the Company’s
stock at an average price of $50 per share as demonstrated in the chart below, oddly repurchasing more shares when the stock price
was high than when the stock price was lower.
$350 $598 $301 $734 $48 $95 $688 $1,218 $1,00 1 $1,284 $2,251 $1,101 $547 $252 $148 $40 $36 $40 $36 $29 $35 $43 $62 $70 $68 $44 $31 $16 $0 $ 10 $ 20 $ 3 0 $ 40 $ 5 0 $ 70 $ 80 $0 $ 5 0 0 $ 1 , 0 0 0 $1,500 $ 2 , 0 0 0 $2,500 $59 $3,000 $57 $ 60 $ 3 , 5 0 0 $ 4 , 0 0 0 F Y04 F Y05 F Y06 F Y07 F Y08 F Y14 F Y15 F Y16 F Y17 F Y18 Price of Shares Repurchased Cash Spent on Share Repurchases ($'s in millions) FY09 FY10 FY11 Cash Used for Share Repurchase FY12 FY13 Average Price
Source: Company filings; CapitalIQ
Poor Corporate Governance and Compensation
Practices Demonstrate a Lack of Alignment with Shareholders
Bed Bath has demonstrated
a history of excessive compensation which seems to lack alignment with performance. Until recently, the Co-Chairmen Emeriti Eisenberg
and Feinstein have both been paid like CEO’s since transitioning to Chairmen in 2003, as evidenced by the fact that each
were paid over $60 million since 2003. Since Steven Temares became CEO, Bed Bath’s shares have declined 58% compared to its
closest retail peers which are up 599%. For presiding over this value destruction, CEO Steven Temares has been paid over $180 million
since 2003.
$186,429 , 263 $63,155,190 $63,434,253 $200,000,000 $150,000,000 $250,000,000 $300,000,000 $350,000,000 Total Cumulative Compensation $100,000,000 $50,000,000 $0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Steven Temares Total Compensation Warren Eisenberg Total Compensation Leonard Feinstein Total Compensation
Source: Company filings; CapitalIQ
(1) Value of stock options issued estimated using Black Scholes
pricing model (FY2003 through FY2005)
Glass, Lewis &
Co., LLC gave the Company’s 2018 and 2017 executive compensation each a grade of “F” in its pay-for-performance
model, noting that the Company paid more compensation to its named executive officers than the median compensation for its peer
group but performed worse than its peers in a number of different performance measures, including both return on assets and return
on equity in 2018. Additionally, in 2018, Institutional Shareholder Services gave the Company a QualityScore of “10”
in its Compensation category and a “9” in its Board Structure category, where a decile score of 1 indicates lower governance
risk, while a 10 indicates higher governance risk.
At the 2018 Annual
Meeting, Victoria Morrison, received 56% of votes cast AGAINST her. The Board, who was not sufficiently responsive to the prior
three
years of failed Say on Pay votes, also chose to ignore the shareholder vote to hold Ms. Morrison accountable and unanimously
voted to keep her on the Board after she failed to receive support from a majority of Bed Bath shareholders. This blatant behavior
to circumvent the will of the shareholders must be corrected.
We also question the
extent of related party transactions with the Co-Chairmen Emeriti’s children. For example, in March 2007, the Company disclosed
in its proxy statement for the 2009 annual meeting of shareholders, that two sons of Leonard Feinstein sold Bed Bath an eight-store
chain now known as buybuy Baby for $67 million in cash and a $19 million debt repayment including $3 million of debt owed to Leonard
Feinstein. In January 2017, the Company disclosed in its proxy statement for the 2017 annual meeting of shareholders that a son
of Warren Eisenberg sold Bed Bath an underperforming small business known as Chef Central for $1 million in cash plus an earnout.
Given the extraordinary losses in shareholder value over the past 15 years, we fail to see the benefit of acquiring these businesses.
In addition, there
is limited ability for shareholders to act outside of the annual meeting process. Shareholders can only act by written consent
with unanimity and special meetings may only be called by shareholders holding at least 50% of the voting power. Moreover, directors
may only be removed for cause and shareholders cannot fill director vacancies even if a director is removed by shareholders.
We Have a Better Path Forward
We Have Recruited an Exceptional Team
of Retail Industry Experts to Return Bed Bath to Prosperity
Our Nominees possess
diverse skill sets in areas directly relevant to Bed Bath’s business. Given the reactive nature of this Board to appoint
five new directors without announcing a new strategic plan while keeping CEO Temares at the helm to continue implementing initiatives
that do not show signs of improving the business, we believe that nothing short of wholesale change to the Board will facilitate
a turnaround of the Company. We have worked diligently with our Nominees, our group of advisors, and one of the leading operationally-focused
consulting firms to develop a comprehensive plan to create significant shareholder value at Bed Bath. Our Nominees, if elected,
are prepared to begin executing on this comprehensive plan for Bed Bath that will seek to dramatically increase margins, cash flow,
and restore Bed Bath’s position as a dominant retailer. Our plan to turn Bed Bath around prioritizes the following initiatives:
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Executive management – recruiting a top-flight CEO to lead Bed Bath into the future. We intend
to launch a search to address this key position and within our group of Nominees there are a number of interim CEO candidates who
have the skill set to take the helm, if necessary, after the Annual Meeting. However, as of the date hereof, there is no understanding
or arrangement for any Nominee or third person to serve as CEO or interim CEO of the Company.
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Sales weakness – fixing the merchandise over-assortment problem through a detailed SKU rationalization
process as well as developing a merchandise architecture that will resonate with customers. Making the in-store experience something
that drives traffic to the stores is a key priority.
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Gross margin deterioration – developing a direct sourcing and private label model as well
as fixing mix issues created by the Company's shift to commoditized and lower margin products.
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Cost cutting – conducting an extensive reassessment of the increases in expenses over the
last 5 years, including the explosion of the Company’s advertising budget, seemingly endless array of initiatives that have
failed to produce meaningful results and extensive use of consultants. Our plan will further create a proper incentive compensation
structure for store management to focus on: sales, margins, inventory and profits.
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Capital allocation – reviewing all non-core businesses and assessing their value as part
of the business or their potential value to other parties. Further, we plan to increase inventory turns which would result in a
substantial release of cash tied up in slow moving goods. Excess cash created could be applied to a combination of investments
in the business as needed and/or reducing debt and returning capital to shareholders. Lastly, the increase in capital expenditures
needs to be addressed.
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Our Nominees are:
SOURCING, SUPPLY CHAIN AND PRIVATE LABEL:
Janet E. Grove
(age 68)
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Former Corporate Vice Chairman from February 2003 to June 2011 for Macy’s, Inc.
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Chairman and Chief Executive Officer of Macy’s Merchandise Group from December 1999 to February
2009
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During her time at Macy’s, Ms. Grove ran its private label business with over $4 billion
in sales and led initiatives focused on optimizing direct sourcing and supply chain for the home category
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Ms.
Grove served on the Board of Directors for Safeway, Inc., a supermarket chain and ClubCorp
Holdings, Inc., an owner and operator of private golf and country clubs, during periods
of time where she oversaw public company turnarounds that culminated in value creating
strategic actions
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Hugh R. Rovit
(age 58)
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Former Chief Executive Officer of Ellery Homestyles from May 2013 through its sale in September
2018. During his tenure, he repositioned merchandising and distribution strategies as the company became a multi-brand, diversified
omni-channel category manager in home décor products. Gross margin significantly improved, third party debt was retired
completely and the company expanded third-party e-commerce revenue to represent almost 25% of total sales
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Former Chief Executive Officer of Sure Fit from April 2006 through December 2012, shepherding the
company thru sales to two private equity firms during that period. E-commerce revenue increased to almost 40% of total sales during
that period, while he also reinvigorated product development to launch various patent-secured products to expand the company’s
product portfolio into new channels, including pet, institutional and healthcare
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Previously, he was a Principal at Masson & Company, LLC, a provider of interim and crisis management,
from 2001 to 2005
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From 1998 to 2001, Mr. Rovit served as Chief Operation Officer and Chief Financial Officer of Best
Manufacturing, Inc., a provider of institutional linen and service apparel.
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Before that, Mr. Rovit served as Chief Financial Officer at Royce Hosiery Mills, Inc., a designer
of brand name hosiery, from 1991 to 1998
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Prior to that, Mr. Rovit served as the assistant to the Chairman at The Natori Company, Inc., a
women’s fashion designer and manufacturer, from 1988 to 1991
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Mr.
Rovit currently serves on the Board of Directors for each of Spectrum Brands Holdings,
Inc. (NYSE: SPB), a global and diversified consumer products company and Xpress Retail,
a self-service movie rental kiosk operator
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RETAIL OPERATIONS:
Theresa R. Backes
(age 61)
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Currently serves as the Managing Director and Chief Operating Officer of Independent Pet Partners,
LLC, which operates nearly 150 independent Natural Pet Wellness Centers across the US
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Former President and Chief Operating Officer from October 2007 to January 2014 at Francesca’s
Holdings Corporation, a U.S. women's specialty value retailer, during a time when the concept grew from 78 boutiques earning 15%
EBIT margins in 2007 to 451 boutiques earning 22% EBIT margins (fiscal year ending February 2014)
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Prior
to Francesca’s, Mrs. Backes held senior operating positions at David’s Bridal,
The Gap Inc. and Gymboree
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Sue Ellen Gove
(age 60)
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President and founder of Excelsior Advisors, LLC, a retail consulting and advisory firm since August
2014
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Chief Executive Officer of Golfsmith International Holdings, Inc., from October 2012 to April 2014
and Chief Operating Officer from September 2008 to October 2012 (in addition to Chief Financial Officer from March 2009 to July
2012) where she led growth through the development of an ecommerce strategy which grew to 20% of sales
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Long,
successful 25 years at Zale Corporation concluding her career there in the position of
Chief Operating Officer and various positions in the finance department
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Cynthia S. Murray
(age 61)
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Founder and Chief Executive Officer of Stanmore Partners, a senior leadership consultant to CEOs
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Brand President of Chico’s FAS, a women’s clothing chain, from February 2009 to September
2016 driving rapid turnaround at the brand
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After Chico posted -8% and -15% same-store sales in 2007 and 2008, Mrs. Murray was instrumental
in driving same-store sales growth of +6%, +6%, and +8% in 2009, 2010, and 2011, respectively, while also driving dramatically
higher profitability
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Executive
Vice President of Stage Stores, Inc., a retailer of trend-right, moderately priced, name-brand
apparel, accessories, cosmetics, footwear and home goods, from 2004 to 2009
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Prior
to Stage Stores, Mrs. Murray held operational roles at Talbots and Saks Fifth Avenue
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Alexander W. Smith
(age 66)
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Chief Executive Officer and a member of the Board of Directors of Pier 1 Imports, Inc. an omnichannel
retailer specializing in imported home furnishings and decor, particularly furniture, table-top items, decorative accessories,
and seasonal décor, from February 2007 until December 2016
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During his career at Pier One, successfully turned around operating performance in a difficult
macro environment by improving gross margins by approximately 1200 bps in the five years between 2007 and 2012
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From 1995 until 2007, Mr. Smith held a number of positions at TJX Companies, Inc. (“TJ Maxx”),
an off-price department store corporation, where he was instrumental in the development of TJ Maxx in the U.K, and served as Group
President, where his responsibilities included Winners in Canada, Home Goods, TJ Maxx and Marshalls, plus a number of corporate
functions
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Executive
Chairman of Vitamin Shoppe, Inc., a retailer of nutritional supplements, since February
2018 (Non-Executive Chairman since December 2017)
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Jeffrey A. Kirwan
(age 52)
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Global President of Gap Brand at The Gap, Inc. from December 19, 2014 to February 20, 2018 and
Chief Executive Officer, Gap,
a division of The Gap, Inc.,
since December
2014 and various other roles at The Gap, Inc. since 2004
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Mr. Kirwan served as President of Greater China at The Gap, Inc. from February 2013 to December
2014 where he was responsible for all brands and channels in mainland China, Hong Kong and Taiwan
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He led the growth of The Gap, Inc.’s presence in China that grew to encompass two brands
– Gap and Old Navy as well as Gap Outlet, reaching more than 100 stores across 25 cities in the region in less than four
years as well as ecommerce channels for Gap and Old Navy
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Prior
to 2004, Mr. Kirwan was a Regional Group Director at Target Corporation
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MARKETING, BRANDING AND E-COMMERCE:
John E. Fleming
(age 60)
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Former Chief Executive Officer of Global eCommerce of Uniqlo Co. Ltd., a Japanese casual wear designer,
manufacturer and retailer, from October 2013 to August 2016
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Prior to that, he was at Walmart, Inc., where he held a number of executive positions, including
Executive Vice President Chief Marketing Officer (2005 to 2006) and Executive Vice President, Chief Merchandising Officer (2007
to 2010)
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During his tenure as CMO, Mr. Fleming transformed the merchandising organization at Walmart to
improve product quality, the assortment clarity and the customer experience. In doing so, he accelerated both sales and profit
in the U.S. business
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From 2001 to 2005, Mr. Fleming was the Chief Executive Officer of Walmart.com, Walmart’s
e-commerce platform, where he profitably scaled the online business to $1 billion in sales in five years
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Mr.
Fleming began his career at Dayton Hudson (now Target, Inc.) and rose through the ranks
to become the Senior Vice President of Merchandising
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Jeremy I. Liebowitz
(age 49)
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Serves as a Founder of Alchemy Rx, a strategy, marketing and eCommerce agency, since October 2018
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Prior to that, he held executive level positions at Newell Brands Inc., a worldwide marketer of
consumer and commercial products with a portfolio of brands, from June 2013 to June 2018, where he eventually became the division
CEO of Global eCommerce
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Mr. Liebowitz led the growth of Newell Brands (100+ brands) in Amazon and pure play online, Walmart.com
and other retail.com, and DTC businesses, driving revenue from 2% of sales to 20% of sales in under five years
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Mr.
Liebowitz was the Vice President of Digital Commerce & Marketing of Jarden Corporation,
a consumer products company, from November 2007 to April 2013 where he led the global
digital, social, eCommerce, Internet Marketing, CRM, direct marketing division for Jarden
Consumer Solutions and drove substantial increases in digital sales
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INVESTMENTS, GOVERNANCE AND TURNAROUNDS:
Jonathan Duskin
(age 51)
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Mr. Duskin has served as Chief Executive Officer of Macellum Capital Management, LLC, which operates
a New York-based pooled investment fund, since July 2009, and as the sole member of Macellum Advisors GP, LLC, which is the general
partner of Macellum Home Fund, LP, since September 2011
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Mr. Duskin served as a Managing Director and Partner at Prentice Capital Management, LP, an investment
management firm from January 2005 to February 2008
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From March 2002 to January 2005, Mr. Duskin was a Managing Director at S.A.C. Capital Associates
LLC, a New York-based hedge fund. From January 1998 to January 2002, Mr. Duskin was a Managing Director at Lehman Brothers Inc.,
an investment bank, and served as Head of Product Management and Chairman of the Investment Policy Committee within the Research
Department
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Mr. Duskin currently serves on the Board of Directors of Christopher & Banks Corporation, a
retail clothing company, and Citi Trends, Inc., a retail clothing chain selling discounted products targeted primarily at urban
customers
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Mr.
Duskin previously served on the Boards of Directors of Furniture.com, The Wet Seal, Inc.
and Whitehall Jewelers, Inc.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board is currently
composed of ten (10) directors, each with a term expiring at the 2019 Annual Meeting. Legion Partners Holdings has nominated ten
(10) independent, highly-qualified Nominees for election to the Board to replace the ten (10) incumbent directors. If at least
six (6) of the Nominees are elected, such Nominees will represent a majority of the members of the Board.
We strongly believe
that anything short of a majority change in the Board at the Annual Meeting will be wholly insufficient to drive the level of change
that we believe is required to improve shareholder value and performance at Bed Bath. We have gone to great lengths to identify
highly credible director candidates who are independent-thinking business leaders and are committed to putting the best interests
of Bed Bath’s shareholders first. Therefore, while the election of a majority of our director candidates may be sufficient
to ensure that the changes we are seeking are implemented at Bed Bath following the 2019 Annual Meeting, we have nevertheless nominated
a full slate because we believe that each of the director nominees that we have identified is more qualified than the existing
members of the Board and that each will bring more relevant skills and experiences to the different aspects of Bed Bath’s
business and current challenges than the incumbent nominees the shareholders would otherwise be forced to accept. We believe shareholders
deserve to have the best possible Board, comprised of the most talented and experienced individual directors.
Each of the Nominees
is committed to the implementation of our comprehensive turnaround plan for Bed Bath. Therefore, in the event that the Nominees
comprise a majority of the Board following the 2019 Annual Meeting, we expect that the Board, consistent with its fiduciary duties,
will implement our comprehensive turnaround plan for Bed Bath. While we have confidence that the Nominees’ plans for Bed
Bath will put the Company on the right path towards substantial shareholder value creation, there can be no assurance that the
implementation of the comprehensive turnaround plan will ultimately enhance shareholder value. In the event that the Nominees comprise
less than a majority of the Board following the 2019 Annual Meeting, there can be no assurance that any actions or changes proposed
by the Nominees, including the implementation of our turnaround plan, will be adopted or supported by the full Board.
There are ten (10)
directorships up for election at the 2019 Annual Meeting. We are soliciting proxies to elect our ten (10) Nominees.
Accordingly,
the enclosed WHITE proxy card may only be voted for the Nominees and does not confer voting power with respect to any of the Company’s
director nominees. Shareholders who return the WHITE proxy card will only be able to vote for our ten (10) Nominees, and will not
have the opportunity to vote for any of the Company’s director nominees for any of the seats up for election at the 2019
Annual Meeting.
THE NOMINEES
The following information
sets forth the name, age, business address, present principal occupation, and employment and material occupations, positions, offices,
or employments for the past five years of each of the Nominees. The nominations were made in a timely manner and in compliance
with the applicable provisions of the Company’s governing instruments. The specific experience, qualifications, attributes
and skills that led us to conclude that the Nominees should serve as directors of the Company are set forth above in the section
entitled “Reasons for the Solicitation” and below. This information has been furnished to us by the Nominees. All of
the Nominees are citizens of the United States.
Theresa R. Backes
,
age 61, has served as the Chief Operating Officer and Managing Director of IPP (Independent Pet Partners), LLC, which operates
nearly 150 independent Premium and Natural Pet Wellness Centers across the United States, since August 2017. From November 2015
until August 2017, Ms. Backes served as Chief Operating Officer of Kriser’s Natural Pet, a retailer of natural pet food.
From January 2014 to November 2015, Ms. Backes served as a consultant to several start-ups on a pro bono basis. From October 2007
until January 2014, Ms. Backes worked at Francesca’s Holdings Corporation, a U.S. women's specialty value retailer, initially
serving as Chief Operating Officer and later becoming President and Chief Operating Officer in January 2013. From 2004 until 2007,
Ms. Backes served as the Vice President, Operations and Services at David’s Bridal. She also served in senior operations
positions at Gap, Inc. (Sr. Director Operations – Banana Republic) and Gymboree (SVP Stores and Operations) for Gymboree
Retail and Play Centers. Ms. Backes holds a BFA in Design from Arizona State University.
We believe Ms.
Backes’ over 30 years of senior executive and operational experience in the department store and specialty store retail
sectors make her well qualified to serve on the Board.
Jonathan Duskin
,
age 51, has served as Chief Executive Officer of Macellum Capital Management, LLC, a Delaware limited liability company (“Macellum
Capital”), which operates a New York-based pooled investment fund, since July 2009, and as the sole member of Macellum GP,
which is the general partner of Macellum Capital, since September 2011. From January 2005 to February 2008, Mr. Duskin served
as a Managing Director and Partner at Prentice Capital Management, LP, an investment management firm. From March 2002 to January
2005, Mr. Duskin was a Managing Director at S.A.C. Capital Associates LLC, a New York-based hedge fund. From January 1998 to January
2002, Mr. Duskin was a Managing Director at Lehman Brothers Inc., an investment bank, and served as Head of Product Management
and Chairman of the Investment Policy Committee within the Research Department. Mr. Duskin currently serves on the board of directors
of Citi Trends, Inc. (NASDAQ: CTRN), a retail clothing chain selling discounted products targeted primarily at urban customers,
since May 2017, Christopher & Banks Corporation (NYSE:CBK), a retail company, since June 2016. Mr. Duskin previously served
on the boards of directors of The Wet Seal, Inc., Whitehall Jewelers, Inc. and Furniture.com Inc.
Mr. Duskin holds
a B.A. in Finance and Economics from the University of Massachusetts at Amherst. We believe Mr. Duskin will bring considerable
business, financial services and retail investment expertise, having provided financial and investment banking services to a variety
of public and private companies.
John
E. Fleming,
age 60, has served as a member of the Advisory Board of UNTUCKit LLC, a casual men’s apparel company, since
December 2017, as a member of the Board of Directors of r21Holdings, Inc., a specialty retailer of young men and women's casual
apparel and accessories, since August 2017, and as a member of the Board of Directors of The Visual Comfort Group, a lighting
company that serves both wholesale and direct to consumer channels, since May 2017. Additionally, Mr. Fleming has served as an
independent director and advisor since August 2016. Previously, Mr. Fleming was most recently the Chief Executive Officer of Global
eCommerce of Uniqlo Co. Ltd., a Japanese casual wear designer, manufacturer and retailer, from October 2013 to August 2016. Prior
to that, he was at Walmart, Inc. (NYSE: WMT) (“Walmart”), a multinational retail corporation, from 2000 to 2010, where
he held a number of executive positions, including Executive Vice President, Chief Marketing Officer (2005 to 2006) and Executive
Vice President, Chief Merchandising Officer (2007 to 2010). From 2001 to 2005, Mr. Fleming was the Chief Executive Officer of
Walmart.com, Walmart’s e-commerce platform, and was the Chief Merchandising Officer in 2000. He began his career at Dayton
Hudson, previously a department store chain, and rose through the ranks to become the Senior Vice President of Merchandising.
He was at Dayton Hudson from 1981 to 2000. Since April 2005, Mr. Fleming has served on the Board of Directors of USA Hockey Foundation,
the philanthropic arm of USA Hockey. He previously served on the Board of Directors of each of Stick Fix, an online subscription
and personal styling service, from 2012 to 2014, Bi-Lo Holdings, LLC, a subsidiary of Southeastern Grocers, a supermarket portfolio,
from 2012 to 2014 and Walmart de México y Centroamérica, the Mexican and Central American Walmart division, from
2006 to 2009. Mr. Fleming received his B.A. from Colorado College.
We
believe that Mr. Fleming’s significant retail experience coupled with his expertise in the e-commerce sector, would make
him a valuable addition to the Board.
Sue
Ellen Gove,
age 60, is President of Excelsior Advisors, LLC, a retail consulting and advisory firm, and serves as a Senior
Advisor to Alvarez & Marsal, a corporate consulting firm. Prior to founding Excelsior Advisors in August 2014, she was the
President and Chief Executive Officer of Golfsmith International Holdings, Inc., an American golf specialty retailer, from October
2012 to April 2014 and President, from February 2012 to April 2014. Ms. Gove also served Golfsmith as Chief Operating Officer
from September 2008 to October 2012, as Chief Financial Officer from March 2009 to July 2012 and as Executive Vice President from
September 2008 to February 2012. In addition, Ms. Gove spent 25 years at Zale Corporation (NYSE: ZLC), a jewelry retailer, where
she served in senior financial, operating and strategic roles, culminating in the EVP and Chief Operating Officer role. Ms. Gove
currently serves on the boards of Tailored Brands, Inc. (NYSE: TLRD), retail holding company for various men's apparel stores
since August 2017 and Iconix Brand Group, Inc. (NASDAQ: ICON), a brand management company. Previously, she was a director of each
of Logitech International SA (NASDAQ: LOGI),
a
provider of personal computer and
mobile peripherals, from September 2015 until September 2018 and AutoZone Inc. (NYSE: AZO), a retailer of aftermarket automotive
parts and accessories, from July 2005 until December 2017. Ms. Gove received her BBA from the University of Texas at Austin.
We
believe that Ms. Gove’s extensive industry experience coupled with her extensive board service would make her a valuable
addition to the Board.
Janet
E. Grove
, age 68, most recently served as Vice Chairman of Macy’s, Inc., a retailer and operator of department stores,
from February 2003 until her retirement in June 2011 and also served as Chairman and Chief Executive Officer of Macy’s Merchandising
Group, Inc. from 1999 until 2009. Prior to those positions, Ms. Grove held various senior management positions for Macy’s
West. Ms. Grove also served as Senior Vice President, General Merchandise Manager of the Home Store. Ms. Grove previously served
on the Board of Directors for each of Safeway, Inc., a supermarket chain, from October 2004 until January 2015, Aeropostale, Inc.,
a shopping mall based specialty retailer, from February 2012 until May 2016 and ClubCorp Holdings, Inc., an owner and operator
of private golf and country clubs, from August 2013 until September 2017. Ms. Grove served in an advisory role to the Chief Executive
Officer and senior management for Karstadt Department Stores, a German department store chain, from April 2012 to November 2014.
Since 2018, Ms. Grove has been a member of the American Cancer Society’s Desert Coastal Area Board, which encompasses parts
of both California and Nevada. Ms. Grove holds a B.S. in Marketing from California State University in Hayward.
We
believe that Ms. Grove’s extensive leadership experience in the consumer products and retail industry as well as her expertise
in merchandising, strategic planning and operational execution would make her a valuable addition to the Board.
Jeffrey
A. Kirwan
, age 52, will be appointed Executive Chairman of Maurices Incorporated (“maurices”), a specialty retailer
focused on women’s value apparel, upon the closing of the acquisition of a majority equity stake in maurices by OpCapita
Consumer Opportunities Fund II LP, which is expected to close by early summer 2019. Previously, Mr. Kirwan served as the Global
President and Chief Executive Officer, Gap (“Gap”), a division of The Gap, Inc. (NYSE: GPS), a worldwide clothing
and accessories retailer, from December 2014 until March 2018. Prior to that, he worked at Gap China as Executive Vice President
and President, from February 2013 to December 2014, and as Senior Vice President, Managing Director and Chief Operating Officer
from May 2011 to February 2013. Previously, he worked as Senior Vice President, Stores and Operations, Old Navy, a division of
The Gap, Inc., from August 2008 to May 2011, and at Old Navy Canady as Senior Vice President and General Manager, from March 2008
to August 2008, and as Vice President and General Manager, from April 2007 to March 2008. Mr. Kirwan received his B.S. from Rhode
Island College and an M.B.A. from the University of Maryland University College.
We
believe that Mr. Kirwan’s extensive c-suite experience in the global retail industry as well as his management background
will make him a valuable addition to the Board.
Jeremy
I. Liebowitz
, age 49, serves as a Founder of Alchemy-Rx, a strategy, marketing and eCommerce agency, since October 2018. Prior
to that, he held a series of executive positions at Newell Brands Inc. (NASDAQ: NWL), a worldwide marketer of consumer and commercial
products with a portfolio of brands, where he eventually became the division CEO of Global eCommerce, from June 2013 to June 2018.
Mr. Liebowitz was the Vice President of Digital Commerce & Marketing of Jarden Corporation, a consumer products company, from
November 2007 to April 2013. From April 2006 to August 2007, Mr. Liebowitz was a Director of Customer Marketing at L Brands, Inc.
(NYSE: LB), a fashion retailer, and AVP of eCommerce and Direct Marketing at TracFone Wireless, Inc., a prepaid mobile virtual
network operator, from February 2004 to April 2006. He was a consultant in consumer marketing/ eCommerce from January 2002 to
February 2004. He was the Vice President of Marketing at Gerald Stevens, Inc., and a Senior Manager of Marketing at 1800flowers.com
(NASDAQ: FLWS), from January 1999 to 2002 and August 1995 to December 1998, respectively. Mr. Liebowitz received his B.A. from
the University of Southern California.
We
believe that Mr. Liebowitz’s experience in the retail industry combined with his expertise as a world-class marketer and
eCommerce operator would make him a well-qualified addition to the Board.
Cynthia
S. Murray (Cinny)
, age 61, is the Founder and has served as Chief Executive Officer of Stanmore Partners, a senior leadership
consultant to CEOs, private equity firms, and start-ups, since July 2018. From January 2017 to July 2018, she was the President
of Fullbeauty Brands, a plus size women’s and men’s apparel and home goods holding company. Prior to that, she was
the Brand President of Chico’s at Chico’s FAS, Inc. (NYSE: CHS), a women’s clothing chain, from February 2009
to September 2016.From 2004 to 2009, Ms. Murray served as the Executive Vice President of Stage Stores, Inc., a department store
retailer of moderately priced, name-brand apparel, accessories, cosmetics, footwear and home goods. She was also the Senior Vice
President of Talbots, Inc., a specialty retailer and direct marketer of women's clothing, shoes and fashion accessories, from
1998 to 2004. Ms. Murray was also the Vice President of Saks Fifth Avenue/ Saks Off Fifth, from 1997 to 2009. Ms. Murray served
on the Board of Directors of
Francesca’s Collections, a specialty retailer offering women’s apparel, jewelry,
shoes accessories and gift items, from 2008 to 2009. She currently serves on the Board of Trustees and was the Honorary Chair
of the Naples Shelter for Women and Children. Additionally, she serves on the Board of Governors for the FSU School of Business
and was inducted to the Florida State University College of Business Hall of Fame in 2014. She holds a B.S. in Business from the
Florida State University.
We believe that
Ms. Murray is a seasoned C-Suite Executive with the expertise and accomplished track record to make her a well-qualified addition
to the Board.
Hugh R. Rovit,
age 58, is a corporate director who
most recently
was the Chief Executive Officer
of Ellery Homestyles LLC, a supplier of consumer products to major retailers, from May 2013 to September 2018. Prior to that,
he was the Chief Executive Officer of Sure Fit, Inc., a provider of ready-made slipcovers and related accessories, from May 2006
to December 2012. Previously, he was a Principal at Masson & Company, LLC, a provider of interim and crisis management, from
2001 to 2005. From 1998 to 2001, Mr. Rovit served as Chief Operation Officer and Chief Financial Officer of Best Manufacturing,
Inc., a provider of institutional linen and service apparel. Before that, Mr. Rovit served as Chief Financial Officer at Royce
Hosiery Mills, Inc., a designer of brand name hosiery, from 1991 to 1998. Prior to that, Mr. Rovit served as the assistant to
the Chairman at The Natori Company, Inc., a women’s fashion designer and manufacturer, from 1988 to 1991. Mr. Rovit worked
as an associate at Lehman Brothers, a global financial services firm, from 1987 to 1988, and as an analyst, from 1983 to 1984.
Currently, Mr. Rovit has served on the board of directors for each of Spectrum Brands Holdings, Inc. (NYSE: SPB), a global and
diversified consumer products company, since 2010 and Xpress Retail, LLC, a self-service movie rental kiosk operator, since 2015.
Previously, Mr. Rovit has served on the board of directors for each of Twin-Star International, Inc., a designer and manufacturer
of home furnishings and electric fireplaces, from 2015 to 2016, Nellson Nutraceutical, LLC, a manufacturer and formulator of branded
and private-label nutritional products, from 2007 to 2013, Oneida Ltd., a manufacturer and marketer of stainless steel flatware
and tabletop products, from 2004 to 2011, Cosmetic Essence LLC, a beauty care products and cosmetics provider, from 2009 to 2010
and Atkins Nutritionals, a nutritional products supplier, from 2005 to 2007. Mr. Rovit received his B.A. from Dartmouth College
and holds an M.B.A. from Harvard Business School.
We believe that
Mr. Rovit’s extensive experience in the retail industry would make him a valuable addition to the Board.
Alexander W.
Smith,
age 66, has served as the Chairman of Vitamin Shoppe, Inc. (NYSE: VSI), a retailer
of nutritional supplements, since December 2017 and has been a member of its Board of Directors since April 2017. Mr. Smith currently
serves as a director of Art Van Furniture, LLC, a furniture retail company, since June 2017 and as a director of Bluestem Group
Inc. (OTC:MKTS), which through its subsidiaries offers a selection of name-brand, private label, and non-branded merchandise through
Internet Websites and catalog serving low to middle income consumers in the United States, since April 2017. Previously, Mr. Smith
served as President, Chief Executive Officer and a member of the Board of Directors of Pier 1 Imports, Inc. ("Pier 1 Imports")(NYSE:PIR),
an
omnichannel retailer specializing in imported home furnishings and decor, particularly
furniture, table-top items, decorative accessories, and seasonal décor, from February 2007 until December 2016. Prior to
joining Pier 1 Imports, from 1995 until 2007, Mr. Smith was employed by TJX Companies, Inc. (NYSE:TJX), an off-price department
store corporation, where he was instrumental in the development of TK Maxx in the U.K, and served as Group President, where his
responsibilities included Winners in Canada, Home Goods, TJ Maxx and Marshalls, plus a number of corporate functions. From December
2013 to July 2016, Mr. Smith served as a director of Tumi, Inc., a manufacturer of high-end suitcases and bags for travel. From
June 2007 to April 2011, Mr. Smith also served as a director of Papa John's International, Inc. (NASDAQ: PZZA). Mr. Smith holds
a BSc and Doctor of Civil Law honoris causa degree from the University of East Anglia.
We
believe that Mr. Smith’s experience in retailing and brand management, his turnaround experience at Pier 1 Imports and his
extensive public company experience as a senior executive and director would make him a well-qualified addition to the Board.
The principal business
address of Ms. Backes is 1518 East Verde Boulevard, San Tan Valley, Arizona 85140. The principal business address of Mr. Duskin
is 99 Hudson Street, 5th Floor, New York, New York 10013. The principal business address of Mr. Fleming is 5022 Bruce Avenue,
Edina, Minnesota 55424. The principal business address of Ms. Gove is 4408 Long Champ Drive, No. 38, Austin, Texas 78746. The
principal business address of Ms. Grove is 38 Sun Ridge Circle, Rancho Mirage, California 92270. The principal business address
of Mr. Kirwan is 462 West 58th Street, New York, New York 10019. The principal business address of Mr. Liebowitz is 35 West 15th
Street, No. 15B, New York, New York 10011. The principal business address of Ms. Murray is 9959 Brassie Bend, Naples, Florida
34108. The principal business address of Mr. Rovit is 51 Twin Oak Road, Short Hills, New Jersey 07078. The principal business
address of Mr. Smith is 35 Watergate Drive, No. 1204, Sarasota, Florida 34236.
As of the date hereof,
none of the Nominees, except Messrs. Duskin and Fleming, own beneficially or of record any shares of Common Stock and have not
entered into any transactions in shares of the Common Stock during the past two (2) years. As of the date hereof, Mr. Fleming beneficially
owns 5,000 shares of Common Stock. The shares of Common Stock purchased by Mr. Fleming were purchased in the open market with personal
funds. As the sole member of Macellum GP, Mr. Duskin may be deemed to beneficially own the 446,415 shares of Common Stock beneficially
owned directly by Macellum Home, including 89,500 shares underlying long call options that are currently exercisable. The shares
of Common Stock purchased by Macellum Home were purchased in the open market with working capital.
Each of the Nominees
may be deemed to be a member of a “group” with the Legion Group, the Ancora Group and the Macellum Group for the purposes
of Section 13(d)(3) of the Exchange Act, and accordingly, the Investor Group may be deemed to beneficially own the 6,914,939 shares
of Common Stock beneficially owned in the aggregate by the members of the Investor Group, including 1,419,500 shares underlying
call options that are currently exercisable. Each member of the Investor Group disclaims beneficial ownership with respect to
the shares of Common Stock reported owned in this Proxy Statement, except to the extent of its, his or her pecuniary interest
therein. Each Participant may be deemed to have the power to vote and dispose of the shares of Common Stock disclosed herein that
he or it directly beneficially owns or he or it may be deemed to beneficially own, except that with respect to 63,312 shares held
in the SMAs, Ancora Advisors only has the power to dispose and not the power to vote such shares. For information regarding purchases
and sales of securities of the Company during the past two (2) years by the members of the Investor Group, see
Schedule
I
.
Each Nominee presently
is, and if elected as a director of Bed Bath would be an “independent director” within the meaning of (i) applicable
NASDAQ listing standards applicable to board composition and (ii) Section 301 of the Sarbanes-Oxley Act of 2002, unless any Nominee
were requested to serve as the Chief Executive Officer of the Company. We intend to launch a search to address this key position
and within our group of Nominees there are a number of candidates who have the skill set to take the helm, if necessary, after
the Annual Meeting. However, as of the date hereof, there is no understanding or arrangement for any Nominee or third person to
serve as CEO or interim CEO of the Company. To the extent the Investor Group determines, after undertaking a comprehensive search
for a new CEO, that a Nominee would be the most qualified candidate to serve as the CEO of the Company, the Investor Group will
provide supplemental disclosure to this effect. No Nominee is a member of the Company’s compensation, nominating or audit
committee that is not independent under any such committee’s applicable independence standards.
On March 20, 2019,
the Legion Group, the Macellum Group, the Ancora Funds, Ancora Advisors and Mr. DiSanto entered into a Group Agreement in which,
among other things, (a) they agreed, to the extent required by applicable law, to the joint filing on behalf of each of them of
statements on Schedule 13D with respect to the securities of the Company, (b) they agreed to solicit proxies or written consents
for the election of the Nominees, or any other person(s) nominated by Legion Partners Holdings, to the Board at the 2019 Annual
Meeting, (c) they agreed to provide notice to the Investor Group’s legal counsel and a representative of the Legion Group
of all trading in the securities of the Company, and not sell or hedge any securities of the Company without the prior written
consent of the other parties, and (d) the Legion Group, the Macellum Group and the Ancora Funds agreed to bear all expenses incurred
in connection with the Investor Group’s activities, including approved expenses incurred by any of the Participants in connection
with this solicitation, subject to certain limitations, on a pro rata basis.
On March 26, 2019,
each of the Nominees other than Mr. Duskin, Ancora Special Opportunity and Ancora/Thelen entered into a joinder agreement agreeing
to be bound by the terms of the Group Agreement (the “Joinder Agreement”). In addition, each of the Nominees other
than Mr. Duskin have agreed, pursuant to the Joinder Agreement, not to undertake or effect any purchase, sale, acquisition or disposal
of any securities of the Company, undertake any expenses in connection with this solicitation or communicate on behalf of the Investor
Group with regards to the Company without the prior written consent of the Legion Group.
On March 31, 2019,
the Group Agreement and Joinder Agreement were amended to provide that the Group Agreement will terminate immediately after the
conclusion of the activities described therein, but no later than the final certification by the inspector of elections of the
votes for the 2019 Annual Meeting or earlier appoint of any Nominee to the Board, unless otherwise agreed to by the parties thereof.
On
March 26, 2019, Legion Partners Holdings, Macellum Home and the Ancora Funds entered into letter agreements with each of the Nominees
other than Mr. Duskin
, pursuant to which each of Legion Partners Holdings, Macellum
Home and the Ancora Funds have agreed to indemnify such Nominees against claims arising from this solicitation and any related
transactions.
Each
of the
Nominees other than Mr. Duskin
has granted Jonathan Duskin and Christopher
S. Kiper, powers of attorney to execute certain SEC filings and other documents in connection with this solicitation.
Other than as stated
herein, and except for compensation received by Mr. Duskin as the sole member of Macellum GP, there are no arrangements or understandings
between the Investor Group and the other Participants or any other person or persons pursuant to which the nomination of the Nominees
described herein is to be made, other than the consent by each of the Nominees to be named in this Proxy Statement and to serve
as a director of Bed Bath if elected as such at the 2019 Annual Meeting. None of the Nominees is a party adverse to the Company
or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries in any material pending
legal proceedings.
If the Investor
Group is successful in obtaining shareholder approval for the election of six or more of the Nominees at the 2019 Annual Meeting,
then a change of control of the Board may be deemed to have occurred under certain of the Company’s material contracts.
Based on a review of the Company’s material contracts and agreements, such a change of control may trigger certain change
of control provisions or payments contained therein as described below.
The Indenture and
First Supplemental Indenture, both dated as of July 17, 2014 (collectively, the “Indenture”), relating to the 3.749%
senior unsecured notes due 2024, the 4.915% senior unsecured notes due 2034 and the 5.165% senior unsecured notes due 2044 (collectively,
the “Notes”), between the Company and The Bank of New York Mellon, as trustee, include a change of control provision
which is triggered, among other things, on the first day on which a majority of the board of directors are not Continuing Directors
(as defined below). Any such change of control becomes a triggering event under the Indenture if, sixty (60) days following the
earlier of the first public notice of a change of control or the Company's intention to effect a change of control transaction,
the rating on any of the Notes is downgraded (below Baa3 by Moody's Investors Service, Inc. and below BBB- by Standard & Poor's
Rating Services). In the event that Legion Partners Holdings is successful in electing six (6) or more of its Nominees at the
2019 Annual Meeting and such triggering event occurs, the Company must offer to each noteholder to repurchase all or part of the
Notes as set forth in the applicable Note. To avoid triggering a change of control, a committee of a majority of independent Continuing
Directors or a majority of Continuing Directors may approve of the nomination of a new director, such that such new director will
be deemed a Continuing Director. For purposes of the Indenture, a “Continuing Director” means, as of any date of determination,
any member of the Company's board of directors who (1) was a member of the Company's board of directors on the date the Notes
were originally issued, (2) was nominated for election to the Company's board of directors with the approval of a committee of
the board of directors consisting of a majority of independent Continuing Directors or (3) was nominated for election, elected
or appointed to such board of directors
with the approval
of a majority of the Continuing Directors who were members
of the Company's board of directors at the time of such nomination, election or appointment (
either by a specific vote
or
by approval of the Company's proxy statement in which such member was named as a nominee for election as a director). We believe
the Board can, by specific vote, “approve” of the Nominees to avoid triggering a change of control under the Indenture.
We have requested such approval based on our belief that the Board has a duty of loyalty and care to the Company and its stockholders
to approve of the Nominees to avoid triggering potential adverse financial consequences and because the threat of such consequences
will taint the corporate electoral process. The Company has suggested that it may not be able to approve of the Nominees under
the Indenture without recommending the Nominees or interviewing them to determine whether they meet the standard for approval.
We have responded that we are not seeking the Board’s recommendation of the Nominees and that the delivery of over 1,400
pages of materials submitted in connection with the nomination process should be more than sufficient to assess whether the Nominees
meet the standard for approval. Moreover, courts addressing this question have found, which may be applicable here, that “approval”
of a rival slate for purposes of a change of control is not a recommendation or endorsement by the incumbent directors and the
company may simultaneously recommend its own slate instead; and absent a finding that the rival slate lacked ethical integrity,
fell within a category of known bad actors or they had made a specific determination that the rival slate proposed a program that
would have demonstrated material adverse effects for the company to meet its legal obligations to its creditors. The incumbent
board should approve of a rival slate and allow stockholders to choose directors without fear of adverse financial consequences.
The Performance Stock
Unit Agreement under the 2012 Incentive Compensation Plan (effective 2017) for Steven H. Temares (the “Temares Agreement”),
contains a change in control provision which is triggered, among other things, whenever the majority of the board of directors
“consists of individuals other than Incumbent Directors, which term means the members of the board of directors …
on [December 31, 2008].” Such a change in control is not triggered if two-thirds of the directors who then comprised the
Incumbent Directors support the election or nomination of any person becoming a director. In the event that Legion Partners Holdings
is successful in electing Nominees at the 2019 Annual Meeting this provision may be triggered. If such change in control is triggered
under the Temares Agreement, all shares of Common Stock issuable to Mr. Temares in respect of the subject performance stock units
will immediately be released from, and no longer subject to, certain sale restrictions. Of note, the Amended and Restated Supplemental
Executive Retirement Benefit Agreement between the Company and Steven H. Temares, dated November 16, 2009 (the “Retirement
Agreement”) contains a similar change in control provision. The Retirement Agreement entitles Mr. Temares to receive certain
retirement benefits upon the earlier of June 12, 2012 or a change in control. Because the June 12, 2012 threshold date has passed,
Mr. Temares is entitled to receive such benefits under the Retirement Agreement regardless of whether Legion Partners Holdings
is successful in electing its Nominees at the 2019 Annual Meeting.
The Company’s
2004 Incentive Compensation Plan (the “2004 Plan”) and the Company’s 2012 Incentive Compensation Plan (the “2012
Plan”) do not define a “change in control,” but if the Board determines to find that a change in a majority of
the Board constitutes a change of control, the Compensation Committee of the Board (the “Compensation Committee”),
in its sole discretion, may (A) provide for the lapse of restrictions of any restricted stock award, (B) accelerate the vesting
of any restricted stock award and/or (c) waive the deferral limitations for any such award. Under the 2004 Plan, a change in control
would permit the Compensation Committee to, in its sole discretion, provide for the acceleration and vesting of options and non-tandem
stock appreciation rights and any performance award in the event of a such change in control. The Compensation Committee would
also be authorized to provide for the earlier lapsing of applicable restrictions on restricted stock awards.
Pursuant to the Company’s
Amended and Restated Nonqualified Deferred Compensation Plan, effective January 1, 2006 and adopted December 18, 2008 (the “NQDC”),
a change in control occurs, among other things, if a majority of members of the Board is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment
or elections. In the event that Legion Partners Holdings is successful in electing six or more of its Nominees at the 2019 Annual
Meeting, a change in control under the NQDC could be triggered. In that case, under the NQDC, all Participants (as defined in the
NQDC) will be fully vested in the amounts credited to their accounts as of the date of the change in control, and the Company may,
in its discretion, terminate the Nonqualified Deferred Compensation Plan and distribute all vested balances.
Pursuant to the Company’s
2018 Incentive Compensation Plan (the “2018 Plan”) a change in control occurs, among other things, if during any period
of twelve (12) months, the majority of the Board consists of individuals other than “Incumbent Directors” which term
means the members of the Board at the beginning of such period, and any new director (other than a director whose initial assumption
of office occurs as a result of either an actual or threatened election contest) whose election by the Board or nomination for
election by the Company’s shareholders was approved by a vote of a majority of the directors who comprised the Incumbent
Directors or whose election or nomination for election was previously so approved. In the event that Legion Partners Holdings is
successful in electing six or more of its Nominees at the 2019 Annual Meeting, a change of control under the 2018 Plan could be
triggered. Under the 2018 Plan, a change in control would permit the Compensation Committee to, in its sole discretion, provide
for the acceleration and vesting of any outstanding award in the event of such change in control. The Compensation Committee would
also be authorized to provide for the earlier lapsing of applicable restrictions on restricted stock awards. To date, it is unclear
whether any shares have been issued under the 2018 Plan.
Legion Partners Holdings
has not independently verified if the copies of the agreements publicly filed by the Company with the SEC and discussed above (collectively,
the “Company Agreements”) are the same as the actual executed copies of the agreements, and the analyses above are
based on our review of the Company’s public SEC filings. While we are not aware of any, there may be other agreements that
may be triggered by a change in control in connection with the nomination and/or election of the Nominees. The discussion of the
potential impact of the nomination is based entirely upon our review of the Company Agreements. Notwithstanding the foregoing,
Legion Partners Holdings has requested that the Board, consistent with its fiduciary duties, take any and all action necessary
to render inapplicable any change in control provision that would be triggered by the nomination and/or election of the Nominees
under the Indenture, Temares Agreement, Retirement Agreement, 2004 Plan, 2012 Plan, 2018 Plan or NQDC, as necessary and to the
extent applicable and permitted. Specifically, and as discussed in more detail in the “Background to the Solicitation”
section of this Proxy Statement, Legion Partners Holdings has requested that the Board approve of the Nominees to avoid any potential
change of control related implications under the Company’s material agreements.
We do not expect that
the Nominees will be unable to stand for election, but, in the event any Nominee is unable to serve, or for good cause will not
serve, the shares of Common Stock represented by the enclosed
WHITE
proxy card will be voted for substitute nominee(s),
to the extent this is not prohibited under Bed Bath’s organizational documents and applicable law. In addition, we reserve
the right to nominate substitute person(s) if the Company makes or announces any changes to its Bylaws or takes or announces any
other action that has, or if consummated would have, the effect of disqualifying any Nominee, to the extent this is not prohibited
under Bed Bath’s organizational documents and applicable law. In any such case, shares of Common Stock represented by the
enclosed
WHITE
proxy card will be voted for such substitute nominee(s). Legion Partners Holdings reserves the right to nominate
additional person(s), to the extent this is not prohibited under Bed Bath’s organizational documents and applicable law,
if Bed Bath increases the size of the Board above its existing size or increases the number of directors whose terms expire at
the 2019 Annual Meeting. Additional nominations made pursuant to the preceding sentence are without prejudice to our position that
any attempt to increase the size of the current Board or to classify the Board constitutes an unlawful manipulation of Bed Bath’s
corporate machinery.
WE STRONGLY URGE YOU
TO VOTE “FOR” THE ELECTION OF THE NOMINEES ON THE ENCLOSED WHITE PROXY CARD
PROPOSAL NO. 2
ADVISORY VOTE ON
NAMED EXECUTIVE OFFICERS’ COMPENSATION
As discussed in further
detail in the Company’s proxy statement, the Company is asking shareholders to approve, on an advisory basis, the compensation
of the Company’s named executive officers as described under “Compensation Discussion and Analysis” in the Company’s
proxy statement and the related executive compensation tables, notes and narrative. Accordingly, the Company is asking shareholders
to vote for the following resolution:
“RESOLVED, that
the compensation paid to the Company’s NEOs for fiscal 2018, as disclosed pursuant to Item 402 of Regulation S-K, including
the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
As discussed in the
Company’s proxy statement, while the vote on the executive compensation resolution is non-binding, the Compensation Committee
and the Board value the views of Bed Bath shareholders and will take the outcome into account when considering future compensation
decisions affecting the Company’s named executive officers.
For the reasons set
forth in the “Reasons for the Solicitation” section, we believe that the Company’s executive compensation is
excessive and poorly aligned with performance.
WE RECOMMEND A VOTE “AGAINST”
THE APPROVAL OF THE NON-BINDING ADVISORY REOLUTION ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AND INTEND
TO VOTE OUR SHARES “AGAINST” THE APPROVAL OF THE NON-BINDING ADVISORY REOLUTION ON THE COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As discussed in further
detail in the Company’s proxy statement, the Company has proposed that the shareholders ratify the Audit Committee’s
appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending February
29, 2020. Additional information regarding this proposal is contained in the Company’s proxy statement.
WE MAKE NO RECOMMENATION
WITH RESPECT TO THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY
FOR ITS FISCAL YEAR ENDING FEBRUARY 29, 2020 AND INTEND TO VOTE OUR SHARES “FOR” THIS PROPOSAL.
VOTING AND PROXY PROCEDURES
Shareholders are entitled
to one vote for each share of Common Stock held of record on the Record Date with respect to each matter to be acted on at the
2019 Annual Meeting. Only shareholders of record on the Record Date will be entitled to notice of and to vote at the 2019 Annual
Meeting. Shareholders who sell their shares of Common Stock before the Record Date (or acquire them without voting rights after
the Record Date) may not vote such shares of Common Stock. Shareholders of record on the Record Date will retain their voting rights
in connection with the 2019 Annual Meeting even if they sell such shares of Common Stock after the Record Date. Based on publicly
available information, the Investor Group believes that the only outstanding class of securities of the Company entitled to vote
at the 2019 Annual Meeting is the Common Stock.
Shares of Common Stock
represented by properly executed
WHITE
proxy cards will be voted at the 2019 Annual Meeting as marked and, in the absence
of specific instructions, will be voted
FOR
the election of the Nominees,
AGAINST
the approval of the non-binding
advisory resolution on the compensation of the Company’s named executive officers,
FOR
the ratification of KPMG LLP
as the Company’s as the independent registered public accounting firm of the Company for the fiscal year ending February
29, 2020, and in the discretion of the persons named as proxies on all other matters as may properly come before the 2019 Annual
Meeting, as described herein.
According to the Company’s
proxy statement for the 2019 Annual Meeting, the current Board intends to nominate ten (10) candidates for election at the 2019
Annual Meeting. This Proxy Statement is soliciting proxies to elect only the Nominees. Accordingly, the enclosed
WHITE
proxy
card may only be voted for the Nominees and does not confer voting power with respect to the Company’s nominees. The participants
in this solicitation intend to vote the Investor Group Shares in favor of the Nominees. Shareholders should refer to the Company’s
proxy statement for the names, backgrounds, qualifications and other information concerning the Company’s nominees.
In the event that some of the Nominees are elected, there can be no assurance that the Company nominee(s) who get the most votes
and are elected to the Board will choose to serve as on the Board with the Nominees who are elected.
QUORUM; BROKER NON-VOTES; DISCRETIONARY VOTING
A quorum is the minimum
number of shares of Common Stock that must be represented at a duly called meeting in person or by proxy in order to legally conduct
business at the meeting. For the 2019 Annual Meeting, the presence, in person or by proxy, of the holders of at least a majority
of the shares of Common Stock outstanding as of the Record Date, will be considered a quorum allowing votes to be taken and counted
for the matters before the shareholders.
Abstentions are counted
as present and entitled to vote for purposes of determining a quorum. Abstentions, however, will not be considered a vote cast
with respect to any proposal. Shares represented by “broker non-votes” also are counted as present and entitled to
vote for purposes of determining a quorum. However, if you hold your shares in street name and do not provide voting instructions
to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote
(a “broker non-vote”). Under applicable rules, your broker will not have discretionary authority to vote your shares
at the 2019 Annual Meeting on any of the proposals.
A broker non-vote occurs
when brokers, banks, or other nominees holding shares for a beneficial owner have discretionary authority to vote on “routine”
matters brought before a shareholder meeting, but the beneficial owner of the shares fails to provide the broker, bank, or other
nominee with specific instructions on how to vote on any “non-routine” matters brought to a vote at the shareholder
meeting. Under the rules of the NASDAQ governing brokers’ discretionary authority, because we anticipate that you will receive
proxy materials from or on behalf of both the Company and Legion Partners Holdings, brokers, banks, and other nominees holding
shares in your account will not be permitted to exercise discretionary authority regarding any of the proposals to be voted on
at the 2019 Annual Meeting, whether “routine” or not. As a result, we do not expect there to be broker non-votes by
such brokers, banks, or other nominees. Accordingly, if you are a beneficial owner, if you do not submit any voting instructions
to your broker, bank, or other nominee, then your shares will not be counted in determining the outcome of any of the proposals
at the 2019 Annual Meeting, nor will your shares be counted for purposes of determining whether a quorum exists.
If you are a shareholder
of record, you must deliver your vote by mail or attend the 2019 Annual Meeting in person and vote in order to be counted in the
determination of a quorum.
VOTES REQUIRED FOR APPROVAL
Election of Directors
─
The Company has adopted a plurality vote standard for contested director elections. The ten (10) nominees receiving
the highest number of affirmative votes will be elected as directors of the Company. With respect to the election of
directors, only votes cast
“FOR”
a nominee will be counted. Proxy cards specifying that
votes should be withheld with respect to one (1) or more nominees will result in those nominees receiving fewer votes but will
not count as votes against the nominees. Neither an abstention nor a broker non-vote will count as a vote cast
“FOR”
or
“AGAINST”
a
director nominee. Therefore, abstentions and broker non-votes will have no direct effect on the outcome of the election
of directors.
Advisory Resolution
to Approve Executive Compensation
─ According to the Company’s proxy statement, although the vote is
non-binding, assuming that a quorum is present, the advisory vote on the Company’s named executive officers’ compensation
will be approved if the number of votes cast
“FOR”
approval of such advisory resolution by holders entitled
to vote exceeds the number of votes cast opposing the approval of the advisory resolution. Therefore, abstentions and
broker non-votes will have no direct effect on the approval of the executive compensation program.
Ratification of
Appointment of Accountants
─ According to the Company’s proxy statement, assuming that a quorum is present,
the selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending February
29, 2020 will be deemed to have been ratified if the number of votes cast
“FOR”
ratification of the
appointment by holders entitled to vote exceeds the number of votes cast opposing the ratification of the appointment. Therefore,
abstentions and broker non-votes will have no direct effect on the outcome of this proposal.
If you sign and submit
your
WHITE
proxy card without specifying how you would like your shares voted, your shares will be voted in accordance
with the Investor Group’s recommendations specified herein and in accordance with the discretion of the persons named on
the
WHITE
proxy card with respect to any other matters that may be voted upon at the 2019 Annual Meeting.
REVOCATION OF PROXIES
Shareholders of the
Company may revoke their proxies at any time prior to exercise by attending the 2019 Annual Meeting and voting in person (although
attendance at the 2019 Annual Meeting will not in and of itself constitute revocation of a proxy) or by delivering a written notice
of revocation. The delivery of a subsequently dated proxy which is properly completed will constitute a revocation of any earlier
proxy. The revocation may be delivered either to the Investor Group in care of Saratoga at the address set forth on the back cover
of this Proxy Statement or to the Company at 650 Liberty Avenue, Union, New Jersey 07083 or any other address provided by the Company.
Although a revocation is effective if delivered to the Company, we request that either the original or photostatic copies of all
revocations be mailed to the Investor Group in care of Saratoga at the address set forth on the back cover of this Proxy Statement
so that we will be aware of all revocations and can more accurately determine if and when proxies have been received from the holders
of record on the Record Date of a majority of the outstanding shares of Common Stock. Additionally, Saratoga may use this information
to contact shareholders who have revoked their proxies in order to solicit later dated proxies for the election of the Nominees.
IF YOU WISH TO VOTE FOR THE ELECTION
OF THE NOMINEES TO THE BOARD, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED WHITE PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
SOLICITATION OF PROXIES
The solicitation of
proxies pursuant to this Proxy Statement is being made by the Investor Group. Proxies may be solicited by mail, facsimile, telephone,
telegraph, electronic mail, in person and by advertisements. Solicitations may also be made by certain of the respective directors,
officers, members and employees of the Investor Group, none of whom will, except as described elsewhere in this Proxy Statement,
receive additional compensation for such solicitation. The Nominees may make solicitations of proxies but, except as described
herein, will not receive compensation for acting as director nominees.
We have retained Saratoga
for solicitation and advisory services in connection with solicitations relating to the 2019 Annual Meeting. Saratoga will receive
up to $130,000, applicable toward the final fee to be mutually agreed upon by Legion Partners Holdings and Saratoga and reimbursement
of reasonable out-of-pocket expenses for its services to Legion Partners Holdings in connection with the solicitation. Arrangements
will also be made with custodians, nominees and fiduciaries for forwarding proxy solicitation materials to beneficial owners of
common stock held as of the record date for the 2019 Annual Meeting. Legion Partners Holdings will reimburse such custodians, nominees
and fiduciaries for reasonable expenses incurred in connection therewith. In addition, directors, officers, members and certain
other employees of Legion Partners Holdings and its affiliates may solicit proxies as part of their duties in the normal course
of their employment without any additional compensation. It is anticipated that Saratoga will employ approximately twenty (20)
persons to solicit shareholders for the 2019 Annual Meeting.
The Legion Group, the
Macellum Group and the Ancora Funds will pay all costs of the solicitation. The Legion Group, the Macellum Group and the Ancora
Funds may seek reimbursement from the Company of all expenses it incurs in connection with the solicitation but does not intend
to submit the question of such reimbursement to a vote of shareholders of the Company. The expenses incurred by the Legion Group,
the Macellum Group and the Ancora Funds to date in furtherance of, or in connection with, the solicitation is approximately $450,000.
Legion Group, the Macellum Group and the Ancora Funds anticipate that its total expenses will be approximately $900,000. The actual
amount could be higher or lower depending on the facts and circumstances arising in connection with any the solicitation.
ADDITIONAL PARTICIPANT
INFORMATION
The Participants in
this proxy solicitation are the Legion Group, the Macellum Group, the Ancora Group and the Nominees. The principal business of
Legion Partners Holdings is serving as the sole member of Legion Partners Asset Management and sole member of Legion LLC. The principal
business of each of Legion Partners I, Legion Partners II and Legion Partners Special XII is investing in securities. The principal
business of Legion LLC is serving as the general partner of each of Legion Partners I, Legion Partners II, Legion Partners Special
XII and certain other affiliated funds. The principal business of Legion Partners Asset Management is managing investments in securities
and serving as the investment advisor of each of Legion Partners I, Legion Partners II, Legion Partners Special XII and certain
other affiliated funds. The principal occupation of each of Messrs. Kiper and White is serving as a managing director of Legion
Partners Asset Management and a managing member of Legion Partners Holdings. The principal business of Macellum Home is investing
in securities. The principal business of Macellum Management is serving as the investment manager for Macellum Home. The principal
business of Macellum GP is serving as the general partner of Macellum Home and Macellum Management. The principal business of each
of Ancora Catalyst Institutional, Ancora Catalyst, Merlin Institutional and Ancora Merlin is investing in securities. The principal
business of Ancora Special Opportunity and Ancora/Thelen is serving as “open-end” management investment companies,
as defined in the Investment Company Act of 1940, as amended, and are separate series of Ancora Trust, an Ohio business trust under
a Declaration of Trust dated August 20, 2003. The principal business of Ancora Advisors is serving as a registered investment advisor
to certain of its affiliates, including each of Ancora Merlin Institutional, Ancora Merlin, Ancora Catalyst Institutional, Ancora
Catalyst, Ancora Special Opportunity, Ancora/Thelen and accounts separately managed, including accounts held by owners and employees
of Ancora Advisors (the “SMAs”). The principal occupation of Mr. DiSanto is serving as the Chairman and Chief Executive
Officer of Ancora Advisors. Messrs. Kiper, White, and DiSanto are citizens of the United States.
The address of the
principal office of each of the members of the Legion Group is 9401 Wilshire Boulevard, Suite 705, Beverly Hills, California 90212.
The address of the principal office of each of the members of the Macellum Group is 99 Hudson Street, 5th Floor, New York, New
York 10013. The address of the principal office of each of the members of the Ancora Group is 6060 Parkland Boulevard, Suite 200,
Cleveland, Ohio 44124.
As of the date hereof,
Legion Partners I beneficially owned directly 3,452,124 shares of Common Stock beneficially owned directly, including 898,000 shares
underlying long call options that are currently exercisable. As of the date hereof, Legion Partners II beneficially owned directly
199,952 shares of Common Stock beneficially owned directly, including 52,000 shares underlying long call options that are currently
exercisable. As of the date hereof, Legion Partners Special XII beneficially owned directly 982,000 shares of Common Stock beneficially
owned directly, including 200,000 shares underlying long call options that are currently exercisable. As of the date hereof, Legion
Partners Holdings owned directly 200 shares of Common Stock, all of which are held in record name. As the sole member of Legion
Partners Asset Management and sole member of Legion LLC, Legion Partners Holdings may also be deemed to beneficially own the 3,452,124
shares of Common Stock beneficially owned directly by Legion Partners I, including 898,000 shares underlying long call options
that are currently exercisable, 199,952 shares of Common Stock beneficially owned directly by Legion Partners II, including 52,000
shares underlying long call options that are currently exercisable, and 982,000 shares of Common Stock beneficially owned directly
by Legion Partners Special XII, including 200,000 shares underlying long call options that are currently exercisable. As the general
partner of each of Legion Partners I, Legion Partners II and Legion Partners Special XII, Legion LLC may be deemed to beneficially
own the 3,452,124 shares of Common Stock beneficially owned directly by Legion Partners I, including 898,000 shares underlying
long call options that are currently exercisable, 199,952 shares of Common Stock beneficially owned directly by Legion Partners
II, including 52,000 shares underlying long call options that are currently exercisable, and 982,000 shares of Common Stock beneficially
owned directly by Legion Partners Special XII, including 200,000 shares underlying long call options that are currently exercisable.
As the investment advisor of each of Legion Partners I, Legion Partners II and Legion Partners Special XII, Legion Partners Asset
Management may be deemed to beneficially own the 3,452,124 shares of Common Stock beneficially owned directly by Legion Partners
I, including 898,000 shares underlying long call options that are currently exercisable, 199,952 shares of Common Stock beneficially
owned directly by Legion Partners II, including 52,000 shares underlying long call options that are currently exercisable, and
982,000 shares of Common Stock beneficially owned directly by Legion Partners Special XII, including 200,000 shares underlying
long call options that are currently exercisable. As a managing director of Legion Partners Asset Management and managing member
of Legion Partners Holdings, each of Messrs. Kiper and White may be deemed to beneficially own the 3,452,124 shares of Common Stock
beneficially owned directly by Legion Partners I, including 898,000 shares underlying long call options that are currently exercisable,
199,952 shares of Common Stock beneficially owned directly by Legion Partners II, including 52,000 shares underlying long call
options that are currently exercisable, and 982,000 shares of Common Stock beneficially owned directly by Legion Partners Special
XII, including 200,000 shares underlying long call options that are currently exercisable, and 200 shares of Common Stock beneficially
owned directly by Legion Partners Holdings.
As of the date hereof,
Macellum Home beneficially owned directly 446,415 shares of Common Stock, including 89,500 shares underlying long call options
that are currently exercisable, and 1,000 shares held in record name. As the investment manager of Macellum Home, Macellum Management
may be deemed to beneficially own the 446,415 shares of Common Stock beneficially owned directly by Macellum Home, including 89,500
shares underlying long call options that are currently exercisable. As the general partner of Macellum Home, Macellum GP may be
deemed to beneficially own the 446,415 shares of Common Stock beneficially owned directly by Macellum Home, including 89,500 shares
underlying long call options that are currently exercisable. As the sole member of Macellum GP, Mr. Duskin may be deemed to beneficially
own the 446,415 shares of Common Stock beneficially owned directly by Macellum Home, including 89,500 shares underlying long call
options that are currently exercisable.
As of the date
hereof, Ancora Catalyst Institutional beneficially owned directly 244,195 shares of Common Stock, including 83,700 shares underlying
long call options that are currently exercisable. As of the date hereof, Ancora Catalyst beneficially owned directly 18,380 shares
of Common Stock, including 6,300 shares underlying long call options that are currently exercisable. As of the date hereof, Merlin
Institutional beneficially owned directly 235,455 shares of Common Stock, including 81,000 shares underlying long call options
that are currently exercisable. As of the date hereof, Ancora Merlin beneficially owned directly 27,121 shares of Common Stock,
including 9,000 shares underlying long call options that are currently exercisable. As of the date hereof, Ancora Special Opportunity
beneficially owned directly 20,000 shares of Common Stock. As of the date hereof, Ancora/Thelen beneficially owned directly 96,780
shares of Common Stock. As the investment advisor to each of Ancora Catalyst Institutional, Ancora Catalyst, Merlin Institutional,
Ancora Merlin, Ancora Special Opportunity, Ancora/Thelen and the SMAs, Ancora Advisors may be deemed to beneficially own the 244,195
shares of Common Stock beneficially owned directly by Ancora Catalyst Institutional, including 83,700 shares underlying long call
options that are currently exercisable, 18,380 shares of Common Stock beneficially owned directly by Ancora Catalyst, including
6,300 shares underlying long call options that are currently exercisable, 235,455 shares of Common Stock beneficially owned directly
by Merlin Institutional, including 81,000 shares underlying long call options that are currently exercisable, 27,121 shares of
Common Stock beneficially owned directly by Ancora Merlin, including 9,000 shares underlying long call options that are currently
exercisable, 20,000 shares of Common Stock beneficially owned directly by Ancora Special Opportunity, 96,780 shares of Common
Stock beneficially owned directly by Ancora/Thelen, and 1,187,317 shares of Common Stock held in the SMAs. As the Chairman and
Chief Executive Officer of Ancora Advisors, Mr. DiSanto may be deemed to beneficially own the 244,195 shares of Common Stock beneficially
owned directly by Ancora Catalyst Institutional, including 83,700 shares underlying long call options that are currently exercisable,
18,380 shares of Common Stock beneficially owned directly by Ancora Catalyst, including 6,300 shares underlying long call options
that are currently exercisable, 235,455 shares of Common Stock beneficially owned directly by Merlin Institutional, including
81,000 shares underlying long call options that are currently exercisable, 27,121 shares of Common Stock beneficially owned directly
by Ancora Merlin, including 9,000 shares underlying long call options that are currently exercisable, 20,000 shares of Common
Stock beneficially owned directly by Ancora Special Opportunity, 96,780 shares of Common Stock beneficially owned directly by
Ancora/Thelen, and 1,187,317 shares of Common Stock held in the SMAs.
Each of Legion Partners
I, Legion Partners II and Legion Partners Special XII purchased in the over the counter market American-style call options referencing
an aggregate of 898,000 shares, 52,000 shares and 200,000 shares, respectively, which are currently exercisable, have an exercise
price of $12.50 per share and expire on January 17, 2020, as further described in
Schedule I
.
Macellum Home purchased
in the over the counter market American-style call options referencing an aggregate of (i) 43,000 shares of Common Stock, which
have an exercise price of $14.00 and expire on November 15, 2019 and (ii) 46,500 shares of Common Stock, which have an exercise
price of $15.00 and expire on January 17, 2020, as further described in
Schedule I
.
Ancora Catalyst Institutional
purchased in the over the counter market American-style call options referencing an aggregate of 83,700 shares of Common Stock,
which have an exercise price of $16.00 and expire on August 16, 2019, Ancora Catalyst purchased in the over the counter market
American-style call options referencing an aggregate of 6,300 shares of Common Stock, which have an exercise price of $16.00 and
expire on August 16, 2019, Merlin Institutional purchased in the over the counter market American-style call options referencing
an aggregate of 81,000 shares of Common Stock, which have an exercise price of $16.00 and expire on August 16, 2019, and Ancora
Merlin purchased in the over the counter market American-style call options referencing an aggregate of 9,000 shares of Common
Stock, which have an exercise price of $16.00 and expire on August 16, 2019, as further described in
Schedule I
.
Each Participant
in this solicitation may be deemed a member of a “group” for the purposes of Section 13(d)(3) of the Exchange Act,
and accordingly, the Investor Group may be deemed to beneficially own the 6,914,939 shares of Common Stock beneficially owned
in the aggregate by the members of the Investor Group (as further described above), including 1,419,500 shares underlying call
options that are currently exercisable. Each member of the Investor Group disclaims beneficial ownership with respect to the shares
of Common Stock reported owned in this Notice, except to the extent of its, his or her pecuniary interest therein. For information
regarding purchases and sales of securities of the Company during the past two (2) years by the Participants, see
Schedule
I
.
From time to time,
each of Legion Partners I, Legion Partners II, Legion Partners Special XII, Macellum Home and the Ancora Funds effect purchases
of securities primarily through margin accounts maintained for them with prime brokers, which may extend margin credit to them
as and when required to open or carry positions in the margin accounts, subject to applicable federal margin regulations, stock
exchange rules and the prime brokers’ credit policies. In such instances, the positions held in the margin accounts are pledged
as collateral security for the repayment of debit balances in the accounts. As of the date hereof, none of the shares of Common
Stock beneficially owned by Legion Partners I, Legion Partners II, Legion Partners Special XII, Macellum Home and the Ancora Funds
are currently pledged and there are no debit balances in any such accounts.
The shares of Common
Stock purchased by each of Legion Partners I, Legion Partners II, Legion Partners Special XII, Macellum Home, the Ancora Funds,
Ancora Special Opportunity, Ancora/Thelen and the shares of Common Stock held in the SMAs were purchased with working capital (which
may, at any given time, include margin loans made by brokerage firms in the ordinary course of business), except as otherwise noted,
as set forth in
Schedule I
.
Except as set forth
in this Proxy Statement (including the Schedules hereto), (i) during the past ten (10) years, no Participant has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors); (ii) no Participant directly or indirectly beneficially
owns any securities of the Company; (iii) no Participant owns any securities of the Company which are owned of record but not beneficially;
(iv) no Participant has purchased or sold any securities of the Company during the past two years; (v) no part of the purchase
price or market value of the securities of the Company owned by any Participant is represented by funds borrowed or otherwise obtained
for the purpose of acquiring or holding such securities; (vi) no Participant is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any securities of the Company, including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies; (vii) no associate of any Participant owns beneficially, directly or indirectly, any securities
of the Company; (viii) no Participant owns beneficially, directly or indirectly, any securities of any parent or subsidiary of
the Company; (ix) no Participant or any of his, her or its associates was a party to any transaction, or series of similar transactions,
since the beginning of the Company’s last fiscal year, or is a party to any currently proposed transaction, or series of
similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeds
$120,000; (x) no Participant or any of his, her or its associates has any arrangement or understanding with any person with respect
to any future employment by the Company or its affiliates, or with respect to any future transactions to which the Company or any
of its affiliates will or may be a party; (xi) no Participant has a substantial interest, direct or indirect, by securities holdings
or otherwise, in any matter to be acted on at the 2019 Annual Meeting; (xii) no Participant holds any positions or offices with
the Company; (xiii) no Participant has a family relationship with any director, executive officer, or person nominated or chosen
by the Company to become a director or executive officer; and (xiv) no companies or organizations, with which any of the Participants
has been employed in the past five years, is a parent, subsidiary or other affiliate of the Company. There are no material proceedings
to which any Participant or any of his, her or its associates is a party adverse to the Company or any of its subsidiaries or has
a material interest adverse to the Company or any of its subsidiaries. With respect to each of the Nominees, none of the events
enumerated in Item 401(f)(1)-(8) of Regulation S-K of the Exchange Act occurred during the past ten (10) years.
OTHER MATTERS AND
ADDITIONAL INFORMATION
The Investor Group
is unaware of any other matters to be considered at the 2019 Annual Meeting. However, should other matters, which the Investor
Group is not aware of at a reasonable time before this solicitation, be brought before the 2019 Annual Meeting, the persons named
as proxies on the enclosed
WHITE
proxy card will vote on such matters in their discretion.
Some banks, brokers
and other nominee record holders may be participating in the practice of “householding” proxy statements and annual
reports. This means that only one copy of this Proxy Statement may have been sent to multiple shareholders in your household. We
will promptly deliver a separate copy of the document to you if you write to our proxy solicitor, Saratoga, at the following address
or phone number: 520 8th Avenue, 14th Floor, New York, New York 10018 or call toll free at (888) 368-0379. If you want to receive
separate copies of our proxy materials in the future, or if you are receiving multiple copies and would like to receive only one
copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact our proxy solicitor
at the above address and phone number.
SHAREHOLDER PROPOSALS
The Company has not yet publicly disclosed
the deadline for shareholders to submit a proposal to be included in the Company’s proxy statement for the 2020 Annual Meeting
or the deadline to nominate a director or bring other business before the shareholders at the 2020 Annual Meeting. Once the Company
publicly discloses these deadlines, we intend to supplement this Proxy Statement with such information and file revised definitive
materials with the SEC.
INCORPORATION BY
REFERENCE
WE HAVE OMITTED FROM
THIS PROXY STATEMENT CERTAIN DISCLOSURE REQUIRED BY APPLICABLE LAW THAT IS EXPECTED TO BE INCLUDED IN THE COMPANY’S PROXY
STATEMENT RELATING TO THE
2019 Annual Meeting
BASED ON RELIANCE ON RULE 14A-5(C).
THIS DISCLOSURE IS EXPECTED TO INCLUDE, AMONG OTHER THINGS, CURRENT BIOGRAPHICAL INFORMATION ON THE COMPANY’S DIRECTORS,
INFORMATION CONCERNING EXECUTIVE COMPENSATION, AND OTHER IMPORTANT INFORMATION. SEE
SCHEDULE II
FOR INFORMATION REGARDING
PERSONS WHO BENEFICIALLY OWN MORE THAN 5% OF THE SHARES AND THE OWNERSHIP OF THE SHARES BY THE DIRECTORS AND MANAGEMENT OF THE
COMPANY.
The information concerning
the Company contained in this Proxy Statement and the Schedules attached hereto has been taken from, or is based upon, publicly
available information.
________________
Your vote is important. No
matter how many or how few shares you own, please vote to elect the Nominees by marking, signing, dating and mailing the enclosed
WHITE proxy card promptly.
Dated: _________, 2019
|
LEGION PARTNERS HOLDINGS, LLC
|
SCHEDULE I
TRANSACTIONS IN SECURITIES
OF THE COMPANY
DURING THE PAST TWO
YEARS
Nature of Transaction
|
Amount of Securities
Purchased/(Sold)
|
Date of
Transaction
|
Legion
Partners, L.P. I
Purchase of Common Stock
|
10,178
|
01/11/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(68,000)
|
01/11/2019
|
Purchase of Common Stock
|
37,824
|
01/14/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(265,400)
|
01/15/2019
|
Purchase of Common Stock
|
380,959
|
01/15/2019
|
Purchase of Common Stock
|
152,888
|
01/16/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(6,600)
|
01/16/2019
|
Short Sale of February 8, 2019 Put Options ($14.50 Strike Price)
1
|
(76,200)
|
01/16/2019
|
Purchase of Common Stock
|
130,737
|
01/17/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(6,200)
|
01/17/2019
|
Short Sale of February 8, 2019 Put Options ($14.50 Strike Price)
1
|
(63,600)
|
01/17/2019
|
Purchase of Common Stock
|
123,022
|
01/18/2019
|
Short Sale of February 8, 2019 Put Options ($14.50 Strike Price)
1
|
(39,600)
|
01/18/2019
|
Purchase of Common Stock
|
21,957
|
01/23/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(290,800)
|
02/07/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(44,800)
|
02/08/2019
|
Short Sale of March 8, 2019 Put Options ($16.00 Strike Price)
2
|
(84,400)
|
02/08/2019
|
Purchase of Common Stock
|
141,641
|
02/11/2019
|
Purchase of Common Stock
|
141,641
|
02/11/2019
|
Purchase of Common Stock
|
124,644
|
02/11/2019
|
Short Sale of February 22, 2019 Put Options ($16.50 Strike Price)
1
|
(132,200)
|
02/13/2019
|
__________________________
1
Represents shares of Common Stock underlying American-style put options sold short in the over-the-counter market, all of which
expired on or prior to March 1, 2019.
2
Represents shares of Common Stock underlying American-style put options sold short in the over-the-counter market,
all of which were assigned on March 8, 2019, the expiration date.
Short Sale of March 1, 2019 Put Options ($16.50 Strike Price)
1
|
(96,600)
|
02/14/2019
|
Purchase of Common Stock
|
162,752
|
02/14/2019
|
Purchase of Common Stock
|
141,787
|
02/14/2019
|
Purchase of Common Stock
|
141,787
|
02/14/2019
|
Purchase of Common Stock
|
141,787
|
02/14/2019
|
Purchase of January 17, 2020 Call Options ($12.50 Strike Price)
3
|
898,000
|
02/15/2019
|
Purchase of Common Stock
|
47,053
|
02/25/2019
|
Purchase of Common Stock
|
149,175
|
02/26/2019
|
Purchase of Common Stock
|
55,062
|
03/01/2019
|
Purchase of Common Stock
|
38,281
|
03/04/2019
|
Purchase of Common Stock
|
127,573
|
03/06/2019
|
Purchase of Common Stock
4
|
84,400
|
03/08/2019
|
Purchase of Common Stock
|
57,188
|
03/11/2019
|
Purchase of Common Stock
|
70,894
|
03/11/2019
|
Purchase of Common Stock
|
70,894
|
03/11/2019
|
Legion
Partners, L.P. II
Purchase of Common Stock
|
586
|
01/11/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(3,900)
|
01/11/2019
|
Purchase of Common Stock
|
2,176
|
01/14/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(15,300)
|
01/15/2019
|
Purchase of Common Stock
|
21,920
|
01/15/2019
|
Purchase of Common Stock
|
8,797
|
01/16/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(400)
|
01/16/2019
|
Short Sale of February 8, 2019 Put Options ($14.50 Strike Price)
1
|
(4,400)
|
01/16/2019
|
Purchase of Common Stock
|
7,523
|
01/17/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(300)
|
01/17/2019
|
Short Sale of February 8, 2019 Put Options ($14.50 Strike Price)
1
|
(3,600)
|
01/17/2019
|
Purchase of Common Stock
|
7,078
|
01/18/2019
|
Short Sale of February 8, 2019 Put Options ($14.50 Strike Price)
1
|
(2,300)
|
01/18/2019
|
Purchase of Common Stock
|
1,293
|
01/23/2019
|
__________________________
3
Represents shares of Common Stock underlying American-style call options purchased in the over-the-counter market with an expiration
date of January 17, 2020.
4
Represents shares of Common Stock underlying American-style put options that were assigned. These put options had
a strike price of $16.00 and would have expired on March 8, 2019.
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(16,800)
|
02/07/2019
|
Short Sale of February 15, 2019 Put Options ($15.00 Strike Price)
1
|
(2,600)
|
02/08/2019
|
Short Sale of March 8, 2019 Put Options ($16.00 Strike Price)
2
|
(4,900)
|
02/08/2019
|
Purchase of Common Stock
|
8,359
|
02/11/2019
|
Purchase of Common Stock
|
8,359
|
02/11/2019
|
Purchase of Common Stock
|
7,356
|
02/11/2019
|
Short Sale of February 22, 2019 Put Options ($16.50 Strike Price)
1
|
(7,700)
|
02/13/2019
|
Short Sale of March 1, 2019 Put Options ($16.50 Strike Price)
1
|
(5,600)
|
02/14/2019
|
Purchase of Common Stock
|
9,427
|
02/14/2019
|
Purchase of Common Stock
|
8,213
|
02/14/2019
|
Purchase of Common Stock
|
8,213
|
02/14/2019
|
Purchase of Common Stock
|
8,213
|
02/14/2019
|
Purchase of January 17, 2020 Call Options ($12.50 Strike Price)
3
|
52,000
|
02/15/2019
|
Purchase of Common Stock
|
2,689
|
02/25/2019
|
Purchase of Common Stock
|
8,525
|
02/26/2019
|
Purchase of Common Stock
|
3,193
|
03/01/2019
|
Purchase of Common Stock
|
2,219
|
03/04/2019
|
Purchase of Common Stock
|
7,389
|
03/06/2019
|
Purchase of Common Stock
4
|
4,900
|
03/08/2019
|
Purchase of Common Stock
|
3,312
|
03/11/2019
|
Purchase of Common Stock
|
4,106
|
03/11/2019
|
Purchase of Common Stock
|
4,106
|
03/11/2019
|
Legion
Partners Special Opportunities, L.P. XII
Purchase of Common Stock
|
130,000
|
03/19/2019
|
Purchase of Common Stock
|
120,000
|
03/20/2019
|
Purchase of Common Stock
|
150,000
|
03/22/2019
|
Purchase of Common Stock
|
150,000
|
03/22/2019
|
Purchase of Common Stock
|
150,000
|
03/22/2019
|
Purchase of Common Stock
|
82,000
|
03/22/2019
|
Purchase of January 17, 2020 Call Options ($12.50 Strike Price)
3
|
200,000
|
03/22/2019
|
Legion
Partners Holdings, LLC
Purchase of Common Stock
|
200
|
01/22/2019
|
Macellum
Home Fund, LP
Purchase of Common Stock
|
3,000
|
02/07/2019
|
Purchase of Common Stock
|
5,000
|
02/14/2019
|
Purchase of Common Stock
|
3,000
|
02/19/2014
|
Purchase of Common Stock
|
6,500
|
03/04/2019
|
Purchase of Common Stock
|
3,200
|
03/05/2019
|
Purchase of Common Stock
|
6,802
|
03/11/2019
|
Purchase of Common Stock
|
132,312
|
03/12/2019
|
Purchase of Common Stock
|
4,500
|
03/15/2019
|
Purchase of Common Stock
|
73,000
|
03/21/2019
|
Purchase of Common Stock
|
73,000
|
03/22/2019
|
Purchase of November 15, 2019 Call Options ($14.00 Strike Price)
5
|
43,000
|
03/25/2019
|
Purchase of January 17, 2020 Call Options ($15.00 Strike Price)
3
|
46,500
|
03/25/2019
|
Purchase of Common Stock
|
27,000
|
03/26/2019
|
Purchase of Common Stock
|
1,601
|
03/27/2019
|
Purchase of Common Stock
|
12,000
|
03/28/2019
|
Purchase of Common Stock
|
6,000
|
04/04/2019
|
Ancora
Catalyst Institutional, LP
Purchase of Common Stock
|
46,500
|
03/11/2019
|
Purchase of Common Stock
|
27,642
|
03/12/2019
|
Purchase of Common Stock
|
23,113
|
03/12/2019
|
Purchase of Common Stock
|
93,000
|
03/13/2019
|
Purchase of Common Stock
|
41,850
|
03/13/2019
|
Purchase of Common Stock
|
93,000
|
03/14/2019
|
Sale of Common Stock
|
(46,500)
|
03/15/2019
|
Sale of Common Stock
|
(46,500)
|
03/15/2019
|
Sale of Common Stock
|
(41,850)
|
03/15/2019
|
Sale of Common Stock
|
(27,642)
|
03/15/2019
|
Sale of Common Stock
|
(2,118)
|
03/15/2019
|
Purchase of August 16, 2019 Call Options ($16.00 Strike Price)
6
|
83,700
|
03/25/2019
|
Ancora
Catalyst, LP
Purchase of Common Stock
|
3,500
|
03/11/2019
|
Purchase of Common Stock
|
2,080
|
03/12/2019
|
Purchase of Common Stock
|
1,740
|
03/12/2019
|
__________________________
5
Represents shares of Common Stock underlying American-style call options purchased in the over-the-counter market with an expiration
date of November 15, 2019.
6
Represents shares of Common Stock underlying American-style call options purchased in the over-the-counter market
with an expiration date of August 16, 2019.
Purchase of Common Stock
|
7,000
|
03/13/2019
|
Purchase of Common Stock
|
3,150
|
03/13/2019
|
Purchase of Common Stock
|
7,000
|
03/14/2019
|
Sale of Common Stock
|
(3,500)
|
03/15/2019
|
Sale of Common Stock
|
(3,500)
|
03/15/2019
|
Sale of Common Stock
|
(3,150)
|
03/15/2019
|
Sale of Common Stock
|
(2,080)
|
03/15/2019
|
Sale of Common Stock
|
(160)
|
03/15/2019
|
Purchase of August 16, 2019 Call Options ($16.00 Strike Price)
6
|
6,300
|
03/25/2019
|
Merlin
Partners Institutional, LP
Purchase of Common Stock
|
44,750
|
03/11/2019
|
Purchase of Common Stock
|
22,243
|
03/12/2019
|
Purchase of Common Stock
|
26,602
|
03/12/2019
|
Purchase of Common Stock
|
89,500
|
03/13/2019
|
Purchase of Common Stock
|
40,275
|
03/13/2019
|
Purchase of Common Stock
|
89,500
|
03/14/2019
|
Sale of Common Stock
|
(44,750)
|
03/15/2019
|
Sale of Common Stock
|
(44,750)
|
03/15/2019
|
Sale of Common Stock
|
(40,275)
|
03/15/2019
|
Sale of Common Stock
|
(26,602)
|
03/15/2019
|
Sale of Common Stock
|
(2,038)
|
03/15/2019
|
Purchase of August 16, 2019 Call Options ($16.00 Strike Price)
6
|
81,000
|
03/25/2019
|
Ancora
Merlin, LP
Purchase of Common Stock
|
5,250
|
03/11/2019
|
Purchase of Common Stock
|
2,610
|
03/12/2019
|
Purchase of Common Stock
|
3,121
|
03/12/2019
|
Purchase of Common Stock
|
10,500
|
03/13/2019
|
Purchase of Common Stock
|
4,725
|
03/13/2019
|
Purchase of Common Stock
|
10,500
|
03/14/2019
|
Sale of Common Stock
|
(5,250)
|
03/15/2019
|
Sale of Common Stock
|
(5,250)
|
03/15/2019
|
Sale of Common Stock
|
(4,725)
|
03/15/2019
|
Sale of Common Stock
|
(3,121)
|
03/15/2019
|
Sale of Common Stock
|
(239)
|
03/15/2019
|
Purchase of August 16, 2019 Call Options ($16.00 Strike Price)
6
|
9,000
|
03/25/2019
|
Ancora
Special Opportunity Fund
Purchase of Common Stock
|
10,000
|
12/31/2018
|
Sale of Common Stock
|
(5,000)
|
01/14/2019
|
Sale of Common Stock
|
(5,000)
|
01/14/2019
|
Purchase of Common Stock
|
10,000
|
03/18/2019
|
Purchase of Common Stock
|
2,000
|
03/18/2019
|
Purchase of Common Stock
|
3,000
|
03/18/2019
|
Purchase of Common Stock
|
5,000
|
03/21/2019
|
Ancora/Thelen
Small-Mid Cap Fund
Purchase of Common Stock
|
28,766
|
03/12/2019
|
Purchase of Common Stock
|
24,053
|
03/12/2019
|
Purchase of Common Stock
|
43,961
|
03/13/2019
|
Ancora
Advisors, LLC
(Through certain separately managed
accounts, including accounts held by
owners and employees of Ancora Advisors)
Sale of Common Stock
|
(7)
|
12/11/2018
|
Purchase of Common Stock
|
653,802
|
03/12/2019
|
Purchase of Common Stock
|
527,065
|
03/13/2019
|
Purchase of Common Stock
|
4,869
|
03/14/2019
|
Sale of Common Stock
|
(3,800)
|
03/18/2019
|
Purchase of Common Stock
|
250
|
03/20/2019
|
Acquisition of Beneficial Ownership
|
890
|
03/29/2019(1)
|
Purchase of Common Stock
|
2,300
|
05/09/2019
|
John
E. Fleming
Purchase of Common Stock
|
969
|
11/20/2018
|
Purchase of Common Stock
|
4,031
|
11/20/2018
|
|
(1)
|
Reflects the net acquisition of beneficial ownership of 890 Shares as a result of opening and closing SMAs.
|
SCHEDULE II
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table
sets forth information known to us with respect to the beneficial ownership of our Common Stock as of March 30, 2019, for the following
persons:
· each shareholder
known by us to own beneficially more than 5% of the Common Stock;
· each of the
Company’s directors and named executive officers; and
· all directors
and executive officers as a group (which group consist of the directors and named executive officers named in the table).
The following table
gives effect to the shares of Common Stock issuable within 60 days of December 1, 2018 upon the exercise of all options and other
rights beneficially owned by the indicated shareholders on that date. Beneficial ownership is determined in accordance with Rule
13d-3 promulgated under Section 13 of the Exchange Act, and includes voting and investment power with respect to shares. Percentage
of beneficial ownership is based on 132,089,269 shares of Common Stock outstanding at March 30, 2019, as reported in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 30, 2019. Except as otherwise noted below,
each person or entity named in the following table has sole voting and investment power with respect to all shares of Common Stock
that he, she or it beneficially owns.
Unless otherwise indicated,
the address of each beneficial owner listed below is c/o Bed Bath & Beyond Inc., 650 Liberty Avenue, Union, New Jersey
07083.
Name
|
|
Position
|
Number of Shares
of Common Stock Beneficially Owned and Percent of Class**
|
BlackRock, Inc.
|
|
|
16,426,666
|
(1)
|
12.44%
|
FMR LLC
|
|
|
14,715,996
|
(2)
|
11.14%
|
The Vanguard Group
|
|
|
12,512,221
|
(3)
|
9.47%
|
Dimensional Fund Advisors LP
|
|
|
11,259,473
|
(4)
|
8.52%
|
Contrarius Investment Management Limited
et al.
|
|
|
9,207,291
|
(5)
|
6.97%
|
Hotchkis and Wiley Capital Management, LLC
|
|
|
7,880,617
|
(6)
|
5.97%
|
TIAA-CREF Investment Management, LLC
|
|
|
7,880,205
|
(7)
|
5.97%
|
Legion Partners Holdings, LLC
et al.
|
|
|
6,914,939
|
(8)
|
5.24%
|
Warren Eisenberg
|
|
Co-Chairman and Co-Founder
|
2,114,038
|
(9)
|
1.60%
|
Leonard Feinstein
|
|
Co-Chairman and Co-Founder
|
1,977,316
|
(10)
|
1.50%
|
Steven H. Temares
|
|
Chief Executive Officer and Director
|
2,389,758
|
(11)
|
1.81%
|
Eugene A. Castagna
|
|
President and Chief Operating Officer
|
124,002
|
(12)
|
*
|
Susan E. Lattmann
|
|
Chief Administrative Officer
|
47,886
|
(13)
|
*
|
Robyn M. D’Elia
|
|
Chief Financial Officer and Treasurer
|
13,095
|
|
*
|
Matthew Fiorilli
|
|
Senior Vice President—Stores
|
302,941
|
(14)
|
*
|
Dean S. Adler
|
|
Director
|
33,981
|
(15)
|
*
|
Stanley F. Barshay
|
|
Director
|
32,744
|
|
*
|
Stephanie Bell-Rose
|
|
Director
|
4,086
|
|
*
|
Klaus Eppler
|
|
Director
|
23,289
|
|
*
|
Patrick R. Gaston
|
|
Director
|
33,290
|
|
*
|
Jordan Heller
|
|
Director
|
5,647
|
|
*
|
Victoria A. Morrison
|
|
Director
|
22,984
|
|
*
|
Johnathan B. Osborne
|
|
Director
|
—
|
|
—
|
Virginia Ruesterholz
|
|
Director
|
10,760
|
|
*
|
All Directors and Executive Officers as a Group (16 persons)
|
|
|
7,135,817
|
|
5.40%
|
* Less than 1% of the
outstanding common stock of the Company.
(1)
Information
regarding BlackRock, Inc. was obtained from a Schedule 13G filed with the SEC on January 24, 2019 by BlackRock, Inc. The Schedule
13G states that BlackRock, Inc. has sole voting power of 15,930,440 shares of common stock and sole dispositive power of 16,426,666
shares of common stock. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.**
(2)
Information
regarding FMR LLC was obtained from a Schedule 13G filed with the SEC on February 13, 2019 by FMR LLC. The Schedule 13G states
that FMR LLC has sole voting power of 2,338,974 shares of common stock and sole dispositive power of 14,715,996 shares of common
stock. The address of FMR LLC is 245 Summer Street, Boston, MA 02210.**
(3)
Information
regarding The Vanguard Group was obtained from a Schedule 13G filed with the SEC on February 11, 2019 by The Vanguard Group.
The Schedule 13G states that The Vanguard Group has sole voting power of 133,944 shares of common stock, shared voting power of
19,600 shares of common stock, sole dispositive power of 12,373,372 shares of common stock and shared dispositive power of 138,849
shares of common stock. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.**
(4)
Information
regarding Dimensional Fund Advisors LP was obtained from a Schedule 13G filed with the SEC on February 8, 2019 by Dimensional
Fund Advisors LP. The Schedule 13G states that Dimensional Fund Advisors LP has sole voting power of 11,055,063 shares of common
stock and sole dispositive power of 11,259,473 shares of common stock. The address of Dimensional Fund Advisors LP is Building
One, 6300 Bee Cave Road, Austin, Texas 78746.**
(5)
Information
regarding Contrarius Investment Management Limited and Contrarius Investment Management (Bermuda) Limited was obtained from a Schedule
13G filed with the SEC on February 5, 2019. The Schedule 13G states that Contrarius Investment Management Limited and Contrarius
Investment Management (Bermuda) Limited has the shared voting power of 9,207,291 and shared dispositive power of 9,207,291 shares
of common stock. The address for Contrarius Investment Management Limited is 2 Bond Street, St. Helier, Jersey JE2 3NP, Channel
Islands and the address for Contrarius Investment Management (Bermuda) Limited is Waterloo House, 100 Pitts Bay Road, Pembroke
HM 08 Bermuda.**
(6)
Information
regarding Hotchkis and Wiley Capital Management, LLC was obtained from a Schedule 13G filed with the SEC on February 13, 2019
by Hotchkis and Wiley Capital Management, LLC. The Schedule 13G states that Hotchkis and Wiley Capital Management, LLC. has sole
voting power of 5,511,508 and sole dispositive power of 7,880,617 shares of common stock. The address of Hotchkis and Wiley Capital
Management, LLC is 725 S. Figueroa Street 39
th
Fl., Los Angeles, CA 90017.**
(7)
The
shares shown as being owned as TIAA-CREF Investment Management, LLC include (a) 832,329 owned by Teachers Advisors, LLC.**
(8)
The
shares shown as being owned as Legion Partners Holdings, LLC include (a) 4,634,276 shares owned by Legion Partners Holdings, LLC,
which includes 1,150,000 shares underlying call options that are currently exercisable (b) 446,415 shares owned by Macellum Advisors
GP, LLC, which includes 89,500 shares underlying call options that are currently exercisable (c) 1,829,248 shares owned by Ancora
Advisors, LLC, which includes 180,000 shares underling call options that are currently exercisable and (d) 5,000 shares owned
by Mr. Fleming.**
(9)
The
shares shown as being owned by Mr. Eisenberg include: (a) 69,792 owned by Mr. Eisenberg individually; (b) 172,466 shares
issuable pursuant to stock options granted to Mr. Eisenberg that are exercisable or become exercisable within 60 days; (c)
500,000 shares owned by a foundation of which Mr. Eisenberg and his family members are trustees and officers; (d) 1,000,000
shares owned by trusts for the benefit of Mr. Eisenberg and his family members; (e) 347,942 shares owned by his spouse; (f)
4,300 shares of restricted stock; and (g) 19,538 shares underlying PSUs that are expected to vest within 60 days. Mr. Eisenberg
has sole voting power with respect to the shares held by him individually and in trust for which he is the trustee but disclaims
beneficial ownership of any of the shares not owned by him individually and in trust for which he is not the trustee.**
(10)
The
shares shown as being owned by Mr. Feinstein include: (a) 933,289 shares owned by Mr. Feinstein individually; (b) 172,466
shares issuable pursuant to stock options granted to Mr. Feinstein that are exercisable or become exercisable within 60 days;
(c) 350,000 shares owned by a foundation of which Mr. Feinstein and his family members are directors and officers; (d) 156,483
shares held by trusts for the benefit of Mr. Feinstein’s family members; (e) 341,240 shares owned by his spouse; (f)
4,300 shares of restricted stock; and (g) 19,538 shares underlying PSUs that are expected to vest within 60 days. Mr. Feinstein
has sole voting power with respect to the shares held by him individually and in trust for which he is the trustee but disclaims
beneficial ownership of any of the shares not owned by him individually and in trust for which he is not the trustee.**
(11)
The
shares shown as being owned by Mr. Temares include: (a) 623,099 shares owned by Mr. Temares individually; (b) 1,509,856
shares issuable pursuant to stock options granted to Mr. Temares that are exercisable or become exercisable within 60 days;
(c) 99,336 shares owned by a family limited partnership, of which Mr. Temares and his spouse are the sole general partners,
and of which Mr. Temares and his spouse serve as limited partners together with trusts for the benefit of Mr. Temares,
his spouse and his children; (d) 5,000 shares owned by a family limited partnership established by Mr. Temares’ mother;
(e) 19,348 shares of restricted stock; and (f) 133,119 shares underlying PSUs that are expected to vest within 60 days. Mr. Temares
has sole voting power with respect to the shares held by him individually and the above described family limited partnership but
disclaims beneficial ownership of the shares owned by the family limited partnership established by Mr. Temares’ mother.**
(12)
The
shares shown as being owned by Mr. Castagna include: (a) 115,295 shares owned by Mr. Castagna individually; (b) 199,019
shares issuable pursuant to stock options granted to Mr. Castagna that are exercisable or become exercisable within 60 days;
(c) 14,123 shares of restricted stock; and (d) 22,816 shares underlying PSUs that are expected to vest within 60 days.**
(13)
The
shares shown as being owned by Ms. Lattmann include: (a) 31,443 shares owned by Ms. Lattmann individually; (b) 51,321
shares issuable pursuant to stock options granted to Ms. Lattmann that are exercisable or become exercisable within 60 days;
(c) 3,890 shares of restricted stock; and (d) 12,220 shares underlying PSUs that are expected to vest within 60 days.**
(14)
The
shares shown as being owned by Mr. Fiorilli include: (a) 84,033 shares owned by Mr. Fiorilli individually; (b) 186,912
shares issuable pursuant to stock options granted to Mr. Fiorilli that are exercisable or become exercisable within 60 days;
(c) 13,386 shares of restricted stock; and (d) 18,610 shares underlying PSUs that are expected to vest within 60 days.**
(15)
The
shares shown as being owned by Mr. Adler include: (a) 29,895 owned by Mr. Adler individually and (b) 10,862 shares owned
by a foundation of which Mr. Adler is a trustee.**
** This information
will be updated when the Company files its definitive proxy materials relating to the 2019 Annual Meeting.
IMPORTANT
Tell the Board what
you think! Your vote is important. No matter how many shares of Common Stock you own, please give the Investor Group your proxy
“FOR” the election of the Nominees and in accordance with the Investor Group’s recommendations on the other proposals
on the agenda for the 2019 Annual Meeting by taking these three steps:
|
·
|
SIGNING the enclosed
WHITE
proxy card;
|
|
·
|
DATING the enclosed
WHITE
proxy card; and
|
|
·
|
MAILING the enclosed
WHITE
proxy card TODAY in the envelope provided (no postage is required
if mailed in the United States).
|
If any of your shares
of Common Stock are held in the name of a brokerage firm, bank, bank nominee or other institution, only it can vote such shares
of Common Stock and only upon receipt of your specific instructions. Depending upon your broker or custodian, you may be able to
vote either by toll-free telephone or by the Internet. Please refer to the enclosed voting form for instructions on how to vote
electronically. You may also vote by signing, dating and returning the enclosed
WHITE
voting form.
If you have any questions
or require any additional information concerning this Proxy Statement, please contact Saratoga at the address set forth below.
If you have any questions, require
assistance in voting your
WHITE
proxy card,
or need additional copies of
the Investor Group’s proxy materials,
please contact:
Shareholders call toll-free
at (888) 368-0379
Email: info@saratogaproxy.com
|
WHITE
PROXY CARD
REVISED PRELIMINARY COPY SUBJECT TO
COMPLETION
DATED MAY 10, 2019
BED BATH & BEYOND INC.
2019 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF LEGION PARTNERS HOLDINGS, LLC
THE BOARD OF DIRECTORS OF BED BATH & BEYOND INC.
IS NOT SOLICITING THIS PROXY
P R O X Y
The undersigned appoints
Christopher Kiper and Jonathan Duskin, and each of them, attorneys and agents with full power of substitution to vote all shares
of Common Stock of Bed Bath & Beyond Inc. (the “Company”) which the undersigned would be entitled to vote if personally
present at the 2019 Annual Meeting of Shareholders of the Company scheduled to be held at such time and place as to be determined
(including any adjournments or postponements thereof and any meeting called in lieu thereof, the “Annual Meeting”).
The undersigned hereby
revokes any other proxy or proxies heretofore given to vote or act with respect to the shares of Common Stock of the Company held
by the undersigned, and hereby ratifies and confirms all action the herein named attorneys and proxies, their substitutes, or any
of them may lawfully take by virtue hereof. If properly executed, this Proxy will be voted as directed on the reverse and in the
discretion of the herein named attorneys and proxies or their substitutes with respect to any other matters as may properly come
before the Annual Meeting that are unknown to Legion Partners Holdings, LLC (“Legion Partners Holdings”) a reasonable
time before this solicitation, each of whom are deemed participants in this solicitation.
IF NO DIRECTION IS INDICATED WITH RESPECT
TO THE PROPOSALS ON THE REVERSE, THIS PROXY WILL BE VOTED “FOR” PROPOSAL 1, “AGAINST” PROPOSAL 2, AND “FOR”
PROPOSAL 3.
This
Proxy will be valid until the completion of the Annual Meeting. This Proxy will only be valid in connection with the solicitation
of proxies for the Annual Meeting by Legion Partners Holdings.
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting
This Proxy Statement and our WHITE
proxy card are available at
www.restorebedbath.com
IMPORTANT: PLEASE SIGN, DATE AND MAIL
THIS PROXY CARD PROMPTLY!
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
WHITE
PROXY CARD
[X] Please mark vote as in this example
LEGION PARTNERS HOLDINGS STRONGLY
RECOMMENDS THAT SHAREHOLDERS VOTE “FOR ALL NOMINEES” LISTED BELOW IN PROPOSAL 1, “AGAINST” PROPOSAL 2,
AND MAKES NO RECOMMENDATION WITH RESPECT TO PROPOSAL 3.
|
1.
|
Legion Partners Holdings’ proposal
to elect Theresa R. Backes, Jonathan Duskin, John E. Fleming, Sue Ellen Gove, Janet E.
Grove, Jeffrey A. Kirwan, Jeremy I. Liebowitz, Cynthia S. Murray, Hugh R. Rovit and Alexander
W. Smith to the Board to serve as directors with a term expiring at the 2020 annual meeting
of shareholders and until their respective successors are duly elected and qualified.
|
|
FOR ALL
NOMINEES
|
WITHHOLD
AUTHORITY TO
VOTE FOR ALL
NOMINEES
|
FOR ALL NOMINEES EXCEPT
NOMINEE(S)
WRITTEN BELOW
|
Nominees:
|
Theresa R. Backes
Jonathan Duskin
John E. Fleming
Sue Ellen Gove
Janet E. Grove
Jeffrey A. Kirwan
Jeremy I. Liebowitz
Cynthia S. Murray
Hugh R. Rovit
Alexander W. Smith
|
¨
|
¨
|
¨
________________
________________
________________
________________
________________
________________
________________
________________
________________
________________
|
Legion Partners Holdings
does not expect that any of the Nominees will be unable to stand for election, but, in the event that any Nominee is unable to
serve or for good cause will not serve, the shares of voting stock represented by this proxy card will be voted for substitute
nominee(s), to the extent this is not prohibited under the Bylaws and applicable law. In addition, Legion Partners Holdings has
reserved the right to nominate substitute person(s) if the Company makes or announces any changes to its Bylaws or takes or announces
any other action that has, or if consummated would have, the effect of disqualifying any Nominee, to the extent this is not prohibited
under the Bylaws and applicable law. In any such case, shares of voting stock represented by this proxy card will be voted for
such substitute nominee(s).
There is no assurance
that any of the candidates who have been nominated by the Company will serve as directors if the Nominees are elected.
NOTE: If you do
not wish for your shares to be voted “FOR” a particular nominee, mark the “FOR ALL NOMINEES EXCEPT NOMINEE(S)
WRITTEN BELOW” box and write the name(s) of the nominee(s) you do not support on the line(s) above. Your shares will be voted
for the remaining nominee(s).
WHITE
PROXY
CARD
|
2.
|
The Company’s proposal to vote on a non-binding, advisory resolution to approve the compensation
of the Company’s named executive officers.
|
¨
|
FOR
|
¨
|
AGAINST
|
¨
|
ABSTAIN
|
|
3.
|
The Company’s proposal to ratify the appointment of KPMG LLP as the independent registered
public accounting firm of the Company for the fiscal year ending February 29, 2020.
|
¨
|
FOR
|
¨
|
AGAINST
|
¨
|
ABSTAIN
|
DATED: ____________________________
____________________________________
(Signature)
____________________________________
(Signature, if held jointly)
____________________________________
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN.
EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH SIGNING. PLEASE SIGN EXACTLY AS NAME APPEARS ON
THIS PROXY.
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