Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
On August 1, 2017, Ascena Retail Group, Inc. (the Company) announced changes
to its leadership structure with the expansion of the role of Brian Lynch (59), the Companys Chief Operating Officer, who will now also serve as the Companys President, and the promotion of Gary Muto (58) to the newly created role
of President and Chief Executive Officer of ascena Brands. In connection with these changes, David Jaffe (58) will remain as the Companys Chairman of the Board of Directors and Chief Executive Officer, but will no longer serve as
President. A copy of the press release announcing the appointments is attached hereto as Exhibit 99.1.
David Jaffe, Chairman and Chief Executive
Officer
Effective as of August 1, 2017 (the Effective Date), Mr. Jaffe will continue to serve as Chairman and Chief
Executive Officer of the Company. The terms and conditions of Mr. Jaffes continued employment with the Company as Chief Executive Officer are set forth in an employment offer letter between Mr. Jaffe and the Company dated
July 29, 2017 (the Jaffe Employment Offer Letter). The Jaffe Employment Offer Letter supersedes the existing employment agreement between the Company and Mr. Jaffe dated March 5, 2014, as amended (the Prior
Agreement), which was due to expire by its terms on September 21, 2017. The terms and conditions of the Jaffe Employment Offer Letter are substantially the same as those of the Prior Agreement, except for the following material
amendments, which are generally designed to conform to similar provisions contained in the Companys Executive Severance Plan:
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Mr. Jaffe may only terminate his employment for Good Reason if he provides notice to the Company setting forth in reasonable detail the alleged Good Reason circumstances or event within 30
days after the occurrence of such event or circumstances and the Company fails to cure such event or circumstances within 60 days after receipt of such notice;
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Mr. Jaffe will be entitled to change in control severance payments if the qualifying termination event occurs during the 90-day period prior to the change in control;
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In the event Mr. Jaffe incurs a qualifying termination entitling him to change in control severance, any stock-based awards not vested immediately prior to the change in control that are outstanding on the change
in control date (or outstanding immediately prior to the change in control date for awards not assumed or replaced by the successor) will be deemed vested on the termination date. If the qualifying termination occurs during the 90-day period before
the change in control, any unvested awards that expired on the date of the termination will be deemed vested and entitled to payment at fair market value;
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The Bonus component of Mr. Jaffes change in control severance will be determined based on Mr. Jaffes annual target cash performance bonus opportunity for the fiscal year in which the
change in control occurs or, if greater, Mr. Jaffes average three-year aggregate annual cash performance bonuses actually paid to him on a semi-annual basis; and
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No severance will be payable to Mr. Jaffe unless he executes and does not revoke within 60 days of termination a general release of claims in favor of the Company and its affiliates.
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The foregoing description of the Jaffe Employment Offer Letter is qualified in its entirety by reference to the full text of the Jaffe Employment Offer
Letter, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Brian Lynch, President and Chief
Operating Officer
Prior to his appointment, Mr. Lynch served as Chief Operating Officer of the Company since October 2016, and as President
and Chief Executive Officer of the Companys Justice brand, since March 2015. Mr. Lynch has over 35 years of fashion and retail experience, having previously served in various executive positions with ANN INC., Gap Inc. and The Walt Disney
Company.
The terms and conditions of Mr. Lynchs appointment as the Companys President and Chief Operating
Officer are set forth in an employment offer letter between Mr. Lynch and the Company dated June 12, 2017 (the Lynch Employment Offer Letter). The material terms of the Lynch Employment Offer Letter are summarized below.
Base Salary and Incentive Compensation.
Mr. Lynch will receive an annual base salary of $1,000,000, and will be considered for an annual
performance evaluation beginning in the fall of 2018. Mr. Lynch will continue to be eligible to participate in the Companys seasonal performance-based incentive compensation program and, beginning with the Fiscal Year 2018 Fall Season,
will have an increased target level equal to 125% of annual base salary, with a maximum annual payout at two times the target level.
Long-Term
Incentives.
Under the Lynch Employment Offer Letter, subject to approval by the Compensation and Stock Incentive Committee (the Committee), Mr. Lynch will continue to be eligible to receive annual equity grants effective
September 2017 in the form of stock options, RSUs or performance-based awards, and will have a target level equal to 250% of annual base salary.
Special One-Time Incentive Award
. The Lynch Employment Offer Letter provides for an additional one-time grant of 1,000,000 restricted stock units
(RSUs) effective September 2017 that will vest 50% on June 30, 2019 and the remaining 50% will vest on June 30, 2020, in each case, subject to continued employment through each applicable vesting date.
The foregoing description of the Lynch Employment Offer Letter is qualified in its entirety by reference to the full text of the Lynch Employment Offer
Letter, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference herein.
Gary Muto, President and Chief
Executive Officer, ascena Brands
Prior to his appointment, Mr. Muto served as President and Chief Executive Officer of the Companys
Premium segment since October 2016, and as President and Chief Executive Officer of ANN INC., since October 2015. Mr. Muto has over 25 years of fashion and retail experience, having previously served in various executive positions with Gap,
Inc.
The terms and conditions of Mr. Mutos appointment as President and Chief Executive Officer of ascena Brands are set forth in an
employment offer letter between Mr. Muto and the Company dated June 1, 2017 (the Muto Employment Offer Letter). The material terms of the Muto Employment Offer Letter are summarized below.
Base Salary and Incentive Compensation.
Mr. Muto will receive an annual base salary of $1,000,000, and will be considered for an annual
performance evaluation beginning in the fall of 2018 to consider increases to his pay. Mr. Muto will continue to be eligible to participate in the Companys seasonal performance-based incentive compensation program and, beginning with the
Fiscal Year 2018 Fall Season, will have an increased target level equal to 125% of annual base salary, with a maximum annual payout at two times the target level.
Transformation Bonus Program Participation
. Mr. Muto will continue his participation in the Companys previously announced Transformation
Bonus Program (Program) and, effective August 1, 2017, will be eligible for an additional amount specified in the Muto Employment Offer Letter, subject to the terms and conditions of the Program.
Long-Term Incentives.
Under the Muto Employment Offer Letter, Mr. Muto will receive an annual long-term incentive grant effective in or about
September 2017 having an estimated total value of $2.5 million (the 2017 Annual Grant). The 2017 Annual Grant may consist of stock options, RSUs, performance-based awards or such other incentives as determined by the Company. Awards that
are not performance based vest in equal annual installments over a three-year period, and awards that are performance based vest on the third anniversary of the grant date, subject to the achievement of the applicable performance goals. All awards
generally require continued employment through the vesting date, subject to certain exceptions in the case of the termination of Mr. Mutos employment by the Company without Cause or by him for Good Reason (in each
case, as defined in the Muto Employment Offer Letter).
Special One-Time Incentive Award
. The Muto Employment Offer Letter provides for an additional one-time
grant of 1,000,000 RSUs effective September 2017 that will vest 50% on June 30, 2019 and the remaining 50% will vest on June 30, 2020, in each case, subject to continued employment through each applicable vesting date.
Restrictive Covenants
. All equity awarded to Mr. Muto will be conditioned on his timely execution of a restrictive covenant agreement containing a
one-year non-competition covenant and a two-year non-solicitation covenant in favor of the Company.
Participation in Executive Severance Plan
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Effective August 24, 2017, Mr. Muto will be a participant in the Companys Executive Severance Plan, amended and restated effective as of June 8, 2017 (the ESP), subject to the terms and conditions of the ESP, with
certain modifications, including that his cash severance payment level relating to a non-change in control termination will be 24 months of base salary, and his cash severance level relating to a change in control related termination will be 24
months of base salary and bonus.
The foregoing description of the Muto Employment Offer Letter is qualified in its entirety by reference to the full text
of the Muto Employment Offer Letter, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated by reference herein.