UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
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Definitive
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Definitive
Additional Materials
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Soliciting
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THE
DRESS BARN, INC.
30
Dunnigan Drive
Suffern,
New York 10901
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Our
Shareholders:
The
Annual Meeting of Shareholders of The Dress Barn, Inc. (the “Company”) will be
held at the corporate offices of the Company, 30 Dunnigan Drive, Suffern, New
York on Wednesday, December 10, 2008, at 2:00 p.m., for the following purposes:
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1.
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To
elect as directors the three nominees named in the attached proxy
statement to serve on our Board of Directors for three-year terms
and
until their successors are duly elected and qualified;
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2.
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To
approve an amendment to the Company’s Amended and Restated Certificate of
Incorporation (the “Certificate of Incorporation”) to increase the number
of shares of Common Stock that the Company is authorized to issue
from
75,000,000 shares to 165,000,000
shares;
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3.
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To
approve an amendment to the Certificate of Incorporation to broaden
the
indemnification of directors and officers to the fullest extent permitted
by applicable law;
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4.
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To
approve a general amendment and restatement of the Certificate of
Incorporation to (i) consolidate all amendments to the Certificate
of
Incorporation since it was last amended and restated effective as
of May
2, 1983 (and all amendments that may be made pursuant to proposals
two and
three); (ii) remove unnecessary and/or outdated provisions; and (iii)
update statutory references;
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5.
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To
ratify the selection by the Audit Committee of the Board of Directors
of
Deloitte & Touche LLP as our independent auditors for the fiscal year
ending July 25, 2009; and
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6.
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To
act upon any other business that may properly come before the meeting
or
any adjournment thereof.
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Only
shareholders of record at the close of business on October 14, 2008 are entitled
to notice of and to vote at the meeting.
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By
Order of the Board of Directors
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Elliot
S. Jaffe
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Chairman
of the Board
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__________________,
2008
TABLE
OF CONTENTS
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Page
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General
Information About These Materials
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1
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Important
Notice Regarding the Availability of Proxy Materials for the 2008
Annual
Meeting of Shareholders
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1
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Questions
and Answers About our 2008 Annual Meeting of Shareholders
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1
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Questions
and Answers About our Board of Directors and Corporate Governance
Matters
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6
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Fiscal
2008 Director Compensation Table
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9
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Security
Ownership of Certain Beneficial Owners, Directors and
Management
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11
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Proposal
One: Election of Directors
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13
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Executive
Compensation
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14
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Compensation
Discussion and Analysis
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14
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Compensation
and Stock Incentive Committee Report
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22
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Summary
Compensation Table
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Grants
of Plan-Based Awards in Fiscal 2008
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25
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Outstanding
Equity Awards at Fiscal Year-End 2008
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27
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Option
Exercises and Stock Vested in Fiscal 2008
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29
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Pension
Benefits
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29
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Employment
Agreements and Employment Letters
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Nonqualified
Deferred Compensation in Fiscal 2008
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31
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Potential
Payments Upon Termination or Change in Control
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32
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Section
16(a) Beneficial Ownership Reporting Compliance
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34
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Interest
of Management and Others in Certain Transactions; Related Party
Transactions
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Proposal
Two: Increase in Number of Authorized Shares
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36
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Proposal
Three: Amendment of Indemnification Provisions of Certificate of
Incorporation
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38
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Proposal
Four: General Amendment and Restatement of Certificate of
Incorporation
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42
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Proposal
Five: Ratification of the Independent Auditors
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45
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Information
Regarding the Independent Auditors
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45
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Fees
Paid to Independent Auditors
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45
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Audit
Committee Report
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46
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Annex
A—Amended and Restated Certificate of Incorporation
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THE
DRESS BARN, INC.
30
Dunnigan Drive
Suffern,
New York 10901
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
December
10, 2008
GENERAL
INFORMATION ABOUT THESE MATERIALS
This
proxy statement describes matters on which we would like you, as a shareholder,
to vote at our 2008 Annual Meeting of Shareholders. It also gives you
information on these matters so that you can make informed decisions. You are
receiving a proxy statement and proxy card from us because our records indicate
that you owned shares of our common stock on October 14, 2008, the record date
for the meeting.
Our
Board
of Directors is soliciting your proxy to be used at the meeting. When you sign
the proxy card, you appoint two of our directors, Elliot S. Jaffe and John
Usdan, as your representatives at the meeting. One or both of these individuals,
or a substitute if necessary, will vote your shares at the meeting as you have
instructed them on the proxy card. If you sign and deliver your proxy card,
but
you do not provide voting instructions, your proxy representative will vote
in
favor of the three nominees for director and subject to applicable rules and
regulations, in favor of Proposals Two through Five, and with respect to any
other matter that may be presented at the annual meeting, in the discretion
of
the proxy representative. This way, your shares will be voted whether or not
you
attend the meeting. Even if you plan to attend the meeting, it is a good idea
to
complete, sign and return your proxy card in advance of the meeting just in
case
your plans change. Proxy materials, including this proxy statement, are first
being sent to shareholders on or about _________________, 2008.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2008 ANNUAL
MEETING
OF SHAREHOLDERS
This
proxy statement, our form of proxy card and our annual report for the fiscal
year ending July 26, 2008 are available at
http://materials.proxyvote.com/261570
.
For
the
date, time, location and information on how to obtain directions to attend
the
2008 Annual Meeting of Shareholders as well as identification of the matters
to
be voted upon at the meeting, please see “Questions and Answers about our 2008
Annual Meeting of Shareholders” below.
QUESTIONS
AND ANSWERS
ABOUT
OUR 2008 ANNUAL MEETING OF SHAREHOLDERS
When
and where will the meeting take place?
The
2008
Annual Meeting of Shareholders will be held on Wednesday, December 10, 2008,
at
2:00 p.m., at our corporate offices, 30 Dunnigan Drive, Suffern, New York.
What
is the purpose of the meeting?
At
the
annual meeting, you will be asked to vote on the following matters:
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To
elect as directors the three nominees named in the proxy statement
to
serve on our Board of Directors for three-year terms and until their
successors are duly elected and qualified;
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·
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To
approve an amendment to our Amended and Restated Certificate of
Incorporation (the “Certificate of Incorporation”) to increase the number
of shares of Common Stock that we are authorized to issue from 75,000,000
shares to 165,000,000 shares;
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·
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To
approve an amendment to the Certificate of Incorporation to broaden
the
indemnification of directors and officers to the fullest extent permitted
by applicable law;
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To
approve a general amendment and restatement of the Certificate of
Incorporation to (i) consolidate all amendments to the Certificate
of
Incorporation since it was last amended and restated effective as
of May
2, 1983 (and all amendments that may be made pursuant to proposals
two and
three); (ii) remove unnecessary and/or outdated provisions; and (iii)
update statutory references;
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To
ratify the selection by the Audit Committee of the Board of Directors
of
Deloitte & Touche LLP as our independent auditors for the fiscal year
ending July 25, 2009; and
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To
act upon any other business that may properly come before the meeting
or
any adjournment of the meeting.
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After
the
conclusion of the formal business of the annual meeting, management will give
a
report on our performance during the fiscal year that ended on July 26, 2008,
which we refer to herein as fiscal 2008.
Could
other matters be decided at the meeting?
Our
By-laws require prior notification of a shareholder’s intent to request a vote
on other matters at the annual meeting. The deadline for notification has
passed, and we are not aware of any other matters that could be brought before
the meeting. However, if any other business is properly presented at the
meeting, your signed proxy card gives authority to Elliot S. Jaffe and John
Usdan, the persons referred to as proxy holders on the proxy card (or a
substitute if necessary), to vote your shares on such matters at their
discretion.
Who
is entitled to attend the meeting?
All
shareholders who owned our common stock at the close of business on October
14,
2008, which is called the record date for the meeting, or their duly appointed
proxies, may attend the meeting. Registration begins at
1:30 p.m.
Who
is entitled to vote at the meeting?
All
shareholders who owned our common stock at the close of business on the record
date, October 14, 2008, are entitled to attend and vote at the meeting and
at
any adjournment or postponement of the meeting.
How
many votes do I have?
You
have
one vote for each share of our common stock that you owned on the record
date.
How
many votes must be present to hold the annual meeting?
The
presence in person or by proxy of the holders of a majority of the outstanding
shares of our common stock entitled to vote at the annual meeting will
constitute a quorum for the transaction of business at the meeting. Once a
share
of the Company’s common stock is represented for any purpose at the annual
meeting, it is deemed present for quorum purposes for the annual meeting and
for
any adjournment of the annual meeting. Abstentions and broker “non-votes” are
counted as present and entitled to vote for purposes of determining whether
there is a quorum. A broker “non-vote” occurs when a broker or nominee holding
shares for a beneficial owner does not vote on a proposal because the broker
or
nominee does not have the necessary voting power for that proposal and has
not
received instructions from the beneficial owner. In order for us to determine
that enough votes will be present to hold the meeting, we urge you to vote
in
advance by proxy even if you plan to attend the meeting.
Assuming
a quorum is present, how many votes will be required to approve the
proposals?
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A
plurality of the votes cast at the annual meeting will elect the
three
nominees to serve as directors;
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The
proposal to increase the number of authorized shares will be approved
if
the votes cast in favor of the proposal exceed the votes cast in
opposition to the proposal;
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The
proposal to amend the indemnification provisions of the Certificate
of
Incorporation will be approved if the votes cast in favor of the
proposal
exceed the votes cast in opposition to the
proposal;
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The
proposal to approve the new Amended and Restated Certificate of
Incorporation will be approved if the votes cast in favor of the
proposal
exceed the votes cast in opposition to the proposal;
and
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The
proposal to ratify the appointment of the independent auditors will
be
approved if the votes cast in favor of the proposal exceed the votes
cast
in opposition to the proposal.
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Abstentions
and broker non-votes have no impact on the vote on any of the
proposals.
How
many votes may be cast by all shareholders?
A
total
of [60,531,017] votes may be cast at the meeting, consisting of one vote for
each share of our common stock outstanding on the record date.
How
do I vote?
You
may
vote in person at the meeting or vote by proxy as described below.
If
you
vote by proxy, your shares will be voted at the meeting in the manner you
indicate. If you sign and return your proxy card, but don’t specify how you want
your shares to be voted, they will be voted for the three nominees named under
the caption “PROPOSAL ONE – ELECTION OF DIRECTORS”, in favor of Proposals Two
through Five, and, with respect to any other matter that may be presented at
the
annual meeting, in the discretion of the proxy holders named in your proxy
card.
May
I change or revoke my vote after I submit my proxy?
Yes.
To
change your vote previously submitted by proxy, you may:
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cast
a new vote by mailing a new proxy card with a later date;
or
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if
your shares are held through a broker, contact your broker to cast
a new
vote; or
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if
you hold shares in your name, attend the annual meeting and vote
in
person.
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If
you
wish to revoke rather than change your vote, written revocation must be received
by our Corporate Secretary prior to the meeting.
What
are the Board’s voting recommendations?
Unless
you give other instructions on your proxy card, the persons referred to as
proxy
holders on the proxy card will vote in accordance with the recommendations
of
our board of directors. Our board of directors recommends a vote:
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FOR
the election of the three nominees named under the caption “PROPOSAL ONE —
ELECTION OF DIRECTORS” to serve as
directors;
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FOR
the increase in the number of authorized shares under the caption
“PROPOSAL TWO — INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK”;
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FOR
the amendment of the indemnification provisions of the Certificate
of
Incorporation under the caption “PROPOSAL THREE — AMEND INDEMNIFICATION
PROVISIONS OF CERTIFICATE OF
INCORPORATION”;
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FOR
the approval of the Amended and Restated Certificate of Incorporation
under the caption “PROPOSAL FOUR — AMENDMENT AND RESTATEMENT OF THE
CERTIFICATE OF INCORPORATION”; and
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FOR
the ratification of the independent auditors under the caption “PROPOSAL
FIVE — RATIFICATION OF THE ENGAGEMENT OF INDEPENDENT
AUDITORS”.
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What
if I participate in the Company’s 401(k) Savings Plan (the
“401(k)”)?
If
you
are a participant in the Company’s 401(k) Savings Plan (the “401(k)”) and own
shares of the Company’s common stock in your 401(k) account as of the record
date, you will receive, with respect to the number of shares held for your
account under the 401(k) as of the record date for the annual meeting, a proxy
card which will serve as a voting instruction to the trustee of the 401(k)
with
respect to shares held for your account. Unless the proxy card is signed and
returned, shares held in your account under the 401(k) will not be
voted.
What
happens if I do not vote by proxy?
If
you do
not vote by proxy, the shares held in your name will not be voted unless you
vote in person at the meeting. If you hold your shares through a broker and you
do not provide your broker with specific instructions, your shares may be voted
with respect to the proposals at your broker’s discretion, subject to applicable
rules and regulations. If the broker does not vote those shares, these broker
non-votes will have no effect on the outcome of the proposal.
How
can I attend the annual meeting?
Shareholders
as of the close of business on the record date, October 14, 2008, may attend
the
annual meeting. You may obtain directions to attend the meeting and vote in
person by contacting our Investor Relations department at (845)
369-4600.
What
happens if the annual meeting is postponed or adjourned?
If
the
meeting is postponed or adjourned, your proxy will remain valid and may be
voted
when the meeting is convened or reconvened. You may change or revoke your proxy
until it is voted.
Will
your independent registered public accounting firm participate in the
meeting?
Yes.
Our
independent registered public accounting firm is Deloitte & Touche LLP. A
representative of Deloitte & Touche LLP will be present at the meeting, will
be available to answer any questions you may have and will have the opportunity
to make a statement.
Are
members of the Board of Directors required to attend the
meeting?
Directors
are encouraged, but not required, to attend the Company’s annual meeting of
shareholders. All seven of our directors attended the 2007 Annual Meeting of
Shareholders.
Who
will pay the expenses incurred in connection with the solicitation of my
vote?
We
pay
all costs and expenses related to preparation of these proxy materials and
solicitation of your vote and all annual meeting expenses. We may retain a
proxy
solicitation firm to assist in the solicitation of proxies from shareholders
for
a fee, plus reimbursement for certain out-of-pocket expenses. In addition to
soliciting proxies by mail, we may solicit proxies by
t
elephone
and personal contact. None of our directors, officers or employees will be
specially compensated for these activities. We reimburse brokers, fiduciaries
and custodians for their costs in forwarding proxy materials to beneficial
owners of our common stock, but we will not pay any compensation for their
services.
Why
did I receive more than one set of proxy materials?
If
your
household is receiving multiple copies of our annual reports or proxy statements
and you wish to request delivery of a single copy, you may send a written
request to:
The
Dress Barn, Inc., 30 Dunnigan Drive, Suffern, New York 10901, Attention:
Investor Relations.
You
also
may receive multiple sets of proxy materials if you hold your shares of our
common stock in multiple accounts (such as through a brokerage account and
an
employee benefit plan, such as the 401(k)). You should vote your shares as
described in each proxy or instruction card you receive.
How
do I obtain a separate set of proxy materials if I share an address with other
shareholders?
In
order
to reduce printing and postage costs, only one annual report and proxy statement
is being delivered to multiple shareholders sharing an address unless the
Company received contrary instructions from one or more of the shareholders
sharing that address. If your household has received only one annual report
and
one proxy statement, the Company will deliver promptly a separate copy of the
annual report and the proxy statement to any shareholder who sends a written
request to:
The
Dress Barn, Inc., 30 Dunnigan Drive, Suffern, New York 10901, Attention:
Investor Relations.
If you
wish to receive a separate annual report and proxy statement in the future,
you
can notify the Company by mailing a written request to the address above or
by
calling our Investor Relations Department at 845-369-4600.
Can
I view these proxy materials electronically?
Yes.
You
may access these proxy materials and our annual report on our website at
http://materials.proxyvote.com/261570
.
You can
view all of our other filings with the Securities and Exchange Commission on
our
website at
www.dressbarn.com
.
Click
on “Investor Relations”, then under “Investor Relations Menu” click on
“SEC”.
How
can I receive copies of the Company’s year-end SEC
filings?
We
will
furnish without charge to any shareholder who requests, in writing, a copy
of
this proxy statement and/or our Annual Report on Form 10-K, including
financial statements and related schedules, for the fiscal year ended July
26,
2008, as filed with the SEC. Any such request should be directed to
The
Dress Barn, Inc., 30 Dunnigan Drive, Suffern, New York 10901, Attention:
Investor Relations.
How
do shareholders submit proposals for the Company’s 2009 Annual Meeting of
Shareholders?
You
may
present matters for consideration at our next annual meeting either by: (i)
having the matter included in our proxy statement and listed on our proxy card,
or (ii) giving us timely advance notice of your intention to properly bring
other business before the meeting.
To
have
your proposal included in our proxy statement and listed on our proxy card
for
the 2009 annual meeting, we must receive your proposal by
[July
6,
2009]
and such
proposal must otherwise comply with Rule 14a-8, as promulgated under the
Securities Exchange Act of 1934.
To
submit
any other matter to a vote at the 2009 Annual Meeting (other than a shareholder
proposal to be included in the Company's proxy materials, as described in the
paragraph above), we must receive written notification of your proposal by
[July
6, 2009] and such proposal must otherwise comply with the advance notice
provision and other requirements of Article II, Section 7 of the Company’s
By-laws, which are on file with the SEC (as Exhibit 3.4 to the Company’s Annual
Report on Form 10-K filed with the SEC on September 24, 2008) and may be
obtained from the Company upon written request.
Whether
you desire to have your proposal included in the Company’s proxy statement for
the 2009 Annual Meeting or otherwise brought before such meeting, you may submit
your proposal in writing to:
The
Dress Barn, Inc., 30 Dunnigan Drive, Suffern, New York 10901, Attention:
Investor Relations.
Can
I see a list of shareholders entitled to vote at the 2008 Annual Meeting?
A
complete list of the shareholders entitled to vote at the 2008 Annual Meeting
is
available for inspection at the principal office of the Company upon written
request to the Company by a shareholder, and at all times during the 2008 annual
meeting at the place of the meeting.
QUESTIONS
AND ANSWERS
ABOUT
OUR BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS
What
is the makeup of the Board of Directors and how often are members
elected?
Our
Board
of Directors currently has seven members, divided into three classes, each
with
a staggered three-year term of office. Only those directors whose terms are
expiring as of the date of the 2008 annual meeting shall stand for election
this
year.
How
often did the Board of Directors meet in fiscal 2008?
The
Board
of Directors met five times during fiscal 2008 and otherwise accomplished its
business through the work of the committees described below. Each incumbent
director attended at least 75% of the meetings of the Board and of the standing
committees of which he or she was a member during fiscal 2008.
Do
the non-management directors meet in regularly scheduled executive
sessions?
Yes.
The
non-management members of our Board of Directors meet in regularly scheduled
executive sessions without any members of management present.
How
does the Board determine which directors are independent?
Our
Board
of Directors determines whether an individual director satisfies all of the
independence standards of the SEC and the NASDAQ Global Select Market, as such
standards may be amended from time to time, and also that the director has
no
material relationships with us (either directly or as a partner, shareholder
or
officer of any entity) that would be inconsistent with a finding of
independence.
Which
directors have been designated as independent?
Based
on
the analysis described below under the caption “Independence Determinations”,
the Board affirmatively determined that a majority of the directors who will
continue to serve on the Board following the annual meeting are independent.
They include Kate Buggeln, Klaus Eppler, Randy L. Pearce and John Usdan.
What
are the standing committees of the Board?
Our
Board
of Directors has three standing committees: the Audit Committee, the Nominating
Committee and the Compensation and Stock Incentive Committee.
Who
are the members of the standing committees?
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Committee
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Members
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Chairperson
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Audit
Committee
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Kate
Buggeln
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Randy
L. Pearce
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Randy
L. Pearce
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John
Usdan
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Nominating
Committee
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Klaus
Eppler
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Klaus
Eppler
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John
Usdan
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Compensation
and Stock Incentive Committee
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Kate
Buggeln
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John
Usdan
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Randy
L. Pearce
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|
|
John
Usdan
|
|
|
Are
all of the members of the standing committees independent?
Yes.
The
members of each of the standing Committees have been deemed independent by
the
Board of Directors.
Do
all of the standing committees operate under a written
charter?
Yes.
The
charters of each of the standing committees are available for viewing on our
website at
www.dressbarn.com
.
Click
on “Investor Relations”, then under “Investor Relations Menu” click on
“Committees/Members”. Paper copies will be provided to any shareholder upon
written request to:
The
Dress Barn, Inc., 30 Dunnigan Drive, Suffern, New York 10901, Attention:
Investor Relations.
What
are the functions of the standing committees?
Audit
Committee
It
is the
responsibility of the Audit Committee to assist the Board of Directors in its
oversight of our financial accounting and reporting practices. The duties of
the
Audit Committee include monitoring our financial reporting process and system
of
internal controls; selecting our independent registered public accounting firm;
monitoring the independence and performance of our independent registered public
accounting firm and internal auditing function; and providing an avenue of
communication among the independent registered public accounting firm,
management, the internal auditing functions and the Board of Directors. The
Audit Committee has the authority to conduct any investigation appropriate
to
fulfilling its responsibilities, and it has direct access to our independent
registered public accounting firm as well as our internal auditors. The Audit
Committee has the ability to retain, at our expense, special legal, accounting
or other consultants or experts it deems necessary in the performance of its
duties. The Board has determined that Mr. Pearce, a member of the Audit
Committee, qualifies as an “audit committee financial expert”, and that each
Audit Committee member is “financially literate” and “independent” as defined by
the SEC’s regulations and the NASDAQ’s listing standards.
Nominating
Committee
The
function of the Nominating Committee is to provide assistance to the Board
of Directors in the selection of candidates for election and re-election to
the
Board. The Committee utilizes a variety of methods for identifying and
evaluating director candidates. Candidates may come to the attention of the
Committee through current directors, members of management, shareholders or
other persons. From time to time, the Committee may also engage a search firm
to
assist in identifying potential Board candidates, although no such firm was
used
to identify any of the nominees for director proposed for election at the 2008
Annual Meeting of Shareholders. Once the Committee has identified a prospective
nominee, the Committee evaluates the prospective nominee against the standards
and qualifications set out in the Committee’s charter, including the
individual’s potential contributions in providing advice and guidance to the
Board and management. The Committee seeks to identify nominees who possess
a
wide range of experience, skills, areas of expertise, knowledge and business
judgment. The Committee evaluates all candidates for director, regardless of
the
person or firm recommending such candidate, on the basis of the length and
quality of their business experience, the applicability of such candidate’s
experience to us and our business, the skills and perspectives such candidate
would bring to the Board and the personality or “fit” of such candidate with
existing members of the Board and management. Successful nominees must have
a
history of superior performance or accomplishments in their professional
undertakings and should have the highest personal and professional ethics and
values.
Compensation
and Stock Incentive Committee
The
function of the Compensation and Stock Incentive Committee is to assist the
Board of Directors by (i) considering and determining all matters relating
to
the compensation of our Chairman, President and Chief Executive Officer and
our
other executive officers, including the named executive officers; (ii)
administering and functioning as the committee that is authorized to grant
stock
options, restricted stock and other equity awards to executive officers and
such
other key executives and employees as the Committee shall determine under our
Equity Incentive Plan (as defined below); and (iii) reviewing and reporting
to
the Board on such other matters as may be appropriately delegated by the Board
for the Committee’s consideration.
How
many times did each standing committee meet in fiscal
2008?
During
fiscal 2008, the Audit Committee met nine times. The Compensation and Stock
Incentive Committee met four times. The Nominating Committee met one time.
How
does the Board evaluate director candidates recommended by
shareholders?
The
Nominating Committee does not evaluate shareholder nominees differently than
any
other nominee. Pursuant to policies set forth in our Nominating Committee
Charter, our Nominating Committee will consider shareholder nominations for
directors if we receive timely written notice, in proper form, of the intent
to
make a nomination at a meeting of shareholders. To be timely for the 2009 annual
meeting, the notice must be received within the time frame discussed above
under
the heading “How do shareholders submit proposals for the Company’s 2009 Annual
Meeting of Shareholders?” To be in proper form, the notice must, among other
things, include each nominee’s written consent to serve as a director if
elected, the number of shares held of record and beneficially owned by the
nominee, and any other information relating to the nominee that is required
to
be disclosed in solicitations of proxies for the election of directors, or
is
otherwise required pursuant to Regulation 14A under the Securities Exchange
Act
of 1934.
How
are directors compensated?
Cash
Compensation
The
annual fee we pay our directors who are not also officers or consultants of
the
Company is $25,000.
In
addition, such directors are also paid $1,000 per regular meeting attended
in
person. No payments are made to directors who participate in telephonic board
meetings. There were five in-person board meetings in fiscal 2008. The annual
fee we pay each member of the Audit Committee is $6,000, the Compensation and
Stock Incentive Committee is $4,000 and the Nominating Committee is $1,000.
The
annual fee paid to the Chair of the Audit Committee is $5,000, and the annual
fee paid to the Chair of the Compensation and Stock Incentive Committee is
$2,500. Mr. Eppler, who serves as Board secretary and attends meetings of the
standing committees, receives an additional $1,000 for each committee meeting
that he attends and for which he serves as Secretary. Burt Steinberg has a
written consulting agreement with the Company. In accordance with his consulting
agreement, he receives $2,000 for each board meeting he attends in person.
Equity
Compensation
Historically
and in fiscal 2008, each director, whether or not employed by the Company,
except for David R. Jaffe, our President and CEO, was also granted non-qualified
stock options to purchase 10,000 shares of our common stock upon such director’s
election by our shareholders to a new three-year term on the Board, with annual
vesting of 3,333 shares from the date of the option grant, and with an exercise
price equal to the average of the high and low stock prices of our common stock
on the date of grant. However, on September 18, 2008, the Board approved a
new
stock option grant policy, pursuant to which directors would transition from
a
three-year option grant cycle to an annual option grant cycle. In order to
ensure that stock option grants are made on a consistent basis among our
directors, stock option grants to our directors under our new stock option
grant
policy are being phased in as follows: on September 18, 2008, (a) directors
who
were re-elected to the board in 2007 (Elliot S. Jaffe and Burt Steinberg),
each
received options to purchase 5,000 shares of our common stock, (b) directors
who
were re-elected to the board in 2006 (John Usdan and Randy L. Pearce), each
received options to purchase 10,000 shares of our common stock, and (c)
directors who are nominees for re-election as directors (other than David R.
Jaffe) at the 2008 Annual Meeting of Shareholders (Klaus Eppler and Kate
Buggeln), each received options to purchase 15,000 shares of our common stock,
at an exercise price equal to the average of the high and low stock price of
our
common stock on the date of grant.
Commencing
in 2009, all directors (except for David R. Jaffe) will be eligible to receive
options to purchase 5,000 shares of our common stock annually. Therefore,
commencing in 2009, all directors (except for David R. Jaffe) will be eligible
to receive options to purchase 15,000 shares of common stock over each
three-year period. This is a 5,000 share increase over the historical number
of
stock options for 10,000 shares every three years.
Commencing
with the stock options granted to all directors (except for David R. Jaffe)
on
September 18, 2008, if a non-employee director that has served on the Board
for
at least three years ceases to be a member of the Board of Directors for any
reason (other than for Cause, as defined below), then all of such director’s
unvested stock options (granted on or after September 18, 2008) will immediately
vest and remain exercisable for a period of six months following termination
of
such directorship, provided that no option will be exercisable for a period
longer than the original term of that option.
Notwithstanding
the foregoing, if a non-employee director receives a grant of stock options
and
is nominated for re-election to the Board at a meeting of shareholders to be
held within six (6) months after the date of the grant, such option grant shall
terminate and shall not become vested if such director either (a) is no longer
serving on the Board on the date of such Meeting of Shareholders; or (b) is
not
re-elected to the Board at such Meeting of Shareholders, or any adjournment
thereof.
“Cause”
shall mean, with respect to a non-employee director’s termination, any of the
following: (i) willful malfeasance, willful misconduct or gross negligence
by such director in connection with his or her duties, (ii) continuing
refusal by a director to perform his or her duties under any lawful direction
of
the Board after notice of any such refusal to perform such duties or direction
was given to such director, (iii) any willful and material breach of
fiduciary duty owing to the Company or its affiliates by the director,
(iv) the director’s conviction of a felony or any other crime resulting in
pecuniary loss to the Company or its affiliates (including, but not limited
to,
theft, embezzlement or fraud) or involving moral turpitude, or (v) habitual
drunkenness or narcotics addiction.
In
addition, commencing with the stock options granted on September 18, 2008 to
directors who are also employees of the Company (i.e., David R. Jaffe), if
such
employee-director ceases to be an employee of the Company for any reason (other
than Cause, as defined above), and such employee has achieved the “Total Years
Test” (as defined below) as of his or her last day of employment, then all of
such employee’s unvested stock options (granted on or after September 18, 2008)
will continue to vest and remain exercisable for a period of five years from
the
date of termination, provided that no option will be exercisable for a period
longer than the original term of that option, and provided further that after
the last unvested option vests, all options shall remain exercisable for one
year thereafter, but not longer than the original term of each option. The
“Total Years Test” shall mean 75 years, determined based on the sum of (i) the
total number of years of employment with the Company or an affiliate plus (ii)
the employee’s age, which shall be at least age 60.
Other
Arrangements
On
July
18, 2006, we entered into a consulting agreement with Burt Steinberg, under
which Mr. Steinberg provides consulting services for up to 40 days per year.
The
fees paid to Mr. Steinberg under this arrangement are reflected in the “All
Other Compensation” column in the Director Compensation Table below.
Our
President and Chief Executive Officer and our Chairman of the Board are
executive officers of the Company and do not receive any cash compensation
for
their services as director. Compensation paid to these individuals for their
services as executive officers during fiscal 2008 is reflected in the Summary
Compensation Table below. As noted above under “Equity Compensation”, our
Chairman, Elliot S. Jaffe, is eligible to receive annually options to purchase
5,000 shares of common stock.
FISCAL
2008 DIRECTOR COMPENSATION TABLE
The
following table provides each element of non-employee director compensation
for
fiscal 2008.
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
Earned
|
|
Option
|
|
All Other
|
|
|
|
|
|
|
or Paid in
|
|
Awards ($)
|
|
Compensation
|
|
Total
|
|
|
Name
|
|
Cash ($)
|
|
(1)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kate
Buggeln
|
|
$
|
39,000
|
|
$
|
43,797
|
|
|
—
|
|
$
|
82,797
|
|
|
Klaus
Eppler
|
|
|
39,000
|
|
|
43,797
|
|
|
—
|
|
|
82,797
|
|
|
Randy
L. Pearce
|
|
|
44,000
|
|
|
38,996
|
|
|
—
|
|
|
82,996
|
|
|
John
Usdan
|
|
|
42,500
|
|
|
25,275
|
|
|
—
|
|
|
67,775
|
|
|
Burt
Steinberg
|
|
|
—
|
|
|
61,133
|
|
|
122,109
|
(2)
|
|
183,242
|
|
|
(1)
|
The
amounts shown represent the compensation cost we recognized in fiscal
2008
related to option awards calculated in accordance with FAS 123R,
and
therefore include amounts from awards granted in and prior to fiscal
2008.
Pursuant to SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. For a discussion
of the valuation assumptions used in connection with option grants
made in
fiscal 2008, 2007 and 2006, see “Share-based compensation” under Note 1 of
the Notes to Consolidated Financial Statements in our 2008 Annual
Report
on Form 10-K filed with the SEC on September 24, 2008.
The
full grant date fair value of the non-qualified options to purchase
10,000
shares of our common stock granted on November 28, 2007 to Mr. Steinberg,
calculated in accordance with FAS 123R, was $43,800.
As
of July 26, 2008, the aggregate number of vested and unvested stock
options held by each non-employee director
were:
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
Vested
|
|
Unvested
|
|
|
Name
|
|
Options
|
|
Options
|
|
|
|
|
|
|
|
|
|
Kate
Buggeln
|
|
|
17,764
|
|
|
6,680
|
|
|
Klaus
Eppler
|
|
|
19,986
|
|
|
6,680
|
|
|
Randy
L. Pearce
|
|
|
7,773
|
|
|
8,893
|
|
|
John
Usdan
|
|
|
10,133
|
|
|
6,667
|
|
|
Burt
Steinberg
|
|
|
13,320
|
|
|
16,680
|
|
|
(2)
|
Amounts
paid to Mr. Steinberg for consulting
services.
|
Do
you have a written Code of Ethics?
Yes,
our
Board of Directors has adopted a “Code of Ethics for Senior Financial Officers”,
which can be viewed at
www.dressbarn.com
.
Click
on “Investor Relations”, then under “Investor Relations Menu” click on “Code of
Ethics”. This code complies with the requirements of the Sarbanes-Oxley Act of
2002 pertaining to codes of ethics for chief executives and senior financial
and
accounting
officers. If we amend or waive a provision of our “Code of Ethics for Senior
Financial Officers” that applies to our principal executive officer, principal
financial officer or controller we will post such information at this location
on our website. Paper copies of the code of ethics will be provided to any
shareholder upon request.
Do
you have a Whistleblower Policy?
Yes,
as
required by the Sarbanes-Oxley Act of 2002, we have established a confidential
hotline for associates to call with any information regarding concerns about
accounting or auditing matters. All calls are referred to the Chairman of the
Audit Committee of the Board of Directors. Our “Whistleblower Policy” can be
viewed on our website at www.dressbarn.com
.
Click
on
“Investor Relations”, then under “Investor Relations Menu” click on
“Whistleblower Policy”.
How
can I communicate with members of the Board of Directors?
You
may
contact any member of the Board of Directors as follows:
Write
to our
Board of Directors at:
Dress
Barn’s Board of Directors
c/o
Chair of
the Audit Committee
The
Dress
Barn, Inc.
30
Dunnigan Drive
Suffern,
New York 10901
To
the
extent reasonably practical under the circumstances, all such communications
are
treated confidentially and you can remain anonymous when communicating your
concerns.
When
do your fiscal years end?
Our
fiscal years end on the last Saturday in July. References in this proxy
statement to a “fiscal year” are to the calendar year in which the fiscal year
ends. For example, the fiscal year ended July 26, 2008 is referred to as “fiscal
2008”.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS, DIRECTORS AND MANAGEMENT
The
following table presents information concerning the beneficial ownership of
the
shares of our common stock as of September 25, 2008 (unless otherwise noted)
by
each of our directors, each of our Named Executive Officers, all of our
directors and executive officers as a group; and each person who is known by
us
to beneficially own more than 5% of our common stock.
Unless
otherwise indicated, beneficial ownership is direct and the person indicated
has
sole voting and investment power.
|
|
|
Number of
|
|
|
|
|
|
|
Shares of
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
Beneficially
|
|
Percent
|
|
|
Name of Beneficial Owner:
|
|
Owned
|
|
of Class (18)
|
|
|
|
|
|
|
|
|
|
Directors
and Executive Officers:
|
|
|
|
|
|
|
|
|
Elliot
S. Jaffe (1)
|
|
|
1,029,359
|
|
|
1.70
|
%
|
|
David
R. Jaffe (2)
|
|
|
5,881,164
|
|
|
9.55
|
%
|
|
Vivian
Behrens (3)
|
|
|
158,271
|
|
|
*
|
|
|
Armand
Correia (4)
|
|
|
101,150
|
|
|
*
|
|
|
Burt
Steinberg (5)
|
|
|
72,962
|
|
|
*
|
|
|
Gene
Wexler (6)
|
|
|
43,141
|
|
|
*
|
|
|
Klaus
Eppler (7)
|
|
|
28,148
|
|
|
*
|
|
|
Kate
Buggeln (8)
|
|
|
24,444
|
|
|
*
|
|
|
John
Usdan (9)
|
|
|
15,466
|
|
|
*
|
|
|
Randy
L. Pearce (10)
|
|
|
13,332
|
|
|
*
|
|
|
All
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
as
a group (consisting of 10 persons) (11)
|
|
|
7,367,438
|
|
|
11.87
|
%
|
|
*
Represents less than 1% of class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Beneficial Owners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elise
Jaffe (12)
|
|
|
5,003,832
|
|
|
8.24
|
%
|
|
c/o
The Dress Barn, Inc.
|
|
|
|
|
|
|
|
|
30
Dunnigan Drive
|
|
|
|
|
|
|
|
|
Suffern,
New York 10901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Jaffe (13)
|
|
|
4,526,298
|
|
|
7.48
|
%
|
|
c/o
The Dress Barn, Inc.
|
|
|
|
|
|
|
|
|
30
Dunnigan Drive
|
|
|
|
|
|
|
|
|
Suffern,
New York 10901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRIMECAP
Management Company (14)
|
|
|
6,050,000
|
|
|
9.99
|
%
|
|
225
Lake Avenue #400
|
|
|
|
|
|
|
|
|
Pasadena,
CA 91101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stadium
Capital Management, LLC (15)
|
|
|
5,486,192
|
|
|
9.06
|
%
|
|
Alexander
M. Seaver;
|
|
|
|
|
|
|
|
|
Bradley
R. Kent; and
|
|
|
|
|
|
|
|
|
Stadium
Relative Value Partners, L.P.
|
|
|
|
|
|
|
|
|
19785
Village Office Court, Suite 101
|
|
|
|
|
|
|
|
|
Bend,
OR 97702
|
|
|
|
|
|
|
|
See
footnotes on the following page
|
|
|
|
|
|
|
|
|
|
Vanguard
Horizon Funds (16)
|
|
|
4,970,000
|
|
|
8.21
|
%
|
|
Vanguard
Capital Opportunity Fund
|
|
|
|
|
|
|
|
|
100
Vanguard Blvd.
|
|
|
|
|
|
|
|
|
Malvern,
PA 19355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royce
& Associates, LLC (17)
|
|
|
4,731,365
|
|
|
7.82
|
%
|
|
1414
Avenue of the Americas
|
|
|
|
|
|
|
|
|
New
York, NY 10019
|
|
|
|
|
|
|
|
(Footnotes
relating to the “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
MANAGEMENT” table on the preceding page and above.)
|
|
(1)
|
Consists
of 524,557 shares owned directly by Elliot S. Jaffe, 381,469 shares
owned
by his wife, Mrs. Roslyn S. Jaffe, and 123,333 shares covered by
options
exercisable by Elliot S. Jaffe within 60 days of September 25,
2008.
|
|
|
(2)
|
Consists
of 4,792,320 shares owned directly by David R. Jaffe, 8,844 restricted
shares subject to vesting restrictions and 1,080,000 shares covered
by
options exercisable within 60 days of September 25,
2008.
|
|
|
(3)
|
Consists
of 8,490 shares owned directly by Vivian Behrens, 19,581 restricted
shares
subject to vesting restrictions and 130,200 shares covered by options
exercisable within 60 days of September 25, 2008.
|
|
|
(4)
|
Consists
of 1,150 shares owned directly by Armand Correia, 4,000 restricted
shares
subject to vesting restrictions and 96,000 shares covered by options
exercisable within 60 days of September 25,
2008.
|
|
|
(5)
|
Consists
of 56,309 shares owned directly by Burt Steinberg and 16,653 shares
covered by options exercisable within 60 days of September 25,
2008.
|
|
|
(6)
|
Consists
of 4,514 shares owned directly by Gene Wexler, 5,027 restricted shares
subject to vesting restrictions and 33,600 shares covered by options
exercisable within 60 days of September 25,
2008.
|
|
|
(7)
|
Consists
of 1,482 shares owned directly by Klaus Eppler and 26,666 shares
covered
by options exercisable within 60 days of September 25,
2008.
|
|
|
(8)
|
Consists
of 24,444 shares covered by options exercisable by Kate Buggeln within
60
days of September 25, 2008
|
|
|
(9)
|
Consists
of 2,000 shares owned directly by John Usdan and 13,466 shares covered
by
options exercisable within 60 days of September 25,
2008.
|
|
|
(10)
|
Consists
of 13,332 shares covered by options exercisable Randy Pearce within
60
days of September 25, 2008
|
|
|
(11)
|
Includes
1,557,694 shares covered by options exercisable by Directors and
Executive
Officers within 60 days of September 25,
2008.
|
|
|
(12)
|
Consists
of 4,790,876 shares owned directly by Elise Jaffe, 956 restricted
shares
subject to vesting restrictions and 212,000 shares covered by options
exercisable within 60 days of September
25.
|
|
|
(13)
|
Consists
of 4,526,298 shares owned directly by Richard Jaffe.
|
|
|
(14)
|
Based
solely on information set forth in the Schedule 13G/A filed with
the SEC
on April 3, 2008 by PRIMECAP Management Company, which indicates
that
PRIMECAP Management Company has sole dispositive power over 6,050,000
shares and sole voting power over 793,600
shares.
|
|
|
(15)
|
Based
solely on information set forth in the Schedule 13G filed jointly
with the
SEC on January 11, 2008 by Stadium Capital Management, LLC ("SCM"),
Alexander M. Seaver, Bradley R. Kent, and Stadium Relative Value
Partners,
L.P. ("SRV"), which indicates that (i) each of SCM and Messrs. Seaver
and
Kent have shared voting and dispositive power over 5,486,192 shares;
and
(ii) SRV has shared voting and dispositive power over 3,695,603 shares.
|
|
|
(16)
|
Based
solely on information set forth in the Schedule 13G/A filed with
the SEC
on February 27, 2008 by Vanguard Horizon Funds-Vanguard Capital
Opportunity Fund.
|
|
|
(17)
|
Based
solely on information set forth in the Schedule 13G/A filed with
the SEC
on January 28, 2008 by Royce & Associates,
LLC.
|
|
|
(18)
|
Based
on 60,531,017 shares outstanding on September 25, 2008.
Shares
subject to stock options which are currently exercisable or will
become
exercisable within 60 days after September 25, 2008, are deemed
outstanding for computing the percentage of the person holding such
options, but are not deemed outstanding for computing the percentage
of
any other person or group.
|
PROPOSAL
ONE
ELECTION
OF DIRECTORS
Our
Certificate of Incorporation provides for a classified Board divided into three
classes, each with a staggered three-year term of office and each class of
directors as nearly equal in number as possible. At the 2008 Annual Meeting
of
Shareholders,
three
directors are to be elected for three-year terms. On the recommendation of
the
Nominating Committee, the Board has nominated David R. Jaffe, Klaus Eppler
and
Kate Buggeln, current directors whose terms of office expire at the 2008 Annual
Meeting of Shareholders, for election for three-year terms expiring at the
2011
Annual Meeting of Shareholders.
Directors
will be elected by a plurality of the votes cast at the 2008 Annual Meeting
of
Shareholders. This means that the three nominees with the most votes for
election for the three-year terms will be elected. We will count only votes
cast
for a nominee, except that a shareholder’s proxy will be voted FOR the three
nominees described in this Proxy Statement unless the shareholder instructs
the
proxy holders to the contrary in his or her proxy.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS
VOTE
FOR
THE ELECTION OF THE NOMINEES LISTED BELOW TO SERVE AS
DIRECTORS.
Information
about Director Nominees
Following
is information regarding the nominees and the other continuing directors.
Nominees
for Election as Director for Three-Year Terms Expiring in
2011
|
Name of Nominee and Age
|
|
Director Since
|
|
David R. Jaffe,
49
|
|
2001
|
|
Klaus
Eppler, 78
|
|
1993
|
|
Kate
Buggeln, 47
|
|
2004
|
DAVID
R.
JAFFE has been our President and Chief Executive Officer (“CEO”) since 2002.
Previously, he had been Vice Chairman and Chief Operating Officer since 2001.
Mr. Jaffe joined our Company in 1992 as Vice President Business Development
and
became Senior Vice President in 1995, Executive Vice President in 1996 and
Vice
Chairman in 2001. He is the son of Elliot S. and Roslyn S. Jaffe. Elliot S.
Jaffe is Chairman of the Board and an executive officer. Roslyn S. Jaffe is
a
Founder and Director Emeritus. David R. Jaffe is the brother of Elise Jaffe,
a
non-executive officer and a more than 5% shareholder, and Richard Jaffe, a
more
than 5% shareholder.
KLAUS
EPPLER is a pensioned partner in the law firm of Proskauer Rose LLP. He was
an
equity partner of Proskauer Rose LLP from 1965 to 2001. Mr. Eppler is also
a
Director of Bed Bath & Beyond Inc.
KATE
BUGGELN is on the Governing Board of the Business Council for Peace. Ms. Buggeln
was Senior Vice President, Strategic Planning and Business Development for
Coach, Inc. from 2001 to 2004.
Directors
with Terms Expiring in 2009
|
Name of Director and Age
|
|
Director Since
|
|
John
Usdan, 50
|
|
2002
|
|
Randy
L. Pearce, 53
|
|
2005
|
JOHN
USDAN has, since 1981, been President of Midwood Management Corporation, a
company specializing in real estate ownership, development and
management.
RANDY
L.
PEARCE has been the Senior Executive Vice President and Chief Financial and
Administrative Officer of Regis Corporation, an owner, operator and franchisor
of hair and retail product salons, since 1998, and has held various executive
positions at Regis Corporation since 1985.
Directors
with Terms Expiring in 2010
|
Name of Director and Age
|
|
Director Since
|
|
Elliot S. Jaffe,
82
|
|
1966
|
|
Burt
Steinberg, 63
|
|
1983
|
ELLIOT
S.
JAFFE, Chairman of the Board and a Founder of our Company, was Chief Executive
Officer from the founding of our Company in 1962 until 2002. Mr. Jaffe is the
spouse of Roslyn S. Jaffe, a Founder and Director Emeritus of our Company,
and
they are the parents of David R. Jaffe, a director and CEO, Elise Jaffe, a
non-executive officer and a more than 5% shareholder, and Richard Jaffe, a
more
than 5% shareholder.
BURT
STEINBERG, Executive Director since 2001, was Chief Operating Officer of our
Company from 1989 until 2001, first as President and then as Vice Chairman.
Mr.
Steinberg was in charge of our merchandising activities from 1982 until 2001.
He
is also a Director of Provident New York Bancorp.
Compensation
Committee Interlocks and Insider Participation
None
of
the members of the Compensation and Stock Incentive Committee was an officer
or
employee of our Company during fiscal 2008. No executive officer of the Company
served during fiscal 2008 as a director or member of a compensation committee
of
any entity one of whose executive officers served on the Board or the
Compensation and Stock Incentive Committee of the Company.
Independence
Determinations
Our
Board
of Directors has determined that a majority of the Board and all members of
the
standing committees are independent pursuant to applicable SEC and NASDAQ rules,
and, in addition, in the case of the Compensation and Stock Incentive Committee,
pursuant to applicable tax rules. Our independent directors include Kate
Buggeln, Klaus Eppler, Randy L. Pearce and John Usdan.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This
Compensation Discussion and Analysis describes the compensation philosophy,
objectives, policies and practices with respect to our named executive officers
(the “NEOs”). The NEOs are the President/CEO, the Chairman of the Board, the
Chief Financial Officer, the Chief Marketing Officer and the General
Counsel.
Role
of Our Compensation and Stock Incentive Committee
Our
Compensation and Stock Incentive Committee (the “Compensation Committee”)
reviews and approves salaries and other compensation of the Chairman of the
Board and all senior executives of the Company (including the NEOs), and its
dressbarn
and
maurices
divisions. Our Compensation Committee also administers the Company’s 2001 Stock
Incentive Plan
(as
amended, the “Equity Incentive Plan”), and review goals and other matters
relating to the Company’s other bonus and incentive plans for senior
executives.
Role
of Executive Officer in Compensation Decisions
David
R.
Jaffe, our President and CEO, annually reviews the performance of each NEO
with
the Compensation Committee and makes recommendations with respect to each key
element of executive compensation for each NEO, excluding himself, as well
as
senior executives from both divisions. Based in part on these recommendations
and other considerations discussed below, the Compensation Committee reviews
and
approves the annual compensation package of our NEOs.
Compensation
Program Objectives and Philosophy
The
overall objective of our executive compensation program is to attract highly
skilled, performance-oriented executives and to motivate them to achieve
outstanding results through appropriate incentives. We focus on the following
core principles in structuring an effective compensation program that meets
our
stated objectives:
Total
Compensation
—
Our
compensation philosophy focuses on each executive’s total compensation. Total
compensation includes a base salary, an annual incentive bonus, long-term
incentive compensation consisting of stock options and restricted stock and
various employee benefits.
Performance
of Company and our Stock Price
—
We
endeavor to align executive compensation with the achievement of operational
and
financial results and increases in shareholder value. Our compensation program
includes significant performance-based remuneration and is designed to ensure
that our executives have a larger portion of their total compensation “at risk”
based on Company performance than we believe is generally the case with
specialty retailers. We believe this feature creates a meaningful incentive
for
outstanding performance and an effective retention tool. Two of the elements
(the annual incentive bonus and performance-based restricted stock) are entirely
“at risk” based on Company performance and will not be earned if the Company
does not achieve threshold performance goals. Company performance below
threshold levels results in no awards of compensation other than base salary
and, commencing in the first quarter of fiscal 2009, an annual grant of
non-qualified stock options.
Our
program also features substantial stock-related components, including
time-vesting stock options and time-vesting restricted stock. The value of
both
the stock options and the restricted stock depends on our stock price. Because
the stock options vest over a five-year period after the grant date, and
restricted stock vests over either a five-year period (for special awards)
or a
three-year period (for performance-based restricted stock), the value of these
components of compensation to our executives is dependent on the performance
of
our stock price over a period of many years. This aligns the interests of our
executives with the long-term interests of our shareholders. Because of this
long-term alignment of interests, we do not have either minimum stock ownership
guidelines or stock sale guidelines for our executives.
Compensation
Benchmarking; Role of Compensation Consultants
Prior
to
the beginning of fiscal 2007, the Compensation Committee engaged Mercer Human
Resource Consulting (“Mercer”), as its independent compensation consultant, to
assist the Compensation Committee in analyzing competitive compensation levels
for our Chairman and President/CEO. Mercer selected 19 companies for comparison
to our Chairman and President/CEO’s salary, bonus and LTIP restricted stock
based on the following criteria:
—SIC
codes similar to the Company (including women’s clothing, apparel and
accessories, women’s, miss and juniors outerwear, and apparel and other finished
products)
—revenues
approximately one-half to two times the Company’s fiscal year 2005 revenue of $1
billion.
For
the
fiscal 2007 analysis, Mercer chose a peer group of specialty retailers for
comparison to our Chairman and President/CEO’s compensation consisting of the
following component companies:
Aeropostale
Inc. (ARO); American Eagle Outfitters Inc. (AEO); Ann Taylor Stores Corp. (ANN);
Bebe Stores Inc. (BEBE); Cato Corp. (CTR); Charlotte Russe Holding Inc. (CHIC);
Charming Shoppes Inc. (CHRS); Chicos FAS Inc. (CHS); Childrens Place Retail
Stores (PLCE); Deb Shops Inc. (DEBS); Gymboree Corp. (GYMB); Hot Topic Inc.
(HOTT); Men’s Warehouse Inc. (MW); Stage Stores Inc. (SSI); Stein Mart Inc.
(SMRT); Talbots Inc. (TLB); Too Inc. (now Tween Brands Inc.)(TWB); United Retail
Group Inc. (URGI); and Urban Outfitters Inc. (URBN).
With
respect to fiscal 2008 compensation for the Chairman and President/CEO, the
Compensation Committee did not engage a compensation consultant.
Each
year, we seek to target salary compensation for our NEOs at approximately the
50th percentile of the applicable peer group. The Compensation Committee reviews
and approves the recommended peer group changes as necessary. With respect
to
the salaries of our NEOs, the Compensation Committee reviews the annual salary
studies published by Mercer for the National Retail Federation.
Compensation
Program Elements
Our
philosophy serves to cultivate a pay-for-performance environment. Our executive
compensation plan design has four key elements:
a.
Base
Salary
b.
Annual
Incentive Bonus
c.
Non-Qualified Stock Options
d.
Long-Term Incentive Plans (“LTIPs”), which consist of performance-based
restricted stock
We
do not
consider change-in-control payments to be a key element of executive
compensation for our NEOs. The only NEO with any change-in-control arrangement
is our President/CEO. For a description of that arrangement, see “Potential
Payments Upon Termination or Change in Control—David R. Jaffe” below. We also do
not consider employee benefits or perquisites to be a key element of executive
compensation for our NEOs. For a description of perquisites received by our
NEOs
in fiscal 2008, see the details of the amounts included in the “All Other
Compensation” column of the Summary Compensation Table below.
We
allocate compensation between short-term and long-term components and between
cash and equity in order to maximize executive performance and retention.
Long-term compensation and equity awards comprise an increasingly larger
proportion of total compensation as position level increases.
Base
Salary
Base
salary represents the annual salary paid to each executive. For salaries for
our
NEOs (excluding the Chairman) we seek to target approximately the 50
th
percentile of our peer group. We review base salaries in the first quarter
of
each new fiscal year (i.e., the fiscal year which follows the completed fiscal
year for which executive compensation is described in this Proxy Statement)
and
increases, where applicable, are typically effective on or about October 1
of
the new fiscal year. Because the Company fell significantly short of its
financial goals for fiscal 2008, David Jaffe, Mr. Correia and Mr. Wexler
did not receive a salary increase in the first quarter of fiscal
2009. Ms. Behren's salary was increased as of October 1, 2008 from $310,000
to $320,000. The Chairman's salary is increased, pursuant to his
employment agreement, each year based on a cost-of-living
adjustment.
Annual
Incentive Bonus Plans
The
Compensation Committee believes that a substantial percentage of each executive
officer’s annual compensation should tie directly to the financial performance
of the Company as well as to the executive’s own individual performance. The
Company maintains two annual cash bonus plans: (i) the Management Incentive
Plan, and (ii) the Executive 162(m) Bonus Plan.
We
structure both bonus plans to encourage the achievement of above-market annual
performance targets and to recognize annual Company performance. The bonus
plans
help to focus the executive team on key annual objectives and business drivers,
which we believe will support growth of Company EBITDA (“EBITDA” represents
Earnings before Interest, Taxes, Depreciation and Amortization), improvement
in
overall operations, and increases in shareholder value. We establish an
executive’s annual incentive bonus as a percentage of base salary, with
increases in target percentages directly related to position level. This
approach places a proportionately larger percentage of total annual pay at
risk
based on Company performance for our executives relative to position level.
The
target award opportunity for our CEO is equal to 100% of base salary and the
target award opportunities for our other NEOs (excluding the Chairman) are
equal
to 60% of base salary.
Management
Incentive Plan (“MIP”)
The
Management Incentive Plan (“MIP”) covers all
dressbarn
division
executives at the level of Manager and above and selected salaried
employees at the
maurices
division. In fiscal 2008, approximately 180 executives participated in the
MIP.
All of the NEOs participated in the MIP for fiscal 2008 (other than the
Chairman, who does not participate in any annual incentive programs, and the
President/CEO, who participated in the Executive 162(m) Bonus Plan). For
executives at the Director level and above, which includes of the NEOs Armand
Correia, Vivian Behrens and Gene Wexler, the performance goals under the MIP
for
fiscal 2008 had three components:
40%
attributable to division (i.e.,
dressbarn
or
maurices
)
financial goals, as follows:
—20%
on
division EBITDA dollars
—20%
on
division EBITDA as a percent of sales
20%
Company financial goals, as follows:
—10%
on
Company EBITDA dollars
—10%
on
Company EBITDA as a percent of sales
40%
Personal Goals
For
the
three NEOs mentioned above who participated in the MIP in fiscal 2008, their
divisional financial goals and personal goals were based primarily on the
dressbarn
division
and partially on the
maurices
division.
The
MIP
award is calculated by adding the components corresponding to the achievement
of
each of the goals, up to the maximum bonus percentage for each participant
in
the bonus plan. Maximum bonus percentages increase with position level. For
Mr.
Correia, Ms. Behrens and Mr. Wexler, each of whom is a Senior Vice President,
the maximum bonus award for fiscal 2008 was 60% of his or her base salary.
If a
participant’s employment terminates for any reason prior to the payout date,
they will not be eligible for an award, unless they terminate after December
31,
2008 and the bonus has not yet been paid.
Executive
162(m) Bonus Plan
For
fiscal 2008, our President and CEO, David R. Jaffe, was the only participant
in
the Executive 162(m) Bonus Plan (the “162(m) Plan”). The 162(m) Plan is used
instead of the MIP for those executives who may be affected by Section 162(m)
of
the Internal Revenue Code of 1986, as amended (the “Code”) and are designated by
the Compensation Committee to be subject to the 162(m) Plan. Code Section 162(m)
generally disallows a Federal income tax deduction to any publicly held
corporation for non performance based compensation paid in excess of $1,000,000
in any taxable year to certain NEOs. The Company structures awards under the
162(m) Plan so that compensation under this plan is intended to qualify as
“performance-based compensation” eligible for continued deductibility.
Performance-based compensation satisfying the requirements of Code Section
162(m) is excluded from the $1,000,000 deductibility cap.
The
maximum performance award payable to any individual under the 162(m) Plan for
any one-year performance period will not exceed 100% of his or her annual base
salary for the year.
The
President/CEO’s performance goals for fiscal 2008 were as follows:
10%
on
the Company’s EBITDA dollars
10%
on
the Company’s EBITDA as a percent of sales
20%
on
the EBITDA of the
dressbarn
division
20%
on
the EBITDA of the
maurices
division
40%
personal goals, which were approved at the beginning of fiscal 2008 by the
Compensation Committee
Fiscal
2008 Performance Metrics
For
fiscal 2008, for each participant in the MIP bonus program (which included
Mr.
Correia, Ms. Behrens and Mr. Wexler) and the sole participant in the 162(m)
Plan
(our President/CEO), the Compensation Committee established the following
performance goals, which were substantially uncertain to be achieved when
approved, and which were based on our Board-approved financial plan and the
recommendation of our President/CEO. These financial goals represented a
significant increase above the prior year’s financial achievements.
|
Performance Goals
|
|
fiscal 2008 Results
|
|
Payout Percentage (1)
|
|
|
|
|
|
|
|
|
|
Company
EBITDA dollars
—$225.2 million
|
|
$
|
161.4
million
|
|
|
0.0
|
%
|
|
Company
EBITDA as a percent of sales
—14.30%.
|
|
|
11.16
|
%
|
|
0.0
|
%
|
|
dressbarn
division EBITDA dollars
—$134.8 million.
|
|
$
|
71.0
million
|
|
|
0.0
|
%
|
|
dressbarn
division EBITDA as a percent of sales
—13.42%
|
|
|
7.99
|
%
|
|
0.0
|
%
|
|
maurices
division EBITDA dollars
—$90.5 million
|
|
$
|
90.4
million
|
|
|
99.3
|
%
|
|
maurices
division EBITDA as a percent of sales
—15.83%
|
|
|
16.25
|
%
|
|
103.3
|
%
|
(1)
The
Payout Percentage is not calculated by dividing the fiscal 2008 results by
the
performance goal amount or percentage. Rather, the MIP Plan has pre-established
percentage payouts based on various levels of achievement of the performance
goals, with interpolation in between.
For
an
NEO (other than the Chairman), in order to achieve any portion of either the
two
10% bonus components based on Company EBITDA dollar and EBITDA percentage of
sales goals, the Company needed to achieve more than 95% of either goal,
respectively. To achieve any portion of either of the two 20% divisional bonus
components based on divisional EBITDA dollar and EBITDA percentage of sales
goals, the division needed to achieve more than 95% of either goal,
respectively.
Each
NEO
(other than the Chairman), at the beginning of fiscal 2008, submitted, with
the
recommendation of the CEO, other than with respect to himself, and had approved
by the Compensation Committee personal goals totaling 100 points. After the
end
of fiscal 2008, the bonus review committee (which consists of certain members
of
senior management) reviewed each participant’s achievement of his or her
personal goals. The scoring was from the lowest rating of “1” to the highest
rating of “5”. Therefore, the highest rating possible would be 500 points (i.e.,
a rating of 5 on all personal goals). If the Company or a division achieves
greater than 95% of its financial goals, then an NEO needs at least 300 points
to receive a threshold payment of 20% of the target bonus, at least 400 points
to receive a target payment of 100% of the target bonus, and at least 475 points
to receive the maximum payment of 150% of the target bonus. However, in no
case
can the total bonus payments from achievement of the Company financial goals
and
the personal goals exceed 100% of the target award.
The
Chairman is not a participant in any bonus programs. For fiscal 2008, the
Compensation Committee awarded no bonus to the President and CEO based on his
not meeting all of his performance goals for fiscal 2008. For fiscal 2008,
the
other three NEO’s each received a partial bonus under the MIP Plan due to their
involvement with the maurices division and the fact that the maurices division
achieved approximately 100% of its divisional goals, as follows: $41,422 for
Mr.
Correia; $59,520 for Ms. Behrens; and $32,400 for Mr. Wexler.
Non-Qualified
Stock Options and Restricted Stock under the Company’s Equity Incentive
Plan
The
Equity Incentive Plan, as amended and restated in 2005, provides that key
employees and non-employee directors of the Company or an affiliate may be
granted (i) options to acquire shares of the Company’s common stock, or (ii)
shares of restricted stock (collectively, “Awards”). The purpose of the
Company’s Equity Incentive Plan is to enhance the profitability and value of the
Company for the benefit of its shareholders by enabling the Company to offer
eligible participants Awards, thereby linking shareholder and eligible
participants’ interests. The Plan also creates a means to raise the level of
stock ownership by our executives, in order to attract, retain and reward these
individuals. Each Award is subject to a maximum grant to an eligible participant
in any year of 400,000 option shares and 400,000 shares of restricted stock
that
are intended to be “performance based” compensation under Code Section 162(m),
subject to customary adjustments, with any unused portion of the limitation
available to be carried forward.
The
Equity Incentive Plan is designed to meet the requirements of Section 162(m)
of
the Code in order to preserve the Company’s ability to take compensation expense
deductions in connection with the exercise of options granted and the vesting
of
performance-based restricted stock
.
Conversion
from three-year to one-year stock option grant cycles
The
Compensation Committee has historically granted options to employees, and the
Board has granted options to non-employee directors, once every three
years. However, on September 18, 2008, the Compensation Committee approved
with
respect to employees, and the Board approved with respect to non-employee
directors, a new stock option grant policy, pursuant to which officers and
members of the Board would transition from a three-year option grant cycle
to
annual grants of options. The Compensation Committee and the Board believe
that
the change to annual grants of options will improve our ability to attract
and
retain talented directors and executives. In addition, it will allow us to
grant
options each year to all directors and executives at the same exercise price;
under the old three-year option cycle program, directors and executives received
option grants at different exercise prices, depending on which year they
received their option grants. In order to effect the transition from three-year
to one-year option grant cycles, on September 18, 2008, the Compensation
Committee and the Board approved the following stock option grants:
|
|
a.
|
2008
Cycle Participants
.
For those participants whose 3-year cycle would normally occur in
September 2008, which is part of our fiscal 2009 year, they received
in
September 2008, upon the recommendation of management and the approval
of
the Compensation Committee, 100% of the number of options that they
would
otherwise receive once every 3 years. Every year thereafter, commencing
in
September 2009, they will be eligible to receive, subject to the
recommendation of management and the sole discretion of the Compensation
Committee, an annual grant equal to 1/3 of the number of options
that they
were eligible to receive in September 2008. Of our NEOs, David R.
Jaffe,
Mr. Correia, Ms. Behrens and Mr. Wexler each fell into this category
and
received in September 2008 an option grant of 250,000; 60,000; 60,000;
and
50,000 options, respectively.
|
|
|
b.
|
2009
Cycle Participants
.
For those participants whose 3-year cycle would normally occur in
September 2009, which is part of our fiscal 2010 year, they received
in
September 2008, upon the recommendation of management and the approval
of
the Committee, two-thirds of the number of options that they would
otherwise receive in September 2009. Every year thereafter, commencing
in
September 2009, they will be eligible to receive, subject to the
recommendation of management and the sole discretion of the Compensation
Committee, an annual grant equal to 1/2 of the number of options
that they
were eligible to receive in September
2008.
|
|
|
c.
|
2010
Cycle Participants
.
For those participants whose 3-year cycle would normally occur in
September 2010, which is part of our fiscal 2011 year, they received
in
September 2008, upon the recommendation of management and the approval
of
the Compensation Committee, one-third of the number of options that
they
would otherwise receive in September 2010. Every year thereafter,
commencing in September 2009, they will be eligible to receive, subject
to
the recommendation of management and the sole discretion of the
Compensation Committee, an annual grant equal to the same number
of
options that they were eligible to receive in September 2008. Of
our NEOs,
Elliot S. Jaffe fell into this category and received in September
2008 an
option grant of 5,000 options.
|
Non-Qualified
Stock Options
There
are
currently approximately 515 option holders. Options granted to executives vest
20% per year for five years following the grant date. The exercise price of
a
stock option is the average of the high and low Company stock prices on the
date
of grant. Options typically have a term of ten years.
During
fiscal 2008, none of the five NEOs received any grants of stock options as
part
of his or her regular three-year option grant cycle, except for Elliot S. Jaffe,
who received a stock option to purchase 10,000 shares of our common stock upon
his reelection to the Board in November of 2007. During fiscal 2007, Mr. Wexler
received a special stock option to purchase 4,000 shares of our common stock.
The
CEO
may exercise discretion in his recommendations to the Compensation Committee
for
grants of stock options for all executives, including the NEOs, excluding
himself and the Chairman. The CEO may recommend an increase or decrease to
the
stock option grant guidelines for a given executive, based on individual
performance.
Historically,
the Compensation Committee has strived to grant options which were, on a three
year trailing average, approximately 2.5% or less of the outstanding shares
of
the Company’s common stock. During fiscal 2008, the Compensation Committee
granted options for approximately 663,800 shares, which was approximately 1.1%
of our average shares outstanding during fiscal year 2008 of 61,675,000. Over
the past three fiscal years, the Compensation Committee has granted options
for
an aggregate of approximately 3,815,766 shares (adjusted for a two-for-one
stock
split on March 31, 2006), which averaged over the past three fiscal years
approximately 2.0% of our average shares outstanding over the past three fiscal
years of 62,492,000.
The
Compensation Committee may also make other equity grants from time to time
during the course of the year, such as when a new employee is hired, a current
employee is promoted or recognition of special achievement.
The
Compensation Committee has a policy of not granting any stock options until
at
least one business day after the Company has issued its quarterly and/or annual
sales and earnings release, as well as the public release of any other pending
material non-public information. In the first quarter of fiscal 2009, the
Company issued its annual sales and earnings release after the close of NASDAQ
trading on September 17, 2008. The Compensation Committee approved grants of
stock options at its regularly scheduled meeting on September 18, 2008. The
date
of grant is the date of the Compensation Committee Meeting.
Post-Termination
Continued Vesting and Exercisability of Employee Options in Certain
Circumstances.
Commencing
with the stock options granted to employees (including employee-directors)
on
September 18, 2008, if an employee ceases to be an employee of the Company
for
any reason (other than “Cause”), and such employee has achieved the “Total Years
Test” (as defined below) as of his or her last day of employment, then all of
such employee’s unvested stock options (granted on or after September 18, 2008)
will continue to vest and remain exercisable for a period of five years from
the
date of termination, but not longer than the original term of each option,
and
provided that after the last unvested option vests, all options shall remain
exercisable for one year thereafter, but not longer than the original term
of
each option
.
“Cause”
shall mean, with respect to an employee’s termination, any of the following:
(i) willful malfeasance, willful misconduct or gross negligence by such
employee in connection with his or her duties, (ii) continuing refusal by
an employee to perform his or her duties under any lawful direction of the
Board
after notice of any such refusal to perform such duties or direction was given
to such employee, (iii) any willful and material breach of fiduciary duty
owing to the Company or its affiliates by the employee, (iv) the employee’s
conviction of a felony or any other crime resulting in pecuniary loss to the
Company or its affiliates (including, but not limited to, theft, embezzlement
or
fraud) or involving moral turpitude, or (v) habitual drunkenness or
narcotics addiction.
The
“Total Years Test” shall mean 75 years, based on the sum of (i) the total number
of years of employment with the Company or an affiliate, plus (ii) the
employee’s age, which shall be at least age 60.
Special
Grants of Restricted Stock
We
do not
have a regular program of granting to our executives shares of non-performance
based restricted stock. All grants of non-performance based restricted stock
are
“special awards” based on outstanding performance, a promotion or an increase in
responsibilities. On November 29, 2006, as awards for special achievement during
fiscal 2007, Ms. Behrens received an award of 10,000 shares of restricted
stock
and
Mr.
Correia received an award of 5,000 shares of restricted stock
.
These
shares vest 20% per year at the end of each of the five years following the
date
of grant. None of the NEO’s received any special grants of restricted stock
during fiscal 2008.
Long-Term
Incentive Plans
During
the first quarter of fiscal 2007, the Compensation Committee created a long-term
incentive plan (an “LTIP”), which authorized the potential grant of
performance-based restricted stock under our Equity Incentive Plan to our senior
executives. LTIP performance goals are established annually, and the performance
period for each annual plan consists of three consecutive fiscal years. The
goal
was to give each senior executive a substantial incentive to maximize our
long-term financial performance. During the third quarter of fiscal 2007, the
Compensation Committee decided to create two one-year “bridge” LTIPs for fiscal
2007 (the “2007 LTIP”) and fiscal 2008 (the “2008 LTIP”). The 2007 LTIP and 2008
LTIP plans each use a one-year performance period, consisting of fiscal 2007
and
fiscal 2008, respectively. The 2009 Long-Term Incentive Plan (the “2009 LTIP”)
uses a three-year performance period consisting of fiscal 2007, fiscal 2008
and
fiscal 2009. During the first quarter of fiscal 2008, the Compensation Committee
established the 2010 Long-Term Incentive Plan (the “2010 LTIP”). The 2010 LTIP
uses a three-year performance period consisting of fiscal 2008, fiscal 2009
and
fiscal 2010. During the first quarter of fiscal 2009, the Compensation Committee
established the 2011 Long-Term Incentive Plan (the “2011 LTIP”). The 2011 LTIP
uses a three-year performance period consisting of fiscal 2009, fiscal 2010
and
fiscal 2011. With respect to the NEOs, the performance goals for the 2008 LTIP,
2009 LTIP, 2010 LTIP and 2011 LTIP performance periods are intended to
constitute “performance goals” under our Equity Incentive Plan and, accordingly,
shares granted under these LTIPs to the NEOs are intended to constitute
“performance-based compensation” under Section 162(m) of the
Code.
We
expect
that during the first quarter of each subsequent fiscal year, the Compensation
Committee will establish a new Long-Term Incentive Plan similar to the 2009
LTIP, the 2010 LTIP and the 2011 LTIP. Each such plan will include potential
grants of restricted stock based on our financial performance over three full
fiscal years. Any shares granted under future long-term incentive plans will
be
intended to constitute “performance based compensation” under Section 162(m) of
the Code.
Each
LTIP
to date includes the potential grant of performance-based restricted stock
under
our Equity Incentive Plan to approximately 30 Company executives, including
all
of the NEOs, other than the Chairman. Each participant in each LTIP was or
will
be assigned a “target” number of shares. The actual number of shares of
restricted stock to be awarded at the end of the applicable performance period
will depend on the Company’s achievement of three Company financial goals during
the applicable performance period. The target shares for each LTIP are allocated
one-third to each of the following three performance metrics: market
capitalization growth, operating income growth, and return on invested capital.
The Compensation Committee has the right to change the performance metrics
used
in future LTIP plans as long as the performance metrics are already included
in
the Equity Incentive Plan, which was approved by our shareholders at the 2005
Annual Meeting. The percentage of shares awarded with respect to each of the
performance metrics have depended or will depend on the compounded annual
increase over the applicable performance period for each such performance
metric. The Company’s performance over the applicable performance periods
required to achieve full payout of awards to participants in all of the LTIP
plans was or is significantly higher than the annual performance goals set
under
the MIP described above.
Any
target shares awarded after the applicable performance period will then become
subject to a three-year vesting period, with the awarded shares of restricted
stock vesting one-third per year at the end of each of the next three years.
The
date of grant of shares of any earned restricted stock following the end of
a
performance period is called the “Grant Date”.
Holders
of outstanding restricted stock have the right to vote prior to vesting. Any
shares awarded on the Grant Date will be subject to accelerated vesting upon
the
participant’s termination due to death or disability, upon a change of control,
or upon achievement of the “Total Years Test”. The “Total Years Test” means 75
years, based on the sum of (i) the total number of full years of the
participant’s continuous employment or consultancy with the Company, plus the
participant’s age, which needs to be at least age 60. “Change of Control” is
defined in the Equity Incentive Plan as: (a) a transfer of 30% or more of the
Company’s voting securities; (b) a change in a majority of the members of the
Company’s board of directors over any two-year period unless the new directors’
election to the board was approved by at least two-thirds of the existing
directors; (c) a merger of the Company, unless the voting securities of the
Company outstanding immediately prior to the merger continue to represent more
than 50% of the voting securities of the Company or surviving entity outstanding
immediately after such merger; (d) approval by the Company’s shareholders of a
plan of liquidation or the sale of all or substantially all of the Company’s
assets; (e) the Company’s board of directors no longer has any member of the
Jaffe Family as a member; or (f) the Jaffe Family owns less than 5% of the
voting securities of the Company. “Jaffe Family” means Elliot S. Jaffe, Roslyn
S. Jaffe, David R. Jaffe, or any of their direct lineal
descendants.
2007
Long-Term Incentive Plan
During
the third quarter of fiscal 2007, the Compensation Committee established the
2007 Long-Term Incentive Plan (the “2007 LTIP”). On September 20, 2007, our
Compensation Committee determined that the Company had achieved an 82.9% payout
of the 2007 LTIP performance goals (0% payout of the market capitalization
growth goal, 99.5% payout of the operating income growth goal, and 149.1% of
the
return on invested capital goal). The aggregate payout percentage was calculated
as the average of the three performance goal payout percentages. As a result,
David R. Jaffe, Mr. Correia, Ms. Behrens and Mr. Wexler were awarded 10,866,
2,450, 2,371 and 1,541 shares, respectively, of the Company’s restricted stock.
These shares became subject to a three-year vesting period, with the awarded
shares of restricted stock vesting one-third per year at the end of each of
the
next three years.
All
of
Mr. Correia’s shares awarded under the 2007 LTIP were fully vested because he
had achieved the Total Years Test; he had been employed by the Company for
17
years and he was over the age of 60, resulting in his total being more than
75
years.
Because
the three performance metrics were not approved by the Compensation Committee
during the first 90 days of fiscal 2007, the shares granted under the 2007
LTIP
did not constitute “performance based compensation” under Section 162(m) of the
Code.
2008
Long-Term Incentive Plan
No
awards
were made under the 2008 LTIP because the Company did not achieve threshold
performance levels in any of the three performance categories for fiscal
2008.
No
Delegation of Authority
The
Compensation Committee does not delegate any authority for awards to NEOs or
any
other officers.
Executive
Perquisites
Executive
perquisites are not a significant component of our executive compensation
program. We limit the use of perquisites among our eligible executives. The
cost
of perquisites for our NEOs is included in the “All Other Compensation” column
of the Summary Compensation Table. The Company also offers broad health and
welfare programs, which are available to our full-time employees
generally.
Deferred
Compensation
We
maintain a non-qualified deferred compensation plan for approximately 60 of
our
executives, including all of our NEOs. See “Nonqualified Deferred Compensation
in Fiscal 2008” below.
Severance
and Change in Control Payments
All
of
our NEOs are entitled to receive severance payments and/or other benefits in
the
event of a change in control of the Company and/or upon the termination of
the
executive’s employment with the Company under specified circumstances. These
arrangements provide essential protections to both the executive and the
Company. Agreements providing for severance and change of control payments
assist the Company in attracting and retaining qualified executives that could
have other job alternatives. None of these arrangements provides any golden
parachute tax “gross-up” payments under Code Section 280G.
Under
David Jaffe's employment agreement, in the event of a change-in-control, he
is
entitled to elect to terminate employment and to receive a severance payment
of
two times base salary. He is the only executive officer entitled enhanced
severance pay in the event of a change-in-control. The Compensation Committee
has evaluated David Jaffe’s employment agreement and believes that the change in
control provision is appropriate given his long relationship and service with
the Company and due to the fact that if a change-in-control were to occur,
his
responsibilities and services would likely be very different from those that
currently exist.
For
a
description and quantification of these severance and change in control
benefits, see the section entitled “Potential Payments upon Termination or
Change in Control” below.
Impact
of Accounting and Tax Matters
As
a
general matter, the Compensation Committee reviews and considers the various
tax
and accounting implications of compensation vehicles that we utilize. With
respect to accounting matters, the Compensation Committee examines the
accounting cost associated with equity compensation in light of FAS
123R.
With
respect to tax matters, the Compensation Committee considers the impact of
Section 162(m) of the Internal Revenue Code, which generally permits a tax
deduction to public corporations for compensation over $1,000,000 paid in any
fiscal year to a corporation’s NEOs only if the compensation qualifies as being
performance-based under Section 162(m). We endeavor to structure our
compensation to qualify as performance-based under Section 162(m) where it
is reasonable to do so while meeting our compensation objectives.
Nonetheless,
from time to time certain non-deductible compensation may be paid and the Board
of Directors and the Compensation Committee reserve the authority to award
non-deductible compensation in appropriate circumstances. In addition, it is
possible that some compensation paid pursuant to certain equity awards may
be
non-deductible under Code Section 162(m).
Consideration
of Prior Amounts Paid or Realized
Actual
pay earned by our executive officers in prior years from annual incentive
opportunities and long-term equity compensation is not specifically taken into
account by the Compensation Committee in making a current year’s compensation
decisions for (i) salary increases, (ii) target annual incentive
compensation opportunity, (iii) target long-term equity incentive
opportunity, or (iv) equity compensation. The Compensation Committee also does
not specifically adjust a current year’s target incentive compensation in order
to reflect the prior year’s actual earned cash or equity incentive compensation.
COMPENSATION
AND STOCK INCENTIVE COMMITTEE REPORT
The
Compensation and Stock Incentive Committee has reviewed and discussed with
management the above Compensation Discussion and Analysis. Based on this
review and discussion, the Compensation Committee recommended to the Company’s
Board of Directors that the Compensation Discussion and Analysis be
included in this proxy statement.
John
Usdan, Chairman
Kate
Buggeln
Randy
L.
Pearce
SUMMARY
COMPENSATION TABLE
The
table
below summarizes information concerning compensation for fiscal 2008 and fiscal
2007 of those persons who were on July 26, 2008 our NEOs, including:
(i) our Chief Executive Officer, (ii) our Chief Financial Officer, and
(iii) our three other most highly compensated executive officers, including
our Founder and Chairman of the Board.
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Change in
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Pension
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Value and
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Non-
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Non-qualified
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Equity
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Deferred
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Incentive
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Compen-
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Stock
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Option
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Plan
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sation
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All Other
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Awards
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Awards
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Compensa-
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Earnings
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Compensa-
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Name and Principal Position
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Year
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Salary ($)
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Bonus ($)
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($) (1)
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($) (1)
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tion ($) (2)
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($) (3)
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tion ($) (4)
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Total ($)
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David
R. Jaffe
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2008
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$
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850,000
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—
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$
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302,698
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$
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358,148
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$
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0
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—
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$
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177,749
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$
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1,688,596
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President
and
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2007
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825,000
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—
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149,703
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642,633
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825,000
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—
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174,384
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2,616,720
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Chief
Executive Officer
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Elliot
S. Jaffe
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2008
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358,800
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—
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0
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356,144
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—
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—
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168,198
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883,143
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Founder
and
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2007
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350,000
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—
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5,988
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474,928
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—
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—
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167,164
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998,079
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Chairman
of the Board
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Armand
Correia
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2008
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320,000
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—
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100,629
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143,259
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41,422
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—
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78,585
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683,894
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Senior
Vice President and
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2007
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310,000
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—
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63,446
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189,971
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186,000
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—
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66,276
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815,693
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Chief
Financial Officer
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Vivian
Behrens
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2008
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310,000
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—
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142,099
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138,963
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59,520
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—
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108,190
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758,772
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Senior
Vice President,
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2007
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300,000
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—
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86,113
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178,349
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180,000
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—
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101,868
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846,331
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Marketing
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Gene
Wexler, Esq.
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2008
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270,000
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—
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61,096
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86,155
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32,400
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—
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37,184
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486,834
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Senior
Vice President,
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2007
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260,000
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—
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52,477
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85,464
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156,000
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—
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23,470
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577,411
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General
Counsel and
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Assistant
Secretary
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(1)
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The
amounts shown represent the compensation expense we recognized in
fiscal
2008 and fiscal 2007 related to restricted stock and stock option
awards
calculated in accordance with FAS 123R, and therefore include amounts
from
awards granted in and prior to each such fiscal year. Pursuant to
SEC
rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For a discussion of
the
valuation assumptions used in connection with awards made in fiscal
2008,
2007 and 2006, see “Share-based compensation” under Note 1 of the Notes to
Consolidated Financial Statements in our 2008 Annual Report on Form
10-K
filed with the SEC on September 24, 2008.
The
Grants of Plan-Based Awards in Fiscal 2008 Table below includes additional
information regarding the restricted stock and stock option awards
granted
to our NEOs during fiscal 2008, including the aggregate grant date
fair
value (computed in accordance with FAS 123R) of such
awards.
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(2)
|
The
amounts shown related to 2008 represent the annual incentive bonuses
awarded under our Executive 162(m) Bonus Plan for David R. Jaffe,
and
under our Management Incentive Plan for Mr. Correia, Ms. Behrens
and Mr.
Wexler, based on performance during fiscal 2008, but actually paid
during
fiscal 2009, as discussed under “
Annual
Incentive Bonus Plans”
in
the Compensation Discussion and Analysis. Elliot S. Jaffe is no longer
eligible for annual incentive bonuses.
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(3)
|
We
have no actuarial pension plans. All earnings in our nonqualified
Executive Retirement Plan are at market values and are therefore
omitted
from the table.
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(4)
|
A
detailed breakdown of “All Other Compensation”
for
fiscal 2008 is provided in the table
below.
|
Details
of amounts included for fiscal 2008 in “All Other Compensation” column of
Summary Compensation Table
The
table
below provides the details of amounts included for fiscal 2008 in the “All Other
Compensation” column of the Summary Compensation Table for each
NEO.
|
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Contributions
|
|
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to Executive
|
|
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Officer’s
|
|
Payments made
|
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Defined
|
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for
|
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Payments made
|
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Commuting/
|
|
|
|
|
|
|
|
|
Contribution
|
|
Supplemental
|
|
For
|
|
Automobile
|
|
Tax and
|
|
|
|
|
|
|
Plan
|
|
Retirement
|
|
Life
|
|
Related
|
|
Accounting
|
|
|
|
|
Name
|
|
Accounts
|
|
Benefits
|
|
Insurance
|
|
Payments (2)
|
|
Services
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Jaffe
|
|
$
|
49,952
|
|
|
—
|
|
$
|
79,882
|
|
$
|
39,115
|
|
$
|
8,800
|
|
$
|
177,749
|
|
|
Elliot
S. Jaffe
|
|
|
18,198
|
|
|
150,000
|
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
168,198
|
|
|
Armand
Correia
|
|
|
25,511
|
|
|
—
|
|
|
34,940
|
|
|
18,133
|
|
|
—
|
|
|
78,585
|
|
|
Vivian
Behrens
|
|
|
23,410
|
|
|
—
|
|
|
26,640
|
|
|
58,140
|
|
|
—
|
|
|
108,190
|
|
|
Gene
Wexler
|
|
|
21,464
|
|
|
—
|
|
|
—
|
|
|
15,720
|
|
|
—
|
|
|
37,184
|
|
|
(1)
|
Represents
supplemental retirement benefit as discussed under “Retirement Agreements”
below. This amount is adjusted on an annual basis for cost-of-living
increases as determined using the Consumer Price Index.
|
|
|
|
|
(2)
|
Represents,
for David R. Jaffe, the 2008 cost to the Company for his car service
and,
for Ms. Behrens, the cost to the Company of providing her with a
car
(including gas, maintenance, insurance, taxes and registration) and
the
cost of her driver, which is provided due to her lengthy
commute.
|
GRANTS
OF PLAN-BASED AWARDS IN FISCAL 2008
The
following table provides information regarding the grants of plan-based awards
made to the NEOs during fiscal 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Option
|
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Awards:
|
|
|
|
|
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Number
|
|
|
|
|
|
|
|
|
or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
of
|
|
Exercise
|
|
Grant
|
|
|
|
|
Perfor-
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
of
|
|
Securities
|
|
or Base
|
|
Date Fair
|
|
|
|
|
mance
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive
|
|
Shares
|
|
Under-
|
|
Price of
|
|
Value of
|
|
|
Name
|
|
Period
|
|
Plan*
|
|
Plan Awards (1)
|
|
Plan Awards (2)
|
|
of Stock
|
|
lying
|
|
Option
|
|
Equity
|
|
|
|
|
|
|
|
|
Thres-
|
|
Target
|
|
Max
|
|
Thres-
|
|
Target
|
|
Max
|
|
or Units
|
|
Options
|
|
Awards
|
|
Awards
|
|
|
|
|
|
|
|
|
hold ($)
|
|
($)
|
|
($)
|
|
hold (#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(3)
|
|
($/Sh)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Jaffe
|
|
|
|
162(m)
|
|
$
|
170,000
|
|
$
|
850,000
|
|
$
|
850,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY08-10
|
|
10LTIP
|
|
|
|
|
|
|
|
23,079
|
|
46,158
|
|
69,237
|
|
|
|
|
|
|
|
$
|
756,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elliot
S. Jaffe (3)
|
|
11/28/07
|
|
NQ
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
14.06
|
|
43,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armand
Correia
|
|
|
|
MIP
|
|
38,400
|
|
192,000
|
|
192,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY08-10
|
|
10LTIP
|
|
|
|
|
|
|
|
5,213
|
|
10,426
|
|
15,639
|
|
|
|
|
|
|
|
169,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vivian
Behrens
|
|
|
|
MIP
|
|
37,200
|
|
186,000
|
|
186,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY08-10
|
|
10LTIP
|
|
|
|
|
|
|
|
5,050
|
|
10,100
|
|
15,150
|
|
|
|
|
|
|
|
164,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gene
Wexler
|
|
|
|
MIP
|
|
32,400
|
|
162,000
|
|
162,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY08-10
|
|
10LTIP
|
|
|
|
|
|
|
|
3,299
|
|
6,598
|
|
9,897
|
|
|
|
|
|
|
|
107,547
|
|
|
*
|
Plan:
MIP
= Management Incentive Plan
NQ
= Non-qualified stock options (granted under the 2001 Stock Incentive
Plan)
10LTIP
= 2010 Long-Term Incentive Plan (granted under the 2001 Stock Incentive
Plan)
162(m)
= Executive 162(m) Bonus Plan
|
|
(1)
|
Amounts
represent the range of annual cash incentive awards the NEO was
potentially entitled to receive based on the achievement of his or
her
performance goals during fiscal 2008 under the 162(m) Plan, for David
R.
Jaffe, and under the MIP, for Mr. Correia, Ms. Behrens and Mr. Wexler.
Threshold represents the minimum payment under the plan which is
20% of
the NEO’s maximum potential payment. Target represents the payment if 100%
of the goals are achieved and Maximum represents the maximum payment
possible under the plan (which is the same as the Target as the payments
are capped at the Target amount).
Additional
information regarding the 162(m) Plan and MIP and a description of
the
fiscal 2008 EBITDA performance goals are included above in the
Compensation Discussion and Analysis under “Annual Incentive Bonus Plans”.
Amounts paid relating to fiscal 2008 performance are shown above
in the
Summary Compensation Table under the “Non-Equity Incentive Plan
Compensation” column.
|
|
(2)
|
Amounts
represent the range of shares of restricted stock that each eligible
NEO
may potentially be granted based on the achievement of his or her
performance goals established for the three-year fiscal 2008, 2009
and
2010 cycle under the 2010 LTIP. The Compensation Committee established
the
performance metrics under the 2010 LTIP on September 20, 2007. However,
shares are not actually granted to participants in the plan until
the
Committee has certified the level of achievement for each performance
metric applicable to the 2010 LTIP and has determined the number
of shares
that each participant has earned, which will occur after the Company
files
its Annual Report on Form 10-K for fiscal 2010. The Threshold amount
represents the minimum number of shares that could be awarded, the
Target
amount represents the number of shares that could be awarded if 100%
of
the goals are achieved, and the Maximum amount represents the value
of the
maximum number of shares that could be awarded.
Any
shares of restricted stock that may potentially be awarded under
the 2010
LTIP cycle will vest in equal one-third increments over the course
of the
three years following the Compensation Committee’s determination of the
award earned under the LTIP cycle. However, as described above in
the
Compensation Discussion and Analysis under “Long-Term Incentive Plans”,
this vesting schedule may be accelerated upon the NEO’s termination due to
death or disability, upon a change of control, or upon achievement
of the
“Total Years Test”.
Prior
to vesting, holders of restricted stock have the right to vote the
shares.
Potential
awards under the “2011 Long-Term Incentive Plan” are not reflected in this
table as the potential awards were approved by the Compensation Committee
after the end of fiscal 2008. Because the Company did not achieve
its
financial goal under the 2008 LTIP, no awards of restricted stock
were
made under the 2008 LTIP.
|
|
|
|
|
(3)
|
Represents
a stock option to purchase 10,000 shares of our common stock awarded
to
Elliot Jaffe upon his re-election to the Board in November of 2007,
as
described above under “Questions and Answers About Our Board of Directors
and Corporate Governance Matters – How are directors
compensated?”
|
Equity
incentives granted to our executives have historically been limited to stock
options and restricted stock grants. Our executives do not participate in any
other long- or short-term equity incentive plans.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2008
The
following table provides information relating to outstanding equity awards
held
by the NEOs at July 26, 2008.
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Market
|
|
Number
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
|
|
Value of
|
|
of
|
|
Value of
|
|
|
|
|
|
|
Number
|
|
Number
|
|
|
|
|
|
Shares
|
|
Shares or
|
|
Unearned
|
|
Unearned
|
|
|
|
|
|
|
of
|
|
of
|
|
|
|
|
|
or Units
|
|
Units of
|
|
Shares, Units
|
|
Shares, Units
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of Stock
|
|
Stock
|
|
Or Other
|
|
Or Other
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
That
|
|
That
|
|
Rights That
|
|
Rights That
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
Have
|
|
Have
|
|
Have
|
|
Have
|
|
|
|
|
|
|
Options
|
|
Options
|
|
Option
|
|
Option
|
|
Not
|
|
Not
|
|
Not
|
|
Not
|
|
|
|
|
|
|
(#)
|
|
(#)
|
|
Exercise
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
|
|
Name
|
|
Plan
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Date
|
|
(#)
|
|
($) (1)
|
|
(#)
|
|
($) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Jaffe
|
|
NQ
(3)
|
|
300,000
|
|
0
|
|
$
|
3.52
|
|
8/11/2009
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(4)
|
|
300,000
|
|
0
|
|
$
|
7.56
|
|
6/4/2012
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(5)
|
|
300,000
|
|
0
|
|
$
|
6.76
|
|
12/9/2012
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(6)
|
|
120,000
|
|
180,000
|
|
$
|
11.84
|
|
10/12/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
RS
(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,400
|
|
$
|
36,024
|
|
—
|
|
—
|
|
|
|
|
07LTIP
(11)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,866
|
|
163,099
|
|
—
|
|
—
|
|
|
|
|
09LTIP
(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
39,323
|
|
590,238
|
|
|
|
|
10LTIP
(13)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
46,158
|
|
692,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elliot
S. Jaffe
|
|
NQ
(5)
|
|
60,000
|
|
0
|
|
$
|
6.76
|
|
12/9/2012
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(6)
|
|
60,000
|
|
180,000
|
|
$
|
11.84
|
|
10/12/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(8)
|
|
0
|
|
10,000
|
|
$
|
14.06
|
|
11/28/2017
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Armand
Correia
|
|
NQ
(5)
|
|
24,000
|
|
0
|
|
$
|
6.76
|
|
12/9/2012
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(6)
|
|
48,000
|
|
72,000
|
|
$
|
11.84
|
|
10/12/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
RS
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,000
|
|
60,040
|
|
—
|
|
—
|
|
|
|
|
07LTIP
(11)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
0
|
|
0
|
|
—
|
|
—
|
|
|
|
|
09LTIP
(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,866
|
|
133,079
|
|
|
|
|
10LTIP
(13)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,426
|
|
156,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vivian
Behrens
|
|
NQ
(5)
|
|
73,200
|
|
0
|
|
$
|
6.76
|
|
12/9/2012
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(6)
|
|
33,000
|
|
72,000
|
|
$
|
11.84
|
|
10/12/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
RS
(9)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,000
|
|
120,080
|
|
—
|
|
—
|
|
|
|
|
07LTIP
(11)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,371
|
|
35,589
|
|
—
|
|
—
|
|
|
|
|
09LTIP
(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,580
|
|
128,786
|
|
|
|
|
10LTIP
(13)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,100
|
|
151,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gene
Wexler
|
|
NQ
(6)
|
|
16,000
|
|
48,000
|
|
$
|
11.84
|
|
10/12/2015
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
NQ
(10)
|
|
800
|
|
3,200
|
|
$
|
23.30
|
|
11/29/2016
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
|
RS
(7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,000
|
|
90,060
|
|
—
|
|
—
|
|
|
|
|
07LTIP
(11)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,541
|
|
23,130
|
|
—
|
|
—
|
|
|
|
|
09LTIP
(12)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,577
|
|
83,711
|
|
|
|
|
10LTIP
(13)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,598
|
|
99,036
|
|
See
footnotes on the following page
(Footnotes
relating to the “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2008” table on the
preceding page.)
|
*
|
Plan/Type
of Award:
NQ
= Non-qualified stock option
RS
= Restricted stock
07LTIP
= 2007 Long Term Incentive Plan
09LTIP
= 2009 Long Term Incentive Plan
10LTIP
= 2010 Long Term Incentive Plan
|
|
(1)
|
The
amounts in this column equal the number of shares of restricted
stock
indicated multiplied by the closing price of our common stock
($15.01) on
July 26, 2008.
|
|
(2)
|
The
amounts in this column equal the number of shares of restricted
stock
indicated multiplied by the closing price of our common stock ($15.01)
on
July 26, 2008. The amounts assume the threshold amounts of each
Long-Term
Incentive Plan will be earned and the percentage of shares of restricted
stock will vest based upon the achievement of each of the Plan’s minimum
goals. The amounts indicated are not necessarily indicative of
the amounts
that may be realized by our NEOs.
|
|
(3)
|
This
award is fully vested.
|
|
(4)
|
This
award is fully vested.
|
|
(5)
|
This
award is fully vested.
|
|
(6)
|
The
unexercisable options relating to this award vest equally over
the next
three years on each October 12
th
.
|
|
(7)
|
The
unvested shares of restricted stock vest equally over the next
three years
on each October 12
th
.
|
|
(8)
|
The
unexercisable options relating to this award vest equally over
the next
three years on each November 28
th
.
|
|
(9)
|
The
unvested shares of restricted stock vest equally over the next
four years
on each November 29
th
.
|
|
(10)
|
The
unexercisable options relating to this award vest equally over
the next
four years on each November 29
th
.
|
|
(11)
|
This
award was the payout from the 2007 Long-Term Incentive Plan and
vests in
two remaining installments on July 28, 2009 and July 28, 2010.
In the case
of Mr. Correia these shares were immediately vested upon issuance
as he
met the criteria for immediate
vesting.
|
|
(12)
|
This
award relates to the 2009 Long-Term Incentive Plan and will vest
in three
equal installments on July 23, 2010, July 23, 2011 and July 23,
2012,
provided we meet the minimum performance target necessary to achieve
the
minimum (threshold) payouts as defined in the
Plan.
|
|
(13)
|
This
award relates to the 2010 Long-Term Incentive Plan and will vest
in three
equal installments on July 23, 2011, July 23, 2012 and July 23,
2013,
provided we meet the minimum performance target necessary to achieve
the
minimum (threshold) payouts as defined in the
Plan.
|
OPTION
EXERCISES AND STOCK VESTED IN FISCAL 2008
The
following table shows information about stock options exercised by our NEOs
and
stock awards held by our NEOs that vested during fiscal 2008.
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
Value
|
|
Shares
|
|
Value
|
|
|
|
|
Acquired
|
|
Realized
|
|
Acquired
|
|
Realized
|
|
|
|
|
on
|
|
on
|
|
on
|
|
on
|
|
|
|
|
Exercise
|
|
Exercise
|
|
Vesting
|
|
Vesting
|
|
|
Name
|
|
(#)
|
|
($) (1)
|
|
(#)
|
|
($) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Jaffe
|
|
|
—
|
|
|
—
|
|
|
14,066
|
|
$
|
13,224
|
|
|
Elliot
S. Jaffe
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Armand
Correia
|
|
|
—
|
|
|
—
|
|
|
7,450
|
|
|
54,852
|
|
|
Vivian
Behrens
|
|
|
—
|
|
|
—
|
|
|
16,371
|
|
|
82,140
|
|
|
Gene
Wexler
|
|
|
—
|
|
|
—
|
|
|
9,541
|
|
|
33,060
|
|
|
(1)
|
The
value realized upon the exercise of the stock options reflect the
number
of options multiplied by the difference between the closing stock
price of
our common stock on the date of the exercise and exercise price of
the
options.
|
|
(2)
|
The
value realized upon vesting of the stock awards is based on the closing
stock price of our common stock on the date the awards
vested.
|
PENSION
BENEFITS
Other
than the supplemental retirement benefit agreements for Elliot S. Jaffe and
Mrs.
Roslyn Jaffe (see “Retirement Agreements” below) we do not maintain any pension
benefit plans for our officers or directors.
EMPLOYMENT
AGREEMENTS AND EMPLOYMENT LETTERS
We
have
entered into “employment agreements” with Elliot S. Jaffe and David R. Jaffe. We
have entered into “employment letters” with Armand Correia, Vivian Behrens and
Gene Wexler. An “employment agreement” provides an executive with a time period
(or “term”) during which he or she will be employed by the Company. An
“employment letter” does not have a term of employment. Rather, the letter sets
forth the minimum compensation and benefits that the executive will receive
during his or her employment. An executive with an employment letter is an
“employee at will”, i.e., the Company may terminate such executive at any time
with or without cause, subject to any applicable severance provisions.
The
Compensation Committee believes that these employment agreements and employment
letters are important to our executives and to the Company. Each executive
benefits from clarity of the terms of his or her employment. The Company
enhances its ability to retain the services of its executives. The Compensation
Committee periodically reviews the terms of the employment agreements and
employment letters and amends them as necessary to remain competitive and to
carry out its objectives. Details of the terms of the specific employment
agreements and employment letters are discussed below.
David
R. Jaffe
David
R.
Jaffe is employed by the Company pursuant to an employment agreement, dated
May
2, 2002, which currently expires on July 30, 2009, and which contains successive
automatic one-year renewal provisions.
The
agreement provides for an annual salary of $650,000 per year or such higher
salary as the
Compensation
Committee
may set
from time to time. The agreement entitles Mr. Jaffe to participate in all of
the
Company’s retirement, insurance, bonus, incentive and other benefit plans,
including the Company’s 162(m) Plan and its equity incentive plans. It also
provides for certain perquisites, including the use of a car service ($39,115
in
fiscal 2008) and tax preparation services ($8,800 in fiscal 2008). Mr. Jaffe
may
terminate his employment under his agreement following a Change in Control
(as
defined below under “Potential Payments Upon Termination or Change in
Control—David R. Jaffe”). In such event, he would be entitled to a lump sum
payment in an amount equal to two years’ salary. Mr. Jaffe may also terminate
his employment under his agreement for “Good Reason” (as defined below under
“Potential Payments Upon Termination or Change in Control—David R. Jaffe”) after
providing at least 60 days prior written notice of termination. If Mr. Jaffe
terminates his employment for Good Reason or the Company terminates his
employment without “Cause” (as defined below under “Potential Payments Upon
Termination or Change in Control—David R. Jaffe”), he would be entitled to
continued payment of his salary for one year. The agreement further provides
for
payments of an amount equal to one year’s salary, and continued health and
medical coverage for one year, following termination of employment by reason
of
death or disability
.
The
agreement also contains non-competition restrictions effective during the
employment term and for one year thereafter. For further information regarding
Mr. Jaffe’s employment agreement and the payments to which he may be entitled
thereunder, see below under “Potential Payments Upon Termination or Change in
Control—David R. Jaffe.”
Elliot
S. Jaffe
Elliot
S.
Jaffe, in accordance with the terms of an employment agreement, dated May 2,
2002, gave notice of his election to terminate his term as Executive Chairman
of
the Board effective on July 30, 2006. In an amendment dated July 10, 2006
(effective July 30, 2006), the terms of the 2002 agreement were amended to
provide that Mr. Jaffe will continue to be employed by the Company initially
as
Chairman of the Board at a reduced salary of $350,000 per year (subject to
cost
of living increases). The 2006 amendment eliminated a number of Mr. Jaffe’s
personal benefits, including his eligibility for a bonus and any
change-of-control payment. Under the 2006 amendment, commencing on July 30,
2006, Mr. Jaffe also became eligible to receive
a
supplemental retirement benefit of $150,000 per year for life, subject to an
annual cost-of-living increase,
as well
as health insurance coverage for life similar to the Company’s current health
plan. Mr. Jaffe is obligated to provide 24 days per fiscal year of advisory
and
consultative services and remains subject to non-competition restrictions.
Mr.
Jaffe, while he continues to serve as Chairman of the Board, shall be entitled
to an office and secretarial assistance.
All
other
terms, conditions and covenants of the 2002 agreement shall remain in full
force
and effect, including
a lump
sum payment equal to one-year’s salary based on the salary rate last in effect
prior to his termination of employment by reason of death.
Employment
Letters
We
have
entered into employment letters with each of Mr. Correia, Ms. Behrens and Mr.
Wexler. A description of such letters follows:
Armand
Correia
Mr.
Correia’s employment letter was entered into in 1991. His employment can be
terminated at any time by either the Company or Mr. Correia. Mr. Correia is
entitled to a base salary of at least $150,000 per year, subject to possible
increase based on annual performance reviews, as well as standard executive
benefits, including participation in our bonus, option, life insurance, medical
and dental, and short-term and long-term disability plans. He is also entitled
to the use of a Company car while employed by us.
Vivian
Behrens
Ms.
Behrens’ employment letter was entered into in 2002. As discussed below under
“Potential Payments upon Termination or Change in Control”, should her
employment be terminated by the Company for reasons other than death, disability
or “just cause” involving misconduct, the Company will provide her with six
months continuance of her base salary. She is entitled to a base salary of
at
least $240,000 per year, subject to possible increase based on annual
performance reviews, as well as standard executive benefits, including
participation in our bonus, option, life insurance, medical and dental, and
short-term and long-term disability plans. The Company provides her with a
car
and pays for all gas, maintenance, repairs, insurance, taxes and registration
expenses. Due to her lengthy commute, the Company also pays for the cost of
her
driver, up to $31,200 per year.
Gene
Wexler
Mr.
Wexler’s employment letter was entered into in 2005. As discussed below under
“Potential Payments upon Termination or Change in Control”, should his
employment be terminated by the Company for reasons other than death, disability
or “just cause” involving misconduct, the Company will provide him with six
months continuance of his base salary, and he will be eligible to continue
to
receive medical and dental coverage at the standard associate rate for six
months following such termination. He is entitled to a base salary of at least
$250,000 per year, subject to possible increase based on annual performance
reviews, as well as standard executive benefits, including participation in
our
bonus, option, life insurance, medical and dental, and short-term and long-term
disability plans. He also receives a car allowance of $15,720 per
year.
Retirement
Agreements
Elliot
S. Jaffe
Commencing
July 30, 2006, Elliot S. Jaffe became eligible to receive a supplemental
retirement benefit of $150,000 per year for life, subject to an annual
cost-of-living increase.
Mrs.
Roslyn S. Jaffe
We
also
entered into a retirement agreement with Mrs. Jaffe. The agreement provides
Mrs. Jaffe, in view of her role as co-founder of the Company and her 44 years
of
service to the Company, with a supplemental retirement benefit, commencing
July
30, 2006, of $50,000 per year for life, subject to an annual cost-of-living
increase.
NONQUALIFIED
DEFERRED COMPENSATION IN FISCAL 2008
After
satisfying a waiting period, over 60 of our executives, including our NEOs,
are
eligible for participation in our Executive Retirement Plan, which is an
unfunded, unsecured nonqualified defined contribution plan. The Executive
Retirement Plan allows our executives to defer a maximum of 95% of their base
salary and any bonuses paid or other performance-based cash compensation
awarded. Elections to participate in the Executive Retirement Plan are made
by
our executives on an annual basis, prior to the beginning of the year in which
the compensation is earned. Executives who elect to participate in the Executive
Retirement Plan are not eligible to participate in our 401(k) plan.
We
make
Company contributions to the Executive Retirement Plan in an amount determined
by us for each plan year. For fiscal 2008, Senior Vice Presidents and above,
which included all of the NEOs, received a Company matching contribution of
100%
on the first 5% of base salary and bonus deferred. Employees are immediately
vested in deferrals of their own compensation. Company matching contributions
vest in 25% increments after 2 years, 3 years, 4 years and 5 years of service
with the Company.
The
aggregate balance of each participant’s account consists of amounts that have
been deferred by the participant, Company matching contributions, plus earnings
(or minus losses). We do not deposit any amounts into any trust or other account
for the benefit of plan participants. In accordance with tax requirements,
the
assets of the Executive Retirement Plan are subject to claims of our creditors.
Account balances are deemed invested in accordance with investment elections
designated by the executive. Investment option transfers may be made daily.
There are 19 investment options available to plan participants, including fixed
income funds, domestic and international equity funds, blended funds and
pre-allocated lifestyle fund investments. Interest and gains or losses on each
deemed investment are credited or debited to each participant’s account on a
monthly basis based on the actual performance of the funds in which the
participant is deemed invested.
Deferred
account balances are distributed to the plan participants in accordance with
elections made by the executive at the time the deferral is made, subject to
Section 409A of the Code. A participant may elect to receive distributions,
either in a lump sum or in installments, upon his or her termination of
employment with the Company, disability, death, an unforeseeable emergency
or a
change of control, each of the last two events as defined in Section 409A of
the
Code. A participant may also elect to receive distributions while still employed
by the Company if he or she elects to have in-service or education
distributions, made at a date specified by the participant.
The
following table shows the executive and Company contributions, earnings and
account balances for the NEOs.
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Balance
|
|
|
|
|
Executive
|
|
Registrant
|
|
(Loss) Earnings
|
|
Aggregate
|
|
at Last
|
|
|
|
|
Contributions
|
|
Contributions
|
|
in Last
|
|
Withdrawals/
|
|
Fiscal Year
|
|
|
|
|
in Last FY
|
|
in Last FY
|
|
FY
|
|
Distributions
|
|
End
|
|
|
Name
|
|
($) (1)
|
|
($) (2)
|
|
($) (3)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Jaffe
|
|
$
|
885,673
|
|
$
|
49,952
|
|
$
|
(432,939
|
)
|
|
—
|
|
$
|
4,392,569
|
|
|
Elliot
S. Jaffe
|
|
|
18,198
|
|
|
18,198
|
|
|
132,782
|
|
|
—
|
|
|
3,402,767
|
|
|
Armand
Correia
|
|
|
383,200
|
|
|
25,511
|
|
|
137,663
|
|
|
—
|
|
|
3,777,344
|
|
|
Vivian
Behrens
|
|
|
86,410
|
|
|
23,410
|
|
|
(22,758
|
)
|
|
—
|
|
|
170,527
|
|
|
Gene
Wexler
|
|
|
21,464
|
|
|
21,464
|
|
|
(6,503
|
)
|
|
—
|
|
|
53,174
|
|
|
(1)
|
All
executive contributions represent amounts deferred by each NEO under
the
Executive Retirement Plan and are included as compensation in the
Summary
Compensation Table under “Salary” and “Non-Equity Incentive Plan
Compensation”.
|
|
(2)
|
All
registrant contributions are reported under “All Other Compensation” in
the Summary Compensation Table.
|
|
(3)
|
These
amounts are not reported in the Summary Compensation Table as the
earnings
included in this column are based on the investment options selected
by
the NEO, none of which provide interest above the market rate.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Upon
termination of their employment or a change in control of the Company, our
NEOs
will be entitled to various payments and other benefits pursuant to their
respective employment agreements or employment letters. In addition, each of
our
NEOs would be entitled to certain benefits under our Equity Incentive Plan
and
other agreements upon death, disability or a change in control. These payments
and benefits are described below and assume that the hypothetical termination
event or change in control event occurred on July 26, 2008, the last day of
fiscal year 2008.
In
addition to these payments, participants in our Executive Retirement Plan,
including the NEOs, may elect to receive distributions, either in a lump sum
or
in installments, upon his or her termination of employment with the Company,
disability, death, or following a change of control (subject to Section 409A
of
the Code). Each NEO’s account balance under the Executive Retirement Plan as of
the end of fiscal 2008 is set forth under the “Aggregate Balance at Last Fiscal
Year End” column of the Nonqualified Deferred Compensation Table
above.
David
R. Jaffe
David
Jaffe’s base salary was last increased by the Compensation Committee on October
1, 2007 to $850,000.
David
R.
Jaffe’s employment agreement
provides
for successive one-year terms of employment, each starting on July 30 of one
year and ending on July 30 of the following year, unless either party gives
not
less than one year written notice of non-renewal to the other party.
Under
the
terms of his agreement, if Mr. Jaffe’s employment is terminated by the Company
without “Cause” or by Mr. Jaffe for “Good Reason”, he would be entitled to one
year’s salary continuation payable at the same time and in the same manner as
such compensation was paid prior to termination. If we terminated Mr. Jaffe’s
employment without “Cause” or he terminated his employment for “Good Reason”,
Mr. Jaffe would receive $850,000 of salary continuation. Mr. Jaffe will not
receive any post-termination payments if his employment is terminated for
“Cause”. “Cause” is generally defined to include conviction of a crime,
intentional and willful failure to satisfactorily perform employment duties
reasonably requested by our board of directors, fraud or embezzlement, gross
misconduct or gross negligence, Mr. Jaffe’s intentional and willful act or
omission which is materially detrimental to our business or reputation, or
Mr.
Jaffe’s willful breach of the covenants set forth in his employment agreement
(which include covenants not to compete, not to solicit our employees and not
to
disparage the Company). “Good Reason” is generally defined in the agreement as
the occurrence, without Mr. Jaffe’s consent, of any of the following: a material
demotion in his position, job duties or responsibilities, our failure to pay
him
his compensation or benefits, the relocation of Mr. Jaffe’s principal place of
work at least 35 miles from its current location, or any material breach of
any
of our obligations under his agreement.
Upon
a
“Change of Control”, Mr. Jaffe, at his option, may terminate his employment and
receive in a single lump sum an amount equal to two years’ salary ($1,700,000).
“Change of Control” is generally defined in David Jaffe’s employment agreement
as: (a) the transfer of 30% or more of the outstanding common stock of the
Company; (b) a change of a majority of the board of directors after May 2,
2002
(the “Incumbent Directors”), unless the election of a new director was supported
by two-thirds of the Incumbent Directors (Incumbent Directors includes any
new
director whose election was supported by two-thirds of the Incumbent Directors);
(c) the Company adopts a plan of liquidation; or (d) the Company disposes of
all
or substantially all of the assets or business of the Company pursuant to a
merger or other transaction.
In
the
event that Mr. Jaffe’s employment is terminated by reason of death or
disability, his employment agreement further provides for (i) life insurance
or
disability benefits, if any, under the Company’s plans and policies, (ii)
payments of an amount equal to one year’s salary ($850,000) payable to Mr. Jaffe
or his designated beneficiary or estate at the same time and in the same manner
as such compensation was paid prior to termination and (iii) continuation for
one year of health and medical insurance following such termination of
employment
.
The
agreement contains non-competition and non-solicitation restrictions effective
during the employment term and for one year thereafter as well as a perpetual
non-disparagement restriction.
Elliot
S. Jaffe
Under
Elliot S. Jaffe’s
employment
agreement, as amended on July 10, 2006, he is no longer eligible for any payment
upon a change of control of the Company. The 2006 amendment provides for a
supplemental retirement benefit of $150,000 per year payable for life (subject
to cost of living increases) and health insurance coverage similar to the
Company’s current health plan for life. Mr. Jaffe is entitled to a lump sum
payment equal to one-year’s salary upon his termination of employment by reason
of death.
Mr.
Jaffe
is subject to non-competition restrictions that remain in effect for as long
as
he is receiving compensation from the Company, provided that if the Company
elects to terminate Mr. Jaffe’s employment, the non-competition restrictions
will nevertheless remain in effect.
Armand
Correia
Pursuant
to Mr. Correia’s employment letter with the Company, he is not entitled to any
salary continuation for any reason upon any termination of his employment.
However, in the event of a “change of control” (which is defined in his
employment letter as any change of control which needs to be disclosed in any
SEC filing), all of Mr. Correia’s unvested stock options will automatically
become fully exercisable. Assuming that the change of control took place on
the
last business day of our last completed fiscal year, i.e., on July 26, 2008,
when our closing stock price was $15.01, the value of accelerating Mr. Correia’s
unvested stock options as of such date would have been $228,240. This amount
was
calculated by multiplying the number of stock options which were unvested as
of
October 14, 2008, the record date for the 2008 annual meeting of shareholders,
by the excess of the closing stock price on July 26, 2008 over the exercise
price of Mr. Correia’s unvested stock options.
Vivian
Behrens
Pursuant
to Ms. Behrens’ employment letter with the Company, should her employment be
terminated by the company for reasons other than death, disability or “just
cause” involving misconduct, the Company will provide her with six months
continuance of her base salary. Ms. Behrens’ base salary was increased by the
Compensation Committee as of October 1, 2008 to $320,000.
Therefore,
upon her termination of employment for reasons other than death, disability
or
“just cause involving misconduct,” Ms. Behrens would be entitled to six months’
base salary continuation equaling a total benefit of $160,000.
Gene
Wexler
Pursuant
to Mr. Wexler’s employment letter with the Company, should his employment be
terminated by the Company for reasons other than death, disability or “just
cause” involving misconduct, the Company will provide him with six months
continuance of his base salary. During this six-month period, he will also
be
eligible to continue his medical and dental coverage at the standard associate
rate. Mr. Wexler’s base salary was last increased by the Compensation Committee
on October 1, 2007 to $270,000. Therefore, upon his termination of employment
for reasons other than death, disability or “just cause involving misconduct,”
Mr. Wexler would be entitled to six months’ base salary continuation equaling a
total benefit of $135,000.
Acceleration
of Equity Awards
As
discussed under the heading “Non-Qualified Stock Options and Restricted Stock
under the Company’s Equity Incentive Plan” in the Compensation Discussion and
Analysis, eligible employees, including our NEOs, may be awarded non-qualified
stock options, which generally vest over a period of five years, or shares
of
restricted stock, which generally vest over a period of three years, if granted
following the actual achievement of performance goals under our LTIPs (unless
the shares are subject to immediate vesting because the recipient satisfies
the
“Total Years Test”), or five years, if granted in connection with a special
award. The Equity Incentive Plan and relevant award agreements, however, provide
for the accelerated vesting of certain equity awards following a change in
control of the Company or upon certain termination events, as described
below.
Change
in Control Provisions under the Equity Incentive Plan
Under
the
Equity Incentive Plan, stock options generally vest immediately upon the
occurrence of a change in control.
“Change
of Control” is defined in the Equity Incentive Plan as: (a) a transfer of 30% or
more of the Company’s voting securities; (b) a change in a majority of the
members of the Company’s board of directors over any two-year period unless the
new directors’ election to the board was approved by at least two-thirds of the
existing directors; (c) a merger of the Company, unless the voting securities
of
the Company outstanding immediately prior to the merger continue to represent
more than 50% of the voting securities of the Company or surviving entity
outstanding immediately after such merger; (d) approval by the Company’s
shareholders of a plan of liquidation or the sale of all or substantially all
of
the Company’s assets; (e) the Company’s board of directors no longer has any
member of the Jaffe Family as a member; or (f) the Jaffe Family owns less than
5% of the voting securities of the Company. “Jaffe Family” means Elliot S.
Jaffe, Roslyn S. Jaffe, David R. Jaffe, or any of their direct lineal
descendants.
Special
Provisions Related to Option Awards
If,
prior
to the occurrence of a change in control, the Compensation Committee reasonably
determines in good faith that the stock options will be honored or assumed,
or
new rights substituted, then stock options granted under the Equity Incentive
Plan generally will not be subject to accelerated vesting upon a change in
control.
If
the
stock options granted under the Equity Incentive Plan are accelerated upon
a
change in control, the Compensation Committee, in its sole discretion, may
authorize the Company or its affiliates to purchase any such accelerated options
by paying the option holder the difference between the exercise price of his
or
her option and the higher of: (i) the highest price paid for a share of common
stock in any transaction related to the change in control, or (ii) the highest
fair market value per share of common stock at any time during the 60 day period
preceding the change in control.
Special
Provisions Related to Restricted Stock Awards
Restricted
stock awards granted under any completed LTIP cycle
also
would immediately vest in the event that a change in control occurs or the
recipient’s employment is terminated due to death or disability. With respect to
special awards of restricted stock (i.e., an award that was not made in
connection with the Company’s LTIPs), unless otherwise determined by the
Compensation Committee at the time of grant, any portion of such award of
restricted stock that had not yet vested would be forfeited to the Company
at
the time of the recipient’s termination, including due to death or disability.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and executive
officers to file reports with the SEC disclosing their ownership, and changes
in
their ownership, of our stock. Copies of these reports must also be furnished
to
us. Based solely upon our review of these copies, we believe that during fiscal
2008 all of such forms were filed on a timely basis by reporting
persons.
INTEREST
OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS; RELATED PARTY
TRANSACTIONS
In
September 2007, the Board adopted a written policy for the review and approval
or ratification of any transaction with a related person, which applies to
related person transactions after the adoption date of the policy. Under this
policy, related persons include our directors and executive officers and
beneficial owners who are known to control over five percent of our common
stock, as well as the immediate family members of any of the foregoing. The
policy generally defines a related person transaction as one or a series of
similar transactions, arrangements or relationships in which: (i) the Company
was, is or will be a participant; (ii) a related person has a direct or indirect
material interest; and (iii) the amount involved is expected to exceed $120,000
(determined without regard to the amount of profit or loss involved in the
transaction). The policy does not cover arrangements available on the same
basis
to all employees generally or employment or compensation arrangements for our
executive officers or director compensation arrangements.
Under
the
policy, a related person transaction requires the approval or ratification
of
the Audit Committee or the Chair of the Audit Committee in those situations
in
which the legal department, in consultation with the CEO or the Chief Financial
Officer, determines that it is not practicable or desirable for us to wait
until
the next Audit Committee meeting for review. Prior to approving or ratifying
any
transaction, the Audit Committee or the Chair will consider the material facts
of the transaction, including the related person’s relationship to us and their
interest in the transaction, and will determine whether the transaction is
entered into in good faith and on fair and reasonable terms to us. No person
may
participate in the review of a transaction in which such person, or any of
his
or her immediate family members, may have a direct or indirect material
interest.
During
fiscal 2008, no transactions were reviewed by the Audit Committee since there
were no new related person transactions, or any modifications to existing
related person transactions, during fiscal 2008.
The
Company leases two of its store locations from Nordan, LLC, a limited liability
company of which Elliot S. Jaffe, Chairman of the Board (the “affiliated
landlord”) is the sole member. The following table describes the terms of these
leases:
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
|
|
|
|
|
|
|
Rent
Per
|
|
|
Store
|
|
|
|
Renewal
|
|
Square
|
|
Square
|
|
|
Location
|
|
Expiration
|
|
Options
|
|
Feet
|
|
Foot
|
|
|
Norwalk,
Connecticut
|
|
April
30, 2011
|
|
Until
April 30, 2031
|
|
12,700
|
|
$
|
11.22
|
|
|
Danbury,
Connecticut
|
|
June
30, 2010
|
|
Until
June 30, 2020
|
|
8,000
|
|
$
|
21.16
|
|
These
store rentals approximate the range of minimum rentals paid by the Company
on
its other store leases. The store leases also contain provisions for payment
of
a percentage of sales as additional rent when sales reach specified levels.
The
effective rent (total rent as a percentage of sales with respect to particular
stores) for these stores is approximately eight percent (8%). During fiscal
2005, we
exercised
the renewal option in the lease for our Danbury, Connecticut store, extending
the expiration date of the lease to June 30, 2010 and extending the renewal
options contained in the lease until June 30, 2020. In connection with the
extension, the minimum annual rent was increased from $13.00 per square foot
to
$21.16 per square foot, and the affiliated landlord agreed to a $25,000 rent
credit upon the remodeling of the store. We
believe
that these leases are on terms that are comparable to terms we could obtain
in
arms-length negotiations with unrelated third parties for store locations in
similar geographic areas. During fiscal 2008, we paid a total of approximately
$332,313.22 in rent and related expenses.
PROPOSAL
TWO
AMENDMENT
OF
CERTIFICATE OF INCORPORATION
TO
INCREASE
THE NUMBER OF AUTHORIZED
SHARES
OF COMMON STOCK
General
The
Board
of Directors has approved, and is recommending to the shareholders for approval
at the Annual Meeting, an amendment to the Company’s Certificate of
Incorporation to increase the number of shares of Common Stock the Company
is
authorized to issue from 75,000,000 to 165,000,000. The Board of Directors
determined that this amendment is advisable and should be considered at the
Annual Meeting. The Company is currently authorized to issue 1,000,000 shares
of
Preferred Stock, par value $0.05 per share, and the proposed amendment will
not
affect this authorization.
The
text
of the proposed amendment to the Company’s Certificate of Incorporation to
increase the authorized number of shares of Common Stock as described in this
proposal is set forth in Annex A attached to this proxy statement and is
incorporated by reference herein.
If
the
amendment to the Certificate of Incorporation is approved by the stockholders,
the Company will promptly file a Certificate of Amendment with the
Connecticut Secretary of State reflecting the increase in authorized shares.
The
amendment will become effective on the date the Certificate of Amendment is
accepted for filing by the Connecticut Secretary of the State.
Purposes
and Effects of the Increase in the Authorized Number of Shares of Common Stock
The
Company’s Certificate of Incorporation currently authorizes the issuance of
75,000,000 shares of Common Stock. As of the close of business on the record
date, [……………….] shares of Common Stock were issued and outstanding,
[……………….] shares were issuable pursuant to outstanding options or restricted
stock,________ shares were reserved for the maximum potential issuance of shares
upon conversion of the Company’s 2.5% Convertible Notes, and [……………….] shares
were reserved for future grants under the Equity Incentive Plan.
The
Board
believes that the proposed increase to 165,000,000 authorized shares of Common
Stock is desirable so that, as the need may arise, the Company will have the
flexibility to issue shares of Common Stock without additional expense or delay
in connection with possible future stock dividends or stock splits, equity
financings, future opportunities for expanding the Company’s business through
investments or acquisitions, management incentive and employee benefit plans
and
for other general corporate purposes. As of the date of this Proxy Statement,
the Board of Directors has not taken any action to issue any of the additional
authorized shares for any such purposes.
On
five
occasions, the Board of Directors has declared 2-for-1 stock splits. These
stock
splits were declared on May 3, 1985, May 2, 1986, May 22, 1987, May 31, 2002
and
March 31, 2006. Although the Board of Directors has taken no action with respect
to future stock dividends or stock splits, it may do so at any time in the
future that it determines a stock dividend or stock split to be in the best
interests of the Company and its shareholders, subject to the availability
of
authorized shares. The proposed increase in authorized Common Stock would
provide the Board of Directors with greater flexibility to declare additional
stock dividends or stock splits in the future.
Each
additional share of Common Stock authorized by the amendment to the Certificate
of Incorporation will have the same rights and privileges as each share of
Common Stock currently authorized or outstanding. If the Certificate of
Incorporation is approved by the shareholders, the Board of Directors does
not
intend to solicit further shareholder approval prior to the issuance of any
additional shares of Common Stock, except as may be required by applicable
law
or rules. For example, under current rules and policies of NASDAQ, shareholder
approval is required for any issuance of 20% or more of the Company’s
outstanding shares in connection with acquisitions or discounted private
placements.
The
adoption of this proposed amendment to the Certificate of Incorporation will
result in a greater number of shares of Common Stock available for issuance.
Shareholders could therefore experience a significant reduction in their
shareholders’ interest with respect to earnings per share, voting, liquidation
value and book and market value per share if the additional authorized shares
are issued other than through a proportional issuance such as a stock split
or
stock dividend.
The
increase in the authorized number of shares of Common Stock and the subsequent
issuance of such shares could also have the effect of delaying or preventing
a
change in control of the Company without further action by the shareholders.
Shares of authorized and unissued Common Stock could be issued (within the
limits imposed by applicable law) in one or more transactions which would make
a
change in control of the Company more difficult, and therefore less likely.
Any
such issuance of additional stock could have the effect of diluting the earnings
per share and book value per share of outstanding shares of Common Stock and
could be used to dilute the stock ownership or voting rights of a person seeking
to obtain control of the Company. Existing provisions in the Company’s
Certificate of Incorporation and Bylaws may also have the effect of delaying
or
preventing a merger with or acquisition of the Company, even where the
shareholders may consider it to be favorable. These provisions could also
prevent or hinder an attempt by shareholders to replace the Company’s current
directors and include: (i) providing for a classified Board of Directors
with staggered, three-year terms; (ii) authorizing the issuance of “blank check”
preferred stock; and (iii) establishing advance notice requirements for
nominations for election to the Board of Directors or for proposing matters
that
can be acted on by shareholders at a shareholders meeting.
VOTE
REQUIRED
The
amendment to the Company’s Certificate of Incorporation to increase the number
of shares of Common Stock the Company is authorized to issue from 75,000,000
to
165,000,000 will be approved if the votes cast in favor of the amendment exceed
the votes cast opposing the amendment. Abstentions and broker non-votes are
counted for purposes of establishing a quorum, but do not otherwise affect
the
voting. If the amendment is not approved by shareholders, it will not be filed
with the Secretary of the State of the State of Connecticut and will not become
effective.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR
THE APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
.
PROPOSAL
THREE
TO
AMEND PROVISIONS OF CERTIFICATE OF INCORPORATION TO BROADEN THE INDEMNIFICATION
OF
OFFICERS AND DIRECTORS
The
Board
of Directors has approved, and is recommending to the shareholders for approval
at the 2008 Annual Meeting, an Amendment to the Certificate of Incorporation
that has the effect of broadening the existing indemnification of directors
and
officers. In addition, the proposed amendment makes the advancement of expenses
to directors and officers mandatory and moves existing provisions of the
Certificate of Incorporation limiting the liability of directors from being
a
stand-alone section to being within the section that provides for
indemnification of directors and officers.
Under
Connecticut's corporation law in effect prior to January 1, 1997, the
Connecticut Stock Corporation Act, directors and officers of Connecticut
corporations were entitled to indemnification at the level mandated by law
for
all Connecticut corporations, which was the maximum indemnification permitted
for Connecticut corporations. When Connecticut’s new corporation law, the
Connecticut Business Corporation Act, came into effect on January 1, 1997,
corporations became free to change the extent of indemnification protection
offered to directors and officers in that indemnification of directors and
officers became permissive and not mandatory. However, directors and officers
of
corporations which were formed prior to the effectiveness of the new Connecticut
Business Corporation Act (like the Company) maintained the indemnification
rights they had under the older Connecticut Stock Corporation Act unless the
corporation acted to change them.
The
Company now proposes to amend its Certificate of Incorporation to provide
directors and officers the maximum indemnification rights permitted under the
1997 Connecticut Business Corporation Act (CBCA). The proposed amendment does
not represent a change in the Company’s basic obligation to indemnify directors
and officers as the Company is already required, as opposed to permitted, to
provide indemnification. The amendment does, however, incorporate provisions
of
the CBCA that may be added to a company’s certificate of incorporation that
provide for mandatory indemnification of directors (but not officers) in certain
circumstances and that may have the effect of broadening the Company’s existing
obligation to indemnify directors. The proposed amendment clarifies that
directors and officers may be eligible for other forms of indemnification by
the
Company, such as contractual rights of indemnification. The proposed amendment
also states that former directors or officers that may become subject to a
claim
for actions taken in their official capacities shall still receive the benefit
of mandatory indemnification to the extent permitted by law. Under the existing
Certificate of Incorporation, the Company is permitted, but not required, to
advance expenses to directors and officers. Consequently, the amendment provides
for the mandatory advancement of expenses to directors and officers for
indemnifiable actions, provided that certain requirements are met. As part
of
the proposed amendment, the Board also believes that it is logical to move
the
provisions of the existing Certificate of Incorporation providing for the
limitation of liability of directors from being a stand alone provision to
being
in the section providing for indemnification so that all director rights in
respect of protections from liability are in the same section of the Amended
and
Restated Certification of Incorporation.
The
Board
believes that the proposed amendment is in the best interests of the Company
by
helping to attract and retain skilled and effective directors and officers
in
today’s competitive environment and by updating the Company’s charter to conform
to and reflect the changes in Connecticut law enacted in 1997 and
since.
Summary
of the Amendment
The
following summary of the proposed amendment is qualified in its entirety by
the
complete text of the proposed amendment, which is attached as Annex A to this
proxy statement.
Indemnification
of Directors and Officers
The
existing provisions of the Certificate of Incorporation presently require the
indemnification of directors and officers to the fullest extent permitted by
the
old Connecticut Stock Corporation Act. The amended provisions regarding
indemnification would similarly require indemnification of directors and
officers, but to the fullest extent permitted by the CBCA. The amended
provisions also specifically incorporate provisions from the CBCA that allow
the
Company to make obligatory the Company’s indemnification of directors (but not
officers) from liability for actions taken, or not taken, except liability
that
(A) involved a knowing and culpable violation of law by the director or officer,
(B) enabled the director or officer or an associate (as defined in the CBCA)
to
receive an improper personal gain, (C) showed a lack of good faith and conscious
disregard for the duty of the director or officer of the Company under
circumstances in which the director or officer was aware that his or her conduct
or omission created an unjustifiable risk of serious injury to the Company,
(D)
constituted a sustained and unexcused pattern of inattention that amounted
to an
abdication of the director’s or officer’s duty to the Company, or (E) created
liability for unlawful distributions to shareholders under the CBCA, provided
that this provision would not apply to a director’s right to indemnification for
liability stemming from acts or omissions occurring prior to the effective
date
of the amendment or for the advancement of expenses related to such acts or
omissions. The CBCA presently places certain statutory limitations on the
Company’s ability to indemnify directors and officers, including the requirement
that a director or officer seeking indemnification conducted himself or herself
in good faith, that he or she reasonably believed that his or her conduct was
in
the best interests of the Company if acting in an official capacity, and in
all
other cases that his or her conduct was at least not opposed to the best
interests of the Company, and in the case of criminal proceedings that he or
she
has no reasonable cause to believe his or her conduct was unlawful.
Consequently, the proposed amendment would allow for the maximum amount of
indemnification for directors and officers presently permitted under Connecticut
law.
Advancement
of Expenses
The
proposed Amendment and Connecticut law would also require the Company upon
request of a director or officer to advance sums, during the pendency of the
claim, to a director or officer against whom a claim had been made, for the
costs of defending the claim. Any request for advancement of expenses must
include a written affirmation of the director’s or officer’s good faith belief
that he or she met the relevant standards of conduct established by the CBCA
or
that the proceeding for which advancement is sought involves conduct for which
liability has been limited by the Certificate of Incorporation. In addition,
the
director or officer must provide the Company with an unlimited general
obligation to repay any funds advanced to him or her if the director or officer
is not entitled to indemnification and it is ultimately determined that the
director or officer has not met the relevant standard of conduct described
in
the CBCA.
Limitation
of Liability of Directors
The
existing Certificate of Incorporation contains a provision permitted under
the
old Connecticut Stock Corporation Act that places a cap on claims that could
be
made against a director for breaches of a director’s duty other than those types
of breaches enumerated in the provision. The cap limits personal liability
of a
director to his or her compensation for the year in which the violation or
breach occurs. The Board of Directors believes that it is logical to relocate
this provision from the end of the Certificate of Incorporation to the new
Section dealing with indemnification. There are minor changes in the language
of
the provision as it appears in the new Section 8(c) of the proposed amended
and
restated Certificate of Incorporation, which changes primarily reflect the
provisions of the CBCA that continue to permit the insertion of such a provision
into a company’s certificate of incorporation.
The
provisions regarding both indemnification and limitation of liability of
directors in the proposed amended and restated Certificate of Incorporation
clarify that the rights afforded in such provisions will remain available to
a
person who is no longer a director or officer at the time a claim regarding
acts
in their capacity as a director or officer is made. In addition, the provisions
regarding indemnification provide that a director of officer may also be
eligible for indemnification pursuant to the Company’s bylaws or in a resolution
or contract approved by the Board of Directors or the shareholders of the
Company.
If
the
amendment to the Certificate of Incorporation is approved by the stockholders,
the Company will promptly file a Certificate of Amendment with the
Connecticut Secretary of the State amending the provisions of the Certificate
of
Incorporation regarding the indemnification of directors and officers and moving
the provisions regarding the limitation of liability of directors. The amendment
will become effective on the date the Certificate of Amendment is accepted
for
filing by the Connecticut Secretary of the State.
The
text
of the resolution for the proposed amendment is as follows:
“RESOLVED,
that the Amended and Restated Certificate of Incorporation be and hereby is
amended by deleting the existing Section 8 and Section 13 and replacing them
with the following new Section 8:
Section
8
.
Indemnification;
Advancement for Expenses; Limitation of Personal Liability
.
(a)
The
Corporation shall, to the fullest extent permitted by law, indemnify its
directors from and against any and all liability (including any obligation
to
pay a judgment, settlement, penalty, fine, including an excise tax assessed
with
respect to an employee benefit plan, or reasonable expenses incurred with
respect to any proceeding) and other matters referred to in or covered by the
Connecticut Business Corporation Act. In furtherance and not in limitation
thereof, the Corporation shall indemnify each director for liability, as defined
in Section 33-770 of the Connecticut Business Corporation Act, to any person
for
any action taken, or any failure to take any action, as a director, except
liability that (A) involved a knowing and culpable violation of law by the
director, (B) enabled the director or an associate, as defined in Section 33-840
of the Connecticut Business Corporation Act, to receive an improper personal
economic gain, (C) showed a lack of good faith and a conscious disregard for
the
duty of the director to the Corporation under circumstances in which the
director was aware that his conduct or omission created an unjustifiable risk
of
serious injury to the Corporation, (D) constituted a sustained and unexcused
pattern of inattention that amounted to an abdication of the director's duty
to
the Corporation or (E) created liability under Section 33-757 of the Connecticut
Business Corporation Act, provided that nothing in this Section 8(a) shall
affect the indemnification of or advance of expenses to a director for any
liability stemming from acts or omissions occurring prior to the effective
date
of this Section 8(a).
The
Corporation shall indemnify each officer of the Corporation who is not a
director, or who is a director but is made a party to a proceeding in his or
her
capacity solely as an officer, to the same extent as the Corporation is
permitted to provide indemnification to a director, and to such further extent
as permitted by Section 33-776 of the Connecticut Business Corporation
Act.
The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-law of the
Corporation or in a resolution or contract approved by the board of directors
or
shareholders or otherwise, both as to action in such person’s official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of the heirs, executors and
administrators of such person.
(b)
Reasonable
expenses incurred by a director or officer of the Corporation in defending
a
civil or criminal action, suit or proceeding shall be paid for or reimbursed
by
the Corporation to the fullest extent permitted by law in advance of the final
disposition of such action, suit or proceeding upon the Company’s receipt of (i)
a written affirmation by such director or officer of his or her good faith
belief that he or she has met the relevant standard of conduct described in
Section 33-771 of the Connecticut Business Corporation Act, or that the
proceeding involves conduct for which liability has been limited under Section
8(c) below as authorized by Section 33-636(b)(4) of the Connecticut Business
Corporation Act and (ii) a written undertaking by or on behalf of such director
or officer to repay any funds advanced if it shall be ultimately determined
that
such director or officer is not entitled to be indemnified by the
Corporation.
(c)
The
personal liability of a director to the Corporation or its shareholders for
monetary damages for breach of duty as a director shall be limited to an amount
equal to the amount of compensation received by the director for serving the
Corporation during the year in which the violation occurred if such breach
did
not (A) involve a knowing and culpable violation of law by the director, (B)
enable the director or an associate, as defined in Section 33-840 of the
Connecticut Business Corporation Act, to receive an improper personal economic
gain, (C) show a lack of good faith and a conscious disregard for the duty
of
the director to the Corporation under circumstances in which the director was
aware that his conduct or omission created an unjustifiable risk of serious
injury to the Corporation, (D) constitute a sustained and unexcused pattern
of
inattention that amounted to an abdication of the director's duty to the
Corporation or (E) create liability under Section 33-757 of the Connecticut
Business Corporation Act. This Section 8(c) shall not limit or preclude the
liability of a person who is or was a director for any act or omission occurring
prior to the effective date of this Section 8(c). Any lawful repeal or
modification of this provision shall not adversely affect any right or
protection of a person who is or was a director for any act or omission
occurring prior to the effective date of such repeal or
modification.
(d)
No
amendment or repeal of this Section 8 shall apply to or have any effect on
the
indemnification of any director, officer, employee or agent of the Corporation
for or with respect to any acts or omissions of such director, officer, employee
or agent occurring prior to such amendment or repeal, nor shall any such
amendment or repeal apply to or have any effect on the obligations of the
Corporation to pay for or reimburse in advance expenses incurred by a director,
officer, employee or agent of the Corporation in defending any action, suit
or
proceeding arising out of or with respect to any acts or omissions occurring
prior to such amendment or repeal.”
VOTES
REQUIRED
The
amendment to the Company’s Certificate of Incorporation to broaden the
indemnification of directors and officers and to move existing provisions of
the
Certificate of Incorporation that limit the liability of directors will be
approved if the votes cast in favor of the amendment exceed the votes cast
opposing the amendment. Abstentions and broker non-votes are counted for
purposes of establishing a quorum, but do not otherwise affect the voting.
If
the amendment is not approved by shareholders, it will not be filed with the
Secretary of the State of the State of Connecticut and will not become
effective.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS
VOTE
FOR
THE APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO
BROADEN
THE INDEMNIFICATION OF DIRECTORS AND OFFICERS
PROPOSAL
FOUR
APPROVAL
OF THE GENERAL AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF
INCORPORATION
The
Board
of Directors has approved, subject to shareholder approval, an amendment and
restatement of our
Certificate
of
Incorporation in order to clarify certain of its terms, aggregate the terms
of
multiple prior amendments to our Certificate of Incorporation into a single
document and shorten it to conform more closely to those of other Connecticut
public corporations and modern corporate governance practices. The full text
of
the proposed Amended and Restated Articles of Incorporation is set forth as
Annex A of this proxy statement, which also includes the amendments proposed
under “Proposal Two” and “Proposal Three” above as these amendments will also
become part of the new Amended and Restated Certificate of Incorporation if
approved by the shareholders.
If
the
shareholders approve the proposed amendment and restatement of our Certificate
of Incorporation described in this Proposal Four, and the amendments proposed
under “Proposal Two” and “Proposal Three” above, our current Certificate of
Incorporation will be replaced in its entirety by the new Amended and Restated
Certificate of Incorporation included as
Annex
A
of this
Proxy Statement.
Reasons
for Amendment and Restatement
Our
Certificate of Incorporation was filed with the Secretary of the State of
Connecticut in 1966 as the Certificate of Incorporation of “The Dress Barn,
Incorporated.” Other than amendments to (i) increase our authorized
capital, (ii) add a classified Board of Directors, (iii) add the
requirement of a supermajority vote for approval of business combinations and
certain other actions, and (iv) add indemnity provisions as permitted by
then-effective Connecticut Stock Corporation Act, our Certificate of
Incorporation has remained largely unchanged from that filed in 1983. On January
1, 1997, the Connecticut Stock Corporation Act was repealed and replaced by
the
Connecticut Business Corporation Act. As a result of multiple prior amendments
and the adoption of the Connecticut Business Corporation Act, our current
Certificate of Incorporation is difficult to read as a unified document and
contains many out of date references to the prior Connecticut law.
Effect
of Amendment and Restatement
The
effect of the proposed amendment and restatement would be to unify our
Certificate of Incorporation into a more readable and user-friendly document
that omits obsolete provisions and also reflects Connecticut’s adoption of the
Connecticut Business Corporation Act. A table providing a Section-by-Section
summary of the proposed amendment and restatement other than the provisions
described under “Proposal Two” and “Proposal Three” above follows below.
Detailed
Summary of Recommended Changes to the Certificate of Incorporation
Below
is
a side-by-side comparison of, and explanation regarding, those Sections of
the
Certificate of Incorporation that would be amended by the new Amended and
Restated Certificate of Incorporation, other than the Section regarding the
increase in the number of authorized shares of Common Stock, which is described
under “Proposal Two” above, and the amendment regarding indemnification of
directors and officers, which is described under “Proposal Three” above. Also
omitted are any changes in numbering, for example from “(3)” to “(iii)”, and
instances where terms that were not capitalized in the existing Certificate
of
Incorporation have been capitalized in the new Amended and Restated Certificate
of Incorporation, for example from “board of directors” to “Board of
Directors.”
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Current Certificate of
Incorporation
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Proposed Amended and Restated Certificate
of Incorporation
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Explanation of Amendment
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Section 2
: To engage in any lawful act or activities for
which corporations may be formed under the Connecticut Stock Corporation
Act.
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Section
2(a)
: To engage in any lawful act or activities for which
corporations may be formed under the Connecticut Business Corporation
Act,
as may be amended, revised, modified or otherwise supplemented from
time
to time (the “Connecticut Business Corporation Act”); and
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To
reflect Connecticut’s adoption of the Connecticut Business Corporation Act
(“CBCA”) and the repeal of the old Connecticut Stock Corporation Act, and
to clarify application of subsequent changes to the CBCA that may
affect
the Company.
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Section
4
: The terms, limitations and relative rights and preferences
of each
class of shares and series thereof (if any), or an express grant
of
authority to the Board of Directors pursuant to Section 33-341 of
the
Connecticut Stock Corporation Act, are as follows
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Section
4(a)
: The terms, limitations and relative rights and preferences
of
each class of shares and series thereof (if any), or an express grant
of
authority to the Board of Directors of the Corporation (the “Board of
Directors”) pursuant to Section 33-672 of the Connecticut Business
Corporation Act, are as follows
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To
define the term “Board of Directors” and to make conforming changes
reflecting the adoption of the
CBCA.
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Section
4
: The Preferred Stock may be issued from time to time by the
Board
of Directors as shares of one or more series of Preferred Stock and,
subject to the provisions hereof and the limitations prescribed by
law,
the Board of Directors is expressly authorized, prior to issuance,
by
adopting resolutions providing for the issue of, or providing for
a change
in the number of, shares of any particular series and by filing a
certificate pursuant to the Connecticut Stock Corporation Act, to
establish or change the number of shares to be included in each such
series and to fix the designation and relative rights, preferences
and
limitations of the shares of each such series.
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Section
4
: The Preferred Stock may be issued from time to time by the
Board
of Directors as shares of one or more series of Preferred Stock and,
subject to the provisions hereof and the limitations prescribed by
law,
the Board of Directors is expressly authorized, prior to issuance,
by
adopting resolutions providing for the issue of, or providing for
a change
in the number of, shares of any particular series and by filing a
certificate pursuant to the Connecticut Business Corporation Act,
to
establish or change the number of shares to be included in each such
series and to fix the designation and relative rights, preferences
and
limitations of the shares of each such series.
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To
make conforming changes reflecting the adoption of the
CBCA.
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Section
5
: The minimum amount of stated capital with which the Corporation
shall commence business is $25,000.
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Section
5
: omitted
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This
statement is no longer required under the CBCA.
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Section
6
: (a) Upon the filing with the Secretary of State of Connecticut
of
this Amended and Restated Certificate of Incorporation, each of the
currently issued and outstanding shares of the Corporation shall
be
changed as follows:
(i)
Each issued and outstanding share of six percent Non-Cumulative Preferred
Stock having a par value of One Hundred Dollars ($100.00) per share
shall
be changed into three shares of Common Stock having a par value of
$.05
per share (“Common Stock”), so that the 950 issued and outstanding shares
of six percent Non-Cumulative Preferred Stock shall be changed into
2,850
shares of Common Stock;
(ii)
Each issued and outstanding share of Class A voting Common Stock
without
par value shall be changed into approximately 1,762.72 shares of
Common
Stock, so that the 100 issued and outstanding shares of Class A Voting
Common Stock shall be changed into 176,272 shares of Common Stock;
and
(iii)
Each issued and outstanding share of Class B Non-Voting Common Stock
without par value shall be changed into approximately 1,762.72 shares
of
Common Stock, so that the 1,033 issued and outstanding shares of
Class B
Non-Voting Common Stock shall be changed to 1,820,878 shares of Common
Stock.
(b)
The stated capital of the Corporation is decreased by transfer from
stated
capital to earned surplus the sum of $4,086. The resulting stated
capital
of $100,000 is stated capital in respect of the Common Stock of the
Corporation.
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Section
6
: omitted
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This
Section reflects a prior conversion of no longer existing classes
of stock
of the Company into the Company’s current Common Stock, and is no longer
necessary as such conversion was
completed.
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Section
11(a)
:
Classification of Board of Directors
. Commencing at
the 1986 annual meeting of shareholders, the directors of the Corporation
shall be divided into three classes, each class as nearly equal in
the
number of directors as possible. The term of office of the directors
elected to the first class, to be designated as Class I, will expire
at
the 1987 annual meeting of shareholders. The term of office of the
directors elected to the second class, to be designated as Class
II, will
expire at the 1988 annual meeting of shareholders. The term of office
of
the directors elected to the third class, to be designated as Class
III,
will expire at the 1989 annual meeting of shareholders. At each annual
meeting of shareholders following the 1986 annual meeting of shareholders,
directors shall be elected to succeed the directors whose terms will
then
expire and shall be elected for a term of office that will expire
at the
third succeeding annual meeting of the shareholders after their
election.
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Section
11(a)
:
Classification of Board of Directors
. The directors of
the Corporation shall be divided into three classes, each class as
nearly
equal in the number of directors as possible. At each annual meeting
of
shareholders, directors shall be elected to succeed the directors
whose
terms will then expire and shall be elected for a term of office
that will
expire at the third succeeding annual meeting of the shareholders
after
their election. The directors shall be elected to serve until the
annual
meeting of the shareholders at which their term expires and until
their
respective successors shall have been elected and
qualified.
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Because
the classified board of directors was already established by previous
amendment, the changes to this section reflect that the company’s board of
directors is already classified and sets forth the provisions regarding
classification without reference to particular dates, which is no
longer
needed.
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VOTES
REQUIRED
The
amendment and restatement of the Company’s Certificate of Incorporation will be
approved if the votes cast in favor of the amendment and restatement exceed
the
votes cast opposing the amendment. Abstentions and broker non-votes are counted
for purposes of establishing a quorum, but do not otherwise affect the voting.
If the amendment is not approved by shareholders, it will not be filed with
the
Secretary of the State of the State of Connecticut and will not become
effective. If either or both of the amendments described under “Proposal Two”
and “Proposal Three” above are approved, such amendment or amendments will be
included in the document filed with the Connecticut Secretary of the State
as
the “Amended and Restated Certificate of Incorporation.”
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR
THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF
INCORPORATION.
PROPOSAL
FIVE
RATIFICATION
OF THE ENGAGEMENT OF INDEPENDENT AUDITORS
For
fiscal 2008, Deloitte & Touche LLP (“Deloitte & Touche”) provided audit
services, which included examination of our annual consolidated financial
statements. The Audit Committee has selected Deloitte & Touche to provide
audit services to us and our subsidiaries for the fiscal year ending July 25,
2009. The shareholders are being requested to ratify such selection at the
2008
Annual Meeting. A representative of Deloitte & Touche will attend the Annual
Meeting to make any statements he or she may desire and to respond to
appropriate stockholder questions.
Although
this appointment is not required to be submitted to a vote of the shareholders,
the Audit Committee believes it is appropriate as a matter of policy to request
that the shareholders ratify the appointment. Assuming a quorum is present,
the
appointment of the independent registered public accounting firm will be
ratified if the votes cast in favor of ratification exceed the votes cast in
opposition to ratification, present in person or represented by Proxy at the
2008 Annual Meeting and entitled to vote. If the shareholders do not ratify
the
appointment, the Board of Directors and Audit Committee will consider the
selection of another independent registered public accounting firm.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING JULY 25,
2009.
INFORMATION
REGARDING THE INDEPENDENT AUDITORS
The
Audit
Committee selected Deloitte & Touche LLP as auditors with respect to the
financial statements of the Company for the fiscal year ended July 25, 2009.
FEES
PAID TO INDEPENDENT AUDITORS
The
following table shows the fees billed by Deloitte & Touche LLP for the past
two fiscal years for audit and other related fees
:
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Fiscal
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Fiscal
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2008
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2007
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Audit
Fees (1)
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$
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2,151,000
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$
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2,523,000
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Audit-Related
Fees (2)
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199,173
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133,000
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Tax
Fees (3)
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426,000
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255,621
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All
Other Fees
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—
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—
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Total
Fees
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$
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2,776,173
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$
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2,911,621
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(1)
Fees
for audit services billed in fiscal 2008 and fiscal 2007 consist of the annual
audit of the Company's financial statements, interim reviews of the quarterly
consolidated financial statements and auditing the Company’s internal controls
over financial reporting, as required by Section 404 of the Sarbanes-Oxley
Act
of 2002.
(2)
Audit-related fees consist principally of audits of employee benefit plans
and
assurance and related services that are reasonably related to the performance
of
the audit or review of the Company’s consolidated financial statements.
(3)
Includes fees for professional services provided related to tax compliance,
including implementation of FIN48, federal, state and local taxes, tax planning
and advisory services.
During
fiscal 2008, the Audit Committee pre-approved all of the services provided
by
the auditors. The Audit Committee considered whether the provision of non-audit
services is permitted under applicable laws and regulations and is compatible
with maintaining the independence of Deloitte & Touche LLP.
AUDIT
COMMITTEE REPORT
The
following report of the Audit Committee does not constitute soliciting material
and shall not be deemed to be filed with the SEC under the Securities Act of
1933 or the Securities Exchange Act of 1934 or incorporated by reference into
any document so filed except to the extent that the Company specifically
incorporates this Audit Committee Report by reference therein.
The
Audit
Committee oversees our financial reporting process on behalf of the Board of
Directors and is directly responsible for the compensation, appointment and
oversight of our independent registered public accounting firm. Management
is
responsible for the preparation, presentation and integrity of our financial
statements and for the appropriateness of the accounting principles and
reporting policies that are used. Management is also responsible for testing
the
system of internal control over financial reporting, and reports to the Audit
Committee on any deficiencies found. Our independent registered public
accounting firm, Deloitte & Touche LLP (“Deloitte & Touche”), is
responsible for auditing our financial statements and expressing an opinion
as
to their conformity with U.S. generally accepted accounting principles, as
well
as examining and reporting on management’s assertion about the effectiveness of
our internal controls over financial reporting. Under its written charter,
our
Audit Committee has the authority to conduct any investigation appropriate
to
fulfilling its responsibilities, has direct access to our independent registered
public accounting firm as well as any of our employees, and has the ability
to
retain, at our expense, special legal, accounting, or other consultants or
experts it deems necessary in the performance of its duties.
The
Audit
Committee reviewed and discussed the audited financial statements in the Annual
Report with management and Deloitte & Touche. The Audit Committee has also
discussed and reviewed with Deloitte & Touche the matters required to be
discussed by Statements on Auditing Standards No. 61, as amended,
“Communications with Audit Committees”, as adopted by the Public Company
Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee
obtained from Deloitte & Touche the written disclosures and the letter
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 their
independence from management and the Company. The Audit Committee has also
considered whether the provision of non-audit services by Deloitte & Touche
is compatible with maintaining their independence, and has satisfied itself
with
respect to Deloitte & Touche’s independence.
Based
on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors (and the Board has approved) that the audited
financial statements be included in the Annual Report on Form 10-K for the
year
ended July 26, 2008 for filing with the SEC.
Audit
Committee:
Randy
Pearce, Chair
Kate
Buggeln
John
Usdan
BY
ORDER
OF THE BOARD OF DIRECTORS
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ELLIOT
S. JAFFE
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Chairman
of the Board
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ANNEX
A
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
THE
DRESS BARN, INC.
Section
1
.
The
name
of the corporation is The Dress Barn, Inc. (hereinafter referred to as the
“Corporation”).
Section
2
.
The
nature of the business to be transacted or the purposes to be promoted or
carried out by the Corporation are as follows:
(a)
To
engage
in any lawful act or activities for which corporations may be formed under
the
Connecticut Business Corporation Act, as may be amended, revised, modified
or
otherwise supplemented from time to time (the “Connecticut Business Corporation
Act”); and
(b)
Without
limiting the generality of the foregoing, to carry on the business of buying,
selling, distributing and dealing in clothing and wearing apparel of every
description and any and all materials or articles required for, or useful in
connection with, all or any of the objects aforesaid.
Section
3
.
The
designation of each class of shares, the authorized number of shares of each
such class, and the par value (if any) of each such share thereof are as
follows:
The
total
authorized capital stock of the Corporation shall consist of the following
classes of stock: (a) One Hundred Thousand (100,000) shares of preferred stock
with a par value of five cents ($.05) per share (“Preferred Stock”); and (b) One
Hundred Sixty-Five Million (165,000,000) shares of common stock with a par
value
of five cents ($.05) per share (“Common Stock”).
Section
4
.
The
terms, limitations and relative rights and preferences of each class of shares
and series thereof (if any), or an express grant of authority to the Board
of
Directors of the Corporation (the “Board of Directors”) pursuant to Section
33-672 of the Connecticut Business Corporation Act, are as
follows:
(a)
Preferred
Stock
.
The
Preferred Stock may be issued from time to time by the Board of Directors as
shares of one or more series of Preferred Stock and, subject to the provisions
hereof and the limitations prescribed by law, the Board of Directors is
expressly authorized, prior to issuance, by adopting resolutions providing
for
the issue of, or providing for a change in the number of, shares of any
particular series and by filing a certificate pursuant to the Connecticut
Business Corporation Act, to establish or change the number of shares to be
included in each such series and to fix the designation and relative rights,
preferences and limitations of the shares of each such series. The authority
of
the Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:
(i)
the
distinctive serial designation of such series and the number of shares
constituting such series (provided that the aggregate number of shares
constituting all series of Preferred Stock shall not exceed
100,000);
(ii)
the
dividend rate on shares of such series, whether dividends shall be cumulative
and, if so, from which date or dates;
(iii)
whether
the shares of such series shall be redeemable and, if so, the terms and
conditions of such redemption, including the date or dates upon and after which
such shares shall be redeemable, the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates, and the manner of selecting shares for redemption if less
than
all shares of such series are to be redeemed;
(iv)
the
obligation, if any, of the Corporation to retire shares of such series pursuant
to a sinking fund;
(v)
whether
the shares of such series shall be convertible into, or exchangeable for, shares
of stock of any other class or classes and, if so, the terms and conditions
of
such conversion or exchange, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any;
(vi)
whether
the shares of such series shall have voting rights, in addition to the voting
rights provided by law and, if so, the terms of such voting
rights;
(vii)
the
rights of the shares of such series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation in preference to
the
Common Stock of the Corporation;
(viii)
whether
or not the holders of shares of such series shall have any preemptive rights
with respect to issuance of any class of equity shares of the Corporation,
with
respect to the granting by the Corporation of rights or options to purchase
its
equity shares of any class or the issuance of shares or other securities
convertible into or carrying rights or options to purchase its equity shares
of
any class; and
(ix)
any
other
terms, relative rights, preferences and limitations of such
series.
(b)
Common
Stock
.
Subject
to the rights of the Preferred Stock, and except as may be expressly provided
by
law:
(i)
the
entire voting power for the election of directors and in any corporate
proceeding and upon any matter or question whatever pertaining to the
Corporation shall be vested exclusively in the holders of the shares of Common
Stock, each holder of Common Stock being entitled to one vote for each share
thereof held;
(ii)
dividends
may be declared and paid or set apart for payment upon the Common Stock out
of
any assets or funds of the Corporation legally available for the payment of
dividends; and
(iii)
upon
the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the net assets of the Corporation shall be distributed pro rata
to
the holders of the Common Stock in accordance with their respective rights
and
interests.
(c)
Subject
to the rights of the Preferred Stock, no holder of any class of stock of the
Corporation shall be entitled as such, as a matter of right, to any preemptive
or preferential right to subscribe for, purchase or receive any part of any
new
or additional issue of stock of the Corporation of any class whatsoever, or
of
any notes, bonds, obligations, warrants or other securities, whether or not
the
same be convertible into or exchangeable for stock of the Corporation of any
class whatsoever, whether now or hereafter authorized, or whether issued for
cash or other consideration, or by way of dividend.
Section
5
.
[omitted]
Section
6
.
[omitted]
Section
7
.
The
Corporation is to have perpetual existence.
Section
8
.
Indemnification;
Advancement for Expenses; Limitation of Personal Liability
.
(a)
The
Corporation shall, to the fullest extent permitted by law, indemnify its
directors from and against any and all liability (including any obligation
to
pay a judgment, settlement, penalty, fine, including an excise tax assessed
with
respect to an employee benefit plan, or reasonable expenses incurred with
respect to any proceeding) and other matters referred to in or covered by the
Connecticut Business Corporation Act. In furtherance and not in limitation
thereof, the Corporation shall indemnify each director for liability, as defined
in Section 33-770 of the Connecticut Business Corporation Act, to any person
for
any action taken, or any failure to take any action, as a director, except
liability that (A) involved a knowing and culpable violation of law by the
director, (B) enabled the director or an associate, as defined in Section 33-840
of the Connecticut Business Corporation Act, to receive an improper personal
economic gain, (C) showed a lack of good faith and a conscious disregard for
the
duty of the director to the Corporation under circumstances in which the
director was aware that his conduct or omission created an unjustifiable risk
of
serious injury to the Corporation, (D) constituted a sustained and unexcused
pattern of inattention that amounted to an abdication of the director's duty
to
the Corporation or (E) created liability under Section 33-757 of the Connecticut
Business Corporation Act, provided that nothing in this Section 8(a) shall
affect the indemnification of or advance of expenses to a director for any
liability stemming from acts or omissions occurring prior to the effective
date
of this Section 8(a).
The
Corporation shall indemnify each officer of the Corporation who is not a
director, or who is a director but is made a party to a proceeding in his or
her
capacity solely as an officer, to the same extent as the Corporation is
permitted to provide indemnification to a director, and to such further extent
as permitted by Section 33-776 of the Connecticut Business Corporation
Act.
The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-law of the
Corporation or in a resolution or contract approved by the board of directors
or
shareholders or otherwise, both as to action in such person’s official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of the heirs, executors and
administrators of such person.
(b)
Reasonable
expenses incurred by a director or officer of the Corporation in defending
a
civil or criminal action, suit or proceeding shall be paid for or reimbursed
by
the Corporation to the fullest extent permitted by law in advance of the final
disposition of such action, suit or proceeding upon the Company’s receipt of (i)
a written affirmation by such director or officer of his or her good faith
belief that he or she has met the relevant standard of conduct described in
Section 33-771 of the Connecticut Business Corporation Act, or that the
proceeding involves conduct for which liability has been limited under Section
8(c) below as authorized by Section 33-636(b)(4) of the Connecticut Business
Corporation Act and (ii) a written undertaking by or on behalf of such director
or officer to repay any funds advanced if it shall be ultimately determined
that
such director or officer is not entitled to be indemnified by the
Corporation.
(c)
The
personal liability of a director to the Corporation or its shareholders for
monetary damages for breach of duty as a director shall be limited to an amount
equal to the amount of compensation received by the director for serving the
Corporation during the year in which the violation occurred if such breach
did
not (A) involve a knowing and culpable violation of law by the director, (B)
enable the director or an associate, as defined in Section 33-840 of the
Connecticut Business Corporation Act, to receive an improper personal economic
gain, (C) show a lack of good faith and a conscious disregard for the duty
of
the director to the Corporation under circumstances in which the director was
aware that his conduct or omission created an unjustifiable risk of serious
injury to the Corporation, (D) constitute a sustained and unexcused pattern
of
inattention that amounted to an abdication of the director's duty to the
Corporation or (E) create liability under Section 33-757 of the Connecticut
Business Corporation Act. This Section 8(c) shall not limit or preclude the
liability of a person who is or was a director for any act or omission occurring
prior to the effective date of this Section 8(c). Any lawful repeal or
modification of this provision shall not adversely affect any right or
protection of a person who is or was a director for any act or omission
occurring prior to the effective date of such repeal or
modification.
(d)
No
amendment or repeal of this Section 8 shall apply to or have any effect on
the
indemnification of any director, officer, employee or agent of the Corporation
for or with respect to any acts or omissions of such director, officer, employee
or agent occurring prior to such amendment or repeal, nor shall any such
amendment or repeal apply to or have any effect on the obligations of the
Corporation to pay for or reimburse in advance expenses incurred by a director,
officer, employee or agent of the Corporation in defending any action, suit
or
proceeding arising out of or with respect to any acts or omissions occurring
prior to such amendment or repeal.
Section
9
.
(a)
Supermajority
Vote for Approval of Business Combinations
.
(i)
Notwithstanding
any other provisions to the contrary in this Certificate of Incorporation,
except as set forth in subparagraph (ii) of this Section 9(a), the affirmative
vote of the holders of at least 80 percent of the outstanding shares of Voting
Stock (as hereinafter defined) of the Corporation shall be required for the
approval or authorization of any Business Combination (as hereinafter defined)
of the Corporation with any Related Person (as hereinafter defined). Such
affirmative vote shall be required notwithstanding the fact that no vote may
be
required, or that the affirmative vote of a lesser percentage of shareholders
may be specified, by law or otherwise.
(ii)
The
provisions of this Section 9(a) shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as may be required by law or otherwise, if either:
(1)
the
Business Combination shall have been approved by a majority of Continuing
Directors (as hereinafter defined) at a meeting at which a Continuing Director
Quorum (as hereafter defined) is present; or
(2)
the
Business Combination shall involve the Corporation and a Subsidiary (as
hereinafter defined) in which a Related Person has no direct or indirect
interest (other than an interest arising solely by reason of the Related Party’s
interest in the Corporation), provided that (a) if the Corporation shall not
be
the surviving corporation, all shareholders of the Corporation shall be entitled
to receive the same type of consideration in such transaction in proportion
to
their respective stockholdings, (b) the provisions of Sections 9, 10, 11 and
12
hereof shall be continued in effect or adopted by such surviving corporation
as
part of its articles or certificate of incorporation, as the case may be, and
such articles or certificates shall have no provision inconsistent with the
provisions of such Sections hereof and (c) the provisions of the Corporation’s
By-laws shall continue in effect or shall be adopted by such surviving
corporation.
(iii)
For
purposes of Section 9:
(1)
The
term
“person” shall mean any individual, firm, corporation or other
entity.
(2)
The
term
“Business Combination” shall mean (a) any merger or consolidation of the
Corporation or a Subsidiary with or into a Related Person, (b) any sale, lease,
exchange, transfer, mortgage, pledge or other disposition (whether in one
transaction or in a series of transactions) of all or any Substantial Part
of
the Assets (as hereinafter defined) of the Corporation (including without
limitation any securities of a Subsidiary), or of a Subsidiary, to a Related
Person, (c) any sale, lease, exchange, transfer, mortgage, pledge or other
disposition (whether in one transaction or in a series of transactions) of
all
or any Substantial Part of the Assets of a Related Person to the Corporation
or
to a Subsidiary, (d) the issuance of any securities of the Corporation or a
Subsidiary to a Related Person, (e) the acquisition by the Corporation or a
Subsidiary of any securities of a Related Person, (f) any reclassification
of
securities (including any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the Corporation with any
Subsidiary or any other transaction (whether or not with or into or otherwise
involving a Related Person) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class of
equity securities or securities convertible into equity securities of the
Corporation or any Subsidiary which is directly or indirectly owned by a Related
Person, (g) any loan or other extension of credit by the Corporation or a
Subsidiary to a Related Person or any guarantee by the Corporation or a
Subsidiary of any loan or other extension of credit by any person to a Related
Person, (h) the adoption of any plan or proposal for the dissolution,
liquidation or termination of the Corporation or any Subsidiary proposed by
or
on behalf of a Related Person and (i) any agreement, contract or other
arrangement providing for any of the foregoing Business Combination
transactions.
(3)
The
term
“Related Person” shall mean any person that is the Beneficial Owner (as
hereinafter defined ) of 5 percent or more of the outstanding shares of Voting
Stock of the Corporation, other than (a) any individual or trust that was the
Beneficial Owner of 5 percent or more of such outstanding shares on
December 31, 1984, such individual’s estate, and any other person that is a
Beneficial Owner of 5 percent or more of such outstanding shares solely by
reason of being an “affiliate” or “associate” of such individual, trust or
estate and (b) any profit-sharing, employee stock ownership or other employee
benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary
with respect to any such plan when acting in such capacity.
(4)
A
person
shall be a “Beneficial Owner” of any shares of Voting Stock of the Corporation
(a) which such person or any of its “affiliates” or “associates” (as those terms
are defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1985) beneficially
owns, directly or indirectly, (b) which such person or any of its
“affiliates” or “associates” has, directly or indirectly, (i) the right to
acquire (whether such right is exercisable immediately or after the passage
of
time) pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise or (ii) the right to vote pursuant to any agreement, arrangement
or understanding, or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
“affiliates” or “associates” has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares of Voting
Stock of the Corporation.
(5)
For
the
purposes of determining whether a person is a Related Person, the number of
shares of Voting Stock of the Corporation deemed to be outstanding shall include
all shares of Voting Stock deemed owned by such person through application
of
paragraph (4) of this subparagraph (iii), but shall not include any other shares
of Voting Stock which may be issuable pursuant to any agreement, arrangement
or
understanding, or upon exercise or conversion rights, exchange rights, warrants
or options, or otherwise.
(6)
The
term
“Continuing Director” shall mean (a) any member of the Board of Directors of the
Corporation (i) who was a member of the Board of Directors immediately after
the
meeting at which this Section 9(a) was approved by the shareholders of the
Corporation or (ii) became a member of the Board of Directors prior to the
time
that the Related Person became a Related Person, and (b) any successor of a
Continuing Director who is not an affiliate, associate, or representative of
the
Related Person and is nominated or elected to succeed a Continuing Director
by a
majority of Continuing Directors, provided that such nomination or election
shall only be effective if made at a meeting at which a Continuing Director
Quorum is present.
(7)
The
term
“Continuing Director Quorum” shall mean a majority of Continuing Directors
capable of exercising the powers conferred upon them under the provisions of
the
Certificate of Incorporation or the By-laws of the Corporation or by
law.
(8)
The
term
“Subsidiary” shall mean any corporation more than fifty percent (50%) of any
class of equity security of which is owned, directly or indirectly, by the
Corporation.
(9)
The
term
“Substantial Part of the Assets” shall mean assets having fair market value or
book value, whichever is greater, equal to more than 10 percent of the total
assets of a person as of the end of its most recent fiscal year ending prior
to
the time the determination is made.
(10)
The
term
“Voting Stock” shall mean all of the outstanding shares of capital stock of the
Corporation entitled to vote on matters submitted to shareholders generally,
and
each reference to a proportion of shares of Voting Stock shall refer to such
proportion of the votes entitled to be cast by such shares voting as one
class.
(iv)
Nothing
contained in this Section 9 shall be construed to relieve any Related Person
of
any fiduciary obligation imposed upon it by law.
(v)
The
Board
of Directors shall have the power and duty to determine, on the basis of
information then known to it, whether (a) any person is a Related Person, (b)
any person is an “affiliate” or “associate” of another, (c) any Business
Combination relates to a Substantial Part of the Assets of any person and (d)
any director is a Continuing Director and is acting at a meeting at which a
Continuing Director Quorum is or was present. Any such determination made in
good faith by the Board of Directors shall be conclusive and binding for all
purposes of this Section 9.
(b)
Duties
of the Board of Directors Regarding Business Combinations
.
The
fact that any action or transaction conflicts with the provisions of Section
9(a) shall not be construed to waive or satisfy any other requirement of law
or
this Certificate of Incorporation or to impose any fiduciary duty, obligation
or
responsibility on the Board of Directors or any member thereof to approve such
action or transaction or recommend its adoption or approval to the shareholders
of the Corporation, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof, with
respect to evaluations of or actions and responses taken with respect to such
action or transaction. The Board of Directors of the Corporation, when
evaluating any Business Combination, shall, in connection with the exercise
of
its judgment in determining what is in the best interests of the Corporation
and
its shareholders, give due consideration to all relevant factors, including
without limitation, the social and economic effects on the employees, customers,
suppliers and other constituents of the Corporation and its Subsidiaries and
on
the communities in which the Corporation and its Subsidiaries operate or are
located.
Section
10
.
Amendment
of Sections 9 and 10
.
The
provisions of Section 9 and this Section 10 of the Certificate of Incorporation
may be amended, altered or repealed only at a meeting of shareholders by vote
of
the holders of at least 80 percent of the shares of capital stock entitled
to
vote on amendments to the Certificate of Incorporation.
Section
11
.
(a)
Classification
of Board of Directors
.
The
directors of the Corporation shall be divided into three classes, each class
as
nearly equal in the number of directors as possible. At each annual meeting
of
shareholders, directors shall be elected to succeed the directors whose terms
will then expire and shall be elected for a term of office that will expire
at
the third succeeding annual meeting of the shareholders after their election.
The directors shall be elected to serve until the annual meeting of the
shareholders at which their term expires and until their respective successors
shall have been elected and qualified.
(b)
Vacancies
.
Any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause or from newly
created directorships arising from an increase in the number of directors shall
be filled by a majority vote of the remaining directors then in office, and
any
directors so chosen shall hold office for the remainder of the full term of
the
class of directors in which the vacancy occurred or in which the new
directorship was created. No decrease in the number of directors shall shorten
the term of any incumbent director.
(c)
Removal
of Directors
.
Members
of the Board of Directors may be removed from office only (1) for cause, by
the
remaining Directors, or (2) with or without cause, by shareholder action, at
a
meeting of shareholders called for that purpose, by vote of at least 80 percent
of the shares of capital stock then entitled to vote at an election of
directors.
(d)
Amendment
of Section 11
.
The
provisions of this Section 11 may be amended, altered or repealed only at a
meeting of shareholders by vote of the holders of at least 80 percent of the
shares of capital stock then entitled to vote on amendments to the Certificate
of Incorporation.
Section
12
.
Amendment
of By-Laws by Shareholders
.
Action
by the shareholders to adopt, amend, and repeal the By-laws of the Corporation
may be taken only at a meeting of shareholders by the affirmative vote of the
holders of at least 80 percent of the shares of capital stock then entitled
to
vote thereon. The provisions of this Section 12 may be amended, altered or
repealed only at a meeting of shareholders by vote of the holders of at least
80
percent of the shares of capital stock then entitled to vote on amendments
to
the Certificate of Incorporation.
The
Company’s Board of Directors requests that you date and sign the enclosed proxy
and return it in the enclosed, self-addressed envelope. No postage is required
if you mail it in the United States. Your prompt response will be helpful,
and
we appreciate your cooperation
.
THE
DRESS BARN, INC.
30
Dunnigan Drive
Suffern,
New York 10901
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
To Be Held on Wednesday, December 10, 2008: Our proxy statement, form of proxy,
and annual report for the fiscal year ended July 26, 2008 are available at
http://materials.proxyvote.com/261570
.
This
Proxy is Solicited on Behalf of The Board of
Directors
The
undersigned hereby appoints Burt Steinberg and John Usdan, and each or either
of
them, proxies for the undersigned with full power of substitution, to appear
and
vote all shares of common stock of the Company which the undersigned would
be
entitled to vote if personally present, and otherwise with the same force and
effect as the undersigned, at the Annual Meeting of Shareholders of the Company
to be held at the corporate offices of the Company at 30 Dunnigan Drive,
Suffern, New York, on Wednesday, December 10, 2008 at 2:00 P.M., and any
adjournments thereof, upon the matters set forth in the Notice of such meeting
and Proxy Statement, receipt of which is hereby acknowledged:
(Continued
and to be signed on reverse side)
|
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
|
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING PROPOSALS: PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE.
x
|
|
|
1.
|
PROPOSAL
ONE TO ELECT THREE DIRECTORS FOR TERMS EXPIRING IN 2011
|
FOR
ALL
nominees
listed
to
the left (except as marked
to
the contrary).
|
WITHHOLD
AUTHORITY
to
vote for all nominees listed to the left.
|
2.
|
PROPOSAL
TWO TO APPROVE AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK.
|
FOR
¨
|
AGAINST
¨
|
ABSTAIN
¨
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Jaffe (3-year term)
Klaus
Eppler (3-year term)
Kate
Buggeln (3-year term)
|
¨
|
¨
|
3.
|
PROPOSAL
THREE TO APPROVE AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF
INCORPORATION TO BROADEN THE INDEMNIFICATION OF DIRECTORS
AND
OFFICERS.
|
FOR
¨
|
AGAINST
¨
|
ABSTAIN
¨
|
|
|
|
|
|
|
|
|
|
|
|
|
TO
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NAME OF
THE NOMINEE IN THE SPACE PROVIDED BELOW:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
|
4.
|
PROPOSAL
FOUR TO APPROVE A GENERAL AMENDMENT AND RESTATEMENT OF THE
CERTIFICATE OF
INCORPORATION.
|
FOR
¨
|
AGAINST
¨
|
ABSTAIN
¨
|
|
|
|
|
|
|
|
5.
|
PROPOSAL
FIVE TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JULY 25, 2009.
|
FOR
¨
|
AGAINST
¨
|
ABSTAIN
¨
|
|
This
proxy, when properly executed, will be voted in the manner directed
herein
by the undersigned shareholder.
If no direction is made, this
proxy will be voted FOR the election of all nominees as Director,
FOR
Proposals 2 through 5, and, in the discretion of the proxy holders
named
herein, on any other matters as may properly come before the
meeting and
any postponements or adjournments thereof.
|
|
|
|
Signature(s):_____________________________________________________________________________________________________
|
Date:
___________________ , 2008
|
|
|
|
|
|
|
|
Signature(s):_____________________________________________________________________________________________________
|
Date:
___________________ ,
2008
|
IMPORTANT:
Please sign here exactly as your name or names appear on this Proxy. When
shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If the signer is a partnership, please
sign
in partnership name by authorized person.
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