SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Proxy Statement
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Additional Materials
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Soliciting
Material Pursuant to §240.14a-11(c) or §240.14a-12
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Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
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The Talbots, Inc.
(Name of Registrant as Specified In Its
Charter)
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April 8,
2011
ANNUAL
MEETING OF SHAREHOLDERS
MAY 19, 2011
Dear Talbots Shareholder:
It is a pleasure for us to extend to you a cordial invitation to
attend the 2011 Annual Meeting of Shareholders of The Talbots,
Inc. to be held at 9:00 a.m. on Thursday, May 19, 2011
at Hingham Town Hall, 210 Central Street, Hingham, Massachusetts.
This year, we are pleased to take advantage of the Securities
and Exchange Commission rules that permit issuers to furnish
proxy materials to their shareholders on the Internet. We
believe these rules permit us to provide you with the
information you need while lowering our costs of delivery and
reducing the environmental impact of printing paper copies.
The Notice of Internet Availability of Proxy Materials, which
contains instructions on how to access the Notice of Annual
Meeting, Proxy Statement and Annual Report to Shareholders on
the Internet, is first being mailed to shareholders on or about
April 8, 2011.
Whether or not you plan to attend the Annual Meeting, it is
important that your shares be represented and voted at the
meeting. Please refer to the Notice of Internet Availability of
Proxy Materials for more information on how to vote your shares
at the meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
TRUDY F. SULLIVAN
President and Chief
Executive Officer
TABLE OF CONTENTS
THE
TALBOTS, INC.
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 2011
To Talbots Shareholders:
The 2011 Annual Meeting of Shareholders of The Talbots, Inc.
will be held at Hingham Town Hall, 210 Central Street, Hingham,
Massachusetts, on Thursday, May 19, 2011, at
9:00 a.m., for the following purposes:
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1.
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To elect six directors;
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2.
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To ratify the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the 2011
fiscal year;
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3.
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To conduct an advisory vote on executive compensation;
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4.
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To conduct an advisory vote on the frequency of future advisory
votes on executive compensation; and
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5.
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To act upon such other business as may properly come before the
Annual Meeting.
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Shareholders of record at the close of business on
March 25, 2011 are entitled to notice of and to vote at the
Annual Meeting.
By order of the Board of Directors,
RICHARD T. OCONNELL, JR.
Secretary
April 8, 2011
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR
REPRESENTATION AT THE ANNUAL MEETING, PLEASE VOTE YOUR
PROXY, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF
YOU HAVE ANY QUESTIONS REGARDING VOTING OR THE PROPOSALS
DESCRIBED IN THIS PROXY STATEMENT, PLEASE CONTACT GEORGESON
INC., OUR PROXY SOLICITOR, TOLL-FREE AT
866-729-6818.
THE
TALBOTS, INC.
One Talbots Drive
Hingham, Massachusetts 02043
www.thetalbotsinc.com
ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MAY 19, 2011
PROXY
STATEMENT
This Proxy Statement is being furnished to the shareholders of
The Talbots, Inc. (the Company, Talbots,
we, our, ours and
us) in connection with the solicitation of proxies
by our Board of Directors (the Board) for use at the
Annual Meeting of Shareholders to be held on Thursday,
May 19, 2011, at 9:00 a.m., at Hingham Town Hall, 210
Central Street, Hingham, Massachusetts and at any postponement
or adjournment (the Annual Meeting).
We have elected to deliver our proxy materials to our
shareholders primarily over the Internet in accordance with the
notice and access rules of the U.S. Securities
and Exchange Commission (the SEC). We believe this
process allows us to provide shareholders with the information
they need while lowering our costs of delivery and conserving
natural resources. On or about April 8, 2011, we mailed to
each shareholder a Notice of Internet Availability of Proxy
Materials containing instructions on how to access and review
proxy materials, including this Proxy Statement and our Annual
Report, on the Internet and how to vote on the Internet. The
Notice of Internet Availability of Proxy Materials also contains
instructions on how to receive a paper copy of the proxy
materials, including a proxy card. In addition, shareholders may
request to receive the proxy materials in printed form by mail
or electronically by
e-mail
on an
ongoing basis for future shareholder meetings. The information
on our website (www.thetalbotsinc.com) is not and shall not be
deemed to be a part of this Proxy Statement, or incorporated
into any other filings we make with the SEC.
GENERAL
Record Date.
The holders of our shares of
common stock of record at the close of business on
March 25, 2011 are entitled to vote such shares at the
Annual Meeting. On March 25, 2011, there were
69,905,977 shares of common stock outstanding.
Voting Your Proxy.
Holders of shares of our
common stock are entitled to cast one vote per share on all
matters to be voted on at the Annual Meeting. Our warrant
holders do not have voting rights and may not vote on matters
presented at the Annual Meeting. Shares of common stock
represented by proxies received in time for the Annual Meeting
will be voted as specified in the proxy.
Shareholders may vote by attending the Annual Meeting and voting
in person. In order to attend the Annual Meeting in person,
arrive on time at the address listed above with a form of
personal photo identification and either your Notice of Internet
Availability or your proxy card. To obtain directions to attend
the Annual Meeting, call The Talbots, Inc. Investor Relations at
781-741-4500.
If you are a beneficial owner of shares held in street name and
you want to vote in person at the Annual Meeting, prior to the
meeting you must contact the bank, broker or other organization
that holds your shares and obtain from them a valid proxy issued
by them in your name giving you the right to vote the shares
registered in their name.
If you hold shares directly as a shareholder of record or
beneficially in street name, you may also vote your shares
without attending the Annual Meeting. Shareholders may vote by
using one of these alternative methods:
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(1)
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Via the Internet at www.proxyvote.com;
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(2)
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By telephone at
1-800-690-6903
and following the instructions for telephone voting provided at
www.proxyvote.com; or
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(3)
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If you request a paper copy of the proxy materials, by
completing and mailing a proxy card to Vote Processing
c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
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Proxies submitted via the Internet or telephone must be
submitted by 11:59 p.m., Eastern Time, on May 18,
2011. Proxies submitted by mail must be received prior to the
Annual Meeting.
If you hold shares beneficially in street name,
follow the proxy instructions on the form you receive from the
bank, broker or other nominee. For participants in our 401(k)
savings plan holding Talbots common stock in a plan account, the
proxy also serves as voting instructions for the plan trustee.
Shares of common stock represented by proxies received in time
for the Annual Meeting will be voted as specified in the proxy.
Unless contrary instructions are given, the proxy will be voted
(i) for the election of the Board of Directors
nominees for director; (ii) for the ratification of the
appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the 2011
fiscal year; (iii) for the advisory vote approving the
compensation of our named executive officers (our
NEOs); and (iv) for the advisory vote on
executive compensation to occur every year. With respect to any
other matters properly submitted to shareholders at the Annual
Meeting, proxies will be voted as recommended by the Board of
Directors or, if no recommendation is given, in the discretion
of the proxy holders.
Broker Voting.
Under New York Stock Exchange
(NYSE) rules, certain proposals are considered
routine matters, such as the ratification of the
appointment of auditors (Proposal No. 2), and brokers
generally may vote on behalf of beneficial owners who have not
furnished voting instructions with respect to these
routine proposals. For non-routine
proposals, such as director elections
(Proposal No. 1), the advisory vote on the
compensation of the Companys NEOs
(Proposal No. 3) and the advisory vote on the
frequency of future advisory votes on executive compensation
(Proposal No. 4), brokers may not vote on these
proposals unless they have received voting instructions from the
beneficial owner. If you do not provide voting instructions to
your broker on these proposals, the votes will be considered
broker non-votes and will not be counted in
determining the outcome of the vote. Broker non-votes will be
counted as present for purposes of determining whether enough
votes are present to hold the Annual Meeting.
Revoking Your Proxy.
A shareholder who
executes his or her proxy pursuant to this solicitation may
revoke it at any time before it is exercised by
(i) delivering written notice of revocation of the proxy to
our Corporate Secretary prior to the Annual Meeting;
(ii) executing a later Internet or telephone vote;
(iii) executing and delivering a later-dated proxy card to
our Corporate Secretary prior to the Annual Meeting; or
(iv) attending and voting in person at the Annual Meeting.
Attendance at the Annual Meeting, in and of itself, will not
constitute a revocation of a proxy.
Quorum.
The presence, in person or by proxy,
of the holders of a majority of the shares outstanding and
entitled to vote on the record date is necessary to constitute a
quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes are included in determining the
number of shares present or represented at the Annual Meeting
for purposes of determining whether a quorum exists.
Other Matters Presented.
If any other matters
are properly presented at the Annual Meeting for consideration,
including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place, the
individuals named as proxies will have discretion to vote on
those matters in their best judgment to the same extent as the
person delivering the proxy would be entitled to vote. If the
Annual Meeting is postponed or adjourned, your proxy will remain
valid and may be voted at the postponed or adjourned meeting
assuming no new record date is established. You still will be
able to revoke your proxy until it is voted. As of the date of
this Proxy Statement, we are not aware of any matters that are
to be presented at the Annual Meeting other than the matters
stated in the Notice of Meeting accompanying this Proxy
Statement.
Proxy Solicitation.
This proxy solicitation is
being made by our Board of Directors and the expense of
preparing, printing, and mailing this Proxy Statement and proxy
is being paid by us. In addition to use of the mail and
Internet, proxies may be solicited personally, by electronic
mail, by facsimile, or by telephone by our regular employees
without additional compensation. The Company has retained
Georgeson Inc. to assist in proxy solicitation for a fee of
approximately $7,500.00 plus expenses. If you have any questions
regarding voting or the proposals described in this Proxy
Statement, please contact Georgeson Inc. toll-free at
866-729-6818.
We will
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reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending proxy materials to the
beneficial owners of Talbots common stock.
Householding Information.
Under the
householding procedure, a single Notice of Internet Availability
(or for those shareholders that request to receive a paper copy
of proxy materials in the mail, one copy of this Proxy Statement
and our Annual Report) will be sent to multiple shareholders who
share the same address if they appear to be members of the same
family unless we have received contrary instructions from an
affected shareholder indicating that he or she wishes to receive
individual copies. Shareholders who participate in householding
who receive a paper copy of proxy materials in the mail will
continue to receive separate proxy cards.
If a single Notice of Internet Availability (or, as applicable,
a single printed set of the Annual Report and Proxy Statement)
was delivered to an address that you share with another
shareholder, we will promptly deliver a separate copy of any
such document if you make a written request to The Talbots,
Inc., Investor Relations, One Talbots Drive, Hingham,
Massachusetts 02043. You can also make a request by telephone at
781-741-4500
or by emailing investor.relations@talbots.com. You may also
access a copy of Talbots Annual Report and Proxy Statement on
the Investor Relations section of our website, located at
www.thetalbotsinc.com.
If you are a shareholder of record who shares an address and
last name with one or more other shareholders of record and
would like to revoke your householding consent or you are a
shareholder eligible for householding and would like to
participate in householding, please contact Broadridge, either
by calling toll free at
800-542-1061
or by writing to Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. You will be removed from
the householding program within 30 days of receipt of the
revocation of your consent.
If you hold shares beneficially in street name,
please contact your bank, broker, or other nominee in order to
consent to householding should you wish to receive one Notice of
Internet Availability (or proxy materials, if applicable) or to
revoke your consent should you wish to receive individual copies
of such documents.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
General.
Our Board of Directors proposes the
election of six nominees as directors. Directors will hold
office until the next Annual Meeting or until their successors
are chosen and qualified. We have inquired of each nominee and
determined that each will serve if elected. In the event that
any of the nominees should become unavailable for election, the
persons named in the accompanying proxy intend to vote for such
other person or persons, if any, as the Board of Directors may
designate as a substitute nominee. Directors are elected by the
affirmative vote of a plurality of the votes cast at the Annual
Meeting. Abstentions are not counted as votes cast in
determining the plurality required to elect directors.
Background of Directors.
Set forth below is a
brief description of the background of each nominee for
director, including information regarding the experience and
skills that led to the nomination of each person for membership
on our Board. All nominees are currently serving as our
directors.
GARY M.
PFEIFFER
Mr. Pfeiffer, 61, has been a Director since 2004 and
Chairman of the Board of Directors since July 2009.
Mr. Pfeiffer is also the Chairperson of our Compensation
Committee and is a member of our Corporate Governance and
Nominating Committee. Mr. Pfeiffer served as the Secretary
of Finance for the State of Delaware from January through June
2009. He served as Senior Vice President and Chief Financial
Officer of E. I. du Pont de Nemours and Company from 1997
through 2006, when he retired. He also serves as a Director of
both Quest Diagnostics, Inc. and Internap Network Services
Corporation. He is Chairman of the Audit & Finance
Committee and a member of the Compensation, Executive and
Governance Committees of Quest Diagnostics, Inc.s Board of
Directors, and he is Chairman of the Audit Committee and a
member of the Nominations and Governance Committee of Internap
Network Services Corporation Board of Directors. With his
significant experience as Chief Financial Officer and in other
senior executive positions at E. I. du Pont de Nemours and
Company and his considerable public board and committee
responsibilities, Mr. Pfeiffer brings to our Board of
Directors superior financial, management and leadership ability
and extensive knowledge of a wide range of financial, strategic,
and operational issues affecting publicly held organizations.
These qualities have enabled Mr. Pfeiffer to successfully
serve in the past as our Lead Director and as a member of our
Audit Committee, and currently as the Chairman of our Board of
Directors during our strategic turnaround process and throughout
our strategic merger process accomplished in 2010 with BPW
Acquisition Corp.
MARJORIE L.
BOWEN
Ms. Bowen, 46, was first appointed a Director effective
April 16, 2010. Ms. Bowen is a member of our Audit
Committee and Corporate Governance and Nominating Committee.
Ms. Bowen held positions of increasing responsibility from
1989 through 2007 at Houlihan Lokey Howard & Zukin,
Inc., an international advisory-focused investment banking firm.
While at Houlihan Lokey, Ms. Bowen served as a Managing
Director, where she advised an extensive number of public
company boards of directors, providing transactional and
financial advisory services in a wide range of corporate
matters, including mergers and acquisitions, debt and equity
reorganizations and other financial and strategic transactions,
governance and shareholder issues, and shareholder value
maximization. Ms. Bowen was also a member of the
firms Management Committee for Financial Advisory
Services. Until July 2010, Ms. Bowen served on the board of
directors and the compensation and governance committees of
Texas Industries, Inc., a publicly traded supplier of heavy
construction materials. Ms. Bowen also serves on the Board
of Directors of Euramax International, Inc. and Global Aviation
Holdings and holds positions on various board committees at
these companies. With over 20 years of corporate financial
and transactional experience, much of it focused on advising
boards of directors across a broad range of industry sectors,
including retail, Ms. Bowen brings to our Board
considerable strategic planning expertise, financial and
strategic transactional experience, and broad knowledge on
financial and governance matters.
JOHN W.
GLEESON
Mr. Gleeson, 64, has been a Director since 2004.
Mr. Gleeson is Chairperson of our Audit Committee and a
member of our Compensation Committee. Mr. Gleeson served as
Senior Vice President and Chief Strategy Officer
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of Walgreen Co. from April 2007 through February 2008, when he
retired. From 2004 to April 2007, he served as Senior Vice
President, Corporate Strategy and Treasurer of Walgreen Co. and
as Treasurer since 2002. Mr. Gleeson also serves as a
Director of AMCORE Financial, Inc. Mr. Gleesons
extensive career in retail, substantial strategic background and
leadership abilities, business acumen and considerable expertise
and experience in financial matters have added significantly to
our Board of Directors and to each of the Committees of the
Board of which Mr. Gleeson has been a member since first
becoming a Director in 2004. His financial and operating
expertise has particularly benefitted our Company in his role as
Chairperson of our Audit Committee during our strategic
turnaround process and throughout our strategic merger process
accomplished in 2010 with BPW Acquisition Corp.
ANDREW H.
MADSEN
Mr. Madsen, 55, was first appointed a Director effective
April 16, 2010. Mr. Madsen is a member of our Audit
Committee and Compensation Committee. Since November 2004, he
has served as President and Chief Operating Officer of Darden
Restaurants, Inc., a large, publicly-traded restaurant company
whose brands include Red Lobster, Olive Garden, LongHorn
Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52. At
Darden, Mr. Madsen oversees operations and marketing, as
well as the real estate and construction, supply chain, and
group human resource functions. He has also served on the Darden
Board of Directors since 2004. From April 2002 until November
2004, Mr. Madsen was President of Olive Garden and also
served as Executive Vice President of Marketing for Olive Garden
from December 1998 to March 2002. Mr. Madsen began his
career with General Mills, Inc., a leading consumer food
products company. He held various management positions
throughout his 12 years with the company, including Vice
President, Marketing. Prior to joining Darden in 1998,
Mr. Madsen served as President of International Master
Publishers, Inc., a direct marketing business. He also served as
Vice President and General Manager for two divisions of James
River Corporation. Mr. Madsen brings to our Board an
extensive management and leadership background in the retail
sector, consumer products, and marketing and operational matters
affecting large, publicly held organizations. Through his
experience, including leadership and operational roles at
Darden, he contributes considerable insight into business
opportunities and challenges impacting Talbots such as consumer
trends, marketing and branding.
TRUDY F.
SULLIVAN
Ms. Sullivan, 61, joined us as our President and Chief
Executive Officer and as a Director in August 2007. Prior to
Talbots, Ms. Sullivan served as President of Liz Claiborne,
Inc. from January 2006 until July 2007. Ms. Sullivan joined
Liz Claiborne, Inc. in 2001 as Group President of the
companys Casual, Collections, and Elisabeth businesses.
She was named Executive Vice President in March 2002. She served
in this position until she was named President of Liz Claiborne,
Inc. in 2006. In September 2010, Ms. Sullivan joined the
Board of Directors of Yankee Candle Company, Inc.
Ms. Sullivan has extensive experience and a demonstrated
record of success in both the retail and merchandise fields,
with in-depth experience in the womans apparel segment.
She brings to our Board of Directors superior skills as our
Chief Executive Officer, proven strategic vision and has
demonstrated leadership of our organization throughout the
challenging economic environment and the significant liquidity
challenges faced by our Company since joining as our Chief
Executive Officer in mid-2007. She also contributes
significantly to our Board of Directors through her extensive
retail management experience and also from her successful
leadership positions prior to Talbots. Ms. Sullivan has
been successful leading our entire organization during its
strategic turnaround and also throughout our strategic merger
process accomplished in 2010 with BPW Acquisition Corp.
SUSAN M.
SWAIN
Ms. Swain, 56, has been a Director since 2001.
Ms. Swain is Chairperson of our Corporate Governance and
Nominating Committee and is a member of our Audit Committee. In
May 2010, Ms. Swain was appointed by the Board to serve as
the Lead Independent Director. Ms. Swain has also served as
our presiding director, from May 2005 until May 2007. She has
been President and Co-Chief Operating Officer of C-SPAN, a
multichannel national distributer (TV, radio, internet) of
public affairs content, since December 2006. From 1995 to 2006,
Ms. Swain served as Executive Vice President and Co-Chief
Operating Officer of C-SPAN. Ms. Swain also serves as an
officer of National Cable Satellite Corporation, as a Director
of the C-SPAN Education Foundation and as a member of the
Executive Committee of the National Press Foundation.
Ms. Swain brings to her Board and committee work
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experience in the areas of legislation and regulation, national
media, leadership of large organizations, succession planning,
and multichannel operations. Ms. Swains expertise in
building and managing a national brand and in strategic
planning, with a special emphasis on the national broadband
transition, adds to the breadth of experience and expertise of
our Board, particularly during our strategic turnaround process
and throughout our strategic merger process accomplished in 2010
with BPW Acquisition Corp.
RECOMMENDATION
OF THE BOARD
The Board recommends that shareholders vote
FOR
each of the nominees for director.
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Corporate
Governance
We maintain sound principles of corporate governance which
promote integrity and honest, responsible, and ethical business
practices. The Corporate Governance and Nominating Committee and
the Board of Directors conduct regular reviews of these
practices, which include comparing current governance policies
and practices with those suggested by corporate governance
authorities and with the practices of other public companies.
2010 Corporate Governances Changes.
The
Companys corporate governance structure underwent a number
of changes in early 2010. These changes arose in connection with
our merger transaction with BPW Acquisition Corp.
(BPW), which was completed on April 7, 2010 and
resulted in a change in the ownership structure of Talbots. As a
result of this transaction, Talbots is no longer a
majority-owned company and is no longer a controlled
company as defined under NYSE rules. Therefore, we are no
longer exempt from certain NYSE rules regarding independence of
Board and Committee members, and as further described below, a
majority of our Board of Directors and all Committee members are
independent in accordance with NYSE standards of independence,
as adopted by the Company.
Corporate Governance and Business Conduct.
We
are committed to high standards of corporate governance and
ethical behavior. On the recommendation of the Corporate
Governance and Nominating Committee, the Board adopted our
Corporate Governance Guidelines to assist the Board in providing
experience, strategic guidance, and oversight to us and our
shareholders.
The Corporate Governance Guidelines establish corporate
governance policies and principles with respect to the role of
the Board, meetings of the Board, Board composition and
selection, director responsibilities, agenda for Board meetings,
executive sessions, director orientation and continuing
education, related party transactions review, legal compliance
policies, strategic planning, types and composition of Board
committees, Board and committee authority to engage independent
advisors, director access to management, director compensation,
management evaluation, management succession planning, and Board
and committee evaluations. The Corporate Governance Guidelines
are available at the Investor Relations section of our website
located at www.thetalbotsinc.com.
Code of Business Conduct and Ethics.
We have
adopted a Code of Business Conduct and Ethics (the
Code) which applies to our principal executive
officer, principal financial officer and principal accounting
officer as well as all of our other officers, directors, and
associates. The Code addresses conflicts of interest, use of our
assets, fair dealing and competition, accurate recordkeeping,
financial disclosure, and compliance with applicable laws, rules
and regulations. The Code is available at the Investor Relations
section of our website located at www.thetalbotsinc.com. At this
location on our website, we will disclose any substantive
amendments to the Code as well as any waivers from provisions of
the Code made with respect to our principal executive officer,
principal financial officer, principal accounting officer, and
any other executive officer or any director.
Board Independence and Composition.
The Board
complies with and has adopted both the independence criteria
established by the NYSE for determining director independence
and the independence standards of the NYSE and the SEC for
determining the independence of all Audit Committee members. In
determining the independence of its members, the Board considers
all relevant facts and circumstances, including the materiality
of any relationship of a director with the Company or any
affiliate or with any member of executive management, from both
the directors standpoint as well as that of persons or
organizations with which the director may have an affiliation.
The Board assesses all of the information provided by each
director in response to detailed inquiries concerning his or her
independence and any direct or indirect business, family,
employment, transactional, or other relationship or affiliation
of such director with the Company.
Based on its review, the Board has affirmatively determined that
Ms. Bowen, Mr. Gleeson, Mr. Madsen,
Mr. Pfeiffer and Ms. Swain are independent directors
and did not engage in any transactions, relationships, or
arrangements involving or relating to the Company that, in the
Boards review, affected the determination of his or her
independence or required specific Board review consideration or
examination.
Board Leadership Structure.
Pursuant to our
current Corporate Governance Guidelines, our Board Chairman is
required to be an independent director, and the roles of CEO and
Chairman may not be held by one individual. The Company feels
that this structure is appropriate at this time because it is
beneficial to have an independent chairman
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whose responsibility to the Board is leading the Board and
focusing on the Boards oversight responsibilities while
allowing our CEO to focus on the
day-to-day
management and operations of the Company and strengthening our
business as we continue our strategic turnaround.
Since July 2009, our Board has been led by Mr. Pfeiffer, an
independent, non-executive Chairman. As Board Chairman,
Mr. Pfeiffer is responsible for: (a) preparing the
formal agendas and schedules for Board meetings in consultation
with the other Board members and Company management, as
appropriate; (b) ensuring, in conjunction with management,
that all meeting materials and information are sufficient and
are distributed to Board members appropriately in advance of
meetings; (c) serving as the liaison among Board members,
including the independent directors, as well as between the
Board and our CEO and other senior members of management;
(d) communicating with our CEO and, as applicable, other
senior officers and regularly reporting to the full Board on
such communications; (e) convening and calling meetings of
the independent directors; and (f) such other
responsibilities as the Board may establish or request from
time-to-time.
Lead Independent Director.
The position of
Lead Independent Director was established in July 2008 in
connection with the appointment of a non-independent Chairman of
the Board. Though the Board has since appointed an independent
Chairman, this position has been maintained. Under our corporate
governance policies, the roles of Lead Independent Director and
Board Chairman may not be held by the same individual. In May
2010, the Board appointed Ms. Swain to serve as the Lead
Independent Director.
As Lead Independent Director, Ms. Swain is responsible for:
(a) in the absence of or as requested by the Board
Chairman, presiding at meetings of shareholders, of the Board
and of the independent directors; and (b) such other
responsibilities as may be designated to the Lead Independent
Director in our Corporate Governance Guidelines or by-laws or as
the Board or Board Chairman may establish or request from
time-to-time.
Boards Role in Risk Oversight.
The
Company recognizes the importance of effective risk management
to the success of our business and our shareholders and
developed the structures in place to manage risk. Management has
developed a risk management system designed to (i) timely
identify the material risks that the Company faces,
(ii) ensure that necessary information with respect to
material risks is communicated to senior executives and, as
appropriate, to the Board or relevant Board Committee,
(iii) implement appropriate and responsive risk management
strategies consistent with the Companys risk profile, and
(iv) integrate risk management into Company decision-making.
The Boards oversight of risk primarily occurs in
connection with the exercise of its responsibility to oversee
our business, including through the review of our long-term
strategic plans, annual operating plans, financial results and
material legal proceedings. In addition, the Board uses its
Committees to assist with risk oversight within their respective
areas of responsibility and expertise, as further described
below. The Audit Committee is the Board Committee designated to
oversee managements process to assess risk. In connection
with its responsibilities for financial reporting and disclosure
matters, our Audit Committee is charged with discussing with
management the Companys major risk exposures (whether
financial, operating or otherwise) and the steps management has
taken to monitor and control such exposures, including the
Companys risk assessment. In addition, as discussed below,
our Compensation Committee is responsible for overseeing the
management of any risks relating to our executive compensation.
Each of the Committees of the Board is composed entirely of
independent directors which also enhances risk oversight.
While the Board oversees the Companys risk management,
Company management is primarily responsible for
day-to-day
risk management processes and reports to the full Board or the
Audit Committee regarding these processes. We believe this
division of responsibility is the most effective approach for
addressing the Companys risk management.
Board Meetings and Director Attendance; Executive
Sessions.
During fiscal 2010, the Board held six
meetings. During fiscal 2010, the Audit Committee held
twenty-two meetings (a substantial number of which related to
its review of the BPW merger and related transactions (BPW
merger transaction)); the Compensation Committee held four
meetings; and the Corporate Governance and Nominating Committee
held three meetings. Each member of the Board of Directors
during fiscal 2010 attended at least ninety-six percent of the
Board and Committee meetings of which they were members.
8
We encourage all of our directors to attend our annual meeting
of shareholders. All of the directors serving on the Board at
the time of our 2010 annual meeting of shareholders were in
attendance.
The Boards independent directors meet in executive
sessions periodically each year, generally at the time of each
Board meeting held in person. The Board Chairman presides at
these executive sessions. Any director may provide the Board
Chairman with suggested agenda items for discussion at executive
sessions.
Board Committees.
The Board has an Audit
Committee, a Compensation Committee and a Corporate Governance
and Nominating Committee. Each Committee operates pursuant to a
written charter adopted by the Board and each Committee reviews
its charter at least annually. The charters of each Committee
are available to view at the Investor Relations section of our
website located at www.thetalbotsinc.com. Information contained
on the website is not incorporated by reference or otherwise
considered part of this document.
The table below provides current membership of each Committee:
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Corporate
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Governance and
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Compensation
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Nominating
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Audit Committee
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Committee
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Committee
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Gary M. Pfeiffer
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Chair
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X
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Marjorie L. Bowen
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X
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X
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John W. Gleeson
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Chair
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X
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Andrew H. Madsen
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X
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X
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Trudy F. Sullivan
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Susan M. Swain
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X
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Chair
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Audit Committee.
The Audit Committee is
appointed by the Board to assist the Board in monitoring:
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The integrity of the financial statements of the Company;
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The external auditors qualifications and independence;
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The performance of the Companys internal audit function;
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The performance of the external auditors; and
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The Companys compliance with legal and regulatory
requirements.
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The current members of the Audit Committee are Mr. Gleeson
(Chairperson), Ms. Swain, Ms. Bowen and
Mr. Madsen. The Board has determined that each member of
the Audit Committee is independent in accordance with the NYSE
listing standards, our Corporate Governance Guidelines, and
Rule 10A-3
under the Securities Exchange Act of 1934 and is financially
literate in accordance with NYSE standards. The Board has also
determined that Mr. Gleeson qualifies as an audit
committee financial expert in accordance with SEC rules.
One of the Audit Committees functions in 2009 and 2010
(during which time Mr. Gleeson, Mr. Pfeiffer and
Ms. Swain served as the members of the Committee) was its
review of the BPW merger transaction consummated in April 2010
as well as related party debt transactions with AEON, as further
described in the Transactions With Related Persons
section below.
Compensation Committee.
The Compensation
Committee is appointed by the Board and evaluates, determines
and approves the compensation of our Chief Executive Officer and
all of our other executive officers. The Committee has overall
responsibility for approving and evaluating our compensation
plans, policies and programs, as well as our philosophy and
strategy, as they affect the CEO and other executive officers.
More specifically, the Committees duties and
responsibilities include, among others:
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Reviews and approves our goals and objectives relevant to our
CEOs compensation, and evaluates our CEOs
performance in light of those goals and objectives;
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Determines our CEOs annual and long-term compensation,
including all incentive compensation and equity-based
compensation awards;
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In consultation with our CEO, reviews and approves base salary,
annual and long-term incentive compensation and equity-based
compensation of all other executive officers of the Company;
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Determines the need to retain any compensation consultant to be
used by the Committee to assist in the performance of its
responsibilities;
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Establishes performance goals and financial targets for our
executive officers under our incentive programs and for
determining incentive awards actually earned by our executive
officers each year;
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Performs an ongoing review of our executive compensation
practices and arrangements;
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Reviews with management the Compensation Discussion and Analysis
and recommends to the Board its inclusion in the Companys
proxy statement for its annual meeting; and
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From time-to-time may delegate authority to one or more of its
members to, for example, assist in the negotiation of employment
agreements for new executives or amendments to existing
executive employment agreements subject to final Committee
approval.
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Mr. Pfeiffer (Chairperson), Mr. Gleeson and
Mr. Madsen are the current members of the Compensation
Committee. All are independent directors and qualify as
non-employee directors for purposes of
Section 16 of the Securities Exchange Act of 1934 and as
outside directors for purposes of Internal Revenue
Code Section 162(m).
Committee Process and Role of Management.
The
Compensation Committee generally holds a minimum of two
regularly scheduled in person meetings per year and additional
meetings as appropriate either in person or by telephone.
Generally, the Compensation Committee Chair works with
management in establishing the agenda for Committee meetings.
Management also prepares and submits information during the
course of the year for the consideration of the Committee, such
as proposed recommendations for annual or special incentive
compensation programs, proposed incentive performance measures
and financial targets, proposed recommendations for salary
increases and proposed equity award allocations for executive
officers and other senior management, managements
performance evaluations of executive officers and other senior
management, and other data and information requested by the
Committee. For additional information, see below under
Role of the Compensation Committee and Management in
the Compensation Discussion and Analysis.
Compensation Committee Advisors.
The
Compensation Committee charter grants the Compensation Committee
full authority to engage compensation consultants and other
advisors to assist it in the performance of its
responsibilities. The compensation consultant retained by the
Committee reports directly to the Compensation Committee. Pearl
Meyer & Partners has acted as outside compensation
consultant to the Committee since 2002. Pearl Meyer &
Partners does not provide any services to the Company beyond
those related to executive and director compensation.
Our management has historically retained Towers
Watson & Co. for advisory services concerning
regulatory and tax issues related to our compensation programs,
and actuarial work and plan structure for our retirement plans.
Our management has also engaged Exequity, LLP from time-to-time
to obtain compensation market data and marketplace trends and in
connection with targeted compensation recommendations, proposed
programs and arrangements, and other compensation matters. The
results, proposals or recommendations from this process are then
reviewed with the Compensation Committee.
Compensation Risk Assessment.
We believe that
the performance goals and incentive plan structures generally
established under our annual and long-term incentive programs do
not contribute to excessive risk by our senior executives or by
our employees. The Compensation Committee reviews annually the
compensation arrangements for our executives and believes that
this pay has represented a balanced compensation mix,
appropriately distributed between fixed and variable
compensation, and not overly weighted toward short-term cash
incentives. Further, our long-term incentive plan has consisted
entirely of equity incentive awards, which promote longer term
performance and significantly lessens the risk of pursuing
business strategies seeking short-term gains at the risk of
long-term profitability. The approved goals under our annual and
long-term incentive programs are consistent with our financial
operating plans and strategies, and these programs are discussed
and reviewed with our Board. In addition, significant business
decisions and our ongoing financial and operating results, upon
which our incentive performance goals and awards are based, are
reviewed and discussed with our Board
10
throughout the year. Further, incentive awards are generally
made based on a review of achievement against both financial and
non-financial performance, which we believe lessens the risk
associated with relying on any single financial metric. We
believe these factors encourage our executives to manage in a
prudent manner, with an emphasis on building sustainable value.
Compensation Committee Interlocks and Insider
Participation.
During part of fiscal 2010,
Mr. Pfeiffer, Ms. Swain and our former Board member,
Tsutomu Kajita, served on the Compensation Committee.
Mr. Kajita was an executive officer of AEON while serving
on the Compensation Committee and voluntarily resigned from the
Board and his position on the Committee in April 2010 as part of
the BPW merger transaction. The Transactions With Related
Persons section of this Proxy Statement includes a
description of certain transactions during fiscal 2010 between
us and certain AEON entities. Effective May 20, 2010 the
Board appointed current members Mr. Pfeiffer,
Mr. Gleeson and Mr. Madsen to serve on the
Compensation Committee.
Corporate Governance and Nominating
Committee.
The principal functions of the
Corporate Governance and Nominating Committee include:
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Regularly assesses and recommends corporate governance policies
and practices to the Board;
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Assesses the operation and performance of the Boards
various committees, and reports the results of these assessments
to the Board;
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Reviews and makes recommendations to the Board with respect to
compensation of non-management directors, which includes having
the authority to obtain advice and assistance from outside
advisors to assist with this assessment and recommendation
process (a further discussion of our director compensation
program is included in the Director Compensation
section of this Proxy Statement); and
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Identifies, screens and recommends certain potential director
candidates to the Board.
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Ms. Swain (Chairperson), Ms. Bowen and
Mr. Pfeiffer are the current members of the Corporate
Governance and Nominating Committee and all are independent
directors. Our former director Mr. Okada also served on the
Corporate Governance and Nominating Committee during part of
fiscal 2010 until he voluntarily resigned from the Board and his
position on the Committee in April 2010 as part of the BPW
merger transaction.
Identifying New Director Nominees.
Our
directors play a critical role in guiding our long-term business
strategy and in overseeing our management. In identifying
acceptable potential director candidates, the Committee seeks
input from Board members and other sources so that a variety of
viewpoints are considered. The Committee may also engage
independent search firms to assist in identifying potential
director candidates; however, the Committee ultimately
determines which candidates are to be recommended to the Board
for approval.
Board candidates are considered based on various criteria which
may change over time and as the composition of the Board
changes. At a minimum, the Committee considers:
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the appropriate mix of educational and professional background
and business experience to make a significant contribution to
the overall composition of the Board;
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global business and social perspective;
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if applicable, whether the candidate would be considered an
audit committee financial expert or independent under SEC and
NYSE rules and any of our additional independence standards;
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demonstrated character and integrity consistent with our image
and reputation;
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willingness to apply sound and independent business judgment;
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ability to work productively with the other members of the
Board; and
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availability for the substantial duties and responsibilities of
a director.
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The Committee also considers other appropriate factors including
the current composition of the Board and evaluations of
prospective candidates. While the Board has not adopted a formal
diversity policy with regard to the selection of director
nominees and identifies qualified potential candidates without
regard to any candidates race,
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religion, gender, national origin or other protected category,
diversity is one of the factors considered by the Committee in
identifying director nominees. The Committee recognizes that
individual candidates have unique strengths, and no one factor
or qualification outweighs all others. As part of the director
identification process, the Committee evaluates how a particular
candidate would contribute to and strengthen the overall balance
of the Boards perspectives, backgrounds, knowledge,
experience, skill sets and expertise in substantive matters
pertaining to the Companys business, thereby strengthening
the diversity of the Board. In terms of personal diversity, the
Committee seeks directors who are committed to ensuring that the
organization as a whole values diversity and will increase the
diversity of the Board in all respects. On an annual basis, as
part of its self-assessment, the Committee and the Board review
the overall functioning of the Board.
The Committee will consider director candidates recommended by
shareholders. Shareholders wishing to submit a director
candidate for consideration by the Committee should submit the
recommendation to The Talbots, Inc. Corporate Governance and
Nominating Committee,
c/o Corporate
Secretary/Legal Department, One Talbots Drive, Hingham,
Massachusetts 02043, in writing, not less than 120 days nor
more than 150 days prior to the annual meeting date
(determined based on the same date as the previous years
annual meeting). Shareholders may nominate director candidates
by following the procedures set forth in Section 1.11 of
our by-laws, as amended and restated effective April 16,
2010, and the Committees Policy Regarding the Selection of
New Director Candidates and Shareholder Nomination of Director
Candidates (which can be found on the Investor Relations section
of our website located at www.thetalbotsinc.com). The request
for nomination must be accompanied by certain information
concerning the director candidate and the recommending
shareholder, as required by Section 1.11 of the by-laws.
The Committee may also request additional background or other
information.
Shareholder Communications Process.
The Board
maintains a process for shareholders or other interested parties
to communicate with the Board of Directors or with the Chairman
of the Board of Directors or with the independent directors as a
group. Shareholders wishing to communicate with the Board of
Directors or with the Chairman of the Board of Directors or with
independent directors should send any communication to The
Talbots, Inc. Board of Directors,
c/o Corporate
Secretary/Legal Department, One Talbots Drive, Hingham,
Massachusetts 02043. Any such communications should state the
number of shares owned by the shareholder or, if the person
submitting the communication is not a shareholder and is
submitting the communication as an interested party, the nature
of the persons interest in Talbots.
Our Corporate Secretary will forward such communications to the
Board of Directors or to the Board Chairman or to the
independent directors as appropriate. All such communications
will be kept confidential to the extent possible. Our Corporate
Secretary, however, may discard any communication not related to
the duties or responsibilities of the Board or the independent
directors, including personal or similar grievances, shareholder
proposals or related communications which are not submitted in
accordance with our procedures for shareholder proposals, and
abusive or inappropriate communications. Our Corporate Secretary
will maintain a log and copies of all communications directed to
the Board, the Board Chairman and the independent directors, for
their inspection and review, and will periodically review the
log and all such communications with the Board, the Board
Chairman, and the independent directors.
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Transactions
with Related Persons
Related Person Policy and Procedures.
Our
practice and policy is to review all material related party
transactions. Our policy and practices are set forth under our
Audit Committee Charter, Code of Business Conduct and Ethics,
and Corporate Governance Guidelines, as outlined below.
Audit Committee Review and Approval.
Pursuant
to its charter, the Audit Committee of the Board, which consists
entirely of independent directors, reviews any transaction in
which we or our subsidiaries are participating, the amounts
involved are material, and we are aware that an affiliate of
ours or other related person may have a direct or indirect
material interest in the transaction. The Audit Committee will
consider the facts and circumstances and will approve or ratify
a transaction if the Audit Committee considers it appropriate
and in our and our shareholders interest.
Transactions with Officers.
Under our Code of
Business Conduct and Ethics, the Board or a Board committee must
approve any direct or indirect financial interest of our Chief
Executive Officer in a transaction involving Talbots. It further
requires that:
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(i)
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the Chief Executive Officer, Senior Vice President, Investor and
Media Relations and the Legal Department must approve any direct
or indirect financial interest of any executive officer in any
transaction involving Talbots;
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(ii)
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the Chief Operating Officer/Chief Financial Officer and the
Legal Department must approve any direct or indirect financial
interest of any Senior Vice Presidents or Vice President,
Financial Planning and Analysis in any transaction involving
Talbots; and
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(iii)
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either the Chief Operating Officer/Chief Financial Officer or
the Legal Department must approve any direct or indirect
financial interest of any of our other Vice Presidents in any
transaction involving Talbots.
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Transactions with Directors.
The Corporate
Governance Guidelines require that any proposed business
relationship between the Company and one of our directors must
be reviewed by the Board or the Audit Committee, including
instances where the proposed relationship will be between
Talbots and an entity in which a Company director has a material
direct or indirect interest. Under our Corporate Governance
Guidelines, each director has the responsibility to exercise
informed business judgment and to act in our and our
shareholders interests.
Copies of our Audit Committee Charter, Code of Business Conduct
and Ethics and Corporate Governance Guidelines are available at
the Investor Relations section of our website located at
www.thetalbotsinc.com.
Certain
Transactions with Related Persons
AEON
Repurchase, Repayment and Support Agreement
As discussed above, we merged with BPW in April 2010. On
December 8, 2009, in connection with the BPW merger
agreement, we also entered into a Repurchase, Repayment and
Support Agreement with our then majority owner AEON (U.S.A.),
its parent AEON Co., Ltd. (collectively referred to as
AEON for purposes of this discussion of the
repurchase agreement) and BPW (the Repurchase
Agreement). Under the terms of this Repurchase Agreement,
AEON agreed to sell to Talbots all of the shares of Talbots
common stock owned by AEON for an aggregate of one million
warrants to purchase shares of Talbots common stock, with an
exercise price for such warrants equal to the closing price of
Talbots common stock on the date of the completion of the BPW
merger transaction. These warrants are immediately exercisable.
This share repurchase was completed concurrently with the
consummation of the BPW merger transaction on April 7, 2010
(the Closing Date). In addition, Talbots agreed to
repay in full all outstanding indebtedness under its financing
agreements with AEON and to repay in full all outstanding bank
indebtedness under its financing agreements with third parties.
As a result of this share repurchase and repayment of
indebtedness, AEON does not currently own any shares of Talbots
common stock and is not a lender to Talbots. The Repurchase
Agreement also provides for certain indemnification and
directors and officers liability insurance policy
obligations.
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The above summary of the Repurchase Agreement is subject to and
qualified in its entirety to the terms of that Agreement, which
was filed as Exhibit 10.1 to the Current Report on
Form 8-K
filed by the Company on December 10, 2009.
Credit
Facilities with AEON
Upon completion of the BPW merger transaction on April 7,
2010, we also entered into a senior secured revolving credit
agreement with a third party lender which provided us with
borrowing capacity up to $200.0 million. The proceeds from
the BPW merger transaction, this credit facility and our own
cash resources were used to repay all outstanding principal
indebtedness ($486.5 million) plus accrued interest and
costs under our credit facilities with AEON as described below.
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$250.0 Million Secured Revolving Loan Facility with AEON
On December 28, 2009, we executed an
Amended and Restated Secured Revolving Loan Agreement with AEON
Co., Ltd. (the Amended Facility). The Amended
Facility was provided pursuant to AEONs April 9, 2009
financial support commitments, which were satisfied and
discharged in full upon the December 29, 2009 funding of
$245.0 million under this Amended Facility for the
repayment of all of our outstanding third party bank
indebtedness, related interest, and other costs and expenses.
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Borrowings under the Amended Facility carried interest at a
variable rate equal to LIBOR plus 6.00%, payable monthly in
arrears. As of the Closing Date, the interest rate was 6.25% and
$2.8 million in interest was paid in fiscal 2010.
Outstanding borrowings under the Amended Facility totaled
$245.0 million (which was the largest aggregate amount of
principal outstanding during fiscal 2010).
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$200.0 Million Term Loan Facility with AEON
In February 2009, we entered into a
$200.0 million term loan facility agreement with AEON Co.,
Ltd. (the AEON Loan).
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The AEON Loan was an interest-only loan until maturity.
Borrowings under the AEON Loan carried interest at a variable
rate equal to LIBOR plus 6.00%, payable semi-annually in
arrears. As of the Closing Date, the interest rate was 6.23% and
$7.9 million in interest was paid in fiscal 2010. As of the
Closing Date, outstanding borrowings under the AEON Loan totaled
$191.5 million (which was the largest aggregate amount of
principal outstanding during fiscal 2010).
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Term Loan with AEON (U.S.A.)
In July 2008, we
entered into a $50.0 million unsecured subordinated working
capital term loan credit facility with AEON (U.S.A.) (the
AEON (U.S.A.) Facility). The AEON (U.S.A.) Facility
was scheduled to mature and AEON (U.S.A)s commitment to
provide borrowings under the AEON (U.S.A.) Facility was
scheduled to expire on January 28, 2012. Under the terms of
the AEON (U.S.A.) Facility, the financing was an unsecured
general obligation of ours. The AEON (U.S.A.) Facility was
available for use by us and our subsidiaries for general working
capital and other appropriate general corporate purposes.
Borrowings under the AEON (U.S.A.) Facility carried interest at
a rate equal to three-month LIBOR plus 5.0%. As of the Closing
Date, the interest rate was 5.25% and $0.7 million in
interest was paid in fiscal 2010. We were required to pay a fee
of 0.5% per annum on the undrawn portion of the commitment,
payable quarterly in arrears. As of the Closing Date, we were
fully borrowed under the AEON (U.S.A.) Facility.
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Other
AEON Agreements
The following arrangements were put in place while AEON was our
majority shareholder. The current status of each agreement and
our related obligations are described below.
We have had a service agreement with Talbots Japan Co., Ltd.
(Talbots Japan), a subsidiary of AEON, which remains
in effect. This agreement continues on a
year-to-year
basis unless terminated by either party on or before August 18th
of each year. If so terminated, the agreement will end on the
next following November 18th. Under this agreement, we provide
Talbots Japan requested services on a cost reimbursement basis.
The services provided by us to Talbots Japan are primarily in
the merchandising and import operations areas. We also make our
merchandising and store management information systems available
to Talbots Japan. Our direct costs related to this arrangement
are charged back to Talbots Japan. Payment terms to Talbots
Japan under these arrangements are net-30 days.
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Interest at a rate equal to the Internal Revenue Service monthly
short-term applicable federal rate accrues on amounts more than
30 days after the original invoice date. Talbots Japan was
current on their outstanding invoices during fiscal 2010,
therefore eliminating the interest calculation for invoices
outstanding past 30 days. During fiscal 2010, the largest
amount outstanding was $1,132,139 and Talbots Japan paid us a
total of $5,451,125, approximately $450,000 of which related to
the services described above and the balance of which related to
payment for merchandise for Talbots Japan stores.
We had an advisory services agreement with AEON (U.S.A.) under
which AEON (U.S.A.) provided strategic planning and related
advisory services to us. AEON (U.S.A.) also maintained a working
relationship on our behalf with Japanese banks and other
financial institutions as part of this agreement. AEON (U.S.A)
received an annual fee of $0.25 million plus expenses for
these services each year since our 1993 initial public offering.
In fiscal 2010, the total fees paid to AEON (U.S.A) under this
agreement was $74,183. This agreement was terminated on the
Closing Date.
In connection with our 1993 initial public offering, we, through
our wholly owned subsidiary, The Classics Chicago, Inc. (which
was merged into The Talbots Group, Limited Partnership, a wholly
owned subsidiary of Talbots, in fiscal 2007), purchased the
Talbots trade name and certain other trademarks (the
Trademarks) in all countries of the world (which we
refer to as the territory) excluding Australia, New Zealand,
Japan, China and certain other Asian countries (which we refer
to as the excluded countries) from a subsidiary of AEON. Under
the purchase agreement, The Talbots Group, Limited Partnership
(as successor in interest to The Classics Chicago, Inc.) has the
non-exclusive right, for a royalty equal to 1% of net catalog
sales in the excluded countries, to distribute catalogs bearing
the Trademarks and to make catalog sales in the excluded
countries. Talbots Japan is the non-exclusive licensee of the
Trademarks in Japan and the other excluded countries. Under the
agreement, AEON retained an approval right for any assignment by
The Talbots Group, Limited Partnership of rights in the
Trademarks in the territory. This retained right may be
purchased by The Talbots Group, Limited Partnership (for the
fair market value of such retained right or $2.0 million,
whichever is less) should AEON attempt to sell or transfer its
retained right or should AEON cease to own a majority of our
voting stock. Upon the BPW Closing Date, we exercised our right
to purchase the retained right and we are currently in
discussions with AEON regarding the appropriate purchase price.
Indemnification
Pursuant to our by-laws, Talbots will indemnify to the extent
permitted by law any person made or threatened to be made a
party to any legal action by reason of the fact that such person
is or was a director, officer or employee of the Company and
will also generally reimburse such person for expenses,
including attorneys fees, he or she incurs in defending
such legal action.
In addition, the BPW merger agreement states that from and after
the effective date of the BPW merger transaction, we will
provide to BPWs current and former directors and officers
exculpation and indemnification which is at least as favorable
as the exculpation and indemnification provided under BPWs
certificate of incorporation and bylaws. In addition, Talbots
agreed to indemnify each of BPWs current and former
directors and officers against all losses or costs in connection
with any claim pertaining to (i) the fact that such person
is or was a director or officer of BPW or (ii) the
transactions contemplated by the BPW merger agreement.
On February 24, 2011, a putative Talbots shareholder filed
a derivate action in Massachusetts Superior Court, captioned
Greco v. Sullivan, et. al., Case
No. 11-0728
BLS, against certain of Talbots officers and directors.
Information regarding this derivative suit can be found in our
Annual Report on
Form 10-K
for fiscal 2010 under Item 3. Legal Proceedings.
15
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Summary
I. Strategic
Turnaround
Under the direction of Trudy Sullivan, our President and Chief
Executive Officer who joined the Company in mid-2007, we have
made significant progress in our business turnaround and
transformation as we implemented a long-range strategy to
reinvigorate the Talbots brand, streamline operations to focus
on the core Talbots business, significantly increase our
operating profitability, and strengthen our balance sheet.
Over the past three years, we have recruited a strong team of
experienced senior leaders to execute our long-term strategy,
including a new Chief Operating Officer/Chief Financial Officer,
a Chief Creative Officer, a Chief Marketing Officer and a Chief
Supply Chain Officer.
The year 2010 was particularly significant to Talbots because it
was our executive teams and Board of Directors first
year as an independent public company, without a majority owner
and with a reconstituted Board of Directors.
We ended 2010 with operating income of $31.4 million,
compared with an operating loss of $(8.7) million for 2009.
As a result of our strategic initiatives, our 2010 net
income of $10.8 million reflects a substantial improvement
from our net loss of $(29.4) million for 2009. We ended
2010 with stockholders equity of $183.6 million
compared with a stockholders deficit of
$(185.6) million at year end 2009. Our outstanding debt of
$25.5 million at the end of 2010 reflects a major change
and improvement in our liquidity, compared with year end debt of
$486.5 million for 2009.
In 2010, our executive team took significant steps toward
completing the critical actions necessary to position the
Company to execute the next phase of its turnaround strategy,
with the goal of generating long-term sustainable growth and
profitability.
Our executive team also successfully implemented a complex
financial solution that substantially deleveraged the
Companys capital structure and provided Talbots with the
resources we believe will be necessary to execute our strategic
growth plan. Additionally, after achieving operating
profitability in the second half of 2009, we substantially
improved our year- over-year operating performance in 2010. All
of these actions were accomplished while the executive team
continued to effectively manage the business through an
extremely difficult economic and retail environment.
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Comprehensive Financing Solution Achieved in 2010
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In April 2010, our executive team was instrumental in the
Company completing a critical merger transaction with BPW
Acquisition Corp. (BPW), a special purpose
acquisition corporation (the BPW merger
transaction). Our executive team led a series of financing
transactions that enabled Talbots to substantially reduce its
level of indebtedness and significantly delever its balance
sheet.
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¡
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Talbots received approximately $333.0 million net cash in
the BPW merger transaction.
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¡
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Talbots obtained a new senior secured revolving credit facility
with borrowing capacity up to $200.0 million.
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¡
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Talbots repurchased the 29.9 million Talbots shares owned
by AEON (U.S.A.), the Companys then majority shareholder,
in exchange for warrants for one million Talbots shares at
an exercise price of $13.21.
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16
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¡
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Talbots reduced its total outstanding debt by approximately
$461.0 million and increased stockholders equity by
approximately $369.2 million, from the end of fiscal year
2009.
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Fiscal Year End 2009
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Fiscal Year End 2010
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(pre- BPW Merger
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(post- BPW Merger
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Transaction)
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Transaction)
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($ millions)
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Debt
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$
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486.5
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$
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25.5
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Stockholders (Deficit) Equity
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$
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(185.6
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$
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183.6
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Substantial
Improvement in Operating Performance Achieved in 2010
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¡
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As shown below, Talbots has achieved substantial improvement in
adjusted operating income and gross margins since our new
executive team was put in place:
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2008
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2009
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2010
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Adjusted Operating Income
(Loss)
1
($ millions)
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$
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(77.8
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$
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11.2
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$
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58.9
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Gross Margins(%)
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29.8
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33.5
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37.7
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Adoption
of Long-Term Strategic Growth Plan
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¡
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With this added liquidity, our executive team has developed a
strategic growth plan that was approved by our Board of
Directors in 2010 and which the Company began executing in the
third quarter of 2010. The growth plan includes our store
re-image program, store segmentation strategy, enhanced
marketing programs, and an expected closing of approximately
90-100
stores over a two-year period to improve overall store
productivity. All these initiatives are designed to transform
our Company and deliver sustainable, profitable growth over the
long-term.
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II. Key
Executive Compensation Decisions
Pay-for-Performance
Throughout our turnaround, beginning in late 2007 and throughout
fiscal 2010, our executive management and our Board of Directors
have worked closely together to keep our compensation costs in
close rein while the Company progressed through its turnaround.
Our CEO, Trudy Sullivan, was recruited by the Board of Directors
in mid-2007 to lead a complete turnaround and re-engineering of
our Company.
Over the three-year period immediately following Trudy Sullivan
coming on board, executive management has recommended to our
Compensation Committee, as part of our turnaround progression,
and the Committee has approved:
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No general salary increases from 2007 through mid-2010, at which
point a conservative merit salary increase was first approved;
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No base salary increases for our CEO since 2007, consistent with
her recommendation. Further, consistent with our turnaround
progression, our CEO has waived a proposed salary increase for
fiscal 2011 which was approved by our Compensation Committee in
fiscal 2011 and was to have gone into effect during the current
year;
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Aggressive financial targets under our annual incentive
program; and
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Significantly reduced long-term incentive program equity awards
to our management, reflecting our continued turnaround as well
as limiting our equity use.
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1
Adjusted
operating income (loss) excludes the impact of merger-related
costs, restructuring charges, impairment of store assets, the
cumulative effect of change in estimate/gift card breakage, and
the impact of the store re-image initiative. See Appendix A
to this Proxy Statement for a reconciliation of GAAP to Non-GAAP
financial measures.
17
These compensation decisions were consistently designed to
reflect pay-for-performance and the need to continue to limit
compensation cost during our turnaround. The Committee believes
that our CEOs compensation package provides a significant
incentive for, and is well aligned with, shareholder value
creation.
We also believe our executive compensation program has been
effective in driving substantial improvement in our Company
during our turnaround. The Company is stronger, leaner and a
more profitable company. Our balance sheet position is healthy
and our debt level is significantly reduced. Our enhanced
financial foundation allows us the opportunity to invest in
strategic measures to refresh our brand and drive improved
results across our business.
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¡
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Annual
Incentive Program
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Our annual incentive program (our MIP) is a cash
incentive program for executives that provides for awards when
financial performance measures, set at aggressive but achievable
levels, have been met. Demonstrating our Compensation
Committees
pay-for-performance
approach under this program:
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The 2010 performance goals consisted of adjusted operating
income and adjusted return on invested capital, which the
Compensation Committee considered our most important financial
metrics for 2010. Our actual 2010 operating results exceeded
threshold performance resulting in incentive awards paid to
executives in accordance with the plan.
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The Compensation Committee approved a one-time
special financing/retention award in early 2010. This incentive
award was subject to the successful completion of our
comprehensive liquidity transaction. This transaction, when
completed, resulted in net cash of approximately
$333.0 million to the Company, reduced our debt level by
approximately $461.0 million and increased
stockholders equity by approximately $369.2 million,
from the end of fiscal year 2009. This one-time incentive award
was granted one-third in cash and two-thirds in restricted stock
units, or RSUs.
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Long-Term
Incentive Program
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Our long-term incentive program (our LTIP) has been
exclusively equity-based, tying it directly to shareholder value
and promoting retention and management stability. Although
historically the Company had structured the long-term incentive
program to position target total direct compensation between
market median and the 75th percentile, awards for 2010 and prior
years were adjusted downward by the Compensation Committee based
on the status of our strategic turnaround, our financial results
achieved and consideration for annual equity use.
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For 2010, the Committee approved equity awards at a value below
the 25
th
percentile of market consensus for our CEO and, on average, at
value below median for the other NEOs.
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Role of
the Compensation Committee and Management
Our Compensation Committee, consisting solely of independent
members of the Board of Directors, is responsible for
establishing and administering the compensation program for our
executive officers. The Committee is also responsible for
ensuring that the total compensation paid to our executive
officers is both competitive and performance-driven. Since 2002,
the Compensation Committee has engaged Pearl Meyer &
Partners to review our executive compensation program and to
recommend any changes. Pearl Meyer & Partners is
retained exclusively by the Compensation Committee.
The Committee obtains from its compensation consultant specific
data and information concerning executive compensation
practices, including:
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market positioning data, compensation levels, structure and
practices from a peer group and retail industry executive
compensation surveys;
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recommendations on compensation programs, competitive pay, pay
mix, annual and long-term incentive opportunity information and
alternatives, and changes in the competitive
marketplace; and
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recommendations concerning proposed long-term equity incentive
award structure and levels.
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18
The Committee also receives recommendations from our CEO and our
Senior Vice President Human Resources on proposed
pay arrangements, proposed new executive hire compensation
packages, pay mix, performance evaluations, changes in executive
responsibilities, proposed annual compensation levels and
proposed allocations of long-term equity award grant values and
mix. The Committee also receives recommendations from our CEO
and our CFO/COO on proposed performance measures and financial
targets under our annual cash incentive program.
The Committee considers all of this information and makes its
decisions and its own judgments based on what it considers to be
appropriate and in the best interest of our shareholders.
2010
Market Positioning
Each year the Compensation Committee reviews and approves
recommendations for pay changes for the CEO and each member of
the Companys senior leadership team, including the NEOs.
The Committees independent compensation consultant, Pearl
Meyer & Partners, develops competitive pay levels from
both publicly-filed proxy data from the peer group and retail
industry survey data. Each year, the Committee asks Pearl
Meyer & Partners to update the competitive analysis
for each of these positions. Pearl Meyer & Partners
works with the Companys Senior Vice President
Human Resources to ensure a proper understanding of the roles
and responsibilities of each position reviewed.
Early in 2010 Pearl Meyer & Partners reviewed with the
Committee compensation data relative to our CEO and ten other
senior executives, including each of our NEOs.
With the Company in a strategic turnaround mode, competitive
data prepared by its compensation consultant has provided only
one market data point, among other factors considered by the
Committee in making its compensation decisions.
In assembling this competitive data against which to review
Talbots executive pay for Talbots CEO and the other senior
executives included in the reviewed group, the Committees
independent compensation consultant used:
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compensation data from public filings of the peer group
(comprised of 14 retail
companies)
1
; and
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retail industry survey data from three sources.
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Using the above data points, the compensation consultant
determined market consensus median as well as
25
th
percentile and
75
th
percentile pay levels, for each executive position. For Talbots
CEO, COO/CFO and EVP/Chief Supply Chain Officer, the blend of
market data was approximately one-half public filing information
of the peer group and approximately one-half survey data; for
Talbots Chief Creative Officer, the data used was based on
public filing information of the peer group; and for all other
Talbots executives in the reviewed group, market consensus was
based on the industry survey data.
1
The
retail companies in this group were:
Abercrombie &
Fitch
Co. Coldwater
Creek Nordstrom,
Inc.
American
Eagle
Outfitters The
Gap Polo
Ralph Lauren
AnnTaylor
Stores J.
Crew Tiffany
& Co.
Chicos
FAS Liz
Claiborne Williams-Sonoma
Coach Macys
This peer group is made up of
organizations with which the Company shares a common customer
base and executive talent pool and with which the Company is
likely to compete for executives, which the Committee developed
with its consultant Pearl Meyer & Partners in 2008.
Taking into account the Companys exit from its Kids,
Mens and J. Jill business in 2008 and 2009, respectively,
the 2008/2009 peer group median sales of $3.3 billion were
significantly larger than Talbots 2009 sales of
$1.2 billion.
19
Over the three-year period immediately following our CEO Trudy
Sullivan coming on board, executive management recommended, as
part of our turnaround progression, and the Committee approved:
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No general salary increases from 2007 through mid-2010, at which
point a conservative merit salary increase was approved;
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Aggressive financial targets under our annual incentive program
(MIP); and
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Significantly reduced LTIP equity awards to our management,
reflecting our continued turnaround as well as limiting our
equity use.
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The market positioning of our executive compensation
program going into 2010 reflects these compensation decisions
recommended by executive management and approved by our
Compensation Committee, representing both pay-for-performance
and the need to continue to limit compensation cost and equity
use during our strategic turnaround.
Base salaries.
Going into 2010, market
consensus positioning of the base salaries of our top eleven
executives as a group was on average at approximately the market
median, with two NEOs at approximately the 75th percentile. The
salary of our CEO, which has not been increased since our CEO
first joined the Company in 2007, was just below market median.
The Committee believed that this positioning was appropriate as
it reflected, for our CEO and our new executives hired over the
past three years, the level of competitive compensation required
to attract and retain these executives, and with respect to our
other executives, their longer tenure with us.
Targeted total annual compensation
(salary
and target potential annual incentive plan compensation
opportunity) for our top eleven executives was on average just
above the 75th percentile. However,
actual total
annual compensation
including salary and the actual annual
incentive payout for this executive group was on average at the
market consensus median. Our CEOs actual total annual
compensation (including salary and actual annual incentive
payout) was 13% below market median.
Total direct compensation
(base salary, actual annual
incentive payout, and the value of our 2009 long-term equity
award). Taking into account the special one-time
financing/retention incentive award, total direct compensation
for our top eleven executives was on average 22% above the
25
th
percentile. Two NEOs were above market median and one NEO was
above the
75
th
percentile. For our CEO total direct compensation, plus the
one-time financing/retention award, was 13% below the 25th
percentile of market consensus.
Description
of Our Executive Compensation Program
Our executive compensation program consists of the following
principal elements:
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Base salary;
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Annual cash incentive opportunity (or MIP); and
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Long-term incentive opportunity.
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In designing our overall program, the Compensation Committee
applies the following principles:
Appropriate balance between short-term and long-term
incentives.
Our incentive program is
appropriately balanced between our annual MIP cash incentive
program that directly links payment to the achievement of annual
financial goals and our equity based long-term incentive program
that allows the Committee to grant different types of equity
awards, including stock options, restricted stock and other
stock-based awards. Equity grants are intended to provide
long-term compensation tied specifically to increases in the
price of the Companys stock, thereby aligning the
financial interests of executives and stockholders.
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Pay-for-Performance.
The Committee believes
that a substantial portion of each senior executives
compensation should come from incentive pay and be at risk. For
fiscal 2010, 79% of our CEOs total direct compensation, at
target performance, was variable compensation tied to
performance. For our other NEOs, on average 68% of total direct
compensation, at target performance, was variable compensation
tied to performance:
Remaining Competitive in the Marketplace, Retention and
Supporting our Turnaround Strategy
. To ensure
that we are competitive in both attracting and retaining our
senior executives, the Committee reviews compensation and pay
mix with our independent compensation consultant and against
compensation survey data (see 2010 Marketing
Positioning). The target mix between annual and long-term
incentives was approved by the Committee to support both the
Companys annual financial goals (which in 2010 were
represented primarily by adjusted operating income and adjusted
return on invested capital goals) and long-term strategic plans
(using equity incentive awards rather than cash awards). This
mix has been balanced by the Committee in this fashion to
motivate both the achievement of the annual financial goals
essential to our turnaround strategy and to support our
long-term strategic plan to increase shareholder value.
2010 Base
Salary
We pay our executive officers a base salary as part of a
competitive compensation package. The Compensation Committee
reviews the salaries of our executive officers annually, as well
as at the time of new appointments or promotions.
In setting base salary levels, the Committee takes into account
external market factors (what our peer group companies pay for
similar positions), internal parity, the level of experience and
skill of each executive, as well as individual performance.
Thereafter, other than in connection with promotions or
significant changes in responsibilities, increases in base
salary are generally based solely on merit.
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In 2010, the Compensation Committee approved modest merit salary
increases in the second half of 2010 for executive officers and
our employees generally (within a range of 0%-5% based on
individual performance), and only after substantial improvements
in operating results were achieved. The mid-year 2010 salary
adjustments were the first general salary increase for our
executives since 2007, other than for promotions or increases in
responsibility. Consistent with her recommendation during our
turnaround progression, our CEOs salary was not increased
in 2010.
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2010
Annual Cash Incentive Program (MIP)
Our Management Incentive Program, the MIP, is an
annual cash incentive opportunity for executives that awards for
performance of Company and individual goals. Goals are
established by the Compensation Committee at the beginning of
the fiscal year for payment the following year. The Compensation
Committee believes that achieving our annual business and
financial objectives are important to executing our business
strategy and delivering long-term value to shareholders.
21
How
the Plan Works
In April 2010, the Compensation Committee established two
financial performance measures for the 2010 MIP,
(i) adjusted operating income from ongoing operations
(which excludes impairment, restructuring, acquisition charges
and other special items) and (ii) adjusted return on
invested capital (which is measured by calculating adjusted
operating income from ongoing operations as a percentage of our
debt and equity), as the performance measures for our annual
cash incentive opportunity program for 2010 for our senior
executives and other covered management employees.
The performance measure for adjusted income from ongoing
operations was weighted at 60% with a 20% weighting for adjusted
return on invested capital (ROIC). This weighting
was based on the Committees judgment that adjusted
operating income from ongoing operations represents an important
financial metric to measure the Companys achievement
during its strategic turnaround efforts, as well as reflecting
the Boards and managements continuing emphasis on
return to sustained profitability. Our financial performance
measures, as well as the relative weighting of performance
measures, will continue to be reviewed by the Committee each
year and may change based on the input and recommendations of
the Board and management as well as the Committees own
judgment as to the most important performance measures in
achieving the Companys strategic and operational goals.
Target performance for each of these two 2010 financial measures
was established at a level equal to our Board-approved operating
plan for 2010. For each of these two financial measures, target
performance required achievement for 2010 substantially above
the results achieved for the prior completed year.
2010 MIP
Performance Goals
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Goals ($ thousands)
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Measures
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Threshold
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Target
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Maximum
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Weight
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Adjusted Operating Income from Ongoing
Operations
1
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$
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50,298
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$
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62,872
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$
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75,447
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60
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%
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Return on Invested
Capital
2
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19.4
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%
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24.2
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%
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29.1
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%
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20
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%
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Individual/Business Unit
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specific to individual
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20
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%
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1
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Excludes impairment, restructuring,
acquisition charges and other special items
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2
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ROIC = adjusted operating income
from ongoing operations
¸
(average debt + average equity)
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Each performance measure category is computed independently of
the other performance measures, and achievement against any one
performance measure does not affect payout against any other
performance measure. Actual achievement below
threshold for any performance measure results in no
award for that performance measure. Actual achievement above
threshold and below target, or above
target and below maximum, for any MIP
performance measure would result in an incremental award for
that performance measure.
Notwithstanding, if actual achievement was below
threshold for adjusted operating income from ongoing
operations, no annual cash incentive award would be payable for
any of the MIP performance measures (
i.e.
, if adjusted
operating income from ongoing operations had not met threshold,
no award would have been made under the 2010 annual cash
incentive program).
2010
Participant Target Rates
The individual target award percentages under the MIP were
established generally at market median against market consensus
data considered by the Committees compensation consultant
as follows:
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Executive
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Target Award Percentage
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Ms. Sullivan
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120% of base salary
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Mr. Scarpa
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100% of base salary
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Mr. Smaldone
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90% of base salary
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Mr. OConnell
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75% of base salary
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Mr. Poole
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75% of base salary
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For each financial performance measure, a participant earns 50%
of his or her target award if actual achievement equals
threshold; 100% of his or her target award if
achievement is equal to or above target performance;
and 200% of his or her target award if achievement is equal to
or above maximum performance. The Committee
believed that this potential maximum award, if achieved against
the maximum performance goals set by the Committee, would
provide significant upside opportunity to participants for
achieving outstanding performance and at the same time would
generate material incremental value to our shareholders. Our
CEOs target award potential was increased for fiscal year
2011 from 120% to 150%.
2010
Total Payout under the Plan
In February 2011, the Committee determined the Companys
performance achieved against financial measures (approximately
78% of financial target performance). The specific amounts
earned by our NEOs under the MIP for 2010 are included in the
Summary Compensation Table for Fiscal Year 2010 in the
Non-Equity Incentive Plan Compensation column.
Individual
Performance
Under the 2010 MIP, the Committee considers individual
performance, accounting for 20% of the weighting. Due to tax
reasons, under the MIP executive officers are initially provided
a maximum rating for individual performance. The Committee then
considers the individuals performance in his or her areas
of responsibility and, based on the Committees own
judgment and the recommendations of the CEO (other than as to
the CEOs own performance), the Committee will then
generally adjust downward any MIP computed award for that
executive officer.
The Compensation Committee considers the CEOs evaluations
on the performance of each of our executive officers and may
approve or, in its judgment, may adjust the CEOs
compensation recommendations. The Committees review is not
formulaic and is based on the Committees judgment of the
operational and financial performance in each NEOs
specific area of responsibility, as reported on to the full
Board by the CEO and other NEOs from time-to-time, and
recommendations of the CEO, other than with respect to the
CEOs own performance.
The 2010 MIP payout for each NEO followed the funding percentage
(78%) calculated from the actual results achieved by the Company
against the two financial performance metrics used for the 2010
plan (adjusted operating income from ongoing operations and
adjusted return of investment capital), with minor variation
(between 1.7% and 4.1%) above or below the financial metric
calculated amount based on the CEOs recommendation of the
performance of those business areas of the Company within the
scope of responsibility of the particular NEO. No adjustment was
made from the financial performance funding calculation (78%)
for the CEO.
2010
Long-Term Incentive Program (LTIP)
The Compensation Committee has historically used equity awards
for its long-term incentive program. The Committee believes that:
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equity awards align management with shareholder
interests; and
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the potential for value appreciation over time, combined with
vesting over a period of years, promotes retention and
management stability.
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How
Awards are Determined
Our long-term equity incentive awards have historically been
made annually at the discretion of the Committee. The
Compensation Committee determines, with the assistance of its
outside consultant, the form of and the amount of the equity
award to be granted to executive officers, including the CEO.
The CEO adds her input and recommendations regarding grants to
executives (other than herself) and other eligible employees.
The Committee reviews such recommendations and determines all
final equity awards to all eligible employees.
In February 2010, the Committee provided equity grants to
management under its 2010 long-term incentive plan. In
determining what equity awards to make in a given year, the
Committee weighs competitive positioning,
23
Company and stock price performance, annual equity grant rates
(
i.e.
, run rates and dilution), and availability of
shares under our shareholder approved plan. The results of these
considerations in 2010 were grants that resulted in a lower
quartile calculated compensation value for our CEO, and at or
below median market for other senior executives.
The grants were made in the form of restricted stock, which will
vest over three years in equal annual increments. The Committee
believes that an equity-based LTIP award creates the necessary
alignment between our senior executives and shareholders, makes
it more likely to produce long-term value and share price
appreciation, and provides our senior executives with the same
long-term investment risk as our shareholders based on our
performance. Restricted stock awards were selected by the
Committee in 2010 as the long-term incentive award vehicle that
would best drive these considerations. Restricted stock, rather
than stock options, provides readily valued securities at the
time of grant, which align the equity interests of our
executives with our shareholders in gaining share value
appreciation, along with the same long-term investment risk.
Pension
Freeze/Retirement Benefits
In 2009, as part of our cost containment efforts and to align
our programs with evolving market practices, our Board made the
decision to freeze our defined benefit pension plans. As a
result, all future benefit accruals under our defined benefit
pension programs ceased for all participants and existing
accrued pension benefits under those plans were frozen.
All of our executive officers are eligible to participate in our
tax-qualified 401(k) plan (our RSVP). All of our executive
officers are also eligible to participate in our Supplemental
Savings Plan and our Deferred Compensation Plan, which are
non-qualified deferred compensation contribution plans. As part
of our cost reduction program, we suspended matching
contributions under these plans for 2009. In 2010, the
Compensation Committee decided to re-implement matching
contributions to our RSVP, but only at 50% of the prior
contribution level.
Executive
Severance Arrangements
Under her 2007 employment agreement, our CEO is entitled to two
times base salary plus two times annual target bonus in the
event her employment is terminated without cause or for good
reason either prior to or following a
change-in-control.
This severance protection was negotiated with our CEO and was
consistent with the finding of the Committees independent
compensation consultant that this severance benefit was
reasonable for a CEO in light of general industry practices.
Our CEO has a right to a potential tax
gross-up
on
any
change-in-control,
which was included in her original 2007 employment agreement.
The Committee intends to revisit this provision when the
existing agreement is first up for renewal or extension later
this year, and the Committee does not intend to provide any such
change-in-control
tax
gross-up
in any other future executive agreements. No other Talbots
executive has any
change-in-control
tax
gross-up
provision.
In 2007, the Committee also approved a severance program for
senior executives at the level of senior vice president and
above. Under this program, covered executives became entitled to
severance protection of 1.5 times base salary (EVP level) or 1.0
times base salary (SVP level), plus health and welfare benefits
for the severance period at the executives same
participation rate. The Committee, working with our CEO and our
head of Human Resources, believed that severance protection for
this executive group was important in order to allow the
management team to remain focused on their responsibilities in a
time of turnaround. The level of severance protection was
determined based on the recommendation of our CEO following a
review of severance practices in the retail industry and general
market data considered by Towers Watson & Co., which
provides compensation consulting services for our management.
Each of our NEOs (other than our CEO who is covered under her
employment agreement) also has a
change-in-control
agreement which provides twelve months severance (salary
plus target bonus) and benefits continuation in the event
employment is terminated without cause and, in the case of
Mr. Scarpa, in the event of a termination for good reason,
within twelve months following a
change-in-control.
If severance is provided under this agreement, no severance
protection would apply under our general severance program.
24
Personal
Benefits
Our executive compensation program provides perquisites that the
Committee believes are competitive and reasonable.
Our CEO is entitled to an annual allowance under her 2007
employment agreement, including commuting expenses between her
residence in New York and our Massachusetts headquarters as well
as a housing allowance so long as she maintains both a New York
and Boston residence, provided the total annual amount of such
allowance in any year does not exceed $250,000 to which she is
entitled under her agreement (of which $144,958 was used in
2010). The Committee considered this benefit package reasonable
for a CEO in this industry based on discussions with its
compensation consultant and the need for the CEO to spend
substantial periods of time between New York and our
headquarters.
Our other executive officers are entitled to receive financial
counseling ranging from $2,500 to $3,500 annually. We also
provide an auto allowance benefit to our other executive
officers, spread over two years, of between $39,700 and $44,000.
In connection with the negotiation of his 2008 employment
agreement and based on his spending considerable time between
our New York and Hingham, Massachusetts locations, our CFO/COO
is entitled to a housing and commuting allowance of $10,000 per
month for him and his spouse unless and until he relocates to
the Hingham area.
Other
2010 Compensation Matters
Following entry into the merger agreement with BPW in December
2009, Talbots management and BPW began discussions concerning
possible 2009 annual incentive and retention arrangements for
management. Based on these discussions and with the agreement of
BPW, Talbots management proposed, and on February 25, 2010
the Compensation Committee approved, a 2009 annual incentive and
one-time retention program for certain employees, including
executive officers.
A portion of these 2009 annual incentive awards was based on the
consummation and completion of the BPW merger transaction (the
financing/retention incentive award), which was
consummated in the first quarter of fiscal 2010. Such one-time
award is reported in the Summary Compensation Table for Fiscal
Year 2010 under columns (E) and (G).
One-third of the financing/retention award payable to each
individual was payable in cash and two-thirds of the award was
awarded in the form of special restricted stock units. Under
such arrangement Talbots (1) paid the cash portion upon the
closing of the BPW merger transaction, and (2) granted the
special restricted stock unit awards, which we refer to as the
special RSUs, to these employees as of the closing of the
merger. The special RSUs vested on April 7, 2011, the first
anniversary of the closing of the merger, subject to the
employees continued employment through that date. The
number of shares subject to each of the special RSU awards was
calculated based on and was equal to the same Talbots share
price used in 2010 for the BPW merger exchange ratio.
In determining to provide an incentive award based on
consummation of this merger, the Committee considered that:
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The consummation of the BPW merger transaction addressed the
critical short-term and longer-term liquidity needs of the
Company.
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Executive management had been charged by the Talbots Board of
Directors at the beginning of 2009 with achieving a
comprehensive solution to the Companys significant
short-term and long-term financing and liquidity needs, which
they accomplished.
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Executive management was key in achieving the negotiation,
execution and consummation of this important transaction.
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The BPW merger transaction substantially deleveraged the
financial structure of the Company, which added significant
value to all shareholders and positioned the Company for
achieving its long-term financial and strategic goals.
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The significant equity component of the award continued to align
our senior managements interests with our
shareholders interests, to improve share price
appreciation over the long-term.
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The particular incentive amount allocated to each executive was
determined based on a review of the level of responsibilities of
the executive team in achieving this transaction, with our CEO,
our CFO/COO and our Executive Vice President/chief legal officer
having had significant responsibility for this important and
strategic financing transaction.
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Other
Considerations
Executive
Stock Ownership Guidelines
In order to align executives interests with the interests
of our shareholders, the Compensation Committee has adopted
executive stock ownership guidelines, which apply to our NEOs as
well as other senior executives in the Company. Executives are
required to accumulate and hold a targeted number of shares of
Talbots common stock having a value established through a
multiple of base salary. The multiples of base salary for our
senior executives, including NEOs, are as follows:
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Five times salary for the CEO;
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Three times salary for the COO/CFO and CCO; and
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Two times salary for Executive Vice Presidents.
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The Committees objective is to have executives reach their
ownership guideline not later than five years after
implementation of the program. Executives who join the Company
or are promoted to these senior officer-level grades after the
implementation of the guidelines will have up to five years from
the date of joining the Company or the date of promotion to
attain the requisite number of shares specified in the
guidelines. Compliance with the ownership guidelines will be
reviewed annually by the Committee.
Adjustment
or Recovery of Awards Clawback Provisions
Section 954 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-Frank Act)
requires the SEC to direct the national securities exchanges to
prohibit the listing of any security of an issuer that does not
develop and implement a clawback policy. At this time, the SEC
has not finalized rules related to clawback policies. Once the
final rules are in place, the Company intends to adopt a
clawback policy that fully complies with SEC regulations.
Further, under Section 304 of the Sarbanes-Oxley Act, if we
are required to restate our financial results due to material
noncompliance with any financial reporting requirements as a
result of misconduct, the CEO and CFO could be required to
reimburse the Company for (1) any bonus or other
incentive-based or equity-based compensation received during the
twelve months following the first public issuance of the
non-complying document, and (2) any profits realized from
the sale of our securities during those twelve months.
Hedging
Transactions
During fiscal 2010, none of our executive officers engaged in
financial transactions designed to hedge or offset any decrease
in the market value of equity securities granted as compensation
or held by the officer. Moreover, the Dodd-Frank Act requires
the SEC to adopt rules to mandate proxy disclosure regarding
whether any employees or directors of the Company are permitted
to purchase financial instruments designed to hedge or offset
any decrease in the market value of equity securities granted as
compensation or held by the employee or director. Once the final
rules are in place, the Company intends to adopt a hedging
policy that fully complies with SEC regulations.
Timing of
Equity Grants
The Compensation Committee historically grants equity awards
once each year, generally coinciding with a regularly scheduled
Committee meeting. Other equity grants are made by the Committee
during the course of the year at the time of promotions or new
appointments or other special circumstances.
26
Tax and
Accounting Considerations
The Compensation Committee considers the deductibility of
executive compensation under Internal Revenue Code
Section 162(m), which provides that we may not deduct
compensation of more than $1 million that may be paid to
certain executives unless such compensation qualifies as
performance-based within the meaning of Section 162(m). The
Committees general policy is to structure executive
compensation (including target awards under our annual cash
incentive program and stock option grants) to be tax deductible.
The Committee also believes that under some circumstances, such
as to attract or retain executives or to recognize outstanding
performance, it may be important to compensate one or more key
executives above tax deductible limits. The financial/retention
award based on completion of the BPW merger transaction was
designed to reward outstanding management achievement in
addressing the Companys financial and liquidity needs.
Beginning in fiscal 2006, we began accounting for stock-based
compensation in accordance with new accounting rules for
equity-based awards. The Committee did not change its approach
to granting equity awards as a result of the new stock option
expense rules and did not alter vesting or other provisions in
order to seek to realize more favorable treatment under these
non-cash accounting rules at the expense of what it considers to
be an appropriate long-term equity compensation program.
27
COMPENSATION
COMMITTEE REPORT
The following Report of the Compensation Committee is not
deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that we specifically incorporate
this information by reference, and shall not otherwise be deemed
filed under either of such Acts.
The Compensation Committee has reviewed and discussed with our
management the above Compensation Discussion and Analysis and,
based on its review and discussion, the Compensation Committee
has recommended to the Board that the Compensation Discussion
and Analysis be included in this Proxy Statement.
Compensation Committee
of the Board of Directors
Gary M. Pfeiffer (Chairperson)
John W. Gleeson
Andrew H. Madsen
28
SUMMARY
COMPENSATION TABLE FOR FISCAL YEAR 2010
The following table provides information concerning the
compensation of the Chief Executive Officer, the Chief Operating
Officer/Chief Financial Officer, and our three other most highly
compensated executive officers (the NEOs).
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(A)
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(B)
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(C)
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(D)
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(E)
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(F)
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(G)
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(H)
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(I)
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(J)
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Change in
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Pension Value
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Non-Equity
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and Nonqualified
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Stock
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Option
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Incentive Plan
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Deferred
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All Other
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Fiscal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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Earnings ($)
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($)
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($)
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Trudy F. Sullivan
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2010
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1,000,000
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3,618,770
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1,436,000
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30,478
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183,512
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6,268,760
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President and Chief Executive
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2009
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1,000,000
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240,000
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290,005
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47,144
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1,376,529
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2,953,678
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Officer
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2008
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1,000,000
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734,820
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197,099
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235, 362
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314,614
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2,481,895
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Michael Scarpa
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2010
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798,077
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2,338,094
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1,041,700
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146,568
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4,324,439
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Chief Operating Officer, Chief
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2009
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775,000
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387,500
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203,438
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151,358
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1,517,296
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Financial Officer, and Treasurer
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2008
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110,288
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250,000
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13,500
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184,220
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558,008
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Michael Smaldone
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2010
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736,538
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1,280,662
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583,300
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8,044
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24,722
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2,633,266
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Chief Creative Officer
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2009
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725,000
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130,000
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203,438
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14,166
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21,691
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1,094,295
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2008
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725,000
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362,500
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41,055
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274,164
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1,402,719
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Richard T. OConnell, Jr.
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2010
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511,538
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1,328,554
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633,300
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295,357
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68,831
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2,837,580
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Executive Vice President, Real
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2009
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474,771
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75,000
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118,000
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115,940
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269,585
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60,111
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1,113,407
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Estate, Legal, Store Planning and Design and Construction, and
Secretary
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2008
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406,292
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495,507
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78,736
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93,197
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85,604
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1,159,336
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Gregory Poole
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2010
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586,538
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738,662
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433,300
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26,337
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1,784,837
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Executive Vice President, Chief
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Supply Chain Officer
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The information in the following footnotes explains the amounts
reflected in the Summary Compensation Table for fiscal 2010.
Unless otherwise specifically noted in the footnotes below,
information regarding the amounts reflected for fiscal 2009 and
fiscal 2008 can be found in our proxy statement relating to last
years Annual Meeting of Shareholders, filed with the SEC
on April 26, 2010, and our proxy statement relating to our
2009 Annual Meeting of Shareholders, filed with the SEC on
April 24, 2009.
Salary
(Column (C))
The NEOs may defer a portion of their salary (column (C)) and
any annual cash incentive award (column (G)) or bonus award
(column (D)) that they might earn into our RSVP (401(k) savings
plan), Supplemental Savings Plan and Deferred Compensation Plan.
Stock
Awards (Column (E))
Amounts shown for fiscal 2010 reflect the aggregate grant date
fair value computed in accordance with FASB ASC Topic 718 for
restricted stock awards and restricted stock unit
(RSU) awards granted during fiscal 2010.
Amounts in this Column (E) reflect equity grants awarded
under the Companys long-term incentive program. The grants
were made in the form of restricted stock, which vest in
one-third increments over three consecutive years beginning on
the first anniversary of the award date, February 26, 2010,
subject to continued employment through that date.
Amounts shown in Column (E) also reflect the special RSUs
awarded in connection with the BPW merger transaction. On
February 25, 2010, the Compensation Committee approved a
one-time special financing/retention award related to the BPW
merger transaction, payment of which was contingent upon the
consummation and completion of the merger, as further discussed
in the Compensation Discussion and Analysis under Other
2010 Compensation Matters. Two-thirds of the award was
paid in the form of special RSUs, which were granted on
April 7, 2010 subject to a one-year vesting schedule. These
RSUs vested on April 7, 2011, the first anniversary of the
closing of the merger, subject to the individuals
continued employment through that date and possible earlier
vesting based on the occurrence of certain termination events.
The remaining one-third of the special financing/retention award
was paid to each individual in cash (see Column (G) and the
related footnote).
29
Amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For restricted
stock and RSU awards, fair value was calculated using the
closing price of our common stock on the grant date. Additional
information concerning our accounting for restricted stock and
RSU awards is included in Note 5 to our 2010
Form 10-K.
Dividends are taken into account in arriving at the fair value
of restricted stock and RSU awards and, therefore, any dividends
paid with respect to these awards would not be separately
disclosed under column (I) as All Other
Compensation. No dividends were paid during fiscal 2010.
Since these amounts reflect our accounting expense, they do not
correspond to the actual value that will be recognized by the
named executive officers.
Option
Awards (Column (F))
There were no option awards granted to NEOs in fiscal 2010.
Non-Equity
Incentive Plan Compensation (Column (G))
Amounts in this column are awards earned under the annual
incentive program (MIP) for fiscal 2010 and the cash
portion of the one-time special financing/retention award
related to the BPW merger transaction.
Amounts in this column earned under the MIP were based on
financial performance measures approved by the Compensation
Committee in early 2010. Our NEOs earned the following amounts
under the 2010 MIP: Ms. Sullivan, $936,000;
Mr. Scarpa, $625,000; Mr. Smaldone, $500,000;
Mr. OConnell, $300,000; and Mr. Poole, $350,000.
The grant of annual incentives under the MIP is described in
greater detail under 2010 Annual Cash Incentive Program
(MIP) in the Compensation Discussion and
Analysis.
Amounts in this column also reflect the one-third portion of the
special one-time financing/retention awards related to the BPW
merger transaction that were paid on the April 7, 2010
closing of the merger. Our NEOs earned the following cash
amounts pursuant to these awards: Ms. Sullivan, $500,000;
Mr. Scarpa, $416,700; Mr. Smaldone, $83,300;
Mr. OConnell, $333,300; and Mr. Poole, $83,300.
Change in
Pension Value and Nonqualified Deferred Compensation Earnings
(Column (H))
Amounts in this column for fiscal 2010 reflect the increase in
the actuarial value of defined pension benefit plans (including
supplemental plans) for each NEO during fiscal 2010. Actuarial
value computations are based on assumptions discussed in
Note 15 to our 2010
Form 10-K.
In February 2009, as part of our cost-saving initiatives, our
Board made the decision to freeze the tax-qualified Retirement
Plan and our non-qualified Supplemental Executive Retirement
Plan with respect to all participants. Effective May 1,
2009, benefit accruals under the Retirement Plan and the
Supplemental Executive Retirement Plan ceased for all
participants, and the accrued benefits under these plans were
frozen as of that date. Mr. Scarpa and Mr. Poole are
not eligible to participate in either our tax qualified
Retirement Plan or our non-qualified Supplemental Plan. For more
information regarding our qualified and non-qualified pension
plans and the impact of the freeze on participants benefit
accruals, see Pension Benefits for Fiscal 2010 below.
No above-market rates (as defined in SEC rules) were earned
under our non-qualified defined contribution or deferred
compensation plans in fiscal 2010.
All Other
Compensation (Column (I))
The amounts reported in this column represent the aggregate
dollar amount for fiscal 2010 for each NEO for perquisites and
other personal benefits, tax reimbursements, our contributions
to our tax qualified RSVP 401(k) savings plan and life insurance.
30
The following table shows the specific amounts included in the
All Other Compensation column for fiscal 2010.
ALL OTHER
COMPENSATION
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Our
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Contributions to
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Perquisites and
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Defined
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Other Personal
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Tax
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Contribution
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Life
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Benefits
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Reimbursements
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Savings Plans
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Insurance
|
Name
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($)
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($)
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($)
|
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($)
|
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Ms. Sullivan
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144,958
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15,874
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22,680
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Mr. Scarpa
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146,400
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168
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Mr. Smaldone
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|
|
20,850
|
|
|
|
|
|
|
|
3,704
|
|
|
|
168
|
|
Mr. OConnell
|
|
|
64,880
|
|
|
|
|
|
|
|
3,783
|
|
|
|
168
|
|
Mr. Poole
|
|
|
23,400
|
|
|
|
|
|
|
|
2,769
|
|
|
|
168
|
|
The aggregate value of perquisites and other personal benefits
for Ms. Sullivan in 2010 was $144,958. This amount
comprised: auto allowance ($24,850), commuting and private
carriages ($18,181), housing allowance ($98,537), residential
security ($840), a Company contribution to
Ms. Sullivans health savings account ($300), and the
par value issuance cost of restricted stock ($2,250).
Ms. Sullivan received tax reimbursement on her life
insurance policy ($15,272) and residential security ($602).
The aggregate value of perquisites and other personal benefits
for Mr. Scarpa in fiscal 2010 was $146,400. This amount
comprised: auto allowance ($21,000), housing allowance
($120,000), financial counseling ($4,150) and the par value
issuance cost of restricted stock ($1,250).
The aggregate value of perquisites and other personal benefits
for Mr. Smaldone in fiscal 2010 was $20,850. This amount
comprised: auto allowance ($19,850) and the par value issuance
cost of restricted stock ($1,000).
The aggregate value of perquisites and other personal benefits
for Mr. OConnell in fiscal 2010 was $64,880. This
amount comprised: auto allowance ($15,269), financial counseling
($1,075), the par value issuance cost of restricted stock
($500), and the value of supplemental medical/dental plan
benefits ($48,036).
The aggregate value of perquisites and other personal benefits
for Mr. Poole in fiscal 2010 was $23,400. This amount
comprised: auto allowance ($19,850), moving and storage
($2,310), financial counseling ($440), a Company contribution to
Mr. Pooles health savings account ($300), and the par
value issuance cost of restricted stock ($500).
31
GRANTS OF
PLAN-BASED AWARDS DURING FISCAL 2010
The following table provides information concerning the equity
awards granted to each of our NEOs under our long-term incentive
program, the special financing/retention awards granted in
connection with the BPW merger transaction, and potential annual
performance awards under our MIP in fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
|
(C)
|
|
|
(D)
|
|
|
(E)
|
|
|
(F)
|
|
|
(G)
|
|
|
(H)
|
|
|
(I)
|
|
|
(J)
|
|
|
(K)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Payouts
|
|
|
Awards:
|
|
|
Awards:
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
Under Equity
|
|
|
Number of
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Fair Value
|
|
|
|
|
|
|
Date of
|
|
|
Incentive Plan
|
|
|
Incentive
|
|
|
Shares of
|
|
|
Securities
|
|
|
Base Price
|
|
|
of Stock and
|
|
|
|
|
|
|
Compensation
|
|
|
Awards
|
|
|
Plan Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
of Option
|
|
|
Option
|
|
|
|
Grant
|
|
|
Committee
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Target
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
Approval
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/SH)
|
|
|
($)
|
|
|
Trudy F. Sullivan
|
|
|
2/26/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
|
2,439,000
|
|
|
|
|
4/7/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
87,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179,770
|
|
|
|
|
|
|
|
|
|
|
|
|
600,000
|
|
|
|
1,200,000
|
|
|
|
2,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Scarpa
|
|
|
2/26/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
1,355,000
|
|
|
|
|
4/7/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
416,700
|
|
|
|
|
|
|
|
72,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
983,094
|
|
|
|
|
|
|
|
|
|
|
|
|
387,500
|
|
|
|
775,000
|
|
|
|
1,550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Smaldone
|
|
|
2/26/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
1,084,000
|
|
|
|
|
4/7/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
83,300
|
|
|
|
|
|
|
|
14,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,662
|
|
|
|
|
|
|
|
|
|
|
|
|
326,500
|
|
|
|
652,500
|
|
|
|
1,305,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard T. OConnell, Jr.
|
|
|
2/26/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
542,000
|
|
|
|
|
4/7/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
333,300
|
|
|
|
|
|
|
|
58,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
786,554
|
|
|
|
|
|
|
|
|
|
|
|
|
187,500
|
|
|
|
375,000
|
|
|
|
750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Poole
|
|
|
2/26/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
542,000
|
|
|
|
|
4/7/2010
|
|
|
|
2/25/2010
|
|
|
|
|
|
|
|
83,300
|
|
|
|
|
|
|
|
14,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,662
|
|
|
|
|
|
|
|
|
|
|
|
|
215,625
|
|
|
|
431,250
|
|
|
|
862,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
Date and Date of Compensation Committee Approval (Columns
(B) and (C))
On February 25, 2010, at its regularly scheduled first
quarter meeting, the Compensation Committee approved the
Companys 2010 equity awards and established a
February 26, 2010 grant date. At this meeting, the
Compensation Committee also approved the BPW special
financing/retention awards, which were granted as of
April 7, 2010.
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards (Columns
(D) through (F))
The amounts in Columns (D) through (F) for the 2010
MIP awards represent the potential threshold, target and maximum
cash incentive awards under the MIP for each NEO based on fiscal
2010 performance. Actual payouts to the NEOs based on fiscal
2010 performance are reported under the Non-Equity
Incentive Plan Compensation column of the Summary
Compensation Table. A discussion of the material terms of our
MIP applicable to fiscal 2010, including a description of the
performance goals, incentive participation rates, and the manner
in which any amounts earned under the plan were to be determined
is included above under 2010 Annual Cash Incentive Program
(MIP) in the Compensation Discussion and
Analysis.
The amount in Column (E) for the BPW awards represents the
one-third portion of the one-time special financing/retention
award which was payable in cash. As described in more detail in
the Compensation Discussion and Analysis under Other 2010
Compensation Matters, each NEO was entitled to an award
equal to a fixed dollar amount (one-third payable in cash and
two-thirds payable in the form of RSUs) contingent upon the
closing of the BPW merger transaction. The BPW merger
transaction closed on April 7, 2010, at which time the cash
amounts reported in Column (E) were paid to our NEOs. The
cash portion of these one-time awards paid to each NEO is also
included in Column (G) of the Summary Compensation Table.
Estimated
Future Payouts Under Equity Incentive Plan Awards Target (Column
(G))
As part of the one-time special financing/retention award
described above in the footnote to Columns (D) through (F),
the NEOs were also granted RSUs that vested on April 7,
2011, the first anniversary of the closing of the BPW merger
transaction, subject to the NEOs continued employment
through this date and possible earlier
32
vesting based on the occurrence of a change-in-control or
certain termination events, as described below under
Potential Payments Upon Termination or
Change-in-Control Treatment of Equity Upon
Termination of Employment. These RSUs were granted under
our 2003 Executive Stock Based Incentive Plan. Holders of RSUs
are entitled to dividend equivalents but do not have voting
rights.
All Other
Stock Awards (Column (H))
All restricted stock grants shown in this column were granted in
fiscal 2010 under our 2003 Executive Stock Based Incentive Plan
as part of our long-term incentive program. These stock awards
vest in one-third increments over three consecutive years
beginning on the first anniversary of the grant date. Each
executive that holds outstanding shares of restricted stock has
the right to dividends and to vote with respect those shares.
All unvested shares of restricted stock automatically vest upon
a change-in-control. Additional details regarding the 2010 stock
awards are included under 2010 Long-Term Incentive Program
(LTIP) in the Compensation Discussion and
Analysis.
All Other
Options Awards and Exercise or Base Price of Option Awards
(Columns (I) and (J))
None of the NEOs received stock option grants during fiscal 2010.
Grant
Date Fair Value of Stock and Option Awards (Column
(K))
This column shows the full grant date fair value of the
restricted stock and RSU awards under FASB ASC Topic 718 granted
to each of the NEOs in fiscal 2010. Generally, the full grant
date fair value is the amount that we will expense in our
financial statements over the awards vesting period.
For restricted stock and RSU awards, fair value was calculated
using the closing price of our common stock on the grant date.
The fair value shown for restricted stock and RSUs granted in
fiscal 2010 is accounted for in accordance with FASB ASC Topic
718. For additional information on valuation and valuation
assumptions, refer to Note 5 to our 2010
Form 10-K.
These amounts reflect our accounting expense and do not
correspond to the actual value that will be recognized by the
NEOs.
33
OUTSTANDING
EQUITY AWARDS AT 2010 FISCAL YEAR-END
The following table provides information concerning the current
holdings of unexercised and unvested stock options, unvested
shares of restricted stock, unvested shares of
performance-accelerated restricted stock (PARS) and unvested
RSUs for each of the NEOs as of the end of fiscal 2010. The
market value of restricted stock, PARS and RSUs is based on the
closing market price of our common stock on the NYSE as of
January 28, 2011 (the last trading day of our 2010 fiscal
year), which was $5.97 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|
(F)
|
|
(G)
|
|
(H)
|
|
(I)
|
|
(J)
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
Awards:
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market or
|
|
|
|
|
Number of
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout Value
|
|
|
Number of
|
|
Securities
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
of Unearned
|
|
|
Securities
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
|
|
Market Value
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Unexercised
|
|
Underlying
|
|
|
|
|
|
Number of Shares
|
|
of Shares or
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
and
|
|
Unexercised
|
|
|
|
|
|
or Units of Stock
|
|
Units of Stock
|
|
Rights That
|
|
Rights That
|
|
|
Exercisable
|
|
Unexercisable
|
|
Unearned
|
|
Option
|
|
Option
|
|
That Have Not
|
|
That Have Not
|
|
Have Not
|
|
Have Not
|
|
|
Options
|
|
Options
|
|
Options
|
|
Exercise Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Trudy F. Sullivan
|
|
|
325,000
|
|
|
|
|
|
|
|
|
|
|
|
22.70
|
|
|
|
8/7/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,733
|
|
|
|
25,367
|
|
|
|
|
|
|
|
9.93
|
|
|
|
3/14/2018
|
|
|
|
37,000 (G.4
|
)
|
|
|
220,890
|
|
|
|
|
|
|
|
|
|
|
|
|
62,366
|
|
|
|
124,734
|
|
|
|
|
|
|
|
2.36
|
|
|
|
4/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000 (G.8
|
)
|
|
|
1,343,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,585 (G.9
|
)
|
|
|
522,882
|
|
|
|
|
|
|
|
|
|
Michael Scarpa
|
|
|
50,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
2.00
|
|
|
|
12/4/2018
|
|
|
|
62,500 (G.6
|
)
|
|
|
373,125
|
|
|
|
|
|
|
|
|
|
|
|
|
43,750
|
|
|
|
87,500
|
|
|
|
|
|
|
|
2.36
|
|
|
|
4/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000 (G.8
|
)
|
|
|
746,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,984 (G.9
|
)
|
|
|
435,714
|
|
|
|
|
|
|
|
|
|
Michael Smaldone
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
12.85
|
|
|
|
12/17/2017
|
|
|
|
8,750(G.3
|
)
|
|
|
52,238
|
|
|
|
|
|
|
|
|
|
|
|
|
43,750
|
|
|
|
87,500
|
|
|
|
|
|
|
|
2.36
|
|
|
|
4/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 (G.8
|
)
|
|
|
597,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,600 (G.9
|
)
|
|
|
87,162
|
|
|
|
|
|
|
|
|
|
Richard T. OConnell, Jr.
|
|
|
46,000
|
|
|
|
|
|
|
|
|
|
|
|
46.94
|
|
|
|
3/6/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000
|
|
|
|
|
|
|
|
|
|
|
|
35.80
|
|
|
|
3/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
25.00
|
|
|
|
3/13/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
33.92
|
|
|
|
3/11/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
31.62
|
|
|
|
3/11/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
25.56
|
|
|
|
3/3/2016
|
|
|
|
12,500 (G.1
|
)
|
|
|
74,625
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
24.91
|
|
|
|
3/9/2017
|
|
|
|
20,000 (G.2
|
)
|
|
|
119,400
|
|
|
|
|
|
|
|
|
|
|
|
|
20,266
|
|
|
|
10,134
|
|
|
|
|
|
|
|
9.93
|
|
|
|
3/14/2018
|
|
|
|
14,800 (G.4
|
)
|
|
|
88,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,150 (G.5
|
)
|
|
|
60,596
|
|
|
|
|
|
|
|
|
|
|
|
|
24,933
|
|
|
|
49,867
|
|
|
|
|
|
|
|
2.36
|
|
|
|
4/30/2019
|
|
|
|
37,500 (G.7
|
)
|
|
|
223,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 (G.8
|
)
|
|
|
298,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,393 (G.9
|
)
|
|
|
348,606
|
|
|
|
|
|
|
|
|
|
Gregory Poole
|
|
|
10,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
12.31
|
|
|
|
6/23/2018
|
|
|
|
17,500 (G.10
|
)
|
|
|
104,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,867
|
|
|
|
|
|
|
|
2.36
|
|
|
|
4/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 (G.8
|
)
|
|
|
298,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,600 (G.9
|
)
|
|
|
87,162
|
|
|
|
|
|
|
|
|
|
34
Option
Awards (Columns (B), (C), (E) and (F))
As shown in the table below, unless otherwise noted, all stock
option awards reflected in these columns for our current NEOs
either vested or will vest in one-third annual increments over
the first three years of the ten year option term (or eight year
option term in the case of Ms. Sullivans August 2007
appointment grant of an option to purchase 325,000 shares).
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Expiration Date
|
|
1
st
Vesting Date
|
|
2
nd
Vesting Date
|
|
3
rd
Vesting Date
|
|
3/6/2011
|
|
|
3/6/2002
|
|
|
|
3/6/2003
|
|
|
|
3/6/2004
|
|
3/7/2012
|
|
|
3/7/2003
|
|
|
|
3/7/2004
|
|
|
|
3/7/2005
|
|
3/13/2013
|
|
|
3/13/2004
|
|
|
|
3/13/2005
|
|
|
|
3/13/2006
|
|
3/11/2014
|
|
|
3/11/2005
|
|
|
|
3/11/2006
|
|
|
|
3/11/2007
|
|
3/11/2015
|
|
|
3/11/2006
|
|
|
|
3/11/2007
|
|
|
|
3/11/2008
|
|
8/7/2015
|
|
|
8/7/2008
|
|
|
|
8/7/2009
|
|
|
|
8/7/2010
|
|
3/3/2016
|
|
|
3/3/2007
|
|
|
|
3/3/2008
|
|
|
|
3/3/2009
|
|
3/9/2017
|
|
|
3/9/2008
|
|
|
|
3/9/2009
|
|
|
|
3/9/2010
|
|
12/17/2017
|
|
|
12/17/2008
|
|
|
|
12/17/2009
|
|
|
|
12/17/2010
|
|
3/14/2018
|
|
|
3/14/2009
|
|
|
|
3/14/2010
|
|
|
|
3/14/2011
|
|
6/23/2018
|
|
|
6/23/2009
|
|
|
|
6/23/2010
|
|
|
|
6/23/2011
|
|
12/4/2018
|
|
|
12/4/2009
|
|
|
|
12/4/2010
|
|
|
|
12/4/2011
|
|
4/30/2019
|
|
|
4/30/2010
|
|
|
|
4/30/2011
|
|
|
|
4/30/2012
|
|
Unvested options automatically vest on a
change-in-control.
Ms. Sullivans unvested options also automatically
vest upon the occurrence of the events described under
Potential Payments Upon Termination or
Change-in-Control Employment Agreement for Trudy F.
Sullivan below.
Stock
Awards (Columns (G) and (H))
As indicated in the footnotes below, all awards reflected in
column (G) represent restricted stock, PARS or RSUs. PARS
shown in column (G) were subject to possible earlier
vesting based on achievement of the specified performance metric
measured as of the end of the three-year period following the
grant date, and if not earlier vested, PARS would vest five
years from the grant date, subject to continued employment. The
RSUs shown in Column (G) represent the equity-based portion
of the one-time special financing/retention award which was
granted upon the closing of the BPW merger transaction with a
scheduled vesting date of April 7, 2011, the first
anniversary of the grant date. The footnotes below indicate the
specific vesting schedules for each grant of time-vested
restricted stock, PARS and RSUs.
(G.1) PARS granted on March 3, 2006, which vested on
March 3, 2011.
(G.2) PARS granted on March 9, 2007, which will vest on
March 9, 2012, subject to continued employment. Based on
our achievement against the performance goals, none of the PARS
award was subject to earlier vesting.
(G.3) Restricted stock granted on December 17, 2007 to
Mr. Smaldone pursuant to his employment agreement. The
remaining 8,750 shares will vest on December 17, 2011.
(G.4) Restricted stock granted on March 14, 2008. These
shares vested on March 14, 2011.
(G.5) Special retention shares of restricted stock granted on
March 14, 2008. These shares vested on March 14, 2011.
(G.6) Restricted stock granted on December 4, 2008 to
Mr. Scarpa pursuant to his employment agreement. The
remaining 62,500 shares will vest on December 4, 2011.
(G.7) Restricted stock granted on April 30, 2009 to
Mr. OConnell. Of these shares, 12,500 will vest on
April 30, 2011 and 25,000 will vest on April 30, 2012.
(G.8) Restricted stock granted on February 26, 2010, which
vests over a three-year period. One-third of these shares vested
on February 26, 2011; one-third will vest on
February 26, 2012; and one-third will vest on
February 26, 2013.
(G.9) Restricted stock units granted on April 7, 2010,
which vested in full on April 7, 2011.
35
(G.10) Restricted stock granted on June 23, 2008 to
Mr. Poole pursuant to his employment agreement. The
remaining 17,500 shares will vest on June 23, 2011.
The unvested restricted stock, PARS and RSU awards included in
the table above automatically vest on a
change-in-control.
For information regarding additional vesting provisions related
to the RSUs and Ms. Sullivans unvested restricted
stock awards upon the occurrence of certain termination events,
see Potential Payments Upon Termination or
Change-in-Control below.
OPTION
EXERCISES AND STOCK VESTED IN FISCAL 2010
The following table provides information concerning stock option
exercises and the vesting of restricted stock and PARS awards
for each of the NEOs during fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
|
(C)
|
|
|
(D)
|
|
|
(E)
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Value
|
|
|
Number of
|
|
|
Value
|
|
|
|
Shares
|
|
|
Realized
|
|
|
Shares
|
|
|
Realized
|
|
|
|
Acquired on
|
|
|
on
|
|
|
Acquired on
|
|
|
on
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Trudy F. Sullivan
|
|
|
|
|
|
|
|
|
|
|
193,500
|
|
|
|
2,222,035
|
|
Michael Scarpa
|
|
|
|
|
|
|
|
|
|
|
31,250
|
|
|
|
365,000
|
|
Michael Smaldone
|
|
|
|
|
|
|
|
|
|
|
8,750
|
|
|
|
75,250
|
|
Richard T. OConnell, Jr.
|
|
|
|
|
|
|
|
|
|
|
42,550
|
|
|
|
550,506
|
|
Gregory Poole
|
|
|
24,933
|
|
|
|
197,771
|
|
|
|
8,750
|
|
|
|
98,788
|
|
Value
Realized on Vesting (Columns (C) and (E))
The amounts in column (E) reflect the number of shares
vested multiplied by the market value per share on the vesting
date. The amounts in column (C) reflect the number of stock
options exercised multiplied by the difference between the
market price per share at which the underlying shares were sold
and the exercise price of the options. The value realized on
exercise or vesting reflects the amounts received before payment
of any applicable withholding tax or broker commissions.
36
PENSION
BENEFITS FOR FISCAL 2010
The following table provides information for each of the NEOs
with respect to our pension plans:
|
|
|
|
|
The Talbots, Inc. Pension Plan (Retirement
Plan); and
|
|
|
|
The Talbots, Inc. Supplemental Executive Retirement Plan
(SERP).
|
For purposes of quantifying the present values of accumulated
benefits discussed below, the valuation method and material
assumptions discussed in Note 15 to our 2010
Form 10-K
were used.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|
|
|
|
|
|
Present
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
Number of Years
|
|
Accumulated
|
|
Payments During
|
|
|
|
|
Credited Service
|
|
Benefit
|
|
Last Fiscal Year
|
Name
|
|
Plan Name
|
|
(#)
|
|
($)
|
|
($)
|
|
Trudy F. Sullivan
|
|
|
Retirement Plan
|
|
|
|
1
|
|
|
|
30,394
|
|
|
|
|
|
|
|
|
SERP
|
|
|
|
1
|
|
|
|
280,164
|
|
|
|
|
|
Michael Scarpa
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Smaldone
|
|
|
Retirement Plan
|
|
|
|
1
|
|
|
|
11,626
|
|
|
|
|
|
|
|
|
SERP
|
|
|
|
1
|
|
|
|
51,640
|
|
|
|
|
|
Richard T. OConnell, Jr.
|
|
|
Retirement Plan
|
|
|
|
22
|
|
|
|
565,211
|
|
|
|
|
|
|
|
|
SERP
|
|
|
|
22
|
|
|
|
864,602
|
|
|
|
|
|
Gregory Poole
|
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2010 Defined Benefit Pension Plans
In 2009, our Board made the decision to freeze the tax-qualified
Retirement Plan and our non-qualified Supplemental Executive
Retirement Plan with respect to all participants. Effective
May 1, 2009, benefit accruals under the Retirement Plan and
the SERP ceased for all participants, and the accrued benefits
under these plans were frozen as of that date; however,
participants service after the effective date of the
freeze continues to be taken into account under these plans for
purposes of vesting and eligibility for early retirement
benefits. The values reflected above in Column (C) of the
Pension Benefits for Fiscal 2010 Table represent the
credited years of service each NEO has accrued for purposes of
benefit accrual. For purposes of vesting and eligibility for
early retirement benefits, each of the NEOs who is a participant
in our defined benefit pension plans has accrued the following
number of years of service: Ms. Sullivan, 3 years;
Mr. Smaldone, 3 years; and Mr. OConnell,
24 years.
Retirement
Plan
Our NEOs who participated in the Retirement Plan during fiscal
2010 were Ms. Sullivan, Mr. Smaldone, and
Mr. OConnell. Mr. Scarpa and Mr. Poole were
ineligible to participate as a result of a freeze on
participation that was implemented with respect to any employees
hired on and after January 1, 2008. The annual retirement
benefit (payable as a single life annuity at the normal
retirement age of 65) is determined under the following
formula:
1.15% of average final compensation up to covered compensation
plus
1.60% of average final compensation in excess of covered
compensation
times
Years of credited service (or fraction) up to 30 years
less
Any predecessor plan benefit.
Average final compensation is the average of a
participants five highest years of compensation within the
last ten years of service; however, due to the freeze,
compensation paid after April 30, 2009 is not taken into
account for
37
purposes of determining average final compensation. Covered
compensation is the average of the taxable wage base (as
published by the IRS) in effect for each calendar year during
the period (up to 35 years) ending with the year in which
the participant attains Social Security retirement age.
Compensation means base salary and bonus paid by us during the
plan year and also includes pre-tax contributions made by the
executive under the RSVP (401(k) savings plan) and any other
salary reductions made under our cafeteria plan. Severance pay
and deferrals to the Deferred Compensation Plan are not included
in compensation. As noted above, compensation paid after
April 30, 2009 is not taken in account.
The annual compensation of each participant (including each of
the eligible NEOs) that can be taken into account under the
Retirement Plan is limited by IRS rules.
For purposes of determining optional forms of payment, except
lump sum payments, the following actuarial assumptions are used:
1984 Unisex Pension Mortality Table with a two year set back in
age and an interest rate of 7.5%.
For purposes of determining lump sum payments, the actuarial
assumptions prescribed under Internal Revenue Code
(IRC) Section 417(e) are used. A participant
may receive a lump sum payment if the present value of his or
her benefit is not more than $5,000.
A participant is generally credited with a year of service for
each year in which he or she completed 1,000 hours of
service. A participant vests in his or her benefit under the
Retirement Plan upon completing five years of vesting service.
Due to the freeze of the Retirement Plan, participants are not
credited with any service under the Retirement Plan following
April 30, 2009 for purposes of benefit accrual. However,
participants service after April 30, 2009 continues
to be taken into account under the Retirement Plan for purposes
of vesting and eligibility for early retirement benefits.
A participant who is vested in his or her benefit upon
termination from employment is eligible to receive benefits
beginning at normal retirement age (age 65) or a
reduced benefit beginning at age 55. For a participant who
continued to work for us after reaching age 65, the
participants compensation and years of service after
age 65 were taken into account in determining his or her
benefit. However, as a result of the freeze of the Retirement
Plan, compensation and service after April 30, 2009 are no
longer taken into account.
If a participant retires between ages 55 and 65 with at
least 10 years of vesting service, he or she is eligible
for a subsidized early retirement benefit payable at any time
before age 65. The amount of the normal retirement benefit
will be reduced by 2% for each of the first 3 years, and by
4% for each of the next 7 years, that payment begins before
age 65. However, if a participant begins receiving benefits
before age 65 but is not eligible for a subsidized early
retirement benefit, the normal retirement benefit will be
reduced by 6% for each of the first 5 years, and by 4% for
each of the next 5 years, that payments begin before
age 65. Of the NEOs who participated in the Retirement Plan
at the end of fiscal 2010, Mr. OConnell has reached
age 55 and completed at least 10 years of vesting
service and is therefore eligible for the subsidized early
retirement benefit if he terminates employment before
age 65.
The normal form of benefit for an unmarried participant is a
single life annuity. The normal form of benefit for a married
participant is a 50% qualified joint and survivor annuity. This
joint annuity is a reduced amount to take into account that
payments will be made to the participants spouse after the
participant dies. The optional forms of payment include a single
life annuity, a contingent annuity (50%, 75%, or 100%) and a
period certain annuity.
Supplemental
Executive Retirement Plan
Various provisions of the IRC limit the amount of compensation
used in determining the amount of benefits that can be paid
under the Retirement Plan. In addition, any compensation
deferred under our Deferred Compensation Plan may also not be
taken into consideration for purposes of determining the amount
of benefits to be paid under the Retirement Plan. We established
the SERP to pay that part of the pension benefit that cannot be
paid to our senior executives as a result of the IRC limitation
on compensation and the exclusion of deferrals to the Deferred
Compensation Plan.
38
Key management employees, including all Talbots vice presidents
and above, whose benefits under the Retirement Plan either
(a) are limited by tax rules or (b) would have been
increased due to the inclusion of deferrals to the Deferred
Compensation Plan in his or her average final compensation, are
eligible to participate in the SERP. Ms. Sullivan,
Mr. OConnell and Mr. Smaldone are participants
in the SERP. A freeze on participation in the SERP was
implemented with respect to any employees hired on and after
January 1, 2008. As a result, Mr. Scarpa and
Mr. Poole do not participate in the SERP. As with the
Retirement Plan, benefit accrual under the SERP was frozen with
respect to all then-current participants effective May 1,
2009. As previously reported, in 2009, pursuant to her
employment agreement, Ms. Sullivan became entitled to a
substantially comparable replacement benefit as reasonably
determined by the Compensation Committee as a result of this
freeze with respect to future benefit accruals under the Plan.
Under the SERP, a participant is entitled to receive the
difference between (i) the amount under the Retirement Plan
that he or she would have received but for the application of
the IRC limit on compensation or the exclusion of deferrals to
the Deferred Compensation Plan, and (ii) the benefit that
he or she is actually entitled to under the Retirement Plan
(plus the benefit payable under a predecessors
supplemental executive retirement plan).
Benefits under the SERP are determined using the same actuarial
assumptions that are used to determine benefits under the
Retirement Plan.
A participant is generally credited with a year of benefit
service for each year in which he or she completed
1,000 hours of service. We do not have a policy or
historical practice of granting additional years of credited
service to executive officers, although in certain instances we
may contractually agree to provide additional service upon a
termination without cause or for good reason. A participant
vests in his or her benefit under the SERP upon completing five
years of vesting service, subject to earlier vesting as may be
contractually provided under the SERP in the event of certain
events such as a change-in-control, termination without cause or
for good reason, or disability or death. Of the NEOs that are
participants in the SERP, Mr. OConnell is vested in
his benefits; Ms. Sullivan and Mr. Smaldone are not
yet vested in their benefits.
Until December 31, 2008, a participants benefit under
the SERP was paid in the same form and at the same time benefits
were paid under the Retirement Plan, subject to any restrictions
on timing of payment under IRC 409A (which concerns the
permissible timing of payment of deferred compensation). As of
January 1, 2009, the timing and form of payment for the
Retirement Plan and the SERP are required to be made pursuant to
separate elections. Unless a participant elects an actuarially
equivalent optional form of annuity prior to commencement of his
or her SERP benefit, the participants SERP benefit will be
paid in the form of a single life annuity on the later of the
(i) first day of the seventh month following the
participants termination from employment, or (ii) the
first day of the month following the participants
attainment of age 55 after termination from employment.
39
NON-QUALIFIED
DEFERRED COMPENSATION FOR FISCAL 2010
The following table provides information with respect to the
following non-qualified defined contribution and compensation
deferral plans for each of our NEOs:
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The Talbots, Inc. Supplemental Savings Plan (Supplemental
Savings Plan or SSP); and
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The Talbots, Inc. Deferred Compensation Plan (Deferred
Compensation Plan or DCP).
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(A)
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(B)
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(C)
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(D)
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(E)
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(F)
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Aggregate
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Executive
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Registrant
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Aggregate
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Aggregate
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Balance
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Contributions in
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Contributions in
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Earnings in
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Withdrawals/
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at Last
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Plan
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Last FY
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Last FY
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Last FY
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Distributions
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FYE
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Name
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Name
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($)
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($)
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($)
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($)
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($)
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Trudy F. Sullivan
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SSP
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44,400
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2,427
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72,161
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DCP
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Michael Scarpa
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SSP
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DCP
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Michael Smaldone
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SSP
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DCP
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Richard T. OConnell, Jr.
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SSP
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52,767
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47,851
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502,073
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DCP
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107,304
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559,296
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Gregory Poole
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SSP
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DCP
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Executive
Contributions in Last Fiscal Year (Column (B))
The amounts reported in this column reflect, on a cash basis,
NEO contributions during fiscal 2010 to our Supplemental Savings
Plan, a non-qualified defined contribution plan, and the
Deferred Compensation Plan, a non-qualified deferred
compensation plan. The contribution amounts to these plans are
also reported as compensation to the NEOs for fiscal 2010 in the
Summary Compensation Table above as follows:
Mr. OConnell $32,769.
Registrant
Contributions in Last Fiscal Year (Column (C))
In 2009, the decision was made to suspend matching contributions
under the SSP and our tax qualified RSVP 401(k) saving plan for
fiscal 2009 (no matching contributions are made under the
Deferred Compensation Plan). Effective January 1, 2010, the
Company reinstated matching contributions under the Talbots
401(k) plan (which is called the Retirement Savings Voluntary
Plan or RSVP) at 50% of the prior contribution level but did not
reinstate matching contributions under the SSP.
Aggregate
Earnings in Last Fiscal Year (Column (D))
The amounts reported in this column are deemed investment
returns in fiscal 2010 on all amounts attributable to total
employee contributions and total registrant contributions for
all years for each of the NEOs under the non-qualified defined
contribution and non-qualified deferred compensation plans.
Aggregate
Withdrawals/Distributions (Column (E))
No withdrawals or distributions were made to any of the NEOs
under the Supplemental Savings Plan or the Deferred Compensation
Plan in fiscal 2010.
Aggregate
Balance at Last FYE (Column (F))
If a person was a NEO in previous years proxy statements,
the amount reported in this column includes amounts that were
included as compensation previously reported for that person in
the Summary Compensation Table for those previous years. All of
Ms. Sullivans deferrals and matching contributions
under the SSP have been
40
previously reported as compensation in the Summary Compensation
Tables for fiscal years 2007, 2008 and 2009. With respect to the
amounts reported in this column for
Mr. OConnells deferrals and matching
contributions under the SSP and DCP, as applicable, a total of
$83,559 has been previously reported as compensation in the
Summary Compensation Tables for fiscal years 2007, 2008, and
2009.
Supplemental
Savings Plan
All of the NEOs were eligible to participate in the Supplemental
Savings Plan in fiscal 2010. Only Mr. OConnell
elected to defer compensation into the Supplemental Savings Plan
for 2010. Amounts reported in Column (B) for
Ms. Sullivan represent deferrals made in 2010 based on her
2009 deferral election.
A participant may voluntarily elect to defer 1% to 60% of his or
her compensation to the Supplemental Savings Plan. Under the
SSP, compensation means salary and bonus paid during the plan
year. Deferrals under the SSP are in addition to the pre-tax
contributions, if any, that the participant makes to the RSVP.
All amounts credited under the Supplemental Savings Plan are
immediately vested.
Prior to February 2009, a participant received matching
contributions under the Supplemental Savings Plan equal to 50%
of his or her pre-tax deferrals up to 6% of his or her
compensation deferred less the amount of matching contributions
made to the RSVP on the participants behalf. However, in
February 2009, the decision was made to suspend matching
contributions on a going-forward basis under both the RSVP and
the Supplemental Savings Plan. In January 2010, the Company
recommenced making matching contributions under the RSVP at 50%
of the prior contribution level but not to the Supplemental
Savings Plan. Participants make deemed investments of their
hypothetical account balances (this plan is not
funded). These hypothetical accounts could be
invested in any combination of the following funds during fiscal
2010:
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Nationwide NVIT Money Market Class V
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Nationwide NVIT Government Bond Class I
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PIMCO VIT Real Return Admin Shares
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PIMCO VIT Low Duration Admin Shares
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JP Morgan NVIT Balanced Class I
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T. Rowe Price Equity Income Class II
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Dreyfus Stock Index Initial Shares
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Oppenheimer Capital Appreciation VA Non-Service
Shares
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Goldman Sachs VIT Mid Cap Value
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Fidelity VIP III Mid Cap Service Class
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T. Rowe Price Mid Cap Growth Class II
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Nationwide Multi-Manager NVIT Small Company
Class I
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Dreyfus VIF International Value Initial Shares
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AIM V.I. International Growth Series I
Shares
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Van Eck WIT Worldwide Emerging Markets Initial Class
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The rate of return earned on the NEOs hypothetical account
balance is based on the actual performance of the funds in which
he or she is deemed invested. The weighted average rate of
return for the NEOs in fiscal 2010 was 17.04%. The participant
may change his or her choice of funds at any time.
A participant may elect to have his or her account paid
(a) as a scheduled in-service distribution, as described in
the next paragraph, or (b) upon termination from employment
as a result of retirement or disability as a lump sum or equal
annual installments over 2 to 10 years, paid or commencing
to be paid six months following employment termination. If a
participants employment with us ends for a reason other
than retirement (having attained age 55
41
with 10 years of service) or disability, the
participants account will be paid in a lump sum six months
following termination from employment without regard to any
election of installment payments. If, however, a participant
terminates employment as a result of retirement, disability or
otherwise and has an in-service distribution scheduled to be
paid to him or her within the six months prior to distribution
(or commencement of distribution) of his or her account, then
the previously scheduled in-service distribution will still be
paid. In addition, if a participant held a vested account
balance under the SSP as of December 31, 2004, that amount
is deemed grandfathered and is not subject to the
six month delay of payment following termination. Of all of the
NEOs currently eligible to participate in the Supplemental
Savings Plan, Mr. OConnell is the only one who would
currently be eligible for a retirement distribution or holds
grandfathered amounts under the SSP.
A participant may elect to receive an in-service scheduled
distribution to commence no earlier than three years after the
beginning of the year in which the deferrals are made to the
Supplemental Savings Plan. A participant may elect to have his
or her scheduled in-service distribution paid in a lump sum or
five annual installments. A participant may also receive a
distribution earlier than initially elected in the event of an
unforeseeable emergency.
Deferred
Compensation Plan
All of the NEOs were eligible to participate in the Deferred
Compensation Plan in fiscal 2010; however, none of the NEOs
deferred compensation into the Deferred Compensation Plan in
fiscal 2010.
A participant may defer 5% to 75% of annual gross salary. Gross
salary is base compensation excluding bonuses and incentive
compensation. A participant may also defer 5% to 100% of the
amounts paid in the form of discretionary bonuses or incentive
compensation. All amounts credited under the Deferred
Compensation Plan are immediately vested. We have not
historically made any matching contributions under the Deferred
Compensation Plan.
Participants make deemed investments of their hypothetical
account balances in any combination of the funds that are listed
under Supplemental Savings Plan above. The rate of
return earned on the NEOs hypothetical account balance is
based on the actual performance of the funds in which he or she
is deemed vested. The weighted average rate of return for the
NEOs in fiscal 2010 was 17.04%. The participant may change
investment choices at any time.
A participant may elect to have his or her account paid
(a) as a scheduled in-service distribution, as described in
the next paragraph, or (b) upon termination from employment
as a result of retirement or disability as a lump sum or equal
annual installments over 2 to 10 years, paid or commencing
to be paid six months following employment termination. If a
participants employment with us ends for a reason other
than retirement (having attained age 55 with 10 years
of service) or disability, the participants account will
be paid in a lump sum six months following termination from
employment without regard to any election of installment
payments. If, however, a participant terminates employment as a
result of retirement, disability or otherwise and has an
in-service distribution scheduled to be paid to him or her
within the six months prior to distribution (or commencement of
distribution) of his or her account, then the previously
scheduled in-service distribution will still be paid. In
addition, if a participant held a vested account balance under
the DCP as of December 31, 2004, that amount is deemed
grandfathered and is not subject to the six month
delay of payment following termination. Of all of the NEOs
currently eligible to participate in the Deferred Compensation
Plan, Mr. OConnell is the only one who would
currently be eligible for a retirement distribution or holds
grandfathered amounts under the DCP.
A participant may elect to receive an in-service scheduled
distribution to commence no earlier than three years after the
beginning of the year in which the deferrals are made to the
Deferred Compensation Plan. A participant may elect to have his
or her scheduled in-service distribution paid in a lump sum or
five annual installments. A participant may also receive a
distribution earlier than initially elected in the event of an
unforeseeable emergency.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
Employment
Agreement for Trudy F. Sullivan
The Company and Ms. Sullivan entered into an employment
agreement when the Board appointed Ms. Sullivan to the
position of President and Chief Executive Officer and a member
of our Board of Directors. The term of her
42
employment agreement has an initial term ending at the end of
our 2011 fiscal year, with one-year automatic renewal terms
unless six months notice is provided by either party. It
was also agreed that Ms. Sullivan will be nominated as a
director each year during the term of her agreement.
Ms. Sullivans agreement sets her base annual salary
at $1,000,000, which is to be reviewed annually for potential
increases. Ms. Sullivans agreement also provided for
an annual incentive award opportunity of 120% of base salary. In
February 2011, Ms. Sullivans annual target incentive
award opportunity was increased to 150% of base salary. As a
special inducement award and make-whole payment, upon employment
commencement in 2007, Ms. Sullivan received a cash payment
of $3,052,000. Ms. Sullivan is eligible to participate in
our equity plan and any other long-term incentive plan for our
senior executives that may be established.
As initial long-term equity incentive inducement awards,
Ms. Sullivan was granted (i) 350,000 shares of
restricted stock on the first day of her employment, which
vested in increments of 25%, 25% and 50% over a three-year
period and (ii) an option to purchase 325,000 shares
at an exercise price of $22.70 per share, which was the NYSE
closing price of Talbots common stock on the date of the option
grant. The stock option included a tandem stock-settled stock
appreciation right feature exercisable solely by us. The stock
option vested in three equal annual installments on the first
through third anniversaries of the grant date and has a term of
eight years. Ms. Sullivans sign-on restricted stock
and option grants have vested in full.
Under her agreement, annual-cycle equity awards under the equity
plan will generally be made on a basis at least as favorable to
Ms. Sullivan as the annual equity grants being made at the
same time to the other of our senior executives as may be
approved by the Compensation Committee.
Pursuant to her agreement, Ms. Sullivan is eligible to
participate in all benefit plans generally available to our
senior executives as well as life insurance coverage of two
times base salary. She is also entitled to certain perquisites
(including commuting expense between New York and our
headquarters and a housing allowance) up to $250,000 per annum.
If her employment is terminated without cause or for good
reason, Ms. Sullivan is entitled to receive a separation
allowance equal to two times base salary plus two times target
bonus under our annual incentive plan payable over a
24-month
severance period, and continued participation in our medical,
dental, long-term disability and life insurance programs for up
to 24 months. Ms. Sullivan will also be entitled to
(i) any annual incentive award earned but not yet paid for
any completed full fiscal year immediately preceding the
employment termination date and (ii) if termination occurs
prior to the end of any fiscal year, a pro rata bonus for the
fiscal year in which employment terminates determined and paid
based on actual performance achieved for that fiscal year.
If Ms. Sullivans employment is terminated without
cause or for good reason within 24 months following a
change-in-control, she will receive a lump sum separation
allowance, subject to Section 409A, equal to two times base
salary plus two times target bonus under our annual incentive
plan, and continued participation in our medical, dental,
long-term disability and life insurance programs for up to
24 months. Ms. Sullivan will also be entitled to
(i) any annual incentive award earned but not yet paid for
any completed full fiscal year immediately preceding the
employment termination date and (ii) if termination occurs
prior to the end of any fiscal year, a pro rata bonus for the
fiscal year in which employment terminates determined and paid
based on actual performance achieved for that fiscal year. Upon
any change-in-control, all then outstanding stock options/SARs,
restricted stock and restricted stock unit awards vest in full.
She would also be entitled to a gross up in connection with any
parachute payment excise tax under Internal Revenue Code
Section 4999 for payments in connection with a
change-in-control, such that she would be in the same after-tax
position she would have been had no excise tax been imposed,
subject to a limited cutback of payments to her under certain
conditions.
In addition, upon termination without cause or for good reason
within the initial
4
1
/
2
year term of the agreement or any failure of us to renew the
agreement at the end of the initial
4
1
/
2
year term other than for cause, all then unvested outstanding
stock options/SARs would automatically vest and all then
unvested restricted stock or restricted stock unit awards would
continue to vest for 24 months.
Our failure to renew the agreement at the end of any term other
than for cause, normal retirement, death or disability will be
considered a termination without cause. Ms. Sullivans
failure to renew the agreement at the end of
43
any term other than for normal retirement or good reason will be
treated as a voluntary termination by Ms. Sullivan without
good reason. Either party may voluntarily terminate employment
on or after normal retirement age of 65.
Ms. Sullivan has agreed to refrain from solicitation or
hiring of our personnel for 18 months following termination
of employment, and for 18 months following any employment
termination not to engage in a competitive business. In
addition, upon a breach of the non-competition or
non-solicitation covenants, we would have the right to terminate
any severance payments and benefits and to recover any severance
payments and benefits previously paid.
Under Ms. Sullivans agreement, the term
cause means, generally, (i) the
executives conviction of, or entrance of a plea of guilty
or nolo contendere to, a felony under federal law or state law;
(ii) fraudulent conduct by the executive in connection with
our business affairs; (iii) theft, embezzlement, or other
criminal misappropriation of funds by the executive (other than
good faith expense account disputes or de minimus amounts);
(iv) the executives willful refusal to materially
perform her executive duties; (v) the executives
willful misconduct, which has, or would have if generally known,
a materially adverse effect on the business or our reputation;
or (vi) the executives material breach of a covenant,
representation, warranty or obligation under her employment
agreement.
Good reason means, generally, without the
executives written consent (i) a reduction by us in
the executives base salary or target bonus, or a breach of
our obligations with regard to certain perquisites,
(ii) the Board materially reduces the executives
authority, responsibilities or duties such that the executive no
longer has the title of, or serves or functions as, our chief
executive officer, (iii) we fail to maintain an annual and
long-term incentive program for senior executives in which the
executive participates; (iv) failure of the Board to
nominate the executive for election to the Board of Directors at
an annual meeting of shareholders or failure of the executive to
have been elected by the shareholders to the Board at any time;
(v) our requiring the executive to be based at a location
in excess of thirty-five miles from the location of our
principal executive office, except for required travel on our
business; (vi) we fail to obtain the written assumption of
its obligations under her employment agreement by a successor
not later than the consummation of a merger, consolidation or
our sale; or (vii) a material breach by us of our
obligations under the employment agreement; which, as to each
event, is not remedied by us within 30 days of receipt of
written notice. The executive may only exercise her right to
terminate for good reason within 120 days immediately
following the occurrence of any of these events.
Change-in-control
is defined in our 2003 Executive Stock Based Incentive Plan and
means, generally, (i) any person or persons (other than us
or any of our subsidiaries or AEON or any of its subsidiaries or
affiliates) acquires more than 25 percent of our
outstanding voting shares and no other person or persons owns a
greater percentage of our voting shares or (ii) individuals
who presently make up our Board or who become members of our
Board with the approval of the existing Board cease to be at
least a majority of the Board.
The Companys employment agreement with Ms. Sullivan,
which was entered into in connection with her initial hiring in
2007, provided that if the Company materially reduced or
eliminated the defined benefit SERP, then the Company would
provide a substantially comparable benefit in replacement. In
February 2009, the Company determined to freeze our Retirement
Plan and the SERP, effective as of May 1, 2009. On
June 18, 2009, in response to the freeze, the Company and
Ms. Sullivan entered an amendment to her employment
agreement pursuant to which Ms. Sullivan waived and
released all claims to future benefit accruals under both the
Retirement Plan and the SERP in exchange for the Company making
six equal payments of $200,000 over six months to
Ms. Sullivan.
Employment
Agreement for Michael Scarpa
Michael Scarpa was appointed as our Chief Operating Officer
effective as of December 4, 2008 and assumed the duties of
Chief Financial Officer on January 5, 2009. Mr. Scarpa
also serves as our Treasurer.
Mr. Scarpas employment agreement set his base salary
at $775,000 per year, which is to be reviewed annually for
potential increases. Mr. Scarpa also received a $150,000
signing bonus at the commencement of his employment. Under his
agreement, Mr. Scarpa is eligible for a target annual
incentive award opportunity of 100% of base salary and
Mr. Scarpa is also eligible to participate in our equity
plan.
As initial long-term equity incentive inducement awards,
Mr. Scarpa was granted (i) 125,000 shares of
restricted stock, vesting 25% on December 4, 2009, 25% on
December 4, 2010, and 50% on December 4, 2011 and
44
(ii) an option to purchase 75,000 shares at an
exercise price of $2.00 per share, which was the NYSE closing
price of our common stock on the date of the option grant. The
stock option vests in three equal annual installments on the
first through third anniversaries of the grant date and has a
term of ten years.
Pursuant to his agreement, Mr. Scarpa is eligible to
participate in all benefit plans generally available to our
senior executives, and is entitled to certain perquisites
commensurate with the chief operating officer level (including
an automobile allowance and reimbursement of financial planning
costs). In addition, Mr. Scarpa was eligible for a
relocation allowance during the first two years of his
employment. Mr. Scarpa is also entitled to receive a
housing and commuting allowance for him and his spouse of
$10,000 per month unless and until he relocates to the Hingham,
Massachusetts area. In the event Mr. Scarpa is terminated
without cause or due to death or disability, or he terminates
his employment for good reason, we will assume responsibility
for lease payments for his Boston area housing rental for a
period of up to one year immediately following the termination
(not to exceed an amount equal to 12 months of his
above-stated housing and commuting monthly allowance).
If employment is terminated without cause or for good reason,
Mr. Scarpa is entitled to receive a separation allowance
equal to 1.5 times base salary payable over an
18-month
severance period, as well as continued participation, including
any required employee contribution, in our medical and dental
programs for up to 18 months.
Pursuant to his
change-in-control
agreement, in the event that Mr. Scarpas employment
is terminated without cause or for good reason (as defined in
the agreement) within 12 months following a
change-in-control, he will receive a lump sum separation
allowance, subject to Section 409A, equal to his annual
base salary plus his target bonus under our annual incentive
plan within 30 days after the effective date of such
termination. He will also be entitled to continued participation
in our benefit programs for up to one year following
termination. Under Mr. Scarpas
change-in-control
agreement,
change-in-control
has the same meaning as it does under our 2003 Executive Stock
Based Incentive Plan.
Mr. Scarpa has agreed to refrain from solicitation or
hiring of our personnel for one year following termination of
employment, and for 18 months following any employment
termination, not to engage in a competitive business. In
addition, 10 days following written notice of an uncured
material breach of Mr. Scarpas confidentiality,
non-competition or non-solicitation covenants, we have the right
to terminate any severance payments and benefits and the right
to recover any severance payments and benefits previously paid
to him. In the event that Mr. Scarpas employment is
terminated without cause within 12 months following a
change-in-control and he is paid severance pursuant to and as
calculated under the terms of the change-in-control agreement or
any amendment or successor agreement thereto, Mr. Scarpa
has agreed to abide by the non-competition covenant for
(i) a period of 12 months following such termination
of employment, or (ii) if greater, the period of time not
to exceed 18 months that is the same as the period of time
used to calculate the salary portion of his severance payment,
even if such severance payment is paid in a lump sum.
Under Mr. Scarpas agreement, the term
cause means, generally, (i) any material breach
by the executive of the employment agreement or any other
agreement with us (which is not cured within 30 days
following written notice from us), (ii) any act or omission
by the executive which may have a material and adverse effect on
our business or on the executives ability to perform
services for us, including, without limitation, the commission
of any crime involving moral turpitude or any felony, or
(iii) any material misconduct in connection with our
business or affairs or intentional neglect by the executive in
performing his assigned responsibilities.
Good reason generally means, without the
executives written consent (i) a substantial adverse
reduction in the executives duties, other than during any
period of illness or incapacity, such that the executive no
longer serves as a principal officer overseeing our financial
matters and our major general operating matters; or (ii) a
material reduction in the executives annual base salary.
Employment
Agreement for Michael Smaldone
Michael Smaldone joined us as our Chief Creative Officer in
December 2007. He received a $400,000 signing bonus, payable in
two increments as follows: $150,000 upon commencement of his
employment, and $250,000 in March 2008.
45
The employment agreement set Mr. Smaldones initial
base salary at $725,000 per year, which is to be reviewed
annually for potential increases. Under his agreement, he was
eligible for an annual incentive award opportunity of 50% of
base salary, and participation for fiscal 2008 was guaranteed at
a minimum of $362,500. In February 2008,
Mr. Smaldones annual incentive award opportunity was
increased to 90% of base salary.
Mr. Smaldone is also eligible to participate in our equity
plan. As initial long-term equity incentive inducement awards,
Mr. Smaldone was granted (i) 35,000 shares of
restricted stock, vesting in annual one-quarter increments on
each of the first four anniversaries of the grant date
(December 17, 2007) and (ii) an option to
purchase 15,000 shares at an exercise price of $12.85 per
share, which was the NYSE closing price of our common stock on
the date of the option grant. The stock option vested in three
equal annual installments on the first through the third
anniversaries of the grant date and has a term of ten years.
Pursuant to his agreement, Mr. Smaldone is eligible to
participate in all benefit plans generally available to our
senior executives and is entitled to certain perquisites
commensurate with the executive vice president level (including
an annual automobile allowance and reimbursement of financial
planning costs).
If employment is terminated without cause or for good reason
Mr. Smaldone is entitled to receive a separation allowance
equal to 1.5 times base salary payable over an
18-month
severance period, as well as continued participation, including
any required employee contribution, in our medical and dental
programs for up to 18 months.
Pursuant to his
change-in-control
agreement, in the event that Mr. Smaldones employment
is terminated without cause (as defined in the agreement) within
12 months following a change-in-control, he will receive a
lump sum separation allowance, subject to Section 409A,
equal to his annual base salary plus his target bonus under our
annual incentive plan within 30 days after the effective
date of such termination. He will also be entitled to continued
participation in our benefit programs for up to one year
following termination. Under Mr. Smaldones
change-in-control
agreement,
change-in-control
has the same meaning as it does under our 2003 Executive Stock
Based Incentive Plan.
Mr. Smaldone has agreed to refrain from solicitation or
hiring of our personnel for one year following termination of
employment and for 18 months following any employment
termination, not to engage in a competitive business. In
addition, 30 days following written notice of an uncured
material breach of the non-competition or non-solicitation
covenants, we have the right to terminate severance payments and
benefits.
Under Mr. Smaldones employment agreement, the term
cause means, generally, (i) any material breach
by the executive of the employment agreement or any other
agreement with us (which is not cured within 30 days
following written notice from us), (ii) any act or omission
by the executive which may have a material and adverse effect on
our business or on the executives ability to perform
services for us, including, without limitation, the conviction
of or plea of nolo contendere for any crime involving moral
turpitude or any felony, or (iii) any material misconduct
or material gross neglect of duties by the executive in
connection with our business or affairs.
Good reason generally means, without the
executives written consent, (i) a substantial adverse
reduction in the executives duties, other than during any
period of illness or incapacity, such that the executive no
longer has the title of, or serves, as a senior executive of a
major branded business; (ii) a material reduction in the
executives annual base salary; or (iii) a requirement
that the executives principal place of business be at an
office located more than 35 miles from the site of the
executives current principal place of business, except for
relocation to our principal headquarters location or to the New
York metropolitan area or for required travel on business.
Employment
Agreement for Gregory Poole
Gregory Poole joined us as Executive Vice President, Chief
Supply Chain Officer in June 2008.
Mr. Pooles employment agreement set his base salary
at $575,000 per year, to be reviewed annually for potential
increases. Mr. Poole also received a $110,000 signing bonus
at the commencement of his employment. Under his agreement,
Mr. Poole is eligible for a target annual incentive award
opportunity of 75% of base salary and participation for fiscal
2008 was guaranteed at a minimum of $216,625 and is also
eligible to participate in our equity plan.
46
As initial long-term equity incentive inducement awards,
Mr. Poole was granted (i) 35,000 shares of
restricted stock, vesting 25% on June 23, 2009, 25% on
June 23, 2010, and 50% on June 23, 2011 and
(ii) an option to purchase 15,000 shares at an
exercise price of $12.31 per share, which was the NYSE closing
price of our common stock on the date of the option grant. The
stock option vests in three equal annual installments on the
first through third anniversaries of the grant date and has a
term of ten years.
Pursuant to his agreement, Mr. Poole is eligible to
participate in all benefit plans generally available to our
senior executives and is entitled to certain perquisites
commensurate with the executive vice president level (including
an annual automobile allowance and reimbursement of financial
planning costs). In addition, Mr. Poole was eligible for
reimbursement of relocation expenses incurred during the year of
employment, including up to six months of temporary living, and
a supplemental $75,000 relocation allowance.
If employment is terminated without cause or for good reason,
Mr. Poole is entitled to receive a separation allowance
equal to 1.5 times base salary payable over an
18-month
severance period, as well as continued participation, including
any required employee contribution, in our medical and dental
programs for up to 18 months.
Pursuant to his
change-in-control
agreement, in the event that Mr. Pooles employment is
terminated without cause (as defined in the agreement) within
12 months following a change-in-control, he will receive a
lump sum separation allowance, subject to Section 409A,
equal to his annual base salary plus his target bonus under our
annual incentive plan within 30 days after the effective
date of such termination. He will also be entitled to continued
participation in our benefit programs for up to one year
following termination. Under Mr. Pooles
change-in-control agreement, change-in-control has
the same meaning as it does under our 2003 Executive Stock Based
Incentive Plan.
Mr. Poole has agreed to refrain from solicitation or hiring
of our personnel for one year following termination of
employment, and for 18 months following any employment
termination, not to engage in a competitive business. In
addition, in the event of Mr. Pooles material breach
of the restrictive covenants in his agreement, we have the right
to terminate any severance payments and benefits and the right
to recover any severance payments and benefits previously paid
to him. In the event that Mr. Pooles employment is
terminated without cause within 12 months following a
change-in-control
and he is paid severance pursuant to and as calculated under the
terms of the
change-in-control
agreement or any amendment or successor agreement thereto,
Mr. Poole has agreed to abide by the non-competition
covenant for (i) a period of 12 months following such
termination of employment, or (ii) if greater, the period
of time not to exceed 18 months that is the same as the
period of time used to calculate the salary portion of his
severance payment, even if such severance payment is paid in a
lump sum.
Under Mr. Pooles agreement, the term
cause means, generally, (i) any material breach
by the executive of the employment agreement or any other
agreement with us (which is not cured within 45 days
following written notice from us), (ii) any act or omission
by the executive which may have a material and adverse effect on
our business or on the executives ability to perform
services for us, including, without limitation, the commission
of any crime involving moral turpitude or any felony, or
(iii) any material misconduct or material neglect of duties
by the executive in connection with our business or affairs.
Good reason generally means, without the
executives written consent (i) a substantial adverse
reduction in the executives duties, other than during any
period of illness or incapacity, such that the executive no
longer has the title of, or serves, as a senior executive of a
major branded business of the Company; or (ii) a material
reduction in the executives annual base salary;
(iii) a requirement that the executives principal
place of business be at an office located more than
35 miles from the site of the executives current
principal place of business, except for required travel for
Company business; or (iv) our material breach of our
obligations under his offer letter.
Severance
Agreement and
Change-in-Control
Agreement for Richard T. OConnell, Jr.
Mr. OConnell has a severance agreement with the
Company dated April 30, 2009. Under this agreement, if
Mr. OConnells employment is terminated without
cause or for good reason he is entitled to receive a separation
allowance equal to 1.5 times base salary payable over an
18-month
severance period, as well as continued participation, including
any required employee contribution, in our medical and dental
programs for up to 18 months.
47
Mr. OConnell (along with two other former executives)
also participates in our separate executive medical plan which
provides for continuation of medical and dental coverage for
Mr. OConnell and his spouse during retirement.
Mr. OConnell currently satisfies the eligibility
conditions for retiree medical and dental coverage under this
separate executive medical plan and would continue to be covered
under the separate executive medical plan upon any separation
from employment with the Company. During retirement, upon
becoming eligible for Medicare, Medicare will become the primary
payer under the plan.
Under this agreement, cause means, generally,
(i) any material breach by the executive of the agreement
or any other agreement to which both the executive and us are
parties, (ii) any act or omission to act by the executive
which may have a material and adverse effect on our business or
on the executives ability to perform services for us,
including the commission of any crime involving moral turpitude
or any felony, or (iii) any material misconduct or material
neglect of duties by the executive in connection with our
business or affairs. Good reason generally means a
termination based on one or more of the following events
occurring without the executives express written consent:
(a) a substantial adverse reduction in the executives
overall responsibilities as an executive; (b) a material
reduction by us in the executives annual base salary as in
effect on the date of their agreement or as the same may be
increased from time-to-time; or (c) our requiring that the
Executives principal place of business be at an office
located more than 35 miles from the site of the
executives current principal place of business, except for
required travel on our business.
Mr. OConnell has a separate
change-in-control
agreement. This agreement was entered into in November 1993 in
connection with our initial public offering. In the event there
is a change-in-control and within the following 12 months
Mr. OConnells employment is terminated by us
without cause (as defined in the agreement), he would be
entitled to receive a lump sum separation allowance, subject to
Section 409A, equal to his annual base salary plus his
target bonus under our annual incentive plan within 30 days
after the effective date of such termination. In addition,
following a
change-in-control,
Mr. OConnell would be entitled to continued
participation in our benefit programs for up to one year after
termination. Under Mr. OConnells
change-in-control
agreement,
change-in-control
has the same meaning as it does under our 2003 Executive Stock
Based Incentive Plan.
Treatment
of Equity Upon Termination of Employment
For purposes of the table below under Estimated Severance
and Certain Other Post-Employment Payments and Benefits,
pursuant to the terms of our equity plan and our named executive
officers respective agreements with the Company,
(i) any unvested stock options held by our named executive
officers would be forfeited upon a termination of employment,
and the executive would have a specified period of time
following such termination to exercise any options which were
vested upon termination of employment, and (ii) any
unvested restricted stock held by a named executive officer upon
any termination of employment would be subject to the
Companys repurchase option, which means the unvested
shares would generally be forfeited. All unvested restricted
stock, restricted stock units and stock options automatically
vest in full upon any
change-in-control
as defined in our 2003 Executive Stock Based Incentive Plan. In
addition, any unvested portion of the restricted stock units
granted in connection with the BPW merger transaction would have
automatically vested in full upon a termination without cause,
termination for good reason, or due to death or disability
(these restricted stock units vested in full on April 7,
2011). Any special vesting provisions with respect to
outstanding equity awards held by our named executive officers
that differ from these general vesting provisions are described
above in this Potential Payments Upon Termination or
Change-in-Control narrative.
BPW
Merger Transaction
As described above under Corporate Governance,
effective April 7, 2010, in connection with the BPW merger
transaction, we are no longer a controlled company
due to the repurchase of AEON (U.S.A.)s majority stake
hold in the Company. This transaction did not trigger a
change-in-control event as defined in our equity
plans or as defined in any of our executives agreements
with the Company.
48
Estimated
Severance and Certain Other Post-Employment Payments and
Benefits
The following table shows the estimated payments and value of
benefits that we would provide to each of our NEOs who is
currently serving as our executive officer in the event of
employment termination, in each case assuming a hypothetical
employment separation date of January 29, 2011 (the last
day of our 2010 fiscal year). For this table, the market price
of our common stock is assumed to be $5.97 per share, which was
the NYSE closing price on January 28, 2011, the last
trading day prior to the end of our 2010 fiscal year. Certain
other assumptions made for purposes of presenting this
information are explained below.
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|
(F)
|
|
(G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Good
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change-in-
|
|
Within
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
Control
|
|
1 Year
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
Event
|
|
Following a
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or
|
|
Without
|
|
Change-in-
|
|
|
|
|
Voluntary
|
|
Voluntary
|
|
|
|
|
|
For Good
|
|
Employment
|
|
Control
|
|
|
|
|
Resignation
|
|
Retirement
|
|
Disability
|
|
Death
|
|
Reason
|
|
Termination
|
|
Event(1)
|
|
Trudy F. Sullivan
|
|
Salary(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
MIP(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400,000
|
|
|
|
|
|
|
|
2,400,000
|
|
|
|
Equity Acceleration(3)
|
|
|
|
|
|
|
|
|
|
|
522,882
|
|
|
|
522,882
|
|
|
|
973,172
|
|
|
|
2,537,312
|
|
|
|
2,537,312
|
|
|
|
Incremental Non-Qualified Pension(4)
|
|
|
|
|
|
|
|
|
|
|
6,835
|
|
|
|
|
|
|
|
40,789
|
|
|
|
|
|
|
|
40,789
|
|
|
|
Incremental Medical, Dental, etc.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,056
|
|
|
|
|
|
|
|
74,056
|
|
|
|
Auto Benefit(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
529,717
|
|
|
|
522,882
|
|
|
|
5,488,017
|
|
|
|
2,537,312
|
|
|
|
7,052,157
|
|
|
Michael Scarpa
|
|
Salary(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,237,500
|
|
|
|
|
|
|
|
825,000
|
|
|
|
MIP(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
825,000
|
|
|
|
Equity Acceleration(3)
|
|
|
|
|
|
|
|
|
|
|
435,714
|
|
|
|
435,714
|
|
|
|
435,714
|
|
|
|
1,970,214
|
|
|
|
1,970,214
|
|
|
|
Incremental Non-Qualified Pension(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental Medical, Dental, etc.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,213
|
|
|
|
|
|
|
|
14,142
|
|
|
|
Housing
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
120,000
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
Auto Benefit(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,000
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
555,714
|
|
|
|
555,714
|
|
|
|
1,814,427
|
|
|
|
1,970,214
|
|
|
|
3,655,356
|
|
|
Michael Smaldone
|
|
Salary(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,125,000
|
|
|
|
|
|
|
|
750,000
|
|
|
|
MIP(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
675,000
|
|
|
|
Equity Acceleration(3)
|
|
|
|
|
|
|
|
|
|
|
87,162
|
|
|
|
87,162
|
|
|
|
87,162
|
|
|
|
1,052,275
|
|
|
|
1,052,275
|
|
|
|
Incremental Non-Qualified Pension(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental Medical, Dental, etc.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,685
|
|
|
|
|
|
|
|
9,124
|
|
|
|
Auto Benefit(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,850
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
87,162
|
|
|
|
87,162
|
|
|
|
1,225,847
|
|
|
|
1,052,275
|
|
|
|
2,506,249
|
|
|
Richard T. OConnell, Jr.
|
|
Salary(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
787,500
|
|
|
|
|
|
|
|
525,000
|
|
|
|
MIP(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393,750
|
|
|
|
Equity Acceleration(3)
|
|
|
|
|
|
|
|
|
|
|
348,606
|
|
|
|
348,606
|
|
|
|
409,202
|
|
|
|
1,393,978
|
|
|
|
1,393,378
|
|
|
|
Incremental Non-Qualified Pension(4)
|
|
|
|
|
|
|
364,395
|
|
|
|
364,395
|
|
|
|
|
|
|
|
364,395
|
|
|
|
|
|
|
|
404,679
|
|
|
|
Incremental Medical, Dental, etc.(5)
|
|
|
|
|
|
|
662,559
|
|
|
|
662,559
|
|
|
|
331,280
|
|
|
|
662,559
|
|
|
|
|
|
|
|
663,612
|
|
|
|
Auto Benefit(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,850
|
|
|
|
TOTAL
|
|
|
|
|
|
|
1,026,954
|
|
|
|
1,375,560
|
|
|
|
679,886
|
|
|
|
2,223,656
|
|
|
|
1,393,978
|
|
|
|
3,400,869
|
|
|
49
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|
(F)
|
|
(G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Without
|
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|
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|
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|
Cause or
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|
|
|
|
|
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|
|
For Good
|
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|
|
|
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|
Reason
|
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|
|
|
|
|
Change-in-
|
|
Within
|
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|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
Control
|
|
1 Year
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
Event
|
|
Following a
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or
|
|
Without
|
|
Change-in-
|
|
|
|
|
Voluntary
|
|
Voluntary
|
|
|
|
|
|
For Good
|
|
Employment
|
|
Control
|
|
|
|
|
Resignation
|
|
Retirement
|
|
Disability
|
|
Death
|
|
Reason
|
|
Termination
|
|
Event(1)
|
|
Gregory Poole
|
|
Salary(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900,000
|
|
|
|
|
|
|
|
600,000
|
|
|
|
MIP(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000
|
|
|
|
Equity Acceleration(3)
|
|
|
|
|
|
|
|
|
|
|
87,162
|
|
|
|
87,162
|
|
|
|
87,162
|
|
|
|
670,157
|
|
|
|
670,157
|
|
|
|
Incremental Non-Qualified Pension(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental Medical, Dental, etc.(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,096
|
|
|
|
|
|
|
|
14,731
|
|
|
|
Auto Benefit(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,850
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
87,162
|
|
|
|
87,162
|
|
|
|
1,009,258
|
|
|
|
670,157
|
|
|
|
1,754,738
|
|
|
|
|
(1)
|
|
Under the terms of her employment agreement, Ms. Sullivan
would receive the benefits represented in column (G) if the
termination event occurred within two years following a
change-in-control.
|
|
|
|
As discussed above, if the employment of Mr. Scarpa,
Mr. Smaldone, Mr. Poole or Mr. OConnell
were terminated by us without cause, or in the case of
Mr. Scarpa, by him with good reason, on January 29,
2011 within one year following a
change-in-control
each executive would be entitled to the benefits under his
change-in-control
agreement. The amounts shown under column (G) represent the
benefit that each of these executives would receive under his
change-in-control
agreement. If the termination is without cause or, for
Mr. Scarpa also for good reason, following a
change-in-control
while each executive is still a party to his Severance Agreement
as currently in effect, then under the terms of the Severance
Agreement, each executive would alternatively be entitled to the
more favorable amount, if any, provided under the Severance
Agreement as compared to the amounts provided under his
change-in-control
agreement.
|
|
(2)
|
|
Each NEOs annual salary earned through fiscal 2010 year end
is reported in the Summary Compensation Table and is not
included in the above table.
|
|
(3)
|
|
The amount for Equity Acceleration represents the
total-in-the-money
value of unvested stock options plus the market value of
unvested restricted stock and restricted stock unit awards held
by each NEO. Any unvested options, restricted stock or
restricted stock units held by our NEOs would have become vested
on an accelerated basis on January 29, 2011 as a result of
a change-in-control as of that date (this value would vest upon
a change-in-control even if the executives employment is
not terminated) and, in the case of Ms. Sullivan, upon
certain termination events specified in her employment
agreement. The restricted stock units granted in connection with
the BPW merger transaction vest upon termination without cause
or for good reason or due to death or disability.
|
|
(4)
|
|
The present value of the accumulated pension benefits under our
non-qualified defined benefit pension plan for each of the NEOs
can be found in column (D) of the Pension Benefits
for Fiscal 2010 table above. The amounts shown here
represent the incremental value associated with the
executives commencement of payout of his or her accrued
pension benefit as a result of termination of employment prior
to normal or early retirement age, as applicable, taking into
account benefit reductions in accordance with the terms of our
defined benefit pension plans. As described above, benefit
accrual under our defined benefit pension plans was frozen in
2009, and as such, no additional years of service credit for
benefit accrual purposes are factored into any amounts reported
in this row, even where a NEO might otherwise have been entitled
to such additional service credit pursuant to an agreement with
the Company.
|
|
|
|
Under Ms. Sullivans employment agreement, a
termination without cause or for good reason before or within
two years following a
change-in-control,
or due to death or disability would trigger the vesting of her
accrued pension benefits. Pursuant to the June 2009 amendment to
her employment agreement, in return for the replacement benefit
to which she was entitled due to the elimination of the SERP,
Ms. Sullivan waived any future rights to benefit accrual
under any defined benefit pension; however, she still holds an
accrued benefit
|
50
|
|
|
|
|
under the plan representing benefit accrual until the February
2009 freeze of the plans. The value of any incremental benefit
associated with the accelerated vesting of this accrued benefit
is reflected in columns (C), (E) and (G) (no incremental
benefit arises with respect to death due to the fact that any
accrued benefit is payable as a 50% joint and survivor benefit
to the beneficiary).
|
|
|
|
As described under Potential Payments Upon Termination or
Change-in-Control above, under their change-in-control
agreements, Mr. Smaldone and Mr. OConnell would
each be entitled to continued participation for one year
following a qualifying termination in any benefit programs which
they participated in prior to termination. As such, each would
have been entitled to an additional year of benefit accrual
under our non-qualified supplemental executive retirement plan;
however, due to the freeze on benefit accrual under our defined
benefit pension plans, no additional year of benefit accrual is
reflected in column (G) for these NEOs.
|
|
|
|
No values are reflected for Mr. Scarpa or Mr. Poole
because they are not eligible participants in our defined
benefit pension plans. No values are reflected for
Mr. Smaldone because he is not vested in his benefits under
our defined benefit pension plans and would not be vested even
taking into account an additional year of vesting service to
which he might otherwise be entitled under his change-in-control
agreement.
|
|
(5)
|
|
As discussed above under Potential Payments Upon
Termination or Change-in-Control, each of our NEOs is
entitled to continuation of certain welfare and other benefits
for a specified period of time following certain termination
events pursuant to his or her severance arrangements with the
Company.
|
|
|
|
Mr. OConnell (along with two other former executives)
participates in our separate executive medical plan.
Mr. OConnell currently satisfies the eligibility
conditions for retiree medical and dental coverage under this
separate executive medical plan and would continue to be covered
under the separate executive medical plan upon any separation
from employment with the Company. However, because
Mr. OConnell is the only current employee who is a
participant in this separate executive medical plan, we have
provided the present value of Mr. OConnells
benefits under the plan as of January 29, 2011. The value
provided under column (G) for Messrs. OConnell,
Scarpa, Smaldone and Poole also reflects the value attributable
to continuation of life insurance and long-term disability
coverage for twelve months following termination of employment
pursuant to the terms of his
change-in-control
agreement.
|
|
(6)
|
|
The amount in Auto Benefit represents continued auto
benefits for one year following employment termination in
accordance with the executives
change-in-control
agreement.
|
The timing of the payment of some compensation and benefits may
be restricted under IRC Section 409A, which regulates
deferred compensation. Some amounts payable to any of the NEOs
upon employment termination may be delayed for six months after
termination.
The amounts in the Estimated Severance and Certain Other
Post-Employment Payments and Benefits table do not include
retirement amounts which a NEO may be entitled to receive under
our Retirement Plan or Supplemental Executive Retirement Plan.
Those retirement amounts are provided above in the Pension
Benefits for Fiscal 2010 section of this Proxy Statement.
The amounts in the above table also do not include any amounts
under our RSVP 401(k) plan. The amounts in the above table also
do not include the amounts under our Supplemental Savings Plan
or Deferred Compensation Plan, which are provided above in the
Non-Qualified Deferred Compensation for Fiscal 2010
section of this Proxy Statement.
The above table only provides estimates of amounts payable and
the value of benefits under existing employment arrangements and
plans and in the circumstances shown. The payments and benefits
actually provided would be materially impacted by when any
employment separation or change-in-control in fact occurred, the
form and amount of consideration payable in any
change-in-control, the market price of our common stock at the
time of a change-in-control or other termination event, and many
other factors. Payments and benefits are governed by the terms
of our plans and contracts with the NEOs, which may be subject
to interpretation and future modification.
51
DIRECTOR
COMPENSATION
Processes,
Procedures and Rationale
The Corporate Governance and Nominating Committee is responsible
for reviewing and making recommendations to the Board of
Directors on the compensation of our non-management directors.
As part of this process, the Committee regularly reviews the
structure, composition and operation of the Board and its
committees and annually solicits comments from all directors
concerning the Boards performance. The Committee also
considers the amount of time spent by our directors in their
duties for us. The Board, in consultation with the Corporate
Governance and Nominating Committee, then determines the form
and amount of non-management directors compensation.
Until April 2010, our non-employee directors were compensated
pursuant to the director compensation program approved in
September 2008. Under this program, our non-employee directors
were entitled to the following compensation:
|
|
|
|
|
Annual cash retainer for each non-employee director of $28,000;
|
|
|
|
Annual cash retainer for the Non-Executive Chairman of the Board
of $10,000;
|
|
|
|
Annual cash retainer for the Lead Independent Director of
$10,000;
|
|
|
|
Annual cash retainer for service as a Committee Chair of $5,000
(no cash retainer was provided for service as a Committee
member);
|
|
|
|
Annual equity grants consisting of 4,000 restricted stock units
(RSUs) and 3,000 stock options on April 1st of each
year; and
|
|
|
|
One-time equity grant of 20,000 options for newly appointed or
elected directors.
|
At the time the above compensation program was established, the
Board contingently approved further increases in the annual cash
retainers for service as a Board member, Committee Chair or
Committee member as part of the overall recommendation by Pearl
Meyer & Partners to address the relatively low
compensation level of our non-management directors. However, in
February 2009, the Board determined not to implement any of the
proposed increases and concluded that it would revisit the
possible increases at an appropriate time in the future.
Following the announcement of the BPW merger transaction in
December 2009, the Corporate Governance and Nominating Committee
reviewed our non-employee director compensation program, with
the assistance of Pearl Meyer & Partners, taking into
account that the Board would be recruiting new Board members in
connection with the BPW merger transaction and would be
overseeing a Company that was no longer majority-owned. Pearl
Meyer & Partners provided an updated analysis of
marketplace data, including a comparison of our director
compensation program as compared to the director compensation
programs of the fourteen peer companies included in the peer
group used in determining compensation for our executives (for a
list of these companies, see above under 2010 Market
Positioning in the Compensation Discussion and Analysis).
Based on this analysis, the director compensation program
described below was recommended and approved by the Board in
April 2010 following the closing of the BPW merger transaction
(this brought the average total direct compensation of our
non-management directors to approximately the
44th percentile of the comparator group). With the
exception of retainer fees and equity awards, the program
remained unchanged.
Retainer
Fees
|
|
|
|
|
Each non-employee director receives an annual cash retainer of
$50,000;
|
|
|
|
The Non-Executive Chairman of the Board receives an annual cash
retainer of $10,000;
|
|
|
|
The Lead Independent Director receives an annual cash retainer
of $10,000;
|
|
|
|
The Chair of the Audit Committee receives an annual cash
retainer of $20,000;
|
|
|
|
The Chair of the Compensation Committee receives an annual cash
retainer of $15,000;
|
52
|
|
|
|
|
The Chair of the Corporate Governance and Nominating Committee
receives an annual cash retainer of $15,000; and
|
|
|
|
Each committee member of the Audit, Compensation and Corporate
Governance and Nominating Committees receives an annual cash
retainer of $10,000.
|
Should a non-employee director serve in more than one position,
he or she is entitled to receive the cash retainer for each such
position.
Equity
Awards
Commencing in fiscal 2010, each non-employee director also
receives the following equity grants on the second business day
following the filing of the Companys Annual Report on
Form 10-K
with the SEC:
|
|
|
|
|
RSUs with a fixed value of $50,000; and
|
|
|
|
Stock options with a fixed value of $50,000.
|
The number of RSUs granted to our directors is determined using
the closing market price on the grant date. RSUs vest one year
from the date of grant. Upon cessation of Board service for any
reason, unvested RSUs are forfeited unless otherwise determined
by the Board.
The number of options granted to our directors is determined
using the closing market price on the date of grant and the
applicable Black-Scholes valuation. The exercise price of the
options is equal to the closing market price on the date of
grant. Options vest in one-third increments over three
consecutive years on the first, second and third anniversaries
of the date of grant and expire ten years following the date of
grant.
Upon a directors retirement, death, or cessation of Board
service for any reason (other than removal for cause or a
directors unilateral decision to resign from the Board),
any unvested portion of an option will continue to vest
according to the same vesting schedule as would have applied had
Board service continued. Following a directors retirement,
death or other cessation of Board service for any reason (other
than removal for cause), the exercise period for any vested
options and any options which become vested following cessation
of Board service will be (i) three years following the
effective date of cessation of Board service or (ii) ninety
days following the vesting date of those particular option
shares which may vest following cessation of Board service,
whichever period is greater. Upon the cessation of Board service
for cause, any outstanding vested options will be exercisable
for a period of 90 days from the effective date of the
directors cessation of service. In no event, however,
shall any options be exercisable after the expiration date.
Director
Recruitment Awards
The Board also provides a one-time sign-on option grant of
20,000 stock options for newly-appointed or newly-elected
independent directors selected at the Boards initiative.
The exercise price of the options is equal to the closing market
price on the date of grant (which is the effective date of the
directors appointment or election to the Board). The
options vest in one-third increments over three consecutive
years on the first, second and third anniversaries of the date
of grant and expire ten years following the date of grant. There
is no post-service continued vesting for sign-on option grants
unless specifically approved by the Board in its discretion.
Upon the cessation of Board service for any reason (other than
removal for cause), any outstanding vested options will be
exercisable for a period of three years from the effective date
of the directors cessation of service. Upon the cessation
of Board service for cause, any outstanding vested portion of
the sign-on options will be exercisable for a period of
90 days from the effective date of the directors
cessation of service. In no event, however, shall the sign-on
options be exercisable after the expiration date.
Share
Ownership Requirement
All non-management directors are subject to a minimum share
ownership requirement. Each non-management director is required
to own beneficially a minimum of 5,000 shares of
Talbots common stock
and/or
RSUs
(together these are referred to as owned shares)
over a three year period from the date of first joining the
Board. Until a
53
director holds 5,000 owned shares, 2,000 RSUs are mandatorily
deferred in the first two years of Board service and 1,000 RSUs
in the third year of Board service and until the director
terminates service as a Board member.
Deferred
Compensation Program for Non-Management Directors
Non-management directors may voluntarily defer all or a portion
of their RSUs or cash retainers under the Directors Deferred
Compensation Plan. As described above, non-employee directors
are also subject to certain mandatory deferral requirements
until meeting the minimum share ownership requirement. No
earnings under the Directors Deferred Compensation Plan are
above market.
Personal
Benefits
Non-management directors are reimbursed for travel expenses
incurred in connection with attending meetings. Non-employee
directors are also entitled to the forty percent clothing
discount to which all employees are entitled.
DIRECTOR
SUMMARY COMPENSATION TABLE FOR FISCAL 2010
The table below summarizes the compensation paid by us to
non-employee directors for fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|
(F)
|
|
(G)
|
|
(H)
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
and Nonqualifed
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
Paid in
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
Cash
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Gary M. Pfeiffer
|
|
|
72,769
|
|
|
|
54,320
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177,089
|
|
Marjorie L. Bowen
|
|
|
47,747
|
|
|
|
50,000
|
|
|
|
279,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
376,947
|
|
John W. Gleeson
|
|
|
66,313
|
|
|
|
54,320
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,633
|
|
Andrew H. Madsen
|
|
|
47,747
|
|
|
|
50,000
|
|
|
|
279,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
376,947
|
|
Susan M. Swain
|
|
|
68,923
|
|
|
|
54,320
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,243
|
|
Tsutomu Kajita
|
|
|
7,538
|
|
|
|
54,320
|
|
|
|
29,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,768
|
|
Motoya Okada
|
|
|
7,538
|
|
|
|
54,320
|
|
|
|
29,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,768
|
|
Yoshihiro Sano
|
|
|
7,538
|
|
|
|
54,320
|
|
|
|
29,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,768
|
|
Isao Tsuruta
|
|
|
7,538
|
|
|
|
54,320
|
|
|
|
29,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,768
|
|
Name
(Column (A))
Ms. Sullivan, our President and Chief Executive Officer,
receives no separate compensation for her service as director
and is not included in this table. The compensation received by
Ms. Sullivan for service as our President and CEO is shown
in the Summary Compensation Table above. Effective as of the
closing of the merger between Talbots and BPW, which occurred on
April 7, 2010, Messrs. Kajita, Okada, Sano and Tsuruta
resigned as members of the Board of Directors, at which time any
unvested equity awards held by these directors were terminated
in accordance with the terms of those awards.
Fees
Earned or Paid in Cash (Column (B))
The amounts in this column reflect the cash retainers earned by
the directors during fiscal 2010.
Stock
Awards (Column (C))
Amounts shown reflect the grant date fair value computed in
accordance with FASB ASC Topic 718 for the RSU award granted to
each of our non-management directors in fiscal 2010. Amounts
shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. For RSUs, fair value is
calculated using the closing price of our common stock on the
grant date. Additional information concerning our accounting for
RSUs is included in Note 5 to our 2010
Form 10-K.
Dividends are taken into account in arriving at the fair value
of RSUs
54
and, therefore, any dividend equivalents paid on RSUs would not
be separately disclosed under column (G) as All Other
Compensation. No dividend equivalents were paid in 2010.
Since these amounts reflect our accounting expense, they do not
correspond to the actual value that will be recognized by the
non-management directors.
As of January 29, 2011, Mr. Pfeiffer, Mr. Gleeson
and Ms. Swain each had 4,000 RSUs outstanding and
Mr. Madsen and Ms. Bowen each had 3,205 RSUs
outstanding.
Option
Awards (Column (D))
Amounts shown represent the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 for the stock
option awards granted to each of our non-management directors in
fiscal 2010. Amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. The
grant date fair value computed in accordance with FASB ASC Topic
718 for each of these grants was as follows:
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|
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Annual award of 3,000 stock options granted on April 1,
2010 to each non-management director listed in the table above
other than Ms. Bowen and Mr. Madsen: $29,910;
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One-time sign-on awards of 20,000 stock options granted on
April 19, 2010 to each of Ms. Bowen and
Mr. Madsen: $229,200;
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|
|
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Annual award of 4,363 stock options granted on April 19,
2010 to each of Ms. Bowen and Mr. Madsen:
$50,000; and
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|
|
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Awards of 1,753 stock options granted on April 19, 2010 to
each of Mr. Pfeiffer, Mr. Gleeson and Ms. Swain:
$20,090. (As described above, pursuant to the non-employee
director compensation program adopted in April 2010, each
non-employee director became entitled to an annual option grant
with a value of $50,000. The total value of this option award
plus the option award granted to each of these directors on
April 1, 2010 was $50,000.)
|
For information on the valuation assumptions with respect to
option grants, refer to Note 5 to our 2010
Form 10-K.
Since these amounts reflect our accounting expense, they do not
correspond to the actual value that will be recognized by the
non-management directors.
As of January 29, 2011, the following individuals had the
following options outstanding: Mr. Pfeiffer, 39,753;
Ms. Bowen, 24,363; Mr. Madsen, 24,363;
Mr. Gleeson, 39,753; Ms. Swain, 69,753;
Mr. Kajita, 18,000; Mr. Okada, 42,000; Mr. Sano,
18,000; and Mr. Tsuruta, 42,000.
55
The following Report of the Audit Committee is not deemed
incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the
Securities Act or the Securities Exchange Act, except to the
extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under either
of such Acts.
Report of
the Audit Committee
General Responsibilities.
The Audit Committee
assists the Board in fulfilling its oversight of:
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our financial reporting process and the integrity of our
financial statements and financial reporting;
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our internal control environment, systems, and performance;
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the qualifications, independence, and performance of our
independent registered public accounting firm; and
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the performance of our internal audit staff.
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Management is responsible for the preparation, presentation, and
integrity of our financial statements, accounting and financial
reporting principles, internal controls, and procedures designed
to ensure compliance with accounting standards and applicable
laws and regulations. Our independent registered public
accounting firm performs an annual independent audit of the
financial statements.
The Audit Committee reviews with our independent registered
public accounting firm the results of its audit and of its
interim quarterly reviews and the overall quality of our
accounting policies. Our independent registered public
accounting firm assists management, as necessary, in updating
the Audit Committee concerning new accounting developments and
their potential impact on our financial reporting. The Audit
Committee also meets regularly with our independent registered
public accounting firm without management present. The Audit
Committee reviews and discusses with management our annual
audited financial statements and quarterly financial statements,
including our disclosures under Managements Discussion and
Analysis of Financial Condition and Results of Operations. The
Audit Committee also meets with our management, without our
independent registered public accounting firm present, to
discuss managements evaluation of the performance of the
independent registered public accounting firm.
The Audit Committee also meets regularly with our internal audit
staff to discuss our internal audit process and the results of
ongoing or recently completed internal audits.
With respect to fiscal 2010, the Audit Committee:
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reviewed and discussed our audited financial statements with
Deloitte & Touche LLP and with management;
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discussed with Deloitte & Touche LLP the scope of its
services, including its audit plan;
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reviewed our internal control processes and procedures;
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discussed with Deloitte & Touche LLP the matters
required to be discussed by Statement on Auditing Standards
No. 114,
The Auditors Communication With Those
Charged With Governance
, as amended;
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reviewed the written disclosures and the letter from
Deloitte & Touche LLP required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent accountants communications with
the audit committee concerning independence, and discussed with
Deloitte & Touche LLP their independence from us and
our management; and
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approved the audit and non-audit services provided by
Deloitte & Touche LLP during fiscal 2010.
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Based on the foregoing review and discussions, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in our Annual Report on
Form 10-K
for fiscal 2010. The Audit Committee also evaluated and
reappointed Deloitte & Touche LLP as our independent
registered public accounting firm for fiscal 2011.
56
Pursuant to Section 404 of the Sarbanes-Oxley Act,
management is required to prepare as part of our 2010 Annual
Report on
Form 10-K
a report by management on its assessment of our internal control
over financial reporting, including managements assessment
of the effectiveness of such internal control.
Deloitte & Touche LLP has issued an audit report
relative to internal control over financial reporting. During
the course of fiscal 2010, management regularly discussed the
internal control review and assessment process with the Audit
Committee, including the framework used to evaluate the
effectiveness of such internal controls, and at regular
intervals updated the Audit Committee on the status of this
process and actions taken by management to respond to issues
identified during this process. The Audit Committee also
discussed this process with Deloitte & Touche LLP.
Managements assessment report and the report of our
independent registered public accounting firm are included as
part of the 2010 Annual Report on
Form 10-K.
Audit Committee
of the Board of Directors
John W. Gleeson (Chairperson)
Marjorie L. Bowen
Andrew H. Madsen
Susan M. Swain
57
BENEFICIAL
OWNERSHIP OF COMMON STOCK
Certain Beneficial Owners.
The following table
sets forth certain information as to beneficial ownership of
each person known to us to own beneficially more than 5% of our
outstanding common stock as of April 4, 2011.
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Name and Address
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Amount and Nature of
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of Beneficial Owner
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Beneficial Ownership
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Percent of Class
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Wellington Management Company, LLP(1)
280 Congress Street
Boston, Massachusetts 02210
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9,151,431(1
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)
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13.09
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%
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Oppenheimer Funds, Inc.(2)
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8,901,002(2
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)
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12.73
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%
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Two World Financial Center
225 Liberty Street
New York, New York 10281
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Columbia Wanger Asset Management, LLC(3)
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5,433,300(3
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)
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7.77
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%
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227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
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(1)
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Schedule 13G/A filed on February 14, 2011 by
Wellington Management Company, LLP (Wellington
Management) reporting the nature of Wellington
Managements beneficial ownership as follows: shared voting
power with respect to 6,229,079 shares; shared dispositive
power with respect to 9,151,431 shares; no sole voting or
dispositive power with respect to any of the shares shown.
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(2)
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Schedule 13G filed on February 9, 2011 by Oppenheimer
Funds, Inc. (Oppenheimer) reporting the nature of
Oppenheimers beneficial ownership as follows: shared
voting power with respect to 8,901,002 shares; shared
dispositive power with respect to 8,901,002 shares; no sole
voting or dispositive power with respect to any of the shares
shown.
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(3)
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Schedule 13G/A filed on February 11, 2011 by Columbia
Wanger Asset Management, LLC (CWAM) reporting the
nature of CWAMs beneficial ownership as follows: sole
voting power with respect to 5,089,300 shares; sole
dispositive power with respect to 5,433,300 shares; no
shared voting or dispositive power with respect to any of the
shares shown. As reported in the Schedule 13G/A, the shares
held by CWAM include shares held by Columbia Acorn Trust, a
Massachusetts business trust that is advised by CWAM.
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Stock Ownership of Directors and Executive
Officers.
The following table sets forth the
beneficial ownership of our common stock as of April 4,
2011 by each director, each of the individuals named in the
Summary Compensation Table, and all executive officers and
directors as a group. All persons listed below have sole voting
and investment power with respect to such shares, except as
indicated. As of April 4, 2011, no director, NEO, or other
executive officer beneficially owned more than one percent of
the total outstanding common stock except for the following
persons who own the percentage of outstanding common stock
indicated (which includes shares held outright, unvested
restricted stock, as well as restricted stock units that are
scheduled to vest within 60 days, and options currently
exercisable or exercisable within 60 days): all directors,
nominees, and executive officers as a group, 4.40% and
Ms. Sullivan, 1.55%.
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Number of
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Number of
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Name of Beneficial Owner
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Shares(1)
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Name of Beneficial Owner
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Shares(1)
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M.L. Bowen
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11,325
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T.F. Sullivan
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1,093,146
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J.W. Gleeson
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56,584
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M. Scarpa
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492,655
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A.H. Madsen
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11,325
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M. Smaldone
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278,198
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G.M. Pfeiffer
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51,584
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R.T. OConnell
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696,857
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S.M. Swain
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61,584
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G. Poole
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138,781
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All current executive officers, directors, and nominees as a
group (12 persons)
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3,147,263
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(1)
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The listed shares include shares subject to stock options that
are exercisable currently or will be exercisable within
60 days of April 4, 2011, as follows: Ms. Bowen,
8,120; Mr. Gleeson, 23,584; Mr. Madsen, 8,120;
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58
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Mr. Pfeiffer, 23,584; Ms. Swain, 33,584;
Ms. Sullivan, 525,833; Mr. Scarpa, 137,500;
Mr. Smaldone, 102,500; Mr. OConnell, 326,266;
Mr. Poole, 34,933; and all current executive officers and
directors as a group, 1,268,957. The listed shares also include
unvested RSUs that are scheduled to vest within 60 days of
April 4, 2011, as follows: Ms. Bowen, 3,205;
Mr. Madsen, 3,205; Ms. Sullivan, 87,585;
Mr. Scarpa, 72,984; Mr. Smaldone, 14,600;
Mr. OConnell, 58,393; Mr. Poole, 14,600; and all
current executive officers and directors as a group, 283,772.
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Our executive officers may hold Talbots shares in margin
accounts at brokerage firms, which means that these shares could
be pledged to secure margin obligations under the account. In
fiscal year 2010, none of our executive officers, directors or
nominees had any outstanding margin obligations under any such
accounts.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our executive officers and directors and beneficial
owners of more than ten percent of our common stock to file
reports regarding ownership of our common stock with the SEC,
and to furnish us with copies of all such filings. Based on a
review of these filings, we believe that all filings were timely
made in fiscal 2010.
59
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected
Deloitte & Touche LLP as our independent registered
public accounting firm to perform an integrated audit of Talbots
for the 2011 fiscal year. Deloitte & Touche LLP has
served as our independent registered public accounting firm
since 1988. Representatives of Deloitte & Touche LLP
are expected to be present at the Annual Meeting and will be
available to respond to appropriate questions and to make such
statements as they may desire.
The fees paid or payable for services rendered by
Deloitte & Touche LLP and its affiliates (collectively
Deloitte & Touche) for fiscal 2010 and
2009 are as follows:
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2010
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2009
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Audit fees(1)
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$
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1,532,000
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$
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2,447,000
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Audit-Related fees(2)
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$
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210,000
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$
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1,027,500
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Tax fees(3)
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|
$
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186,344
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$
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171,185
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All other fees(4)
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$
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2,200
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$
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Total fees
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$
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1,930,544
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$
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3,645,685
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(1) Audit fees consist of fees for professional
services performed for the audit of our annual financial
statements and the audit of our internal controls over financial
reporting as required by Section 404 of the Sarbanes-Oxley
Act, review of quarterly financial statements, and services that
are normally provided by Deloitte & Touche and
out-of-pocket expenses in connection with certain statutory or
regulatory filings or engagements. In 2009, audit fees also
included fees for services related to J. Jill, which we sold on
July 2, 2009, and related regulatory filings.
(2) Audit-related fees consist of fees for
employee benefit plan audits, our bank audit and also included
fees for due diligence services and in 2009 regulatory filings
related to the BPW merger transaction.
(3) Tax fees consist of fees for tax planning,
compliance and advisory services.
(4) All other fees consist of fees for access
to the Deloitte Accounting and Research Tool (DART).
The Audit Committee has established a policy concerning the
pre-approval of the audit and non-audit services to be provided
by the independent registered public accounting firm to The
Talbots, Inc. The policy requires that all services to be
performed by Deloitte & Touche, including audit
services, audit-related services and permitted non-audit
services, be pre-approved by the Audit Committee. Specific
services provided by the independent registered public
accounting firm are regularly reviewed in accordance with the
pre-approval policy. At subsequent Audit Committee meetings, the
Audit Committee receives updates on services being provided by
the independent registered public accounting firm, and
management may present additional services for approval. The
procedures permit limited amounts of services to be approved by
one or more members of the Audit Committee pursuant to authority
delegated by the Audit Committee.
Ratification of the appointment of the independent registered
public accounting firm for fiscal 2011 requires the affirmative
vote of holders of a majority of the shares of common stock
present in person or by proxy and entitled to vote at the Annual
Meeting. Abstentions would have the same effect as a vote
against ratification. Although ratification is not required by
our by-laws or otherwise, we are submitting the selection of
Deloitte & Touche to our shareholders for ratification
as a matter of good corporate governance. The Audit Committee
will consider the outcome of our shareholders vote in
connection with the selection of the Companys independent
registered public accounting firm but is not bound by the
shareholders vote. Even if the selection is ratified, the
Audit Committee may, in its discretion, direct the appointment
of a different independent auditor at any time if it determines
that a change would be in the best interests of the Company and
our shareholders.
RECOMMENDATION
OF THE BOARD
The Board recommends that shareholders vote
FOR
the ratification of the appointment of Deloitte &
Touche as our independent registered public accounting firm for
fiscal 2011.
60
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
At this years Annual Meeting, we are asking our
shareholders to cast a non-binding advisory vote to approve the
compensation of our NEOs as described in the Compensation
Discussion and Analysis and in the tabular and accompanying
narrative disclosure regarding named executive officer
compensation included in this Proxy Statement (the Say on
Pay Vote). We are conducting this vote pursuant to The
Dodd-Frank Wall Street Reform and Consumer Protection Act,
enacted in July 2010, which requires that we provide our
shareholders with the opportunity to cast this advisory vote to
approve the compensation of our named executive officers at
least once every three years.
As described in detail in the section entitled, Executive
Compensation Compensation Discussion and
Analysis, we believe that executive compensation should be
linked with the Companys performance and significantly
aligned with the interests of the Companys shareholders
and have structured our executive compensation program to
support this philosophy. In addition, our executive compensation
program is designed to enable the Company to recruit, retain and
motivate key executives who play a significant role in the
execution and achievement of the Company business goals and
strategies. These executives have been critical in driving the
financial and operating achievements which contributed to the
substantial improvement of our Company during its period of
turnaround. We feel this improvement demonstrates the
effectiveness of our compensation program. Please read the
Compensation Discussion and Analysis, the 2010 Summary
Compensation Table and other related tables and narrative
disclosure for a detailed description of the compensation of our
named executive officers and their achievements during fiscal
year 2010.
The vote on this resolution is not intended to address any
specific element of compensation; rather, the advisory vote
relates to the overall compensation of our named executive
officers. Because this vote is advisory, it will not overrule
any decisions of the Board or Compensation Committee. This
advisory vote also does not seek to have the Board or
Compensation Committee take specific action. However, the Board
and the Compensation Committee value the views expressed by our
shareholders and will review the voting results and take into
account the outcome of the vote when considering executive
compensation matters in the future.
In considering the outcome of this advisory vote, the Board will
review and consider all shares actually voted in favor of or
actually voted against this advisory proposal. As an advisory
vote, abstentions will not be considered by the Board as a vote
cast in favor of or against the proposal. Broker non-votes will
have no impact on the outcome of this advisory vote.
RECOMMENDATION
OF THE BOARD
For the reasons discussed above, the Board recommends that
shareholders vote
FOR
approving the following
resolution:
RESOLVED,
that the Companys shareholders
approve, on an advisory basis, the compensation of the named
executive officers as disclosed in this Proxy Statement pursuant
to the compensation disclosure rules of the Securities and
Exchange Commission, including the Compensation Discussion and
Analysis, the compensation tables and the related material
disclosed in this Proxy Statement.
61
PROPOSAL NO. 4
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY
VOTES ON EXECUTIVE COMPENSATION
At this years Annual Meeting, we are asking our
shareholders to cast a non-binding advisory vote regarding how
frequently the Company should conduct a Say on Pay Vote. We are
conducting this vote pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act which provides that
shareholders must be given the opportunity at least once every
six years to indicate their preference as to whether we should
seek a Say on Pay Vote once every year, every two years or every
three years (the Say on Frequency Vote). Our Board
has determined that an advisory vote on executive compensation
that occurs once every year is the most appropriate option for
the Company and therefore our Board recommends that you vote for
an annual advisory vote on executive compensation. The Board
believes that an annual advisory vote will give our shareholders
the opportunity to provide us with direct and timely input on
our compensation philosophy, policies and practices as disclosed
in the Proxy Statement.
Shareholders may vote on their preferred voting frequency by
selecting the option of One Year, Two Years, Three Years or
Abstain when voting on this Proposal No. 4. Please
note that when casting a vote on this proposal, shareholders
will not be voting to approve or disapprove the Boards
recommendation.
The option of one year, two years or three years that receives
the highest number of votes cast by shareholders will be
considered by the Board as the frequency that has been selected
by shareholders for future Say on Pay Votes. However, because
this vote is advisory and not binding on the Board or the
Company, the Board may decide that it is in the best interests
of our shareholders and the Company to hold an advisory vote on
executive compensation more or less frequently than the option
receiving the most votes cast by our shareholders. In addition,
the Board may in the future decide to hold an advisory Say on
Frequency Vote more often than once every six years.
RECOMMENDATION
OF THE BOARD
The Board recommends a vote
FOR
the option of
ONE YEAR
as the frequency with which the Say on Pay Vote
should be held.
62
SHAREHOLDER
PROPOSALS FOR THE 2012 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at our
2012 Annual Meeting of Shareholders must be received by our
Secretary, for inclusion in our proxy statement, notice of
meeting and proxy relating to the 2012 Annual Meeting, no later
than December 10, 2011.
Our by-laws establish an advance written notice procedure for
shareholders seeking to nominate candidates for election as
directors at any annual meeting of shareholders, or to bring
business before an annual meeting of our shareholders. The
by-laws provide that only persons who are nominated by or at the
direction of the Board, or by a shareholder who has given timely
written notice to our Secretary prior to the meeting at which
directors are to be elected, will be eligible to be considered
for election as our directors at the annual meeting. The by-laws
also provide that at any meeting of shareholders only such
business may be conducted as has been brought before the meeting
by or at the direction of the Board or, in the case of an annual
meeting of shareholders, by a shareholder who has given timely
written notice to our Secretary of such shareholders
intention to bring such business before the meeting. Under the
by-laws, for any such shareholder notice to be timely, such
notice must be received by us in writing not less than
60 days nor more than 90 days prior to the meeting, or
in the event that less than 70 days notice or prior
public disclosure of the date of the annual meeting is given or
made to shareholders, to be timely, notice by the shareholder
must be received not later than the close of business on the
10th day following the day on which such notice of the date
of the meeting or such public disclosure was made. Under the
by-laws, a shareholders notice must also contain certain
information specified in the by-laws.
Shareholders, upon written request to our Investor Relations
Department, One Talbots Drive, Hingham, Massachusetts 02043, may
receive, without charge, a copy of our Annual Report on
Form 10-K,
including the financial statements, any financial statement
schedules and list of exhibits, required to be filed with the
SEC for the 2010 fiscal year. Our Annual Report on
Form 10-K
is also available without charge through our website,
www.thetalbotsinc.com
.
OTHER
MATTERS
As of the date of this Proxy Statement, we know of no business
that will be presented for consideration at the Annual Meeting
other than the items referred to above. Proxies in the enclosed
form will be voted in respect of any other business that is
properly brought before the Annual Meeting as recommended by the
Board of Directors or, if no such recommendation is given, in
the discretion of the proxy holders.
63
APPENDIX A
SEC
Regulation G
THE
TALBOTS, INC. AND SUBSIDIARIES
Reconciliation
of GAAP operating income (loss) to non-GAAP
(adjusted) operating income (loss) (unaudited)
Amounts in thousands
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|
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|
Fiscal Year
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Operating income (loss)
|
|
$
|
31,436
|
|
|
$
|
(8,690
|
)
|
|
$
|
(98,389
|
)
|
Merger-related costs
|
|
|
25,855
|
|
|
|
8,216
|
|
|
|
|
|
Restructuring charges
|
|
|
5,640
|
|
|
|
10,273
|
|
|
|
17,793
|
|
Impairment of store assets
|
|
|
1,420
|
|
|
|
1,351
|
|
|
|
2,845
|
|
Cumulative effect of change in estimate, gift card
breakage
(a)
|
|
|
(6,285
|
)
|
|
|
|
|
|
|
|
|
Store re-image initiative
(b)
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income (loss)
|
|
$
|
58,899
|
|
|
$
|
11,150
|
|
|
$
|
(77,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In the fourth quarter of 2010, the Company began to recognize
income from the breakage of gift cards when the likelihood of
redemption of the gift card is considered remote. Related to
this change in estimate, the Company recorded a cumulative
adjustment of $6.3 million for estimated gift card breakage
from prior years gift card issuances.
|
|
(b)
|
|
In the second quarter of 2010, the Company began its store
re-image initiative. Costs incurred related to the initiative
include accelerated depreciation of leasehold improvements and
other costs associated with property disposed of under the
program.
|
A-1
The Talbots, Inc.
One Talbots Drive
Hingham, MA 02043
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 then follow the instructions to obtain your records and to create an
electronic voting instruction form.
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consent to receiving all future proxy statements, proxy cards and annual reports electronically via
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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:
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
The Board of Directors recommends you vote FOR the following:
1. Election of Directors
Nominees
For Withhold For All To withhold authority to vote for any
All All Except individual nominee(s), mark For All
Except and write the number(s) of the
nominee(s) on the line below.
01 Marjorie L. Bowen 02 John W. Gleeson 03 Andrew H. Madsen 04 Gary M. Pfeiffer 05 Trudy F.
Sullivan
06 Susan M. Swain
The Board of Directors recommends you vote FOR proposals 2 and 3: For Against Abstain
2. Ratification of the appointment of Deloitte & Touche LLP as our independent registered public
accounting firm for the 2011 0 0 0
fiscal year.
3. Advisory vote on The Talbots, Inc. executive compensation program. 0 0 0
The Board of Directors recommends you vote 1 YEAR on the following proposal: 1 year 2 years 3 years
Abstain
4. Advisory vote on the frequency of future advisory votes on The Talbots, Inc. executive
compensation program. 0 0 0 0
NOTE: To act upon such other business as may properly come before the Annual Meeting.
00001005681 R1.0.0.11699
For address change/comments, mark here. Yes No 0
(see reverse for instructions)
Please indicate if you plan to attend this meeting 0 0
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.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice &
Proxy Statement, Annual Report is/ are available at www.proxyvote.com .
THE TALBOTS, INC.
Annual Meeting of Shareholders
May 19, 2011 9:00 AM EDT
This proxy is solicited by the Board of Directors
00001005682 R1.0.0.11699
The undersigned hereby appoints Michael Scarpa and Richard T. OConnell, Jr., or either of them, as
proxies, each with the power of substitution, and hereby authorizes them to represent and to vote,
as designated on the reverse side of this ballot, all of the shares of Common Stock of THE TALBOTS,
INC. that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held at
9:00 AM, EDT on May 19, 2011, at the Hingham Town Hall, 210 Central Street Hingham, Massachusetts
02043, and any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned.
If no such direction is made, this proxy will be voted in accordance with the Board of Directors
recommendations and according to the discretion of the proxy holders on any other matter that may
properly come before the meeting.
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
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