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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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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 §240.14a-12
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ETHAN ALLEN INTERIORS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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ETHAN ALLEN INTERIORS INC.
Ethan Allen Drive
Danbury, Connecticut 06811
October 7,
2010
Dear
Stockholder:
You
are cordially invited to attend the 2010 Annual Meeting of stockholders of Ethan Allen Interiors Inc. This meeting will be held at the Ethan Allen International Corporate
Headquarters, Ethan Allen Drive, Danbury, Connecticut 06811 at 9:00 A.M., local time, on Tuesday, November 16, 2010.
You
will find information about the matters to be voted on at the meeting in the formal Notice Regarding the Availability of Proxy Materials and the Proxy Statement which is included in
the following pages.
Your
vote is very important and we hope you will be able to attend the meeting. To ensure your representation at the meeting, even if you anticipate attending in person, we urge you to
vote. If you attend, you will, of course, be entitled to vote in person.
Sincerely,
M.
Farooq Kathwari
Chairman of the Board,
President and Principal Executive Officer
ETHAN ALLEN INTERIORS INC.
Ethan Allen Drive
Danbury, Connecticut 06811
NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS
To
our Stockholders:
The
Annual Meeting of stockholders of Ethan Allen Interiors Inc. will be held at the Ethan Allen International Corporate Headquarters on Tuesday, November 16, 2010 at
9:00 A.M., local time, for the purpose of considering and acting upon the following:
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1.
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The election or ratification of directors;
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2.
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Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the 2011 fiscal year;
and
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3.
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Such other business as may properly come before the meeting.
The
Board of Directors has fixed September 21, 2010 as the record date for determining stockholders entitled to notice of, and to vote at, the meeting. It is important that your
shares be represented and voted at the meeting. If you received the proxy materials by mail, you can vote your shares by completing, signing, dating, and returning your completed proxy card, or you
may vote by telephone or over the Internet. If you received the proxy materials over the Internet, a proxy card was not sent to you, and you may vote your shares by telephone or over the Internet. To
vote by telephone or Internet, follow the instructions included in the formal Notice Regarding the Availability of Proxy Materials, Proxy Statement or on the Internet. You can revoke a proxy at any
time prior to its exercise at the meeting by following the instructions in the Proxy Statement.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on November 16, 2010the proxy
statement and the annual report are available at http://materials.proxyvote.com/297602
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By Order of the Board of Directors,
Pamela A. Banks
Corporate Secretary
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October 7,
2010
Ethan Allen Interiors Inc.
Ethan Allen Drive
Danbury, Connecticut 06811
ETHAN ALLEN INTERIORS INC.
Ethan Allen Drive
Danbury, Connecticut 06811
Questions and Answers
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Q:
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What is a proxy?
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A:
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A
proxy is a document, also referred to as a "proxy card," on which you authorize someone else to vote for you at the upcoming Annual Meeting in the way that
you want to vote. You also may choose to abstain from voting. Ethan Allen Interiors Inc.'s board of directors is soliciting the proxy card.
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Q:
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What are the purposes of this annual meeting?
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A:
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At
the Annual Meeting, stockholders will elect three Class II directors for a three-year term expiring in 2013. The board's
Class II nominees for election are: Clinton A. Clark, Kristin Gamble and Don M. Wilson. You are also being asked to ratify the election of James W. Schmotter as a Class III director with
a term expiring 2012 (see page 4). Stockholders will also vote on ratifying our appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2011. Other
than routine or procedural matters, we do not expect any other business will be brought up at the meeting, but if any other business is properly brought up, the persons named in the proxy card will
have authority to vote on it as they see fit.
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Q:
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Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full
set of proxy materials?
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A:
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In
accordance with rules adopted by the Securities and Exchange Commission ("SEC"), rather than mailing a printed copy of our proxy materials to each
stockholder of record, we may now send some or all of our stockholders a Notice Regarding the Availability of Proxy Materials ("Notice"), which indicates how our stockholders
may:
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access their proxy materials and vote their proxies over the Internet or by telephone;
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request a paper copy of the materials including a proxy card.
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How can I get electronic access to the proxy materials?
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A:
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The
Notice provides you with instructions regarding how to:
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view our proxy materials for the Annual Meeting over the Internet; and
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instruct us to send our future proxy materials to you electronically by email instead of sending you printed copies by
mail.
Choosing
to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meeting of stockholders on the
environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site.
Your election to receive proxy materials by email will remain in effect until you terminate it. The Annual Report and the Form 10-K accompany these proxy materials but are not
considered part of the proxy soliciting materials.
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Who is entitled to vote?
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A:
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Only
record holders of our common shares of stock at the close of business on the record date for the meeting, September 21, 2010, are entitled to
vote at the Annual Meeting. Each common share has one vote.
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How do I vote?
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A:
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You
can vote either in person at the Annual Meeting or by proxy whether or not you attend the Annual Meeting. You can vote by proxy in three
ways:
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By mailIf you received your proxy materials by mail, you can vote using the proxy card;
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By telephoneIn the United States and Canada, you can vote by telephone by following the instructions in the
Notice, on the Internet or on your proxy card if you received your materials by mail; or
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By InternetYou can vote over the Internet by following the instructions on the Notice or on your proxy card
if you received your materials by mail.
If
you vote by proxy, your shares will be voted at the Annual Meeting in the manner you indicate. If your shares are held in your name (but not in nominee name through a broker) and if you sign your
proxy card, but do not specify how you want your shares to be voted, they will be voted as the Board of Directors recommends.
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Can I change my vote after I have voted?
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later vote by any means will cancel any earlier vote. For example, if you vote by telephone and later vote differently on the Internet, the Internet vote
will count, and the telephone vote will be canceled. If you wish to change your vote by mail, you should write our Corporate Secretary, at the address set forth at the beginning of the Questions and
Answers, and request a new proxy card. The last vote we receive before the meeting will be the one counted. You also may change your vote by voting in person at the meeting.
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Q:
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What does it mean if I get more than one proxy card?
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A:
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It
means that your shares are registered in more than one way. Sign and return
all
proxy cards or vote
each
group of shares by telephone or over the Internet
to ensure that all your shares are voted.
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Q:
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What is a Broker Non-Vote?
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A:
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The
SEC recently approved a New York Stock Exchange (NYSE) amendment to Rule 452 prohibiting brokers from exercising "discretionary voting" in all
director elections. The amendment will apply to shareholder meetings held on or after January 1, 2010. Therefore, if your shares are held in nominee name by your broker and you do not provide
instructions to your broker on how you want your shares voted in director elections, your broker is prohibited from exercising discretionary voting and voting those shares in the director elections.
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Q:
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What is Electronic Access?
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A:
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Our
proxy statement and our 2010 annual report are available on an Internet site at http://materials.proxyvote.com/297602. Most stockholders can elect to
view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. If you are a registered stockholder, you can choose this option and save the Company
the cost of producing and mailing these documents by following the instructions provided on your proxy card or following the prompt if you choose to vote over the Internet. If you hold your stock in
nominee name (such as through a bank or broker), check the information provided by your nominee for instructions on how to elect to view future proxy statements and annual reports over the Internet.
If you are a registered stockholder and have chosen to view future proxy statements and annual reports over the Internet, you will receive an e-mail with instructions containing the
Internet address of those materials.
2
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (the "Board of Directors") of Ethan
Allen Interiors Inc., a Delaware corporation (the "Company"), of proxies for use at the 2010 Annual Meeting of stockholders (the "Annual Meeting") to be held on Tuesday, November 16,
2010 at the Ethan Allen International Corporate Headquarters, Ethan Allen Drive, Danbury, Connecticut 06811 at 9:00 A.M., local time, or any adjournment thereof. The Proxy Statement and our
Annual Report are first being made available electronically on or about October 7, 2010.
VOTING SECURITIES; PROXIES; REQUIRED VOTE
Voting Securities
The Board of Directors has fixed the close of business on September 21, 2010 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, the Company had outstanding 28,728,575 shares of common stock, par value $.01 per share
(the "Common Stock"). The holders of Common Stock as of the Record Date are entitled to notice of, and to vote at, the Annual Meeting. Holders of Common Stock are entitled to one vote per share.
Proxies
M. Farooq Kathwari and Frank G. Wisner, the persons named as proxies, were selected by the Board of Directors to serve in such
capacity. Each properly executed and returned proxy card will be voted in accordance with the directions indicated thereon, or if no directions are indicated, such proxy will be voted in accordance
with the recommendations of the Board of Directors contained in this Proxy Statement for shares held by registered owners. In voting by proxy with regard to the election of directors, stockholders may
vote in favor of all nominees, withhold their vote as to all nominees or withhold their vote as to a specific nominee(s). Each stockholder giving a proxy has the power to revoke it at any time before
the shares it represents are voted. Revocation of a proxy is effective upon receipt of a later vote by (i) telephone; (ii) Internet; or (iii) receipt by the Corporate Secretary of
the Company of either: (a) an instrument revoking the proxy; or (b) a duly executed proxy card bearing a later date. Additionally, a stockholder may change or revoke a previously
executed proxy by voting in person at the Annual Meeting.
Required Vote
The holders of at least one-third of the outstanding shares of Common Stock represented in person or by proxy will
constitute a quorum at the Annual Meeting. Effective with annual meetings held after January 1, 2010, NYSE Rule 452 prohibits brokers from exercising "discretionary" voting on all
director elections. At the Annual Meeting, the vote of a majority in interest of the stockholders present, in person or by proxy, and entitled to vote thereon is required (i) to elect or ratify
directors; and (ii) to ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company.
The
election inspectors appointed for the Annual Meeting will tabulate the votes cast, in person or by proxy, at the Annual Meeting and will determine whether or not a quorum is present.
The election
inspectors will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum but as unvoted for purposes of determining the approval of any
matter submitted to the stockholders for a vote. If a broker indicates on the proxy that it does not have discretionary authority to vote on a particular matter, as to certain shares, those shares
will not be considered as present and entitled to vote with respect to that matter.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is presently composed of seven members. The Restated Certificate of Incorporation of the Company divides the
Board of Directors into three classes, with one class of directors elected each year for a three-year term. The term of the directors in Class II, which is currently composed of
three directors, expires as of the Annual Meeting. On April 21, 2010 Edward H. Meyer, who is currently a Class II director, announced his retirement from the Board of Directors as of the
end of his term. Mr. Meyer has served on the Board of Directors since 1991. We thank him for his commitment and for his insight and guidance over the years.
The
Company nominated Clinton A. Clark, Kristin Gamble, and Don M. Wilson as the Class II directors to serve for a three year term. James W. Schmotter was elected by the Board of
Directors on April 20, 2010 to fill a vacancy in Class III, subject to ratification of such election by the stockholders at the Annual Meeting. Mr. Schmotter is submitted for
ratification at the Annual Meeting to serve as a director in Class III for a term expiring 2012.
If
for any reason Mr. Clark, Ms. Gamble, Mr. Schmotter or Mr. Wilson become unable or unwilling to serve at the time of the Annual Meeting, the persons named
as proxies will have discretionary authority to vote for a substitute nominee(s). Alternatively, the Board of Directors may chose to reduce the size of the board, as permitted by our Amended and
Restated By-laws ("By-laws"). It is not anticipated that Mr. Clark, Ms. Gamble, Mr. Schmotter or Mr. Wilson will be unavailable or will decline to
serve as director.
The
following sets forth information as to Mr. Clark, Ms. Gamble, Mr. Schmotter and Mr. Wilson and each director continuing in office, including his or her
age, present principal occupation, specific
expertise, qualifications and skills along with other business experience, directorships in other publicly held companies, membership on committees of the Board of Directors and period of service as a
director of the Company.
Nominees for Election at this Annual Meeting to a Term Expiring in 2013
Clinton A. Clark
, 68, was elected as a director of the Company on June 30, 1989.
He is the President and sole stockholder of CAC Investments, Inc. ("CAC"), a private investment company he founded in January 1986. Prior to founding CAC, Mr. Clark was Chairman,
President and Chief Executive Officer of Long John Silver's Restaurants, Inc. from 1990 through September 1993 and prior thereto was President and Chief Executive Officer of The Children's
Place, a retail children's apparel chain he founded in 1968. Mr. Clark is also an investor and director of several private companies. Mr. Clark's experience managing a publicly-traded
company, experience as an executive and his knowledge of the history of the Company has provided the Company with a wealth of knowledge in strategic planning, corporate finance, compensation, and
sales and marketing in consumer related industries. He has the necessary skills to chair the Company's Audit Committee and is a member of the Compensation Committee.
Kristin Gamble
, 65, was elected as a director of the Company on July 28, 1992. Since 1984, she has been President of Flood, Gamble
Associates, Inc., an investment counseling firm. Ms. Gamble was Senior Vice President responsible for equity strategy and economic research with Manufacturers Hanover Trust Company from
1981 to 1984. Prior to that, she held various management positions with Manufacturers Hanover (1977-1981), Foley, Warendorf & Co., a brokerage firm (1976-1977),
Rothschild, Inc. (1971-1976) and Merrill, Lynch, Pierce, Fenner & Smith (1968-1971). Since May 1995, she has served as a member of the Board of Trustees of
Federal Realty Investment Trust. Through her roles and responsibilities Ms. Gamble has extensive experience and insight relevant to her service to the Company, including that of Trustee of a
realty investment trust and her knowledge of real estate markets. Ms. Gamble's knowledge of the history of the Company as well as her significant financial management experience has resulted in
4
strong
skills in corporate finance, accounting and compensation. She is a member of the Company's Audit Committee and Compensation Committee.
Don M. Wilson III
, 62, was nominated by the Board of Directors for election on April 21, 2010 based upon recommendation of the
Nominations/Corporate Governance Committee. Mr. Wilson joined Chemical Bank in 1973, a predecessor institution to J.P. Morgan Chase & Co. During his career he managed corporate
finance activities, was the head of the bank's East Asia business and later its European businesses. From 1991 to 2000 he headed the Global Trading Division and, after the acquisition of
J.P. Morgan & Co., in 2000, he was co-head of the Credit and Rates
Division. From 2003 to 2006 he served as the firm's Chief Risk Officer. Mr. Wilson is chairman of Annual Giving at Tuck School at Dartmouth College and vice chairman of Annual Leadership Giving
at the Harvard College Fund. Mr. Wilson also serves on the Board at the Bank of Montreal and several non-profit organizations. Mr. Wilson's extensive executive and financial
experience provides the Company with expertise in capital markets, risk management, and corporate finance.
Directors Whose Present Terms Will Continue Until 2011
M. Farooq Kathwari
, 66, is the Chairman, President and Principal Executive Officer of
Ethan Allen Interiors Inc. He has been President of the Company since 1985 and Chairman and Principal Executive Officer since 1988. He received his B.A. degree from Kashmir University in
English Literature and Political Science and an M.B.A. in International Marketing from New York University. Mr. Kathwari serves on several not-for-profit organizations,
including: Director of Refugees International, Director of National Retail Federation, Director of International Rescue Committee, and a Director of the Institute for the Study of Diplomacy at
Georgetown University. He has received several recognitions, including the 2007 "Outstanding American by Choice" award from the United States Government, 2005 Eleanor Roosevelt Val-Kill
Medal, "National Human Relations Awards" by the American Jewish Committee,
Worth Magazine
Recognition as one of 50 Best CEOs in USA, the National Retail
Federation Gold Medal, recipient of the International First Freedom Award from the Council for America's First Freedom, and Ernst & Young's "Entrepreneur of the Year" Award. Mr. Kathwari
has extensive experience and knowledge of the history of our Company and the furniture industry as well as extensive experience in growing and managing a business. He possesses insight into retailing,
marketing, manufacturing, and strategic planning from experience with the Company as well as his broad experience with both for-profit and not-for-profit
organizations which has given him perspectives from other industries valuable to his service to the Company.
John P. Birkelund
, 80, was elected as a director of the Company on November 13, 2007. Mr. Birkelund co-founded
Saratoga Partners in 1984 and serves as its Managing Director as well as a member of the Saratoga Partners Investment Advisory Committee. He joined Dillon Read & Co., Inc. in
1981. Mr. Birkelund served successfully as President, Chief Executive and Chairman from 1981 to 1997 when the firm was sold to Swiss Bank. Prior to joining Dillon Read, Mr. Birkelund
co-founded New Court Securities in 1967 (now Rothschild, Inc.) and served as its Chairman and Chief Executive Officer and as a non-executive director of N.M.
Rothschild & Sons. Mr. Birkelund is a past director of the New York Stock Exchange and the Securities Industry Association and, in recent years, served on the corporate boards of N.M.
Rothschild & Co., Barings Brothers, C.R. Bard, Copperweld Corporation, Darden Restaurants, NacRe Corporation, Lenox, Inc., and the advisory boards of the European Bank for
Reconstruction & Development and ORIX USA Corporation. Mr. Birkelund's extensive executive and board experience, as a Director, including publicly-traded company experience, as well as
experience in growing and managing a business, strategic planning and knowledge of macroeconomic conditions affecting the Company and its customers, provides invaluable insight to the Company. He is a
member of the Company's Audit Committee and Nominations/Corporate Governance Committee.
5
Directors Whose Present Terms Will Continue Until 2012
James W. Schmotter
, 62 was elected as a Director of the Company on April 20,
2010. Dr. Schmotter currently serves as President of Western Connecticut State University. He previously served as Western Michigan University's Dean of the Haworth College of Business, the
Dean of the College of Business and Economics at Lehigh University in Pennsylvania, as well as Associate Dean and Director of International Studies at the Johnson Graduate School of Management at
Cornell University. Dr. Schmotter has consulted for a variety of organizations including IBM, TRW, the Institute for International Education, the Cleveland Foundation, the Graduate Management
Admission Council, the Educational Testing Service, United States Agency for International Development, and a number of universities in the U.S., Asia and Europe. He has served as Chairman of the
Board of Trustees of the Graduate Management Admission Council, was the founding Vice Chair of the Board of the MBA Enterprise Corps, and has been a member of many committees of the Association to
Advance Collegiate Schools of Business. Dr. Schmotter is currently a director of the United Way of Western Connecticut, the Greater Danbury Chamber of Commerce, and the Hord Foundation.
Dr. Schmotter's strong leadership, educational and governmental background provides key insight and experience in strategic planning, international/global issues as well as communicating with
younger customers which is valuable in his service to the Company.
Frank G. Wisner
, 72, was elected as a director of the Company on July 23, 2001. He is International Affairs Advisor of the law firm
Patton Boggs LLP. He is former Vice Chairman, External Affairs, of American International Group ("AIG"), a United States-based mixed financial services and international insurance organization.
Mr. Wisner is also on the board of directors of EOG Resources. He is also a member of the board of directors of the Commercial International Bank (CIB) in Cairo, Egypt and of Pangea 3, a New
York based legal outsourcing company, privately held. Prior to joining AIG, he was the United States Ambassador to India from July 1994 through July 1997. He retired from the United States Government
with the rank of Career Ambassador, the highest grade in the Foreign Service. Mr. Wisner joined the State Department as a Foreign Service Officer in 1961 and served in a variety of overseas and
Washington positions during his 36-year career. Among his other positions, Mr. Wisner served successively as United States Ambassador to Zambia, Egypt and the Philippines. Before
being named United States Ambassador to India, his most recent assignment was as Under Secretary of Defense for Policy. Prior to that, he was Under Secretary of State for International Security
Affairs. Ambassador Wisner's global, diplomatic and governmental experience provides insights and perspectives valuable in the operations and strategic planning of the Company. He is Chair of the
Company's Nominations/Corporate Governance Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OR RATIFICATION OF THE NOMINEES FOR DIRECTORS NAMED ABOVE, WHICH IS DESIGNATED AS PROPOSAL
NO. 1.
CORPORATE GOVERNANCE
The Board of Directors has determined that each of the following directors or director nominees comprising the six
non-management directors meet the criteria for "independent" directors as defined in Section 303A.02 of the New York Stock Exchange Listed Company Manual (the "NYSE Listed Company
Manual") including, in the case of all members of the Audit Committee, the independence requirements contemplated by Rule 10A-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"): John P. Birkelund, Clinton A. Clark, Kristin Gamble, James W. Schmotter, Don M. Wilson and Frank G. Wisner.
Stockholder Communication with Directors
Stockholders or interested parties may communicate with the full board, full committee, individual committee members or individual
directors by sending communications to the Office of the Secretary,
6
Ethan
Allen Interiors Inc., Ethan Allen Drive, Danbury, Connecticut 06811 for forwarding to the appropriate director(s). Please specify to whom your correspondence should be directed. The
Corporate Secretary has been instructed by the Board to review and promptly forward all correspondence (except advertising material and ordinary business matters) to the full board, full committee,
individual director or committee member, as indicated in the correspondence.
Certain Transactions
The Company is party to indemnification agreements with each of the members of the Board of Directors pursuant to which the Company has
agreed to indemnify and hold
harmless each member of the Board of Directors from liabilities incurred as a result of such director's status as a director of the Company, subject to certain limitations.
Certain Relationships and Related Party Transactions
The Company recognizes that transactions between Ethan Allen and related persons present a potential for actual or perceived conflicts
of interest. The Company's general policies with respect to such transactions are included in its Code of Business Conduct and Ethics ("Code"), the administration of which is overseen by the
Nominations/Corporate Governance Committee. The Company defines "related party" transaction as any transaction or series of related transactions in excess of $120,000 in which the Company is a party
and in which a "related person" has a material interest. Related persons include directors, director nominees, executive officers, 5% beneficial owners and members of their immediate families.
The
Company collects information about potential related party transactions in its annual questionnaires completed by directors and officers as well as throughout the year at its
quarterly Disclosure Control Committee Meetings, comprised of key management responsible for significant business units, departments or divisions. Potential related party transactions are first
reviewed and assessed by our General Counsel to consider the materiality of the transactions and then reported to the Nominations/Corporate Governance Committee. The Nominations/Corporate Governance
Committee reviews and considers all relevant information available to it about each related party transaction and presents the facts to the members of the Board of Directors not associated with the
potential related party transaction. A related party transaction is approved or ratified only if such members of the Board of Directors determine that it is not inconsistent with the best interests of
the Company and its stockholders. The Company did not have any such transactions during fiscal year 2010.
Compensation Committee Interlocks and Insider Participation
No executive officer of the Company, or any of its subsidiaries, served as a director of or on the Compensation Committee (or
equivalent) of another entity except as otherwise disclosed herein.
Charters, Code and Guidelines
The Company's Code, Corporate Governance Guidelines and the charters of its Audit Committee, Compensation Committee and
Nominations/Corporate Governance Committee are available on the Company's website at
www.ethanallen.com/governance
. Any waiver of the Code for directors
or executive officers may only be made by the Nominations/Corporate Governance Committee, and any waivers or amendments will be disclosed promptly by a posting on our website. Stockholders may request
a copy of any of these documents by writing to: Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, CT 06811, Attn: Office of the Secretary.
7
Leadership Structure and Board of Directors' Role in Risk Oversight
The Company's leadership structure combines the leadership role of the Chairman and CEO coupled with the role of a lead director. The
Board of Directors believes that the existence of a lead director supports strong corporate governance principles while deriving the benefit of having the Company's CEO also serve as Chairman of the
Board. The Board believes that the Company's current leadership structure enhances the Chairman/CEO's ability to provide insight and direction on the Company's strategic direction to both management
and independent directors, and at the same time, with the support and oversight of a lead director, ensures that the appropriate level of independent oversight is applied to all management decisions.
The Board believes that this structure ensures that the independent directors continue to effectively oversee management and provide effective oversight of key issues relating to strategy, risk and
integrity without the need to split the roles of Chairman/CEO.
The
Board believes that splitting the roles, especially in light of Mr. Kathwari's skill and experience, would potentially have the consequence of making our management and
governance process less effective through the undesirable duplication of work, and, in the worst case, the blurring of accountability and responsibility without any clear benefits.
The
Board of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic
objectives, to improve long-term organizational performance and to enhance stockholder value. A
fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks but also understanding what level of risk is
appropriate for the company. The involvement of the full Board of Directors in reviewing the Company's business strategy is an integral aspect of its assessment of management's tolerance for risk and
also its determination of what constitutes an appropriate level of risk for the Company. In addition to management's discussion of risk with the full Board of Directors throughout the year, the
independent directors also discuss risk.
Meetings and Committees of the Board of Directors
During fiscal year 2010, there were four (4) regularly scheduled meetings of the Board of Directors and the annual meeting of
stockholders. Independent directors ordinarily meet in executive session without management present immediately after regularly scheduled board meetings. These sessions are chaired by a
non-employee director, which Chair is rotated annually. Kristin Gamble currently serves as lead director.
All
directors are expected to attend all board meetings, independent director meetings, stockholder meetings and committee meetings, as appropriate. The Board of Directors realizes that
conflicts may arise from time to time but expects that each director will make every effort to keep such conflicts to a minimum. All directors who then held office attended the November 16,
2009 annual meeting of stockholders. In fiscal year 2010, except as otherwise set forth hereinafter, there was 91% attendance at all board meetings and committee meetings.
8
The
Board of Directors has established three standing committees: the Audit Committee; the Compensation Committee; and the Nominations/Corporate Governance Committee. Committee
memberships of each nominee and continuing or current director are set forth below:
Audit Committee:
Clinton A. Clark (Chair)
John P. Birkelund
Kristin Gamble
Nominations/Corporate Governance Committee:
Frank G. Wisner (Chair)
John P. Birkelund
Edward H. Meyer
Compensation Committee:
Edward H. Meyer (Chair)
Clinton A. Clark
Kristin Gamble
AUDIT COMMITTEE
The Audit Committee is principally responsible for ensuring the accuracy and effectiveness of the annual audit of the financial
statements as conducted by the Company's internal auditors and independent registered public accounting firm. The duties of the Committee include, but are not limited to: (i) appointing and
supervising the Company's independent registered public accounting firm; (ii) assessing the organization and scope of the Company's internal audit function; (iii) reviewing the scope of
audits to be conducted, as well as the results thereof; (iv) approving audit and non-audit services provided to the Company by the independent registered public accounting firm; and
(v) overseeing the Company's financial reporting activities, including the Company's system of internal control and the accounting standards and principles applied.
In
accordance with SEC regulations, the Audit Committee has approved an Audit Committee Charter, describing the responsibilities of the Audit Committee, (see page 7 for website
address). Each member of the Audit Committee is "independent," as defined in Sections 303A.02 and 303A.07 of the NYSE Listed Company Manual and is an "audit committee financial expert" as
defined under
Item 407 (d) (5)(ii) of SEC Regulation S-K and as contemplated by Rule 10A-3 of the Exchange Act.
9
Report of the Audit Committee of the Board of Directors
The Audit Committee, on behalf of the Board of Directors, oversees the Company's financial reporting process, including the Company's
system of internal control. However, management has the primary responsibility for the financial statements and the reporting process, including the system of internal control. In fulfilling its
oversight responsibilities, the Audit Committee reviewed, with management, the audited financial statements contained within the Annual Report on Form 10-K, including a discussion
of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures contained in those financial statements. In
addition, in compliance with the Sarbanes-Oxley Act of 2002 ("SOX"), the Audit Committee reviewed with management and KPMG LLP, the Company's independent registered public accounting firm
("KPMG"), the effectiveness of the Company's system of internal control over financial reporting as of June 30, 2010.
The
Audit Committee reviewed with KPMG, who is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting
principles, their judgment(s) as to the quality, not just the acceptability, of the Company's accounting principles. The Audit Committee also reviewed such other matters as are required to be
discussed under auditing standards of the Public Company Accounting Oversight Board (United States), including Statement on Auditing Standards No. 61. In addition, the Audit Committee has
received from KPMG the written disclosures required by Independence Standards Board Standard No. 1 and has discussed with KPMG the auditors' independence from management and the Company.
The
Audit Committee discussed with the Company's internal auditors and KPMG the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors
and KPMG, with and without management present, to discuss the results of their examinations, their evaluations of the Company's system of internal control and the overall quality of the Company's
financial reporting practices. The Audit Committee held seven (7) meetings during fiscal year 2010, which included, but were not limited to, the review of the quarterly
Form 10-Q filings and annual Form 10-K filing.
In
reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended June 30, 2010 for filing with the SEC.
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CLINTON A. CLARK, CHAIR
JOHN P. BIRKELUND
KRISTIN GAMBLE
|
10
NOMINATIONS/CORPORATE GOVERNANCE COMMITTEE
The duties of the Nominations/Corporate Governance Committee include, but are not limited to, the duty to: (i) develop
qualification criteria for board members and nominate or recommend to the Board of Directors individuals to serve on the Board of Directors; (ii) review and monitor the Company's corporate
governance policies and guidelines, including the Company's trading policy for its directors and executive officers; and (iii) make an annual assessment of the Board's performance and report to
the Board of Directors. The Nominations/Corporate Governance Committee follows the procedure concerning nominations or consideration of director candidates recommended by stockholders set forth in the
By-laws. The By-laws of the Company permit stockholders, as of the Record Date, to nominate director candidates at the annual meeting, subject to certain notification
requirements. (See "Stockholder Proposals and Nomination of Directors" under Other Matters, beginning on page 34 herein, for information on how to submit a proposal or nominate a director.) The
Nominations/Corporate Governance Committee believes that as a result of the provisions in the By-laws, any separate policy relating to stockholder proposals or nominations would be
duplicative. Each member of the Nominations/Corporate Governance Committee is "independent" as defined in Section 303A.02 of the NYSE Listed Company Manual. The Nominations/Corporate Governance
Committee met formally one (1) time and individual committee members conducted interviews/meetings with potential candidates and communicated, when necessary, by telephone or other means during
fiscal year 2010.
The
Nominations/Corporate Governance Committee seeks candidates who demonstrate a willingness and ability to prepare for, attend and participate in all board and committee meetings and
whose experience and skill would complement the then existing mix of directors. The Committee may consider
the diversity of a candidate's background and experience when evaluating a nominee, as well as the diversity of a candidate's perspectives, which may result from diversity in age, gender, ethnicity or
national origin. While the Committee may consider diversity in its evaluation process, the Committee does not have formal policy with regard to the consideration of diversity in identifying director
nominees. The Nominations/Corporate Governance Committee gathers suggestions as to individuals who may be available to meet the Board of Directors' future needs from a variety of sources, such as past
and present directors, stockholders, colleagues and other parties with which a member of the Nominations/Corporate Governance Committee or the Board of Directors has had business dealings, and
undertakes a preliminary review of the individuals suggested. At such times as the Nominations/Corporate Governance Committee determines that a relatively near term need exists and the
Nominations/Corporate Governance Committee believes that an individual's qualities and skills would complement the then existing mix of directors, the Nominations/Corporate Governance Committee or its
Chair will contact the individual. The Chair will, after such contact, discuss the individual with the Nominations/Corporate Governance Committee. Based on the Nominations/Corporate Governance
Committee's evaluation of potential nominees and the Company's needs, the Nominations/Corporate Governance Committee determines whether to nominate the individual for election as a director. While the
Nominations/Corporate Governance Committee has not, in the past, engaged any third party firm or consultant to identify or evaluate nominees, the Nominations/Corporate Governance Committee, in
accordance with its charter, may do so in the future. The Nominations/Corporate Governance Committee would evaluate nominees for director recommended by a stockholder in the same manner it undertakes
the Committee's evaluation.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, owners of over 10% of our Common Stock, and
some persons who formerly were directors or executive officers, to file reports of ownership and changes in ownership with the SEC and the NYSE and furnish us with a copy of each report filed. Based
solely on our review of copies of the reports by some of those persons and written representations from others that no reports were required, we believe that during fiscal year 2010 all
11
Section 16(a)
filing requirements were complied with in a timely fashion, except for one late filing for M. Farooq Kathwari and John H. Moll, each reporting one transaction.
Security Ownership of Common Stock of Certain Owners and Management
The following table sets forth, as of September 21, 2010, except as otherwise noted, information with respect to beneficial
ownership of the Common Stock in respect of: (i) each director and Named Executive Officer (as defined herein) of the Company; (ii) all directors and Named Executive Officers of the
Company as a group; and (iii) based on information available to the Company and a review of statements filed with the SEC pursuant to Section 13(d) and/or 13(g) of the Exchange Act, each
person or entity that beneficially owned (directly or together with affiliates) more than 5% of the Common Stock. The Company believes that each individual or entity named has sole investment and
voting power with respect to shares of Common Stock indicated as beneficially owned by them, except as otherwise noted. Unless otherwise noted below, the address for each listed director and Named
Executive Officer is Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, CT 06810.
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|
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|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Shares
Beneficially
Owned(1)
|
|
Common Stock
Percentage
Ownership(1)
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
M. Farooq Kathwari(2)
|
|
|
4,368,514
|
|
|
14.38
|
%
|
Edward H. Meyer(3)
|
|
|
81,440
|
|
|
*
|
|
Kristin Gamble(4)
|
|
|
36,500
|
|
|
*
|
|
Clinton A. Clark(5)
|
|
|
33,500
|
|
|
*
|
|
John P. Birklund(6)
|
|
|
25,000
|
|
|
*
|
|
Corey Whitely(7)
|
|
|
23,406
|
|
|
*
|
|
Frank G. Wisner(8)
|
|
|
22,100
|
|
|
*
|
|
Nora Murphy(9)
|
|
|
17,345
|
|
|
*
|
|
Richard Sandberg(10)
|
|
|
3,500
|
|
|
*
|
|
Lynda W. Stout(11)
|
|
|
7,970
|
|
|
*
|
|
David R. Callen(12)
|
|
|
4,570
|
|
|
*
|
|
James W. Schmotter(13)
|
|
|
1,300
|
|
|
*
|
|
Named executive officers and directors as a group(2) - (13)
|
|
|
4,625,145
|
|
|
15.23
|
%
|
Other Principal Stockholders:
|
|
|
|
|
|
|
|
FMR LLC(14)
|
|
|
4,334,647
|
|
|
14.99
|
%
|
Royce & Associates, LLC(15)
|
|
|
3,453,491
|
|
|
11.94
|
%
|
Invesco Ltd.
|
|
|
2,611,043
|
|
|
7.82
|
%
|
BlackRock, Inc.(17)
|
|
|
1,952,153
|
|
|
6.75
|
%
|
Franklin Resources, Inc.(18)
|
|
|
1,521,450
|
|
|
5.30
|
%
|
WS Management, LLLP(19)
|
|
|
1,500,000
|
|
|
5.19
|
%
|
-
*
-
Indicates
beneficial ownership of less than 1% of shares of Common Stock.
-
(1)
-
Information
presented herein for each director and Named Executive Officer reflects beneficial share ownership and includes stock-based compensation awards
and outstanding options granted under the 1992 Stock Option Plan ("Option Plan") (the "Stock Options") which, as of September 21, 2010, are currently exercisable or will become exercisable
within sixty (60) days by such director or Named Executive Officer, as applicable. The information provided for other principal stockholders is based solely on the most recently filed
statements filed with the SEC pursuant to Section 13(d) and/or 13(g). We have not made any individual determination as to beneficial ownership of any such other principal stockholders.
12
-
(2)
-
Includes
(a) 2,084,820 shares owned directly by Mr. Kathwari, (b) 553,550 shares owned indirectly by Mr. Kathwari,
(c) 72,000 shares of restricted Common Stock, (d) options to purchase 1,525,000 shares of Common Stock, (e) 7,144 shares held indirectly by Mr. Kathwari in the Ethan Allen
Retirement Savings Plan, and (f) 126,000 stock units as noted on page 26 under Employment Agreement.
-
(3)
-
Includes
(a) 4,080 shares owned directly by Mr. Meyer, (b) 58,360 shares held indirectly by Mr. Meyer, and (c) options to
purchase 19,000 shares of Common Stock.
-
(4)
-
Includes
(a) 10,000 shares owned directly by Ms. Gamble, and (b) options to purchase 26,500 shares of Common Stock.
-
(5)
-
Includes
(a) 20,000 shares owned directly by Mr. Clark, and (b) options to purchase 13,500 shares of Common Stock.
-
(6)
-
Includes
(a) 20,500 shares owned directly by Mr. Birkelund, and (b) options to purchase 4,500 shares of Common Stock.
-
(7)
-
Includes
(a) 5,000 shares of restricted Common Stock, (b) options to purchase 17,000 shares of Common Stock, and (c) 1,406 shares of
Common Stock held indirectly by Mr. Whitely in the Ethan Allen Retirement Savings Plan.
-
(8)
-
Includes
(a) 3,600 shares owned directly by Mr. Wisner, (b) 1,500 shares of restricted Common Stock, and (c) options to purchase
17,000 shares of Common Stock.
-
(9)
-
Includes
(a) 2,000 shares of restricted Common Stock, (b) options to purchase 15,250 shares of Common Stock, and (c) 95 shares of
Common Stock held indirectly by Ms. Murphy in the Ethan Allen Retirement Savings Plan.
-
(10)
-
Includes
(a) 3,500 shares of Common Stock owned directly by Mr. Sandberg.
-
(11)
-
Includes
(a) 2,500 shares of restricted Common Stock, (b) options to purchase 5,375 shares of Common Stock, and (c) 95 shares of
Common Stock held indirectly by Ms. Stout in the Ethan Allen Retirement Savings Plan.
-
(12)
-
Includes
(a) 1,000 shares of Common Stock owned directly by Mr. Callen, (b) 1,500 shares of restricted Common Stock, (c) 95
shares of Common Stock held indirectly by Mr. Callen in the Ethan Allen Retirement Savings Plan, and (d) options to purchase 1,975 shares of Common Stock.
-
(13)
-
Includes
(a) 300 shares of Common Stock owned directly by Mr. Schmotter, and (b) 1,000 shares of restricted Common Stock.
-
(14)
-
FMR LLC
("FMR"), a parent holding company of certain institutional investment managers registered under the Exchange Act and certain other entities,
beneficially owned 4,334,647 shares of Common Stock as per their Schedule 13G filing with the SEC on February 16, 2010. FMR's filing indicates that it held sole voting power with respect
to 350 of such shares and sole investment power with respect to all of such shares. The address of FMR is 82 Devonshire Street, Boston, MA 02109.
-
(15)
-
Royce &
Associates, LLC ("Royce"), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940,
beneficially owned 3,453,491 shares of Common Stock as per their Schedule 13G filing with the SEC on January 25, 2010. The address of Royce is 745 Fifth Avenue, New York, New York 10151.
-
(16)
-
Invesco Ltd.
("Invesco"), a U.K. entity and an investment advisor registered under Section 203 of the Investment Advisors Act, and a holding
company, beneficially owned 2,611,043 shares of Common Stock per their Schedule 13G filing with the SEC on February 13, 2006. The address of Invesco is 1555 Peachtree Street, NE,
Suite 1000, Atlanta, Georgia 30309.
13
-
(17)
-
BlackRock, Inc.
("BlackRock"), a parent holding company of certain institutional investment managers registered under the Exchange Act and certain
other entities, beneficially owned 1,952,153 shares of Common Stock as per their Schedule 13G filing with the SEC on January 29, 2010. The address of BlackRock is 40 East
52
nd
Street, New York, NY 10022.
-
(18)
-
Franklin
Resources, Inc. ("Franklin"), a parent holding company of certain institutional investment managers registered under the Exchange Act and
certain other entities, beneficially owned 1,521,450 shares of Common Stock as per their Schedule 13G filing with the SEC on January 27, 2010. Franklin's filing indicates that it held
sole voting power with respect to 1,460,150 of such shares and sole investment power with respect to all of such shares. The address of Franklin is One Franklin Parkway, San Mateo, CA
94403-1906 and of Franklin Advisory Services, LLC is One Parker Plaza, Ninth Floor, Fort Lee, NJ 07024-2938.
-
(19)
-
WS
Management, LLLP ("WS"), a partnership, beneficially owned 1,500,000 shares of Common Stock per their Schedule 13G filing with the SEC on
May 7, 2010. The address of WS is 4306 Pablo Oaks Court, Jacksonville, FL 32224.
14
COMPENSATION COMMITTEE
Compensation Discussion and Analysis
The purpose of this Compensation Discussion and Analysis is to provide material information about the Company's compensation objectives
and policies for its Named Executive Officers and to put into perspective the tabular disclosures and related narratives.
Compensation Philosophy and Objectives
The Company's executive compensation philosophy is focused on attracting, retaining and motivating a qualified management team and
aligning their interests with the long-term interests of stockholders. This is accomplished by offering compensation packages which are competitive within the industries in which the
Company operates, fair and equitable among the executives and which provide incentives for the long-term success and performance of the Company. Compensation is allocated among base
salary, annual discretionary cash incentive compensation and long-term equity incentives. Incentive compensation is discretionary and designed to reward achievement within areas under the
control of the relevant employee, although Company-wide performance is also a significant factor and to retain management for the long-term success and performance of the
Company. The Principal Executive Officer exercises discretion in assessing an executive's, including Named Executive Officers, other than his own, personal performance and the extent, if any, of
incentive compensation. We consider the cost to the Company when we make decisions on and consider compensation packages. As the level of responsibility increases, the portion of an executive's
compensation tied to the Company's and the executive's personal performance will be proportionately greater. Finally, we endeavor to ensure that the Company's compensation program is perceived as
fundamentally fair to all stakeholders.
The
duties of the Compensation Committee include, but are not limited to: (i) reviewing and making determinations with regard to the employment arrangements and compensation for
the Principal Executive Officer, President and Principal Financial Officer or Treasurer; and (ii) considering and either accepting, modifying or rejecting the Principal Executive Officer's
recommendations as to incentive compensation for other executives, including Named Executive Officers. No member of the Compensation Committee was an officer or employee of the Company or any of its
subsidiaries during fiscal year 2010. The Compensation Committee, in accordance with its charter, may engage any third party firm or consultant in fulfilling its responsibilities. The Compensation
Committee held three (3) meetings during fiscal year 2010.
General Policies Regarding Compensation of Named Executive Officers
The Compensation Committee's goal is to establish compensation levels and administer executive compensation which serves to:
(1) attract and retain high quality managerial and executive talent; (2) reward executives for superior performance; and (3) structure appropriate incentives for executives to
produce sustained superior performance in the future. Generally, in assessing the compensation arrangements for Named Executive Officers, other than the Principal Executive Officer, the Compensation
Committee solicits recommendations from the Principal Executive Officer relating to annual discretionary cash incentive compensation and long-term equity incentives such as stock option
grants or restricted stock awards, which it considers, and either accepts, modifies or rejects.
Overview of Process and Compensation Components
The compensation for our executives, including our President and Principal Executive Officer, is comprised of three primary elements:
base salary, annual discretionary cash incentive compensation and long-term equity incentives. We also provide or have provided perquisites, a retirement savings plan and, for select
executives, employment and post-employment agreements. The Company does not maintain a stock ownership policy.
15
During
fiscal year 2010, the Company maintained an incentive bonus program ("Bonus Program"). Under the Bonus Program (See "Incentive Bonus" under Executive Compensation on
page 21, the President and Principal Executive Officer makes recommendations to the Compensation Committee with respect to select executives, other than himself. The other executives are not
present at the time of deliberations, although the President and Principal Executive Officer is or may be present. The Compensation Committee considers such recommendations and consistent with the
overall compensation philosophy, the duties of the Committee, and general policies regarding compensation may accept or adjust such recommendations. In fiscal year 2010 the Principal Executive Officer
presented his recommendations as to incentive compensation, including annual discretionary bonus and equity incentives for other Named Executive Officers, taking into account each Named Executive
Officers' total compensation, including base salary, discretionary cash and long-term incentives. After considering such recommendations and discussions with the Principal Executive
Officer, the Compensation Committee agreed with the Principal Executive Officer's recommendations for fiscal year 2010. Because no targets are set in advance of a fiscal year, the Compensation
Committee considers the Incentive Bonus to be a discretionary bonus. The Principal Executive Officer
along with the Compensation Committee conduct, as needed, an informal review of market data, with the assistance of the Company's Human Resource Department which periodically performs benchmarking
studies.
The
Compensation Committee reviews, annually, the performance and compensation of the President and Principal Executive Officer. In view of Mr. Kathwari's substantial
contributions, the Company decided to enter into a new employment agreement with Mr. Kathwari to assure the continued availability of his services to the Company ("Employment Agreement") dated
October, 2007. (See Employment Agreement Page 26). The prior agreement, effective July 1, 2002, expired July 1, 2007.
When
developing an employment agreement for the President and Principal Executive Officer we engage the services of an independent third party consultant to assist in gathering relevant
market information which we analyze and consider in developing the compensation package to be included in the employment agreement. We also receive input from legal counsel, as appropriate.
To
assist in developing the terms of the Employment Agreement for Mr. Kathwari, the Compensation Committee engaged Sibson Consulting. Members of the Compensation Committee met
and/or had discussions and communications with representatives of the consultant over a period of nine months. Key considerations for the Compensation Committee in developing the compensation package
to be included in the Employment Agreement were: (i) identification of a peer group, which included both known competitors of the Company and companies adhering to similar retail models;
(ii) ensuring that the overall level of compensation was competitive and appropriate with the market; (iii) ensuring that a substantial portion of the total compensation package was tied
to long-term incentives; and (iv) creation of parameters that provide for increased compensation based upon performance of the Company. The companies that Sibson Consulting reviewed
included, but were not limited to Bombay Company, Inc., Haverty Furniture Companies, Inc., Pier I Imports, Inc., Restoration Hardware, Inc. and Williams Sonoma. Sibson
Consulting analyzed data contained in proxy filings of the peer group. In addition, they analyzed published compensation data for a broader group of retail and similarly sized companies.
The
Compensation Committee and Mr. Kathwari agreed to include a substantial incentive component in the Employment Agreement. As a result, a large part of Mr. Kathwari's
potential compensation under the Employment Agreement is in the form of stock options, restricted stock awards, and a bonus based upon the Company's operating income.
Effective
October 10, 2007, the Compensation Committee approved and the independent members of the Company's Board of Directors ratified, subject to approval by stockholders of
the incentive components thereof (which approval was obtained at the 2007 Annual Meeting of stockholders held on November 13, 2007), the Employment Agreement. The Compensation Committee
believes that the compensation package for Mr. Kathwari included in the Employment Agreement is appropriate in light of
16
Mr. Kathwari's
extensive experience in the home furnishings industry, his knowledge and background with respect to both manufacturing and retailing and, in particular, his responsibility for
implementation of the strategic plan for the Company and the Ethan Allen brand. For a detailed description of the terms of the Employment Agreement, which governed Mr. Kathwari's compensation
for the 2010 fiscal year, see "Employment Agreement," beginning on page 26.
Whether
an equity incentive grant will be made to a Named Executive Officer, and if so in what amount, is based upon: (i) the subjective evaluation, by the President and Principal
Executive Officer of the Named Executive Officer's contribution to the Company's future success; (ii) the level of incentive compensation previously provided by the number and term of the Named
Executive Officer's existing stock option and restricted stock holdings; and (iii) the market price of the Common Stock on the date of grant. Annually we allocate to the President and Principal
Executive Officer a block of equity incentives (stock options and restricted stock) to be granted throughout the fiscal year to recruit executives, and reward and retain management including the Named
Executive Officers other than himself. Equity incentives are granted to directly align the interest of employees, including the Named Executive Officers, to the appreciation on the Common Stock.
Options typically vest twenty-five (25%) percent per year beginning one year after the grant date, with full vesting over a four (4) year period. The term of such options is ten
(10) years, after which the options expire, unless the employee separates earlier from the Company, at which point the options expire 90 days after such separation. The exercise price is
established as of the date of grant. Restricted stock awards typically vest one-third per year beginning one year after the grant date, with full vesting over a three (3) year
period. Any stock not fully vested on the date the employee separates are forfeited.
In
determining the size of individual option grants, stock unit awards and restricted stock awards, the Compensation Committee considers the aggregate number of shares available, which
is, in turn, a function of: (i) the level of stockholders' dilution; (ii) the number of shares previously authorized by stockholders and remaining available; and (iii) the number
of individuals to whom the Company wishes to grant stock options, stock unit awards and/or restricted stock awards. The Compensation Committee also considers the range of potential compensation levels
that may be yielded by the options or awards. The Compensation Committee reserves the discretion to consider any factors it considers relevant, and to give all factors considered the relative weight
it considers appropriate under the circumstances then prevailing, in reaching its determination regarding the size and timing of option grants, stock unit awards and restricted stock awards. The
timing of option grants is neither date nor event specific. Grants of stock options to the Company's executives under the Option Plan provide an incentive to executives and managerial staff to achieve
the Company's long-term performance objectives and to retain managerial staff.
2010 Compensation
In fiscal year 2010, we allocated 200,000 equity incentives to the President and Principal Executive Officer for use during fiscal year
2010 to recruit executives, and reward and retain management, including the Named Executive Officers. The President and Principal Executive Officer granted 117,200 equity incentives to other
executives and employees including the Named Executive Officers in fiscal year 2010 with the balance carried over to 2011.
At
the time of the November 2009 grant of options, the financial position of the Company, as compared to the Company's prior year position was considered and the Compensation Committee
determined that it was in the best interest of the Company and its stockholders to provide an incentive award to select employees. It was determined that the granting of equity incentives was a
prudent non-cash way to provide incentive to and retain the Named Executive Officers. In addition to the analysis as to
17
whether
equity incentives should be granted, as set forth above, the following were the top factors considered in fiscal year 2010 in determining the extent of each award to the Named Executive
Officers:
-
1.
-
The
extent that the Named Executive Officer took initiatives to position the Company well for the future;
-
2.
-
The
extent that the Named Executive Officer contributed to the reduction and minimization in the overall overhead cost of the Company;
-
3.
-
The
extent that the Named Executive Officer was successful in maintaining the morale of his or her department(s)/division(s);
-
4.
-
The
extent that the Name Executive Officer contributed to the Company's strategic objective to conserve cash; and
-
5.
-
The
more efficient operation of the Company and sensible maximizing of Company revenues.
The
Compensation Committee determined each award was appropriate as to each Named Executive Officer, in light of: (i) the salary reduction taken by the Named Executive Officer,
commencing March 2009; (ii) the absence of a discretionary bonus payment for fiscal year 2009; and (iii) the need to retain and motivate managerial talent during this difficult economic
and business climate.
In
February 2010, once again the Compensation Committee determined it was appropriate to review compensation of its Named Executive Officers. In approving the February 2010 grant of
Restricted Stock, the Company and the Compensation Committee considered not only those factors considered in making the November 2009 Option Awards, including the benefits of granting a
non-cash based award and the factors as they relate to each individual award, but also considered the value of such awards to the Named Executive Officers at that time. After consideration
of all such factors, the Compensation Committee believed that it was in the best interest of the Company and its stockholders to grant the Restricted Stock in the amounts awarded to each Named
Executive Officer.
At
the end of fiscal year 2010, in reviewing total compensation for 2010, the Compensation Committee revisited the total compensation awards granted to the Named Executive Officers
throughout the year and determined that another form of award was appropriate. In making the discretionary incentive bonus awards for each Named Executive Officer, the Compensation Committee
determined that, in view of all of the factors listed above, and with special consideration to the obligation of the Compensation Committee to retain and motivate the Named Executive Officers, the
grant of a cash award was appropriate and the amount of each award was determined in light of the value of total compensation paid or awarded to each Named Executive Officer and the total value the
Named Executive Officer brought to the Company under the foregoing factors.
Although
the Compensation Committee will continue to consider deductibility under Section 162(m) with respect to future compensation arrangements with Named Executive Officers,
deductibility will not be the sole factor used in determining appropriate levels or methods of compensation. Since Company objectives may not always be consistent with the requirements for full
deductibility, the Company may enter into compensation arrangements under which payments are not deductible under Section 162(m).
Conclusion
The Compensation Committee believes that long-term stockholder value is enhanced by corporate and individual performance
achievements. Through the plans and practices described above, a meaningful portion of the Company's executive compensation is based on competitive pay practices, as well as corporate and individual
performance. The Compensation Committee believes equity compensation, in the form of stock options, restricted stock, and stock units is vital to the long-term success of the Company. The
Compensation Committee remains committed to this policy, recognizing that the competitive market
18
for
talented executives and the cyclical nature of the Company's business may result in highly variable compensation for a particular time period.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based
upon the review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's proxy statement.
|
|
|
|
|
EDWARD H. MEYER, CHAIR
CLINTON A. CLARK
KRISTIN GAMBLE
|
Executive Compensation
Set forth below is a description of the business experience of each Named Executive Officer, other than Mr. Kathwari, whose
experience is set forth on page 5.
David R. Callen
, 43, has served as Vice President, Finance and Treasurer since joining the Company in October 2007. Mr. Callen
serves as both the Principal Financial Officer and Principal Accounting Officer, responsible for all aspects of accounting and finance of the Company. From 2003 through 2007, Mr. Callen served
as Vice President of Global Finance for Photronics, Inc., an industry leader in reticles and photomasks for semiconductor applications, in Brookfield, Connecticut after being the Corporate
Controller of Johnson Outdoors, Inc., a global outdoor recreation products company, in Racine, Wisconsin. Mr. Callen holds a B.A. in Accounting from Michigan State University and is a
licensed Certified Public Accountant in the state of Connecticut.
Corey Whitely
, 50, has served as Executive Vice President, Operations since October 2007 and Executive Vice President of our subsidiary,
Ethan Allen Operations, Inc., since 2005. He is responsible for overseeing the Company's manufacturing, logistics processes and information systems. Mr. Whitely served as Vice President
Operations from 2003 until October 2007. He joined the Company in 1988 in the retail division and has held positions of increasing responsibilities including the areas of information technology,
logistics and manufacturing. Mr. Whitely also serves on the Board of Directors of the Connecticut Retail Merchants Association, a statewide group representing retailers in Connecticut, and is a
member of the National Retail Federation's CIO Council which is the industry's committee of IT leaders.
Nora Murphy
, 50, has served as Executive Vice President, Style and Advertising since October 2007. Previously she had served as Vice
President, Style from October 2001 to October 2007. Ms. Murphy is responsible for directing and coordinating the style, presentation, and design of the Company's products, design centers, and
branding. Ms. Murphy began working for Ethan Allen as a consultant in 1992. For twenty years she was the principal of the design firm Balogh Murphy Renderings, which specialized in residential
interior design and architectural and interior renderings. Ms. Murphy has designed furniture for Polo Ralph Lauren, where she held the title of product design manager. Ms. Murphy studied
interior design at the Fashion Institute of Technology, in New York City.
Lynda W. Stout
, 46 has served as Vice President, Retail Division since October 2007. Ms. Stout is responsible for the oversight of
the Company's retail division and its employees. She joined Ethan Allen Retail Inc. in 2002 and has since held positions of increasing responsibility in the Company's retail
division. Ms. Stout has over 23 years experience in the areas of Interior Design, management, and sales. She is a graduate of West Virginia University where she studied Business and
Interior Design.
19
Summary Compensation Table
The
following table sets forth, as to the Principal Executive Officer, Principal Financial Officer and the three next most highly compensated officers (the
"Named Executive Officers"), information concerning all compensation paid or accrued for services rendered in all capacities to the Company during the fiscal years indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary(6)
|
|
Bonus
|
|
Stock
Award(1)
|
|
Option
awards(1)
|
|
All other
compensation(3)
|
|
Total
|
|
M. Farooq Kathwari,
|
|
|
2010
|
|
$
|
1,050,050
|
|
$
|
150,000
|
|
$
|
318,053
|
(2)
|
$
|
630,800
|
|
$
|
83,337
|
(4)
|
$
|
2,232,240
|
|
|
Chairman of the Board,
|
|
|
2009
|
|
$
|
1,118,847
|
|
|
|
|
$
|
772,721
|
(2)
|
$
|
887,900
|
|
$
|
213,767
|
(4)
|
$
|
2,993,235
|
|
|
President and Principal
|
|
|
2008
|
|
$
|
1,127,500
|
|
|
|
|
$
|
776,623
|
(2)
|
$
|
776,623
|
|
$
|
165,084
|
|
$
|
4,022,207
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Callen,
|
|
|
2010
|
|
$
|
213,750
|
|
$
|
25,000
|
|
$
|
21,675
|
|
$
|
11,200
|
|
$
|
750
|
|
$
|
272,375
|
|
|
Principal Financial
|
|
|
2009
|
|
$
|
221,539
|
|
|
|
|
|
|
|
$
|
4,305
|
|
$
|
500
|
|
$
|
226,344
|
|
|
Officer
|
|
|
2008
|
|
$
|
147,115
|
|
$
|
30,000
|
|
|
|
|
$
|
7,032
|
|
|
|
|
$
|
184,147
|
|
Corey Whitely,
|
|
|
2010
|
|
$
|
285,000
|
|
$
|
45,000
|
|
$
|
72,250
|
|
$
|
44,800
|
|
$
|
750
|
|
$
|
447,800
|
|
|
Executive Vice President,
|
|
|
2009
|
|
$
|
295,385
|
|
|
|
|
|
|
|
$
|
8,610
|
|
$
|
500
|
|
$
|
304,495
|
|
|
Operations
|
|
|
2008
|
|
$
|
281,538
|
|
$
|
70,000
|
|
|
|
|
$
|
11,720
|
|
$
|
1,300
|
|
$
|
364,558
|
|
Nora Murphy,
|
|
|
2010
|
|
$
|
285,000
|
|
$
|
20,000
|
|
$
|
28,900
|
|
$
|
31,360
|
|
$
|
750
|
|
$
|
366,010
|
|
|
Executive Vice President,
|
|
|
2009
|
|
$
|
295,385
|
|
|
|
|
|
|
|
$
|
8,610
|
|
$
|
500
|
|
$
|
304,495
|
|
|
Style
|
|
|
2008
|
|
$
|
278,365
|
|
$
|
65,000
|
|
|
|
|
$
|
11,720
|
|
$
|
1,300
|
|
$
|
356,385
|
|
Lynda W. Stout,
|
|
|
2010
|
|
$
|
218,500
|
|
$
|
25,000
|
|
$
|
36,125
|
|
$
|
22,400
|
|
$
|
27,747
|
(5)
|
$
|
329,772
|
|
|
Vice President,
|
|
|
2009
|
|
$
|
226,462
|
|
|
|
|
|
|
|
$
|
7,175
|
|
$
|
21,300
|
(5)
|
$
|
254,937
|
|
|
Retail Division
|
|
|
2008
|
|
$
|
192,692
|
|
$
|
55,000
|
|
|
|
|
$
|
8,790
|
|
$
|
1,300
|
|
$
|
257,782
|
|
-
(1)
-
The
amounts shown for stock awards and option awards represent the fair values as of each grant date, computed in accordance with Accounting Standards
Codification Topic 718, successor to FAS 123R. For financial statement reporting purposes, these fair values are charged to expense over the vesting period, which is generally three years for
stock grants and four years for option grants. The actual values that employees may realize if any, will not be known until the vesting date and could differ significantly. See footnote 11 to the
Company's Form 10-K for fiscal year ended June 30, 2010 for assumptions in the valuation.
-
(2)
-
Stock
awards shown for Mr. Kathwari include performance based restricted shares with payouts that were dependent on performance in 2010, 2009 and
2008 with grant date fair value of $95,153, $772,721 and $318,373 respectively. If the highest level of performance was assumed on these awards at grant date, the resulting values would have been
$216,535, $1,489,172, and $601,238 respectively. Due to their performance requirements, the actual values realized can vary widely, including having no value.
-
(3)
-
Includes
contributions by the Company of $750 for each executive pursuant to the Ethan Allen Retirement Savings Plan for fiscal year 2010, $500 for fiscal
2009 and $1,300 for fiscal 2008.
-
(4)
-
The
following is a detailed table outlining the components of Mr. Kathwari's other compensation for fiscal 2010. Amounts reflected below represent
actual amounts charged to the Company's operations during the fiscal year ended June 30, 2010. In addition, there were other incremental costs incurred by the Company for: (i) a Company
car ($74,002); (ii) a club membership ($6,406); and (iii) a Company plane ($102,262) all of which were used solely for business purposes. It is Mr. Kathwari's practice to
reimburse the Company for any incremental costs relating
20
to
his personal use of the Company plane and club membership. See also Executive Perquisites/Other Personal Benefits on page 25.
|
|
|
|
|
Life insurance premiums
|
|
$
|
39,206
|
|
Retirement contract (change in value)
|
|
-$
|
9,757
|
|
Restricted Stock book account (change in value)
|
|
$
|
27,938
|
|
Cash dividends on Stock Units
|
|
$
|
25,200
|
|
Company match under Ethan Allen Retirement Savings Plan
|
|
$
|
750
|
|
|
|
|
|
Total
|
|
$
|
83,337
|
|
|
|
|
|
-
(5)
-
Includes
reimbursement of moving expenses of $26,997 in fiscal 2010 and $20,800 in fiscal 2009.
-
(6)
-
The
totals reflect a $100,000 voluntary reduction in Mr. Kathwari's annual base salary and a voluntary five percent (5%) reduction in the salary of
the other Named Executive Officers, in all cases beginning March 1, 2009 through July 31, 2010.
Incentive Bonus
Each Named Executive Officer, along with other executives and key employees, is eligible for an annual Incentive Bonus. Incentive
Bonuses are intended: (i) to reward key employees based upon both the Company's performance and the individual's performance; (ii) to motivate key employees; and (iii) to provide
competitive cash compensation opportunities.
For
fiscal year 2010, the Company's Compensation Committee maintained an incentive bonus program (the "Bonus Program") for managerial employees of the Company. The Bonus Program had two
components: (i) an aggregate of $534,000 in cash to be distributed to managerial employees, other than Mr. Kathwari, in amounts recommended by Mr. Kathwari; and (ii) as to
Mr. Kathwari, an amount determined in accordance with his Employment Agreement and such other amount distributed by the Compensation Committee in its discretion. In light of the Company's
performance for fiscal year 2010 and in accordance with the bonus formula in the Employment Agreements, Mr. Kathwari was not eligible for a bonus. The Company did not make any Incentive Bonus
payments for fiscal year 2009. In light of: (i) the Company's performance for fiscal year 2010 and its cash position; (ii) the voluntary reduction in salary forgone by the Named
Executive Officers; (iii) the absence of an Incentive Bonus payment in 2009, the Compensation Committee believed it was in the best interest of the Company and its stockholders to make
Incentive Bonus payments to the Named Executive Officers. The Compensation Committee was in agreement with Mr. Kathwari's recommendations as to the Named Executive Officers, other than himself.
In addition, as a result of the foregoing reasons, the Compensation Committee paid an Incentive Bonus to Mr. Kathwari. All Incentive Bonus payments were made to reward key executives for their
performance during this difficult economic and business climate and to keep the managerial staff motivated to continue to deliver positive results and guide the Company to meet its strategic
objectives. Because no targets are set in advance of a fiscal year, the Compensation Committee considers the Incentive Bonus to be a discretionary bonus.
Equity Incentives
Stock Units and Restricted Stock
We grant stock units and restricted stock in certain circumstances to provide competitive pay packages. These grants are designed
primarily to retain qualified executives since the employee cannot sell shares during the restriction period, which is of variable duration,
including up until the date of separation from the Company. These grants are used to align the Named Executive Officers with long-term stockholder value.
The
accounting cost of restricted stock and stock unit awards, for which the exercise price is zero, is calculated based on the closing price of a single share of Common Stock on the
date of the award for
21
awards
with no performance or market conditions. For awards with market conditions, a binomial lattice model was used, with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards Granted in Fiscal
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Volatility
|
|
|
|
|
|
|
|
|
|
|
|
Ethan Allen
|
|
|
62.2%
|
|
|
34.6%
|
|
|
27.0%
|
|
|
S & P 500
|
|
|
35.1%
|
|
|
14.4%
|
|
|
12.1%
|
|
Risk-free rate of return
|
|
|
1.6%
|
|
|
2.9%
|
|
|
3.5%
|
|
Dividend Yield
|
|
|
1.9%
|
|
|
2.4%
|
|
|
2.4%
|
|
Expected Average Life
|
|
|
3.0 yrs
|
|
|
3.0 yrs
|
|
|
2.6 yrs
|
|
The
Company has issued restricted stock pursuant to the Option Plan. See Note 11 to "Notes to Consolidated Financial Statement" in the Company's Annual Report on
Form 10-K for the year ended June 30, 2010 for additional information. The Company has registered the issuance of the shares. Dividends are not payable on unvested restricted
stock.
Non-qualified stock options
Stock options granted with exercise prices equal to 100% of the underlying Common Stock market value, based on the closing price of a
single share of Common Stock on the date of grant, are currently the Company's primary long term compensation vehicle for executives and managerial staff. The Compensation Committee believes that
stock options align the interests of management with those of the Company's stockholders, providing appropriate incentive to motivate management, thereby increasing stockholder return.
The
Company has issued options to purchase shares of Common Stock pursuant to the Option Plan. See Note 11 to "Notes to Consolidated Financial Statements" in the Company's Annual
Report on Form 10-K for the year ended June 30, 2010 for additional information. The Company has registered the issuance of the shares of Common Stock which are issuable upon
exercise of such options.
The
accounting cost of stock option grants is determined on the date of grant and recognized over the applicable vesting period. We estimate, as of the date of grant, the fair value of
stock options awarded using the Black-Scholes option-pricing model. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including
anticipated changes in the underlying stock price (i.e. expected volatility) and option exercise activity (i.e. expected life). Expected volatility is based on the historical volatility
of our Common Stock and other contributing factors. The expected life of options granted, which represents the period of time that the options are expected to be outstanding, is based, primarily, on
historical data.
22
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Option
Awards;
Number of
Securities
Underlying
Options
(#)
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
|
All Other
Stock
Awards;
Number of
Shares
of Stock #
|
|
|
|
|
|
|
|
|
|
Exercise or
Base Price
of Option
Awards
($/Sh)
|
|
Grant Date
Fair Value of
Stock and
Option
Awards
|
|
Name
|
|
Grant Date
|
|
Threshold(1)
(#)
|
|
Target(2)
(#)
|
|
Maximum(2)
(#)
|
|
M. Farooq Kathwari
|
|
|
7/1/2009
|
|
|
8,000
|
|
|
20,000
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
$
|
151,598
|
|
|
|
|
7/1/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
$
|
10.68
|
|
$
|
274,800
|
|
|
|
|
2/3/2010
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
$
|
222,900
|
|
|
|
|
2/3/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
$
|
14.86
|
|
$
|
356,000
|
|
David R. Callen
|
|
|
11/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
$
|
11.74
|
|
$
|
11,200
|
|
|
|
|
2/4/2010
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
|
|
|
$
|
21,675
|
|
Corey Whitely
|
|
|
11/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
$
|
11.74
|
|
$
|
44,800
|
|
|
|
|
2/4/2010
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
$
|
72,250
|
|
Nora Murphy
|
|
|
11/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
$
|
11.74
|
|
$
|
31,360
|
|
|
|
|
2/4/2010
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
$
|
28,900
|
|
Lynda W. Stout
|
|
|
11/12/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
$
|
11.74
|
|
$
|
22,400
|
|
|
|
|
2/4/2010
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
$
|
36,125
|
|
-
(1)
-
The
threshold is the point at which the smallest payout would be attained.
-
(2)
-
Based
on the interim comparison of Ethan Allen's stockholder return as compared to the Standard & Poor's 500 return as of June 30, 2010,
20,000 shares from the July 1, 2009 grant would have vested if this interim period were the final measurement period of June 30, 2012. The actual payout, if any, will be determined at
June 30, 2012 and is based on a tiered vesting schedule.
See "Outstanding Equity Awards at Fiscal Year End" page 24 and the footnotes thereto for information regarding expirations and vesting of grants listed
above.
See
"Employment Agreement" page 26 for a discussion of the material terms of Mr. Kathwari's employment agreement and for an understanding of the information disclosed in the charts
above.
See
"Compensation Discussion and Analysis" page 15 for an explanation of the base salary and bonus in proportion to total compensation payable to the Named Executive Officers.
23
Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Notes
|
|
Number
Exercisable
|
|
Number
Unexerciseable
|
|
Option
Price
|
|
Expiration
|
|
Number of
shares or units
of stock that
have not
vested (#)
|
|
Market value
of shares or
units of stock
that have not
vested ($)
|
|
M. Farooq Kathwari
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
$
|
279,800
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
$
|
279,800
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
$
|
83,940
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
$
|
209,850
|
|
|
|
|
|
|
|
600,000
|
|
|
|
|
$
|
31.02
|
|
|
8/1/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
|
$
|
35.53
|
|
|
8/1/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
$
|
37.15
|
|
|
8/2/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
$
|
34.03
|
|
|
10/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
$
|
24.62
|
|
|
7/1/2018
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
12,500
|
|
|
37,500
|
|
$
|
15.93
|
|
|
11/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
$
|
10.68
|
|
|
7/1/2019
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
50,000
|
|
$
|
14.86
|
|
|
2/3/2020
|
|
|
|
|
|
|
|
David R. Callen
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
$
|
20,985
|
|
|
|
|
(7
|
)
|
|
600
|
|
|
600
|
|
$
|
25.71
|
|
|
6/20/2018
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
375
|
|
|
1,125
|
|
$
|
17.60
|
|
|
11/5/2018
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
2,500
|
|
$
|
11.74
|
|
|
11/12/2019
|
|
|
|
|
|
|
|
Corey Whitely
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
$
|
69,950
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
$
|
38.79
|
|
|
4/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
$
|
29.55
|
|
|
4/14/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
$
|
41.35
|
|
|
3/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
$
|
31.15
|
|
|
5/27/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
$
|
36.56
|
|
|
6/27/2016
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
1,500
|
|
|
500
|
|
$
|
36.71
|
|
|
6/4/2017
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
1,000
|
|
|
1,000
|
|
$
|
25.71
|
|
|
6/20/2018
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
750
|
|
|
2,250
|
|
$
|
17.60
|
|
|
11/5/2018
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
10,000
|
|
$
|
11.74
|
|
|
11/12/2019
|
|
|
|
|
|
|
|
Nora Murphy
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
$
|
27,980
|
|
|
|
|
|
|
|
2,625
|
|
|
|
|
$
|
38.79
|
|
|
4/18/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
$
|
29.55
|
|
|
4/14/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
$
|
41.35
|
|
|
3/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
$
|
31.15
|
|
|
5/27/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
$
|
36.56
|
|
|
6/27/2016
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
1,875
|
|
|
625
|
|
$
|
36.71
|
|
|
6/4/2017
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
1,000
|
|
|
1,000
|
|
$
|
25.71
|
|
|
6/20/2018
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
750
|
|
|
2,250
|
|
$
|
17.60
|
|
|
11/5/2018
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
7,000
|
|
$
|
11.74
|
|
|
11/12/2019
|
|
|
|
|
|
|
|
Lynda W. Stout
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
$
|
34,975
|
|
|
|
|
|
|
|
400
|
|
|
|
|
$
|
41.35
|
|
|
3/25/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
|
|
$
|
31.15
|
|
|
5/27/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
$
|
36.56
|
|
|
6/27/2016
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
525
|
|
|
175
|
|
$
|
36.71
|
|
|
6/4/2017
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
750
|
|
|
750
|
|
$
|
25.71
|
|
|
6/20/2018
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
625
|
|
|
1,875
|
|
$
|
17.60
|
|
|
11/5/2018
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
5,000
|
|
$
|
11.74
|
|
|
11/12/2019
|
|
|
|
|
|
|
|
-
(1)
-
The
restricted stock contains market conditions, and vests subject to a tiered rate on June 30, 2011 provided performance goals are met.
-
(2)
-
The
restricted stock contains market conditions, and vests subject to a tiered rate on June 30, 2012 provided performance goals are met.
-
(3)
-
The
restricted stock vests in two equal tranches on each June 30 of 2011 and 2012.
-
(4)
-
The
restricted stock vests in three equal tranches on each June 30 of 2011, 2012, and 2013.
-
(5)
-
The
options vest equally in three equal tranches on each November 11 of 2010, 2011, and 2012.
-
(6)
-
The
restricted stock vests in three equal tranches on each February 4 of 2011, 2012, and 2013.
24
-
(7)
-
The
options vest in two equal tranches on each June 20 of 2011, and 2012.
-
(8)
-
The
options vest in three equal tranches on each November 5 of 2010, 2011, and 2012.
-
(9)
-
The
options vest in four equal tranches on each November 12 of 2010, 2011, 2012 and 2013.
-
(10)
-
The
options all vest on June 4, 2011.
-
(11)
-
The
options vest in four equal tranches on each February 3 of 2011, 2012, 2013 and 2014.
Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of
shares acquired
on exercise (#)
|
|
Value realized
on exercise ($)
|
|
Number of
shares acquired
on vesting (#)
|
|
Value realized
on vesting ($)
|
|
M. Farooq Kathwari
|
|
|
|
|
|
|
|
|
11,000
|
|
|
153,890
|
|
No
other Named Executive Officers exercised options or received vested stock awards during fiscal year 2010.
Equity Compensation Plan Information
The following table sets forth certain information regarding our equity compensation plans as of June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in first column)
|
|
Equity compensation plans approved by security holders(1)
|
|
|
2,336,984
|
|
$
|
26.94
|
|
|
814,217
|
|
Equity compensation plans not approved by security holders(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,336,984
|
|
$
|
26.94
|
|
|
814,217
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Amount
includes stock options outstanding under our Option Plan as well as unvested shares of restricted stock and vested Stock Units which have been
provided for under the provisions of the Option Plan. See Note 11 to our Consolidated Financial Statements included under Item 8 of the Annual Report on Form 10-K for
the year ended June 30, 2010.
-
(2)
-
As
of June 30, 2010, we do not maintain any equity compensation plans which have not been approved by our shareholders.
Executive Perquisites/Other Personal Benefits
Benefits offered to Named Executive Officers are similar to those offered to all employees. In addition, the Company provides
perquisites it believes are reasonable and consistent with the overall executive compensation program. In 2010, with the exception of Mr. Kathwari, the Named Executive Officers did not receive
any perquisites. Mr. Kathwari received: (1) access to and use of Company cars (including driver, gas, registration, title, insurance and maintenance); (2) reimbursement of life
insurance premiums up to $50,000; (3) a retirement contract; (4) interest on a restricted stock book account established pursuant to his Employment Agreement; and (5) dividend
equivalent payments on Stock Units awarded pursuant to his prior employment agreement. Mr. Kathwari's use of the car, airplane, and club
25
membership
are as a convenience to the Company and are for business purposes. (See footnote 4Summary Compensation Table on page 20).
The
Named Executive Officers are eligible to participate in the same retirement benefit programs we offer to salaried employees at the corporate level. Our current program is a 401(k)
plan with company-provided match. In addition, Mr. Kathwari is entitled to benefits under a retirement payment contract. Pursuant to the terms of the retirement payment contract, the Company is
required to make monthly retirement payments of $1,250 per month, commencing on the month in which his employment with the Company terminates, and shall be paid until the earlier to occur of
a) 120 monthly payments or b) the death of Mr. Kathwari. Such retirement payment is subject to cost of living adjustments. In the event Mr. Kathwari shall die before
receiving all retirement payments Mr. Kathwari's widow shall be entitled to reduced retirement payments equal to one-half of the retirement payment amount until the earlier to occur
of a) her death or b) the cumulative payment of 120 monthly payments to Mr. Kathwari and/or his widow.
The Ethan Allen Retirement Savings Plan
The Company established the Ethan Allen Profit Sharing and 401(k) Retirement Plan, now known as the Ethan Allen Retirement Savings
Plan, effective July 1, 1994 (the "Retirement Plan"), as a result of the merger of the Company's and/or its subsidiaries' profit sharing and 401(k) plans. The Retirement Plan covers all
employees who have completed at least three months of service.
The
401(k) portion of the Retirement Plan allows participants to defer up to 100% of their compensation, subject to certain statutory limitations. The Company may, at its discretion,
fully match the first $500 of a participant's before tax contribution and one-half of the next $1,600 of a participant's before tax contribution, up to a maximum of $1,300 each year. The
Company made matching contributions, in the form of shares of Company Common Stock to the Retirement Plan equal to $750 for fiscal year 2010 for each of the Named Executive Officers. Participant
contributions and employer matching contributions are immediately and fully vested.
Under
the Profit Sharing portion of the Retirement Plan, contributions can be made only by the Company and are at the sole discretion of the Company. Contributions are allocated among
all Retirement Plan participants in the same ratio as a participant's covered remuneration bears to that of all Retirement Plan participants. The Company made no profit sharing contributions during
fiscal year 2010.
The
Retirement Plan is the primary vehicle for providing retirement income to Company employees. The Retirement Plan is administered by Ethan Allen Global, Inc. with J.P. Morgan
as Investment Manager and Record Keeper. Investment options currently offered under the Retirement Plan include two collective trusts, nine mutual funds, six strategic allocation funds, employer
common stock, and a self-directed brokerage fund. Participants direct the investment of their accounts under the Retirement Plan and may choose from some or all of the investment options
designated by the Retirement Committee from time to time.
Employment Agreement
As of October 10, 2007, the Company's Compensation Committee approved, and the independent members of the Company's Board of
Directors ratified, subject to approval of the incentive components by stockholders (which approval was obtained at the 2007 Annual Meeting of stockholders held on November 13, 2007), the terms
of the Employment Agreement between the Company and Mr. Kathwari. Pursuant to the Employment Agreement, the Company agreed to continue to employ Mr. Kathwari and Mr. Kathwari
agreed to remain as Chairman, President
and Principal Executive Officer of the Company and Ethan Allen Global, Inc., for a period of approximately five years, with two automatic one-year extensions commencing on each of
July 1, 2012, and July 1, 2013 (each, an "Anniversary Date"), unless notice is given by either Mr. Kathwari or the Company not later than 9 months prior to an Anniversary
Date.
26
Pursuant to the terms of the Employment Agreement, Mr. Kathwari will receive a base salary of $1,127,500 per year, subject to an annual increase. The annual increase is based on
the Company's Operating Income as divided by reported sales ("Operating Margin").
|
|
|
Annual Percentage
Increase to Base Salary
|
|
Annual
Operating Margin
|
0%
|
|
Less than 10%
|
2%
|
|
³
10% but < 11%
|
4%
|
|
³
11% but < 13%
|
5%
|
|
³
13%
|
As
of July 1, 2008, Mr. Kathwari was entitled to an annual increase of 2% pursuant to the terms of the Employment Agreement increasing his base salary to $1,150,050.
However, due to the economic climate and Company sales, on March 1, 2009, Mr. Kathwari voluntarily took a $100,000 per year salary reduction, such that his base salary as in effect from
March 1, 2009 through July 31, 2010 was $1,050,050 per year. Beginning August 1, 2010 Mr. Kathwari's annual salary is $1,150,050.
Mr. Kathwari
will be entitled to an annual incentive bonus based upon the Company's Operating Income. Mr. Kathwari's incentive bonus for a given fiscal year will be based
upon the amount by which the Company's Operating Income for the fiscal year exceeds the applicable threshold amount specified below (each a "Threshold").
|
|
|
|
|
Fiscal Year
|
|
Threshold
|
|
2010
|
|
$
|
110 Million
|
|
2011
|
|
$
|
115 Million
|
|
2012
|
|
$
|
120 Million
|
|
2013
|
|
$
|
125 Million
|
|
2014
|
|
$
|
130 Million
|
|
Mr. Kathwari
will receive a bonus equal to (i) 1.25% of the first $20 million (or portion thereof) by which the Operating Income exceeds the applicable Threshold,
(ii) 2.25% of the second $20 million (or portion thereof) by which the Operating Income exceeds the applicable Threshold, (iii) 2.75% of the third $20 million (or portion
thereof) by which the Operating Income exceeds the applicable Threshold, and (iv) 3.25% of any amount greater than $60 million by which the Operating Income exceeds the applicable
Threshold. No incentive bonus under the Employment Agreement was awarded to Mr. Kathwari in fiscal year 2010.
The
Compensation Committee shall make adjustments to the Threshold to reflect certain unusual, non-recurring events, including acquisitions and divestitures. In August 2010,
the Compensation Committee, in addition to any annual incentive bonus provided for in the Employment Agreement, paid Mr. Kathwari an Incentive Bonus of $150,000.
Pursuant
to the Employment Agreement, Mr. Kathwari was granted the following options under the Option Plan: (i) as of October 10, 2007, ten-year stock
options to purchase 150,000 shares of Common Stock, at an exercise price of $34.03 per share (the price of a share of Common Stock on the New York Stock Exchange as of the close of business on the
date of grant), which vest at a rate of 50,000 on each June 30th, up to and including June 30, 2010; (ii) as of July 1, 2008, ten-year stock options to purchase
90,000 shares of Common Stock, at an exercise price of $24.62 per share (the price of a share of Common Stock on the New York Stock Exchange as of the close of business on July 1, 2008), which
vest at a rate of 45,000 each year following the date of grant, up to and including June 30, 2010; and (iii) as of July 1, 2009, ten-year stock options to purchase
60,000 shares of Common Stock, at an exercise price of $10.68 per share (the price of a share of Common Stock on the New York Stock Exchange as of close of business on July 1,
27
2009),
which vest on June 30, 2010. All options are fully vested and were granted pursuant to the Option Plan.
On
November 11, 2008, the Compensation Committee, in addition to the options granted pursuant to the Employment Agreement, granted Mr. Kathwari the right to purchase 50,000
shares of Common Stock at an exercise price of $15.93 per share (the price of a share of Common Stock on the date of grant), which vest at a rate of 25% each year following the date of grant, up to
and including November 10, 2012. On February 3, 2010, the Compensation Committee, in addition to the options granted pursuant to the Employment Agreement, granted to Mr. Kathwari
the right to purchase 50,000 shares of Common Stock at an exercise price of $14.86 per share (the price of a share of Common Stock on the date of grant), which vest at a rate of 25% each year
following the date of grant, up to and including February 3, 2014.
Pursuant
to the Employment Agreement, Mr. Kathwari was granted the following restricted stock under the Option Plan: (i) as of the date stockholders approved the incentive
components of the Employment Agreement (November 13, 2007), 20,000 shares; (ii) as of July 1, 2008, 20,000 shares; and (iii) as of July 1, 2009, 20,000 shares. The
initial grant of 20,000 shares of restricted stock was scheduled to vest on June 30, 2010 upon the attainment of certain performance targets, as set forth below. Thereafter, the July 1,
2008 grant of 20,000 shares of restricted stock will vest on June 30, 2011 and the July 1, 2009 grant of 20,000 shares of restricted stock will vest on June 30, 2012. All of these
restricted stock awards vest in accordance with a tiered vesting schedule based on the Company's total return to its stockholders as compared to the total return of the Standard & Poor's 500.
Any shares which do not vest will be forfeited. As of June 30, 2010, 8,000 shares vested and 12,000 shares were forfeited. As of each dividend record date for the Common Stock occurring on or
after the date of any grant of shares of restricted stock, but prior to the date such shares become vested or are forfeited, an account established by the Company for the benefit of
Mr. Kathwari shall be credited with the amount of dividends which would otherwise have been paid with respect to such shares. Amounts credited to the account will be credited with interest at
the rate of 5% per year until distribution. Mr. Kathwari will be fully vested in all amounts credited to the account, regardless of the subsequent vesting or forfeiture of the shares. The
balance credited to Mr. Kathwari's account will be distributed to him in cash as soon as practicable after the termination of his employment. All shares of restricted stock will become fully
vested upon the occurrence of a change in control of the Company or in the event that Mr. Kathwari's employment is terminated by the Company without "cause" or by Mr. Kathwari "for good
reason."
Pursuant
to the Employment Agreement, on November 11, 2007, Mr. Kathwari received an additional 15,000 shares of restricted stock. These shares of restricted stock vest at
a rate of 3,000 shares per year over the initial five year term of the Employment Agreement.
On
February 3, 2010, the Compensation Committee, in addition to the restricted stock granted pursuant to the Employment Agreement, awarded Mr. Kathwari 15,000 shares of
restricted stock to vest ratably over three years beginning on February 2, 2011, and on July 20, 2010, awarded Mr. Kathwari 11,000 shares of restricted stock to vest ratably over
two years beginning on July 20, 2011.
In
the event Mr. Kathwari's employment with the Company is terminated by reason of death or disability, under the Employment Agreement, he (or his estate) will receive his base
salary plus his bonus through the end of the year, along with any deferred compensation, unreimbursed expenses, insurance proceeds and other payments in accordance with Company practices. If
Mr. Kathwari's employment is terminated by the Company without "cause" or by Mr. Kathwari "for good reason", he will receive his base salary through the end of the term of the Employment
Agreement and a payment equal to the lesser of $1 million or the bonus payments for two years calculated by reference to the highest bonus previously paid to him, and he will be entitled to
settlement of the stock options, which are exercisable within three years after termination. If Mr. Kathwari's employment is terminated by the Company for "cause" or voluntarily by
Mr. Kathwari, he will receive his base salary and bonus prorated through the date of termination, along with any deferred compensation, unreimbursed expenses or any other payment in accordance
with
28
Company
practices. In connection with each of the foregoing termination payments, Mr. Kathwari will be reimbursed for certain excise and other taxes he is required to pay in respect of such
payments.
Under
Mr. Kathwari's prior employment agreement, the Company established a book account for Mr. Kathwari, which has been credited with 126,000 Stock Units (the "Stock
Units"). Following the termination of Mr. Kathwari's employment, Mr. Kathwari will receive shares of Common Stock equal to the number of Stock Units credited to the account. During the
period in which Stock Units are credited to the account, Mr. Kathwari received and will receive dividend-equivalent payments, in cash, equal to the dividends which would otherwise have been
paid on the shares of Common Stock represented by the Stock Units.
Change in Control
We maintain a change in control provision with our President and Principal Executive Officer as set forth in the Employment Agreement
and our Named Executive
Officers as set forth in restricted stock and option agreements to ensure continuity of our leadership in the event of a change in ownership of the Company. Under the Employment Agreement, the Company
pays him in accordance with the terms of the Employment Agreement including base salary, the aggregate of his two largest bonuses not to exceed $2 million in the aggregate, deferred
compensation, reimbursement of expenses and other compensation or benefits owed in accordance with applicable plans, programs or agreements if there is a change in control and his employment is
subsequently terminated.
29
Potential Payments upon Termination or Change in Control
The amount of compensation which would have been payable to the Named Executive Officer upon termination of employment or a change in
control (as defined in our By-laws), assuming a June 30, 2010 triggering event, is listed in the following table.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
For Cause/
Voluntary
Termination/
Retirement
|
|
Without Cause/
Good Reason
Termination/
|
|
Death or
Disability
|
|
Change in
Control
|
|
M. Farooq Kathwari
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary continuation(1)
|
|
|
|
|
$
|
2,300,100
|
|
|
|
|
$
|
2,300,100
|
|
Bonus(2)
|
|
$
|
150,000
|
|
$
|
2,000,000
|
|
$
|
150,000
|
|
$
|
2,000,000
|
|
Life & disability payments(3)
|
|
|
|
|
$
|
150,000
|
|
|
|
|
$
|
150,000
|
|
Stock Options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Units(5)
|
|
$
|
1,762,740
|
|
$
|
1,762,740
|
|
$
|
1,762,740
|
|
$
|
1,762,740
|
|
Restricted Stock Awards(6)
|
|
|
|
|
$
|
293,790
|
|
$
|
293,790
|
|
$
|
293,790
|
|
Restricted Stock Awards with market conditions(7)
|
|
|
|
|
$
|
559,600
|
|
$
|
559,600
|
|
$
|
559,600
|
|
Accrued interest & dividendsbook account(8)
|
|
$
|
240,794
|
|
$
|
240,794
|
|
$
|
240,794
|
|
$
|
240,794
|
|
Retirement Contract payments(9)
|
|
$
|
225,000
|
|
$
|
225,000
|
|
$
|
225,000
|
|
$
|
225,000
|
|
David R. Callen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(10)
|
|
|
|
|
|
|
|
|
|
|
$
|
5,625
|
|
Restricted Stock Awards(11)
|
|
|
|
|
|
|
|
|
|
|
$
|
20,985
|
|
Corey Whitely
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(10)
|
|
|
|
|
|
|
|
|
|
|
$
|
22,500
|
|
Restricted Stock Awards(11)
|
|
|
|
|
|
|
|
|
|
|
$
|
69,950
|
|
Nora Murphy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(10)
|
|
|
|
|
|
|
|
|
|
|
$
|
15,750
|
|
Restricted Awards(11)
|
|
|
|
|
|
|
|
|
|
|
$
|
27,980
|
|
Lynda W. Stout
|
|
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|
|
|
|
|
|
|
|
|
|
|
Stock Options(10)
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|
|
|
|
|
|
|
|
|
|
$
|
11,250
|
|
Restricted Awards(11)
|
|
|
|
|
|
|
|
|
|
|
$
|
34,976
|
|
-
(1)
-
If
terminated other than for cause, Mr. Kathwari is entitled to salary continuation through June 30, 2012. The amount disclosed is the total
undiscounted amount of future payments.
-
(2)
-
If
terminated other than without cause, Mr. Kathwari would receive a prorated bonus entitlement from the beginning of the fiscal year through the
termination date. Mr. Kathwari received a bonus payment for fiscal 2010 of $150,000. If terminated without cause, Mr. Kathwari would have received a bonus equal to the lesser of his two
(2) largest bonuses or $2.0 million dollars.
-
(3)
-
If
terminated without cause, the Company would continue to pay life and disability insurance payments through June 30, 2012. The amount disclosed is
the total undiscounted amount of future payments.
-
(4)
-
Equity
awards that were fully vested by their terms as of June 30, 2010 are not included in the numbers shown above. For information on any
outstanding fully-vested awards, see the "Outstanding Equity Awards at Fiscal Year-End" table page 24. At June 30, 2010, Mr. Kathwari held unvested options to purchase
an aggregate of 87,500 shares of Common Stock, at exercise prices ranging from $14.86 to $15.93. If Mr. Kathwari's employment had been terminated by the Company without cause, by
Mr. Kathwari for good reason (as defined in his Employment Agreement), or for disability on
30
June 30,
2010, the options to purchase the additional shares would have become immediately exercisable. However, since the closing market price of our Common Stock on June 30, 2010 was
$13.99 per share, the net proceeds to Mr. Kathwari from an exercise of all of such options would have been zero.
-
(5)
-
In
connection with Mr. Kathwari's 1997 employment agreement he was awarded 126,000 stock units which will, upon termination for any reason, including
death or disability, be converted to common stock. The closing market price at June 30, 2010 was used to value the shares.
-
(6)
-
If
terminated without cause or due to death or disability, 21,000 unvested restricted shares would vest immediately. The closing market price at
June 30, 2010 was used to value the shares.
-
(7)
-
At
June 30, 2010, Mr. Kathwari held 40,000 restricted shares none of which had vested. If Mr. Kathwari's employment had terminated for
death or disability on June 30, 2010, the restrictions on the 40,000 shares of restricted stock previously granted would have lapsed immediately. If Mr. Kathwari's employment had been
terminated by the Company without cause or by him for good reason on June 30, 2010, the restrictions on the 40,000 shares of restricted stock previously granted would have lapsed immediately.
The closing market price at June 30, 2010 was used to value the shares.
-
(8)
-
If
terminated for any reason, including death or disability, the value of deemed dividends on restricted share awards held in a book account along with
accrued interest at 5% per annum would be paid by the Company.
-
(9)
-
Mr. Kathwari
is also entitled to payments pursuant to a retirement contract, which is described under the section Executive Perquisites/Other
Personal Benefits, on page 25. The amount disclosed is the total undiscounted amount of future payments, assuming the maximum cost of living adjustments.
-
(10)
-
Amounts
reflect the difference between the exercise price of the option and the closing market price of $13.99 as of June 30, 2010, based on
immediate vesting due to a change in control in accordance with the Company's Option Plan. Options with a strike price of at least $13.99 are shown as $0. However any such option may have a fair value
greater than zero as of this date. Equity awards that were fully vested as of June 30, 2010 are not included in the numbers shown above.
-
(11)
-
Amounts
reflect the market value of the shares underlying the awards as of June 30, 2010, based on a market price of $13.99 and do not include any
value for that portion of the award with respect to which the participants accrued a vested interest on June 30, 2010, as provided for in the Company's Option Plan.
Director Compensation
For fiscal year 2010, all independent directors received $35,000 per annum and $3,500 per meeting of the Board of Directors attended in
person ($1,000 per meeting attended by telephone). The Chair of the Compensation and Nominations/Corporate Governance Committees received an additional $8,000 per annum. The Chair of the Audit
Committee received an additional $10,000 per annum. Each independent director received $2,000 for each committee meeting of the Board of Directors attended in person ($1,000 per meeting attended by
telephone) held on a date on which a meeting of the Board of Directors was not held. In addition, independent directors were eligible in fiscal year 2010 for awards of options, restricted
31
stock,
stock appreciation rights under the Option Plan or $25,000 cash. Employee directors do not receive additional compensation for serving on the Board of Directors.
|
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Name
|
|
Fees earned or
paid in cash
|
|
Option
awards(1)
|
|
Restricted
Stock(1)
|
|
Total
|
|
John P. Birkelund(2)
|
|
$
|
45,500
|
|
$
|
13,200
|
|
|
|
|
$
|
58,700
|
|
Clinton Clark(3)
|
|
$
|
89,000
|
|
|
|
|
|
|
|
$
|
89,000
|
|
Kristin Gamble(4)
|
|
$
|
54,000
|
|
$
|
13,200
|
|
|
|
|
$
|
67,200
|
|
Edward H. Meyer(5)
|
|
$
|
58,000
|
|
|
|
|
$
|
11,330
|
|
$
|
69,330
|
|
Richard A. Sandberg(6)
|
|
$
|
16,250
|
|
|
|
|
$
|
11,330
|
|
$
|
27,580
|
|
James W. Schmotter
|
|
$
|
8,750
|
|
|
|
|
|
|
|
$
|
8,750
|
|
Frank G. Wisner(7)
|
|
$
|
57,000
|
|
|
|
|
$
|
11,330
|
|
$
|
68,330
|
|
-
(1)
-
The
amounts shown for stock awards and option awards represent the fair values as of each grant date, computed in accordance with Accounting Standards
Codification Topic 718, successor to FAS 123R. For financial statement reporting purposes, these fair values are charged to expense over the vesting period, which is generally two years for
stock grants and three years for option grants. The actual values realized if any, will not be known until the vesting date and could differ significantly. See footnote 11 to the Company's
Form 10-K for fiscal year ended June 30, 2010 for assumptions in the valuation.
-
(2)
-
Mr. Birkelund
was awarded options in respect of 3,000 shares of July 22, 2009 vesting in two equal annual installments. As of 2010 fiscal year
end, Mr. Birkelund held an aggregate of 6,000 stock options and 500 stock awards.
-
(3)
-
As
of 2010 fiscal year end, Mr. Clark held an aggregate of 13,500 stock options.
-
(4)
-
Ms. Gamble
was awarded options in respect of 3,000 shares on July 22, 009 vesting in two equal annual installments. As of 2010 fiscal year
end, Ms. Gamble held an aggregate of 31,000 stock options.
-
(5)
-
Mr. Meyer
was granted 1,000 restricted shares on July 22, 2009 vesting in two equal annual installments. As of 2010 fiscal year end,
Mr. Meyer held an aggregate of 19,000 stock options and 1,000 stock awards.
-
(6)
-
Mr. Sandberg
was granted 1,000 restricted shares on July 22, 2009 vesting in two equal annual installments. However, with
Mr. Sandberg's retirement from the Board effective November 16, 2009, this vesting accelerated to that date. As of 2010 fiscal year end, Mr. Sandberg held no remaining stock
options.
-
(7)
-
Mr. Wisner
was granted 1,000 restricted shares on July 22, 2009 vesting in two equal annual installments. As of 2010 fiscal year end,
Mr. Wisner held an aggregate of 17,000 stock options and 1,500 stock awards.
Tax Policy
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Tax Code") limits deductibility of annual compensation in
excess of $1 million paid to the Company's Principal Executive Officer and to each of its next three most highly compensated Named Executive Officers (other than the Principal Financial
Officer). However, compensation is exempt from this limit if it qualifies as "performance-based compensation." In 2007, the Company submitted an amendment to the Option Plan to stockholders, to allow
awards thereunder to qualify under the "performance-based compensation" requirements, which was approved by Stockholders. The Company submitted the incentive performance bonus provisions of the
Employment Agreement to its stockholders who agreed to have the annual incentive bonuses and the performance-vesting restricted stock granted under the Employment Agreement comply with the
"performance-based compensation" requirements under Section 162(m) of the Tax Code.
32
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee selects and hires our independent registered public accounting firm and has appointed KPMG as the independent
registered public accounting firm of the Company for the fiscal year ending June 30, 2011. KPMG was the independent registered public accounting firm for the Company for the fiscal year ended
June 30, 2010. Representatives of KPMG will be present at the Annual Meeting and will be given the opportunity to make a statement if they so desire. They will also be available to respond to
appropriate questions. We are asking you to ratify the appointment of KPMG as our independent registered public accounting firm. Although ratification is not required by our By-laws, the
Board of Directors is submitting the appointment of KPMG to you for ratification as a matter of good corporate practice. If the Audit Committee's appointment is not ratified, it will reconsider the
appointment, if appropriate. Even if the appointment is ratified, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time during the
fiscal year if it determines that such a change would be in the best interests of the Company and our stockholders.
AUDIT FEES
The following table represents a summary of professional fees paid to KPMG for services rendered in connection with: (i) the
audit for the Company's annual financial statements for the fiscal years ended June 30, 2010 and 2009; and (ii) other matters.
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Audit fees(1)
|
|
$
|
1,215,000
|
|
$
|
1,200,000
|
|
Audit-related fees(2)
|
|
$
|
45,000
|
|
$
|
38,000
|
|
Tax fees(3)
|
|
$
|
76,233
|
|
$
|
8,500
|
|
All other fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
1,336,233
|
|
$
|
1,246,500
|
|
|
|
|
|
|
|
-
(1)
-
In
the above table, in accordance with the SEC's definitions and rules, "audit fees" are fees that the Company paid to KPMG for the audit of the Company's
annual financial statements included in the Form 10-K and review of the Company's interim financial statements included in the Forms 10-Q; for the attestation of
management's report on the effectiveness of the Company's internal control over financial reporting, as required by Section 404 of SOX; and for services that are normally provided by the
auditors in connection with statutory and regulatory filings or engagements.
-
(2)
-
"Audit-related
fees" are fees for services related to the performance of the annual audit of the Retirement Plan.
-
(3)
-
Tax
fees consist of fees incurred in connection with tax compliance, tax advice and tax planning services.
The
Audit Committee has determined that the provision of tax and other services by the independent registered public accounting firm is compatible with maintaining their independence.
Audit and Non-Audit Engagement Pre-Approval Policy
To help assure the independence of the Company's independent registered public accounting firm, the Audit Committee has established a
policy whereby all audit and non-audit engagements proposed to be
33
performed
by the independent registered public accounting firm must be approved in advance by the Chair of the Audit Committee or, in his discretion, the entire Audit Committee.
THE AUDIT COMMITTEE RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
FISCAL YEAR ENDING JUNE 30, 2011, WHICH IS DESIGNATED AS PROPOSAL NO. 2.
OTHER MATTERS
Proxy Solicitation Expense
The expense of the proxy solicitation will be paid by the Company. In addition to the solicitation of proxies by use of the mail,
solicitation also may be made by telephone, telegraph or personal interview by directors, officers and regular employees of the Company, none of whom will receive additional compensation for any such
solicitation. The Company has engaged Morrow & Co., LLC, located at 470 West Avenue, Stamford, Connecticut 06902, a professional proxy solicitation firm, to provide customary
solicitation services for a fee of $5,500 plus expenses. The Company does not anticipate that the costs and expenses incurred in connection with this proxy solicitation will exceed those normally
expended for a proxy solicitation for those matters to be voted on at the Annual Meeting. The Company will, upon request, reimburse brokers, banks and similar organizations for
out-of-pocket and reasonable clerical expenses incurred in forwarding proxy material to their principals.
Stockholder Proposals and Nomination of Directors
Nominations of persons for election to the Board of Directors along with stockholder proposals may be made at any annual meeting of
stockholders by any stockholder of the Company: (i) who is a stockholder of record on the date of the giving of the notice and on the Record Date; and (ii) who complies with the notice
procedures.
For
the nomination or proposal to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Corporate Secretary of the Company.
To
be timely, a stockholder's notice to the Corporate Secretary must be delivered to or mailed and received at the principal executive offices of the Company not less than sixty days nor
more than ninety days prior to the date of the annual meeting;
provided
,
however
, that in the event that
less than seventy days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder in order to be timely must be so received not
later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was
made, whichever first occurs.
Nomination
To be in proper written form, a stockholder's notice to the Corporate Secretary must set forth: (a) as to each person whom the
stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person; (ii) the principal occupation or employment of the
person; (iii) the class or series and number of shares of Common Stock of the Company which are owned beneficially or of record by the person; and (iv) any other information relating to
the person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such
stockholder; (ii) the class or series and number of shares of Common Stock of the Company which are owned beneficially or of record by such stockholder; (iii) a description of all
arrangements or understandings between such stockholder and each proposed nominee and any other
34
person
or persons (including their name) pursuant to which the nomination(s) are to be made by such stockholder; (iv) a representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the person or persons named in its notice; and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy
statement or other filings or solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected.
Proposal
To be in proper written form, a stockholder's notice to the Corporate Secretary must describe the proposal in sufficient detail for the
proposal to be summarized on the agenda for the 2011 annual meeting of stockholders and must set forth: (i) the name and address, as it appears on the books of the Company, of the stockholder
who intends to make the proposal; (ii) a representation that the stockholder is a holder of record of Common Stock of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at such meeting to present such proposal; and (iii) the class or series and number of shares of Common Stock of the Company which are owned beneficially or of record by the
stockholder. In addition the notice must set forth the reasons for conducting such proposed business at the 2011 annual meeting of stockholders and any material interest of the stockholder in such
business. The presiding officer of the 2011 annual meeting of stockholders will, if the facts warrant, refuse to acknowledge a proposal not made in compliance with the foregoing procedure, and any
such proposal not properly brought before the 2011 annual meeting of stockholders will not be considered.
The
Company currently intends to hold its 2011 annual meeting of stockholders on or about November 15, 2011. In order for any stockholder proposal submitted pursuant to
Rule 14a-8 promulgated under the Exchange Act, to be included in the Company's proxy statement to be issued in connection with the 2011 annual meeting of stockholders, such proposal
must be received by the Company no later than June 9, 2011. Any proposal(s) or nomination(s) to be submitted that do not comply with Rule 14a-8 promulgated under the Exchange
Act may be omitted. Any stockholder proposal or nomination for the 2011 annual meeting of stockholders submitted outside the submission date will be deemed untimely for purposes of
Rule 14a-4(c)(i). Proxies for that meeting may confer discretionary authority to vote on untimely proposals without express direction from the stockholders giving the proxies.
Availability of Annual Report
We will send you a copy of our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 without
charge if you send a written request to Office of the Corporate Secretary, Ethan Allen Interiors Inc., Ethan Allen Drive, Danbury, Connecticut 06811. You can also obtain copies of our
Form 10-K and any other reports we file with the SEC through the SEC's website at
www.sec.gov
or on our website at
www.ethanallen.com/investors
.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on November 16, 2010the proxy
statement along with the annual report is available at
http://materials.proxyvote.com/297602
35
Other Business
The Board of Directors is not aware of any matters to be presented at the Annual Meeting other than those enumerated in the Company's
Notice enclosed herewith. If any other matters do come before the meeting, it is intended that the holders of the proxies will vote thereon in their discretion. Any such other matters will require for
its approval the affirmative vote of the majority in interest of the stockholders present in person or by proxy at the Annual Meeting where a quorum is
present, or such greater vote as may be required by the Company's Restated Certificate of Incorporation, the Company's By-laws or the General Corporation Law of the State of Delaware.
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
Pamela A. Banks
|
|
|
Corporate Secretary
|
Ethan Allen Interiors, Inc.
|
|
|
Ethan Allen Drive
|
|
|
Danbury, Connecticut 06811
|
|
|
October 7, 2010
|
|
|
Each
stockholder, whether or not he or she expects to be present in person at the Annual Meeting, is encouraged to vote. A stockholder may revoke his or her proxy at any time prior to
voting.
36
ETHAN ALLEN INTERIORS INC.
ETHAN ALLEN DRIVE
P. O. BOX 1966
DANBURY, CT 06811-1966
ATTN: PAMELA A. BANKS
VOTE BY
INTERNET - www.proxyvote.com
Use the Internet to transmit
your voting instructions and for electronic delivery of information up until
11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card
in hand when you access the web site and follow the instructions to obtain your
records and to create an electronic
voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce
the costs incurred by our company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please follow
the instructions above to vote using the Internet and, when prompted, indicate
that you agree to receive or access proxy materials electronically in future years.
VOTE BY
PHONE - 1-800-690-6903
Use any touch-tone
telephone
to transmit your voting instructions up until 11:59 P.M. Eastern Time the
day before the meeting date. Have your proxy card in hand when you call and
then follow the instructions.
VOTE BY
MAIL
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or
return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
|
|
|
M27562-P00510
|
KEEP THIS PORTION FOR
YOUR RECORDS
|
|
DETACH AND RETURN THIS
PORTION ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
ETHAN ALLEN
INTERIORS INC.
|
The Board
of Directors recommends a vote FOR the following:
|
|
|
|
|
|
|
|
|
|
1.
|
Election or ratification of
Directors
|
|
|
|
|
|
|
|
|
|
|
|
Nominees
|
For
|
Against
|
Abstain
|
|
|
|
|
|
|
|
|
|
1a)
|
Clinton A. Clark
|
o
|
o
|
o
|
|
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1b)
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Kristin Gamble
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o
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o
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o
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1c)
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Don M. Wilson
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o
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o
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o
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1d)
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James W. Schmotter
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o
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o
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o
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The Board
of Directors recommends a vote FOR proposal 2.
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For
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Against
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Abstain
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2.
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PROPOSAL TO RATIFY KPMG
LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2011 FISCAL
YEAR.
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o
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o
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o
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NOTE:
Such other business
as may properly come before the meeting
or any adjournment thereof.
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For address change/comments,
mark here.
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o
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(see reverse for
instructions)
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Yes
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No
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Please indicate if you
plan to attend this meeting.
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o
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o
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Please sign exactly as
your name(s) appear(s) hereon. When signing as attorney, executor, administrator,
or other fiduciary, please give full title as such. Joint owners should each
sign personally. All holders must sign. If a corporation or partnership, please
sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE SIGN
WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting:
The
Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com.
M27563-P00510
ETHAN ALLEN INTERIORS INC.
Annual Meeting of Stockholders
November 16, 2010 at 9:00 am
This proxy is solicited by the Board of Directors
The undersigned stockholder of
Ethan Allen Interiors Inc., a Delaware corporation (the Company) hereby appoints
M. Farooq Kathwari and Frank G. Wisner as proxies for the undersigned, and each
of them, with full power of substitution in each of them, to attend the annual
meeting of stockholders to be held at the Ethan Allen Interiors Inc.
International Corporate Headquarters at Ethan Allen Drive, Danbury, CT., 06811 on
Tuesday, November 16, 2010, at 9:00 A.M., local time, or any adjournment or
postponement thereof to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at such meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the undersigned if
personally present at the meeting. The undersigned hereby acknowledges receipt
of the Notice of Annual Meeting of Stockholders and Proxy Statement and revokes
any proxy heretofore given with respect to such meeting.
THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS EXECUTED BUT NO INSTRUCTION IS GIVEN,
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST FOR EACH OF THE
NOMINEES FOR DIRECTOR, AND FOR THE RATIFICATION OF KPMG LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2011 FISCAL YEAR AND IN
THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER MATTER THAT MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Address Change/Comments:
(If
you noted any Address Changes and/or Comments above, please mark corresponding box
on the reverse side.)
Continued and to be signed on reverse side
*** Exercise Your
Right
to
Vote ***
Important Notice Regarding the Availability of Proxy
Materials for the
Shareholder
Meeting to Be Held on November 16, 2010.
ETHAN ALLEN INTERIORS INC.
ETHAN
ALLEN INTERIORS INC.
ETHAN
ALLEN DRIVE
P. O. BOX
1966
DANBURY,
CT 06811-1966
ATTN:
PAMELA A. BANKS
Meeting Information
Meeting
Type:
Annual Meeting
For holders
as of:
September 21,
2010
Date:
November 16,
2010
Time:
9:00 a.m.,
EST
Location:
Ethan Allen Interiors Inc.
International Corporate
Headquarters
Ethan Allen Drive
Danbury, CT 06811
You are receiving this
communication because you hold shares in the above named company.
This is not a ballot. You cannot use this notice to vote these
shares. This communication presents only
an overview of the more complete proxy materials that are available to you on
the Internet. You may view the proxy materials online at
www.proxyvote.com
or easily request a
paper copy (see reverse side).
We encourage you to access
and review all of the important information contained in the proxy materials
before voting.
See the reverse side of this
notice to obtain proxy materials and voting instructions.
M27564-P00510
Before You
Vote
How to Access the Proxy
Materials
Proxy Materials Available to VIEW
or RECEIVE:
NOTICE AND PROXY STATEMENT ANNUAL
REPORT (located
on
How to View
Online:
Have the information that is printed in the box marked by
the arrow
XXXX XXXX XXXX
the following page) and visit:
www.proxyvote.com.
How to Request and Receive a PAPER or
E-MAIL Copy:
If you want to receive a
paper or e-mail copy of these documents, you must request one. There is NO
charge for requesting a copy. Please choose one of the following methods to
make your request:
1)
BY INTERNET
:
www.proxyvote.com
2)
BY TELEPHONE
:
1-800-579-1639
3)
BY E-MAIL*
:
sendmaterial@proxyvote.com
* If requesting materials by e-mail, please
send a blank e-mail with the information that is printed in the box marked by
the arrow
XXXX
XXXX XXXX
(located on the
following page) in the subject line.
Requests, instructions and
other inquiries sent to this e-mail address will NOT be forwarded to your
investment advisor. Please make the request as instructed above on or before November 2,
2010 to facilitate timely delivery.
How To Vote
Please
Choose One of the Following Voting Methods
Vote In
Person:
You may attend the shareholder meetings and vote in
person. At the meeting, you will need to request a ballot to vote these shares.
Vote By Internet:
To vote now by
Internet, go to www.proxyvote.com. Have the information that is printed in the
box marked by the arrow XXXX XXXX XXXX (located on the following page)
available and follow the instructions.
Vote By Mail:
You can vote by mail by
requesting a paper copy of the materials, which will include a proxy card.
M27565-P00510
Voting Items
The Board of
Directors recommends a vote FOR the following:
1.
Election or
ratification of Directors
Nominees
1a)
Clinton A. Clark
1b)
Kristin Gamble
1c)
Don M. Wilson
1d)
James W. Schmotter
The Board
of Directors recommends a vote FOR proposal 2.
2.
PROPOSAL TO
RATIFY KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
2011 FISCAL YEAR.
NOTE:
Such other business as may properly come
before the meeting or any adjournment thereof.
M27566-P00510
QuickLinks
ETHAN ALLEN INTERIORS INC. Ethan Allen Drive Danbury, Connecticut 06811
ETHAN ALLEN INTERIORS INC. Ethan Allen Drive Danbury, Connecticut 06811 NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS
ETHAN ALLEN INTERIORS INC. Ethan Allen Drive Danbury, Connecticut 06811
Questions and Answers
PROXY STATEMENT
VOTING SECURITIES; PROXIES; REQUIRED VOTE
PROPOSAL 1 ELECTION OF DIRECTORS
CORPORATE GOVERNANCE
AUDIT COMMITTEE
Report of the Audit Committee of the Board of Directors
NOMINATIONS/CORPORATE GOVERNANCE COMMITTEE
COMPENSATION COMMITTEE Compensation Discussion and Analysis
Summary Compensation Table
Grants of Plan-Based Awards
Outstanding Equity Awards at Fiscal Year-End
Option Exercises and Stock Vested
PROPOSAL 2 RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AUDIT FEES
OTHER MATTERS
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