INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
During Fiscal 2020, EY served as• Michael A. Mathias, our independent registered public accounting firm and, in that capacity, rendered an unqualified opinion on our consolidated financial statements as of and for the year ended January 30, 2021.Executive Vice President, Chief Financial Officer (the “CFO”);
The following table sets forth the aggregate fees billed to us by our independent registered public accounting firm in each of the last two fiscal years:
| | | | | | | | | Description of Fees | | Fiscal 2020 | | | Fiscal 2019 | | Audit Fees | | $ | 2,250,375 | | | $ | 1,881,500 | | Audit-Related Fees | | | 28,000 | | | | 26,250 | | Tax Fees | | | 476,667 | | | | 467,434 | | All Other Fees | | | 5,200 | | | | 4,000 | | Total Fees | | $ | 2,760,242 | | | $ | 2,379,184 | |
“Audit Fees” include fees billed for professional services rendered in connection with (1) the audit of our consolidated financial statements, including the audit of our internal control over financial reporting, and the review of our interim consolidated financial statements included in quarterly reports; (2) statutory audits of foreign subsidiaries; and (3) services that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, consents, assistance with the review of registration statements filed with the SEC and consultation regarding financial accounting and/or reporting standards. “Audit-Related Fees” include fees billed for audits of the Company’s employee benefit plan. “Tax Fees” primarily include fees billed related to federal, state, and local tax compliance and consulting. “All Other Fees” include fees billed for accounting research software.
The Audit Committee has adopted a policy that requires pre-approval of all audit services and permitted non-audit services to be performed by the independent registered public accounting firm, subject to the de minimis exceptions for non-audit services as described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may form and delegate the authority to grant pre-approvals of audit and permitted non-audit services to subcommittees consisting of one or more members when it deems appropriate, provided that decisions of such subcommittee shall be presented to the full Audit Committee at its next scheduled meeting. All audit and non-audit services provided to the Company by EY during Fiscal 2020 were pre-approved by the Audit Committee in accordance with such policy.
| | | | | 46 | | |
| | 
|
| | • Jennifer M. Foyle, our President, Executive Creative Director, AE and Aerie (the “President”); | | • Michael R. Rempell, our Executive Vice President, Chief Operations Officer (the “COO”); | | • Marisa A. Baldwin, our Executive Vice President, Chief Human Resources Officer (the “CHRO”); and | | • Andrew J. McLean, our former Executive Vice President, Chief Commercial Officer (the “Former CCO”) who left the Company effective September 12, 2022. |
This CD&A is organized as follows: 
Business Highlights Fiscal 2022: Overview Fiscal 2022 was defined, for our industry and our business, by a difficult macro environment. As we lapped outstanding results from the prior year, we grappled with rising inflation, higher interest rates, continued supply chain disruptions and a highly promotional retail landscape, each of which created challenges. Against this backdrop, financial results reflected a tale of two halves. While profitability and cash flow were pressured in the first half of Fiscal 2022, swift and aggressive actions to reduce inventory levels and cut expenses and capital spending drove a rebound in the second half. As a result, adjusted operating income(1) of $213 million in the second half of Fiscal 2022 represented meaningful improvement compared to $56 million in the first six months of the year. We also returned to a positive free cash flow position and strengthened our balance sheet. As we navigated these headwinds, we continued to make progress against our long-term strategic initiatives. Full-year consolidated revenue of $5 billion was our second highest in company history and included our second highest Back-to-School and Holiday sales ever. This was down only to last year’s record result, which had benefited from a very strong demand environment. Operating income during the last six months of Fiscal 2022 was up as compared to the same period in pre-pandemic Fiscal 2019, reflecting the benefits of the strategic initiatives we are pursuing as part of our long-term “Real Power. Real Growth.” value creation plan. Aerie’s incredible brand platform continued to see exceptional multi-year growth with record revenue of $1.5 billion, approximately double that of Fiscal 2019 and segment adjusted operating income(1) up close to 150% over | (1) | PROPOSAL THREE: ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
As required by Section 14ASee Appendix A of the Exchange Act, we are providing stockholders with an advisory vote on the overall compensation of our named executive officers. In accordance with the results of the stockholder vote at the 2017 Annual Meeting, advisory votes on the overall compensation of our named executive officers are held every year, and there will be another vote on the frequency of the say on pay vote at the 2023 Annual Meeting.
As discussed in the “Compensation Discussion and Analysis” section below, our executive compensation program is based on four core principles: performance, competitiveness, affordability, and transparency. We believe that our program design implements these principles and provides the framework for alignment between executive compensation opportunities and long-term strategic growth. Based on the advisory vote at the 2020 Annual Meeting on our executive compensation program, which was approved by approximately 98% of the votes cast, we are confident that our stockholders agree.
We have an ongoing commitment to ensuring that our executive compensation plans are aligned with our principles and evolve as the industry and business changes. During Fiscal 2020 our Compensation Committee reacted to unprecedented challenges by evolving our compensation program to ensure it continued to motivate, retain and reward our executives and associates while enabling our strategic growth plans. We continued to engage with our stockholders to gain an understanding of their key perspectives on all aspects of the business and the broader industry, including compensation programs. We continued to evaluate and enhance plan design to align with leading practices in executive compensation, and we believe our plan in 2020 helped lead to the strong results and stockholder returns we delivered.
We urge our stockholders to read the following “Compensation Discussion and Analysis” section for information on our executive compensation program.
In summary, we believe that our executive compensation program has provided and continues to provide appropriate incentives and remains responsive to our stockholders’ views. Accordingly, the following resolution will be submitted for a stockholder vote at the 2020 Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, as set forth in thethis Proxy Statement for the 2021 Annual Meeting.”
As an advisory vote, your vote will not be bindingadditional detail on the Company or the Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the compensation paid to our named executive officers (“NEOs”), we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board recommends that the stockholders vote “FOR” the
approval of the compensation of our named executive officers as set forth in this
Proxy Statement for the Annual Meeting.
| | | | | 2021 Proxy Statement
| | |
| | 47 |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy, objectives, policies, and practices with respect to our NEOs for Fiscal 2020. The following officers comprise our Fiscal 2020 NEOs:
| | • Jay L. Schottenstein, our Chief Executive Officer (the “CEO”);
| | • Michael A. Mathias, our Executive Vice President, Chief Financial Officer (the “CFO”), effective April 20, 2020;
| | • Jennifer M. Foyle, our Chief Creative Officer, AEO Inc. & Global Brand President, Aerie (the “Chief Creative Officer”);
| | • Charles F. Kessler, our Global Brand President, American Eagle (the “Global Brand President, AE”);
| | • Michael R. Rempell, our Executive Vice President, Chief Operations Officer (the “COO”); and
| | • Robert L. Madore, our former Executive Vice President, Chief Financial Officer (the “Former CFO”) who left the EVP-CFO role effective April 20, 2020 and left the Company effective September 25, 2020.
|
This CD&A is organized as follows:
| | | | | 48 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
EXECUTIVE SUMMARY
Navigating the Challenges of COVID-19
The past year was filled with unprecedented challenges, yet ultimately led us to learn, grow, and become even stronger as a Company. Our business in Fiscal 2020 was significantly impacted by the disruptions caused by the COVID-19 pandemic, including the mandated closure of our stores in March 2020, followed by continued capacity restrictions and pressure on mall traffic throughout the year. In response to the global health crisis, we took quick, decisive actions to (1) protect our associates, customers and communities; (2) reduce spending, cut inventory and create efficiencies to preserve financial strength; and (3) innovate to prepare for a new future of retail. This strategy, which we termed our “Pandemic Pillars,” deliveredadjusted results in Fiscal 2020 and, we believe, has positioned us for future growth.
Our response to the COVID-19 pandemic was immediate and deliberate. On March 17, 2020, we closed all American Eagle and Aerie stores in the United States and Canada. While store closures helped keep our communities and associates safe, they also led to the very difficult decision of temporarily furloughing store, field, and some corporate associates beginning April 5, 2020. During this time, in recognition of the hardships imposed on our associates as a result of store closures and other impactsimportant information regarding the use of the pandemic to our associates, customers, and communities, we continued to put our people first and implemented the following actions:
We maintained benefits for furloughed associates and continued to fund 100% of the health premiums for eligible employees impacted by these measures.
We instituted industry-leading safety protocols across our operations, including the procurement of masks and PPE for all teams, the hiring of an AEO medical consultant, physical construction to enable social distancing mandates, temperature check stations, installing infrared lighting and air filtration systems in the distribution centers, new breakroom and cafeteria protocols, creating training and videos to explain new safety measures and expectations, and on-site nurses.
After temporary store closures in the spring, we drafted and deployed a comprehensive global store re-opening playbook (ensuring customer safety; managing capacity restrictions and reduced operating hours; and implementing curbside pickup and touchless checkout).
We created the COVID-19 Associate Relief Fund to provide grants to eligible AEO associates who were adversely impacted by COVID-19; distributed AEO Foundation grants to non-profits in local communities; and donated over $1 million nationally to COVID-19 relief efforts, including donating gift cards and more than one million masks to front-line workers in cities most in need.
Despite the profound challenges of operating during a global pandemic and the impact of COVID-19 to apparel retailers – with three companies in our peer group filing for bankruptcy during the year – we ended Fiscal 2020 with performance that significantly outperformed peers. Our success in 2020 was driven by the commitment and innovation of our most important asset – our people. We are grateful for their dedication to our Company, our customers and each other in an incredibly challenging year. As a result of this extraordinary performance, all eligible associates received an annual incentive bonus for Fiscal 2020 representing 200% of the target bonus amount.
2020 Performance Highlights
After a difficult start with the abrupt closure of all stores during the first quarter of Fiscal 2020, we ended fiscal 2020 with a strong fourth quarter and momentum going into 2021, as evidenced by the following:
Our online business accelerated throughout the year, rising 36% on a year-over-year basis to $1.7 billion, with revenue up across all of our brands fueled by strong customer demand.
Aerie reached a record $1 billion milestone and continued to generate double-digit growth – a truly extraordinary accomplishment in light of the pandemic.
We successfully operated our stores with leading health and safety measures, and our business strengthened each quarter throughout Fiscal 2020.
• | | In the fourth quarter of Fiscal 2020, we achieved a meaningful recovery, posting $106 million in adjusted operating income(1), a 38% increase from 2019, with margins increasing across brands. We ended the year in strong financial condition, with $850 million in cash and approximately $1.2 billion in total liquidity.
|
(1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use of non-GAAP or adjusted measures.
|
| | | | | | | | | | | | 50 | | | | |  | | | | | | | 2021 Proxy Statement
|
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Fiscal 2019. American Eagle (“AE”) achieved operating income and margin expansion compared to Fiscal 2019, driven by structural changes we have enacted to improve brand health. We strengthened our balance sheet, retiring $403 million of outstanding convertible debt and returned $265 million in cash to stockholders through a combination of share repurchases and dividends, our highest level of returns since Fiscal 2015. Key Operating Highlights: Second Highest Revenue Result in Company History. During Fiscal 2022, consolidated revenue of $5 billion was roughly flat to the prior year, including an approximately three percentage point benefit from Quiet Platforms. Brand revenue declined 3% as we lapped extraordinary strength in Fiscal 2021 that had been fueled by stimulus and pent-up demand, yet was up 13% compared to the pre-pandemic Fiscal 2019 base, marking our second highest revenue result in Company history. Brand and channel performance reflected tough year over year comparisons and the prevailing macro environment. Aerie revenue grew 9% compared to Fiscal 2021. The digital channel represented 35% of brand revenue for the year, compared to 29% in Fiscal 2019. 
Meaningful Operating Income and Margin Recovery in the Second Half of Fiscal 2022. During Fiscal 2022, we delivered $269 million in adjusted operating income(1) reflecting an operating margin of 5.4%. While profitability was challenged in the first half of the year, swift and aggressive actions to reduce both inventory levels and expenses drove a rebound in the second half of the year. Adjusted operating income of $213 million in the second half of Fiscal 2022 represented a 7.8% adjusted operating margin(1) and was meaningfully improved compared to $56 million in operating income and a 2.5% operating margin in the first half. Second half profitability also grew 19% relative to the pre-pandemic second half of Fiscal 2019 operating income with the operating margin expanding 20 basis points. Multi-Year Aerie Brand Growth. During Fiscal 2022, Aerie revenue rose 9% to $1.5 billion, on top of 39% growth in Fiscal 2021. Growth was led by OFFLINE, Aerie’s activewear sub-brand launched in Fiscal 2020, as we continued to expand the assortment into new categories across performance and fashion styles. New store expansion continued to build greater awareness and Aerie reached a new milestone of 10 million customers. Segment adjusted operating income (1) of $167 million was down as compared to the prior year driven by higher markdowns as the brand anniversaried a low promotional environment in Fiscal 2021 and took higher markdowns to clear through excess inventory in the second quarter of Fiscal 2022. When comparing to pre-pandemic Fiscal 2019 levels, revenue nearly doubled and operating income was up almost 150%.
| COMPENSATION DISCUSSION AND ANALYSIS |  | |  |
| (1) | Key Operating Highlights:
TSR That Significantly Outperformed Peers. BasedSee Appendix A of this Proxy Statement for additional detail on our competitive strengthsadjusted results and exciting growth opportunities for our brands, Aerie and American Eagle, we were pleased to see AEO’s total stockholder return (“TSR”) exceed thoseother important information regarding the use of our retail peers. Our Fiscal 2020 TSR was approximately 59%, significantly above our peer group median of 15%. Our three-year TSR of 36% and five-year TSR of 70% were each significantly above the peer group medians, which were negative 8% and 0%, respectively.
Digital Sales Accelerated. During Fiscal 2020, online revenues grew by $450 million, or 36% year-over-year, to $1.7 billion and represented 45% of our total revenue. Driven by strong customer demand, we saw digital growth across all of our brands, with Aerie rising 85% and American Eagle up 17% for Fiscal 2020 compared to Fiscal 2019. Our digital channel generated strong profit margins and posted positive sales metrics, including traffic and transaction value.
| | | | | 50 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
• | | Continued Aerie Momentum. During Fiscal 2020, Aerie’s revenue rose 24% year-over-year, to $1 billion. Demand for the brand has been very consistent over the past several years, with the fourth quarter of Fiscal 2020 marking the 25th consecutive quarter of double-digit growth. New customer growth was strong, and sales rose across channels and all major categories.
|
• | | Sequential Margins and Profitability Strength. During Fiscal 2020, margins and profitability strengthened sequentially, with fourth quarter 2020 adjusted operating profit(1) of $106 million up 38% from the fourth quarter of Fiscal 2019, and the second half of Fiscal 2020 posting adjusted operating profit(1) of $209 million. After the abrupt closure of our stores in March 2020, our team took quick, decisive action to reduce inventory, cut spending and find efficiencies. The stores team redesigned the store experience to reopen locations when it was safe to do so and with leading safety protocols in place. Through feedback from our customers and associates, as well as national recognition in various publications, we are confident that these efforts were appreciated. Although store traffic remained under pressure in 2020 due to continued concerns about COVID-19 as well as ongoing capacity restrictions, demand strengthened throughout the year, driving sequential quarterly sales and profit improvement.
|
(1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use of non-GAAP or adjusted measures.
|
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 51 |
| | | | COMPENSATION DISCUSSION AND ANALYSIS | | | 2021 Proxy Statement
|
Multi-Year Structural Profit Improvement at American Eagle. During Fiscal 2022, AE revenue and profitability declined year-over-year as the business lapped extraordinary strength in Fiscal 2021, which saw a record Back-to-School season driven by pent-up demand as schools returned to in-person after two-years of virtual learning. Compared to pre-pandemic Fiscal 2019 levels, revenue declined 6%, yet segment adjusted operating income (1) grew 3% with the segment adjusted operating margin(1) expanding 150 basis points to 16.6%. This improvement was driven by the Company’s multi-year focus on eliminating unproductive SKUs and closing lower margin stores to improve the health of the brand. | | |
Fortified balance sheet and strong cash returns to stockholders. During Fiscal 2022, AEO retired $403 million in outstanding principal related to the Company’s convertible notes, representing 98% of the total issuance position. In connection with this, the Company also completed $200 million in share repurchases. Together, this strengthened the Company’s balance sheet and offset over half of the dilution related to the Company’s convertible note issuance position. In Fiscal 2022, the Company also paid $65 million in dividends to its stockholders. When combined with share repurchases, this reflected the highest cash returns to stockholders since Fiscal 2015. The Company temporarily paused its dividend in the third quarter of Fiscal 2022 to provide near-term flexibility as it navigated a tough macro environment. As profitability and cash flow recovered over the course of the second half of the year, the dividend was reinstated subsequent to the fourth quarter of Fiscal 2022. Fiscal 2021 Say on Pay Historically, we have received strong support on our Say on Pay proposals, which we have taken as an endorsement of our executive compensation programs. At the 2021 Annual Meeting of Stockholders, although our Say-on-Pay proposal received majority support, the vote outcome of 56% fell far short of our expectations. We used this opportunity to participate in significant stockholder outreach to learn more about the expectations and areas of concern for our stockholders. We used that invaluable insight to inform our approach and decisions in Fiscal 2021, making responsive changes to our program design and practices. We are proud that our Fiscal 2021 stockholder support for Say on Pay at the 2022 Annual Meeting of Shareholders was approximately 92%, which aligns with historical levels. This level of support reinforced that our Fiscal 2021 compensation program changes and stockholder engagement were positively received by stockholders. We maintained our Fiscal 2021 executive compensation program design in Fiscal 2022. | Say on Pay Proposal | | Stockholders’ Support Level |
| COMPENSATION DISCUSSION AND ANALYSISFiscal 2021 Executive Compensation | | 92% | Fiscal 2020 Executive Compensation | | 56% | Fiscal 2019 Executive Compensation | | 98% | Fiscal 2018 Executive Compensation | | 98% |
| (1) | Strong Balance SheetSee Appendix A of this Proxy Statement for additional detail on adjusted results and Commitment to Cash Returns. We ended Fiscal 2020 with $850 million in cash and approximately $1.2 billion in total liquidity. Excluding net proceeds from our April 2020 convertible note issuance, we ended Fiscal 2020 with $444 million in cash, up 7% from Fiscal 2019. Early inother important information regarding the year, we took actions to preserve our financial strength, which allowed us to generate free cash flow in the second halfuse of Fiscal 2020 in line with last year despite the reduction in revenue related to COVID-19. The recovery in cash flow enabled us to pay our previously deferred first quarter 2020 cash dividend in December 2020, and on March 3, 2021 we announced the reinstatement of our regularly quarterly cash dividend and unsuspended our share repurchase program.
Outstanding Stock Price Performance. As of April 2021, AEO’s stock price performance was up over 300% from a year ago, fueled by a significant and consistent recovery in our business after the abrupt COVID-19 related store closures in the first quarter of 2020. Through the team’s swift actions and strong management, we saw sequential improvement in our sales, margins and profit in each quarter of 2020. Aerie grew revenue 24% for the year, digital increased 36% and we ended 2020 with strong liquidity and cash flow. In January 2021, we also unveiled our Real Power. Real Growth value creation plan and long-term financial targets, providing investors with greater transparency into our future growth plans.
AEO Stock Price Performance
1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use of non-GAAP or adjusted measures.
|
| | | | | | | | | | | | 52 | | | | | | | | | | | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
| | | | | 52 | | |
Fiscal 2022 Overview, Compensation Program Objectives and Philosophy Fiscal 2022 was a year that presented a variety of challenges in a difficult macro environment. Consumers were pressured from rising inflation while continued supply chain disruptions drove elevated costs. After a challenging first half of the year, we were able to quickly pivot with decisions that led to a second half rebound. The collaboration, capability, and experience of our talented leadership team drove the initiatives that helped us produce revenue of $5 billion, improved free cash flow, and significant growth in second half operating profit. The overall philosophy of our executive compensation program is to attract and retain highly skilled, performance-oriented executives who live our brand and embody its spirit of authenticity and innovation. Our goal is to incentivize our executives to achieve outstanding results for all stakeholders within the framework of a principles-based compensation program. We focus on the following core principles in structuring an effective compensation program that meets this stated philosophy: | |
|
| | | COMPENSATION DISCUSSION AND ANALYSIS |
Our Look ForwardPerformance
| | • We align executive compensation with the achievement of qualitative and quantitative goals that we expect to drive increases in stockholder value. Unveiled Real Power. Real Growth Strategy Plan. The unforeseen events of 2020 accelerated the pace of global change
and innovation. In response to the challenges posed by the COVID-19 pandemic and the continued success of Aerie and
acceleration in our digital channel, we refocused our priorities and in January, 2021 unveiled our “Real Power. Real Growth”
strategy plan aimed at fueling AEO for further growth and profitability. The Real Power. Real Growth long-term plan leverages the
power of our people, brands and operations and the momentum we have generated in 2021. The pillars of Real Power. Real
Growth. include the following goals:
Double Aerie to $2 billion in revenue;
Reignite American Eagle for profit growth;
Leverage customer-focused capabilities;
Strengthen ROI discipline; and
Embrace the power of our people, culture and purpose.
Fiscal 2020 Compensation Takeaways
The results achieved in Fiscal 2020 were• Our program focuses on “at-risk” compensation, with remuneration that creates a direct result of the decisive actions taken by our CEO, executives, and Board,meaningful retention aspect as well as the resilience of our most important asset – our people. The innovation, collaboration, speed, and agility demonstrated by our teams delivered industry-leadingan incentive to achieve challenging performance including record online revenue growth, double-digit growth in Aerie, andobjectives.
• NEOs receive a strong focus on inventory optimization and execution in AE that led to margin growth and a strong year-end cash position. We believe that the decisions made by the Compensation Committee in the face of the COVID-19 challenges motivated our leaders to produce results, and that our compensation practices and our pay-for-performance philosophysubstantial long-term incentive component, which aligns thetheir interests of our executives with those of our stockholders. Specifically:stockholders and serves to retain executive talent through a multi-year vesting schedule.
• Our long-term incentive design varies actual compensation above or below the targeted compensation opportunity based on the degree to which performance goals and changes in stockholder value are attained over time. | Competitiveness | | • Executive compensation is structured to be competitive relative to a group of retail peers, taking into account company size relative to peers and recognizing our highly competitive industry as well as our emphasis on performance-based compensation. • Target total compensation for individual NEOs varies based on a variety of factors, including the executive’s skill set and experience, historic performance, expected future contributions, and the importance of each position to our success. | Affordability | | • Our compensation program is designed to limit fixed compensation expense and tie realized compensation costs to the degree to which budgeted financial objectives are attained. • We structure our incentive plans to maximize efficiency by striving to make performance-based payments aligned with expense. | Transparency | | • We focus on simple, straightforward compensation programs that our associates and stockholders can easily understand. |
Executive Compensation Program Highlights Our compensation program design provides a framework for aligning executive compensation and our long-term Company objectives and financial performance. We continually review leading practices in corporate governance and executive compensation. As appropriate, we consider changes to our program to embrace best practices, remain competitive in our industry, and reinforce the pay-for-performance alignment. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 53 |
| | | | COMPENSATION DISCUSSION AND ANALYSIS | | No routine changes to base salaries: The Compensation Committee did not increase base salaries of our NEOs for Fiscal 2020, other than two promotional base salary increases. For our CEO, this represents the fifth year of no change to his base compensation. As a result, a significant amount of NEO compensation for Fiscal 2020 was “at risk,” which we believe appropriately incentivizes our NEOs with respect to Company performance. During Fiscal 2020, only approximately 20% of our NEO compensation, on average, was guaranteed.
|
• | | Agility in our annual incentive bonus program and recognition of our leadership: To remain responsive to the unprecedented business challenges posed by the COVID-19 pandemic, our Compensation Committee developed an annual incentive bonus structure for Fiscal 2020 that recognized the need to motivate and focus our teams and measure performance in a different way than we have historically. This structure focused on measuring results based upon both our qualitative strategic business pillars – protecting our people, preserving cash, and preparing for a new future – as well as quantitative financial results. The focus on our qualitative strategic goals resulted in exceptional quantitative financial achievements, ultimately generating a payout of 200% of the target annual incentive bonus for all eligible associates and executives, including NEO’s, for Fiscal 2020. The Compensation Committee also awarded recognition bonuses to reflect the significant competitive landscape, strong leadership, and exceptional execution on our initiatives by our executives, including the NEOs, during Fiscal 2020.
|
• | | No adjustments or modifications to previously-granted long-term equity incentive awards: As previously disclosed in our 2019 proxy statement, performance shares (“PSUs”) previously granted in Fiscal 2018 vested based on cumulative performance results at the end of a three-year performance period that ended in Fiscal 2020. Despite the business impact of COVID-19 on Company performance during Fiscal 2020, the Compensation Committee did not exercise discretion to adjust the performance criteria applicable to the Fiscal 2018 PSUs. Based on these unadjusted results during the performance period, the Compensation Committee determined that the Fiscal 2018 PSUs would payout at a 50% level of achievement.
|
• | | Fiscal 2020 long-term equity incentive awards: In addition to a unique annual incentive bonus structure for Fiscal 2020, the Compensation Committee slightly modified our long-term incentive awards for Fiscal 2020, while remaining true to the historic performance-oriented nature of
The following table highlights the Company’s practices relating to our executive compensation program. Historically, the Compensation Committee has granted long-term equity awards in the form of 50% PSUs, 25% restricted stock units (“RSUs”) and 25% stock options. The Fiscal 2020 long-term equity program maintained the same equity components and the strong performance orientation, while altering the mix slightly. Accordingly, our Fiscal 2020 long-term incentive program delivered an aggregate mix composed of 42% RSUs, 33% PSUs, and 25% stock options. Effective for Fiscal 2021, the Compensation Committee has changed the long-term incentive equity mix to be 50% PSUs, 30% stock options, and 20% RSUs to provide for an even stronger performance orientation. |
| | | | | 2021 Proxy Statement
| | |
| | 53 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Fiscal 2020American Eagle Outfitters’ Executive Compensation Program Objectives and Philosophy
The overall philosophy of our executive compensation program is to attract and retain highly skilled, performance-oriented executives who live our brand and embody its spirit of authenticity and innovation. Our goal is to incentivize our executives to achieve outstanding results for all stakeholders within the framework of a principles-based compensation program.
We focus on the following core principles in structuring an effective compensation program that meets this stated philosophy:
| | | Performance
| | • We align executive compensation with the achievement of qualitative and quantitative goals that we expect to drive increases in stockholder value.
• Our program focuses on “at-risk” compensation, with remuneration that creates a meaningful retention aspect, as well as an incentive to achieve challenging performance objectives.
• NEOs receive a substantial long-term incentive component, which aligns their interests with those of our stockholders and serves to retain executive talent through a multi-year vesting schedule.
• Our long-term incentive design varies actual compensation above or below the targeted compensation opportunity based on the degree to which performance goals and changes in stockholder value are attained over time.
| Competitiveness
| | • Executive compensation is structured to be competitive relative to a group of retail peers, taking into consideration company size relative to peers and recognizing our highly-competitive industry as well as our emphasis on performance-based compensation.
• Target total compensation for individual NEOs varies based on a variety of factors, including the executive’s skill set and experience, historic performance, expected future contributions, and the importance of each position to our success.
| Affordability
| | • Our compensation program is designed to limit fixed compensation expense and tie realized compensation costs to the degree to which budgeted financial objectives are attained.
• We structure our incentive plans to maximize financial efficiency by establishing programs that are intended to be tax deductible (whenever it is reasonably possible to do so while meeting our compensation objectives) and accounting efficient by striving to make performance-based payments aligned with expense.
| Transparency
| | • We focus on simple, straightforward compensation programs that our associates and stockholders can easily understand.Checklist
|
| | | | | | 54 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
Executive✓ A Compensation Highlights
Our compensation program design provides a framework for aligningCommittee composed entirely of independent directors oversees the Company’s executive compensation policies and our long-term Company objectives and financial performance. We continually review leading practices in corporate governance and executive compensation. As appropriate we consider changes to our program to embrace best practices, remain competitive in our industry, and reinforce the pay-for-performance alignment.decisions
The following table highlights the Company’s practices relating to our executive compensation program.
| | | American Eagle Outfitters’ Executive Compensation Checklist
| | ✓ A Compensation Committee composed entirely of independent directors oversees the Company’s executive compensation policies and decisions
| | ✓✓ The Compensation Committee utilizes an independent compensation consulting firm, FW Cook, which does not provide any other services to the Company
| | ✓ We maintain robust executive stock ownership guidelines (six times base salary for our CEO, and three times base salary for our other NEOs)
| | ✓ We pay for performance. The majority of our NEOs’ total compensation opportunities are “at-risk”
| | ✓ Our long-term incentive plan does not allow for the payment of dividends or dividend equivalents on unearned PSU awards or unvested RSU awards
| | ✓ We do not maintain (i) employment contracts of defined length with our NEOs, or (ii) multi-year guarantees for base salary increases, bonuses, or long-term incentives
| | ✓ We have a robust clawback policy with respect to both cash and equity incentive awards
| | ✓ We maintain a stringent anti-hedging and anti-pledging policy, applicable to all employees and non-employee directors
| | ✓ We do not provide significant perquisites
| | ✓ We do not provide tax gross-ups on change-in-control benefits
| | ✓ We have double-trigger cash severance and long-term incentive vesting in the event of a change-in-control
| | ✓ We discourage excessive risk-taking by having our Compensation Committee closely monitor the risks associated with our executive compensation program and individual executive compensation decisions to determine that they do not encourage excessive risk-taking
|
OUR EXECUTIVE COMPENSATION PROGRAM
Fiscal 2020 Goal Setting Process
Goal Setting:
We remain committed to setting incentive goals that are aligned with delivering strong financial performance and returns to our stockholders, while also enabling the successful execution of our strategy. This includes building a solid foundation for long-term growth while consistently delivering near-term results. Against the backdrop of the significant and unanticipated impacts of the COVID-19 pandemic on our business and industry and ongoing uncertainty, the Compensation Committee introduced qualitative goals to the 2020 annual incentive bonus program and based the quantitative financial performance component of the annual incentive bonus program on performance during the third and fourth quarters of Fiscal 2020.
| | | | | 2021 Proxy Statement
| | |
| | 55 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Timing of Award Grants:
Traditionally, the Compensation Committee sets performance goals for our annual incentive program and equity-based grants at the end of the first fiscal quarter of the year. During Fiscal 2020, this timing aligned with the initial impacts of the COVID-19 pandemic on our industry and business, which were both immediate and severe. Accordingly, the timing of setting our annual bonus goals and long-term incentives was delayed until the Compensation Committee felt that appropriate realistic qualitative and quantitative goals could be set.
• | | First quarter of Fiscal 2020.
|
| o | Qualitative Goals for Fiscal 2020 Annual Incentive Bonus: At the onset of the COVID-19 pandemic, the leadership team quickly established a key set of strategic business priorities: protect our people and business; preserve cash; and prepare for a new future. These near term priorities informed our focus for Fiscal 2020 and subsequently were accordingly approved as the qualitative goals for the annual incentive bonus in the second quarter of Fiscal 2020.
|
| o | Annual Approval of Long Term Incentive Grants (RSUs and Options): Typically our long term incentives are awarded in the first quarter of Fiscal 2020. Accordingly, in March 2020, the Compensation Committee chose to grant time-based RSUs to all eligible associates including the NEOs, as well as a partial grant of the annual stock options historically given to NEOs as part of their total compensation. The Compensation Committee was mindful of the remaining share balance available under the 2017 Stock Award and Incentive Plan, as amended (the “2017 Plan”). At the 2020 Annual Meeting, stockholders were asked to approve the adoption of the American Eagle Outfitters, Inc. 2020 Stock Award and Incentive Plan (the “2020 Plan”) to serve as the successor to the 2017 Plan. On June 4, 2020, stockholders overwhelmingly approved the 2020 Plan, which made an additional 10.2 million shares of Company stock available for grant as equity awards to our associates and executives.
|
| o | Quantitative Goals for Fiscal 2020: Given the significant impact of store closures during the first and second quarters of Fiscal 2020 and the related disruption to our business, the Compensation Committee believed that the most prudent course of action was to wait until the third quarter of Fiscal 2020 to establish the quantitative financial performance goal for the 2020 annual incentive program. The Compensation Committee did not believe that it was in a position to adequately assess business projections or establish well-informed and challenging financial goals with respect to Fiscal 2020 until such date. During the third quarter of Fiscal 2020, the Compensation Committee set the EBIT goals for the annual incentive bonus based on what it believed would be challenging, yet attainable goals for the balance of the year, and in particular, focusing on the executives on recouping as much of the financial loss suffered by the Company in the first half of Fiscal 2020 as possible. Achievement of the EBIT levels set by the Compensation Committee required significant sales and margin improvement from forecasts at the time the goals were set, as well as expense reduction.
|
| o | Annual Approval of Long Term Incentive Grants (PSUs, RSUs and Options). Given continued uncertainties in the retail industry, the Compensation Committee granted Fiscal 2020 PSU awards using relative TSR as the performance metric in lieu of historic financial goals. The Committee also awarded additional stock option awards in June 2020 as well as an RSU award to the executives.
|
| | | | | 56 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
Role of Our Compensation Committee:
The Board has delegated authority to the Compensation Committee to develop and approve the overall compensation program for our NEOs, including the authority to establish and award annual base salaries, annual incentive bonuses, and long-term incentive awards pursuant to our stockholder-approved incentive plan. Furthermore, the Compensation Committee reviews and approves changes to our compensation peer group, as appropriate. In making its decisions, the Compensation Committee takes into consideration a variety of factors, including suggestions made by the CEO, compensation consultants, and the Company’s external advisory firms. The Compensation Committee acts in accordance with its charter, which can be found on our Investors website at investors.ae.com.
Role of Executive Officers in Compensation Decisions:
Our CEO annually reviews the performance of each NEO and makes recommendations to the Compensation Committee with respect to each element of executive compensation for the NEOs, excluding himself. The CEO considers Company, brand, and individual performance and market positioning in his recommendations to the Compensation Committee with regard to total compensation for all NEOs. The Compensation Committee makes the final determination of individual compensation levels and awards, taking into consideration the CEO’s recommendations. CEO compensation is determined with input from the compensation consultant, FW Cook, informed by market benchmarking, and ultimately approved by the Compensation Committee.
Role of Compensation Consultants:
The Compensation Committee has the authority under its charter to retain outside consultants or advisors for assistance. In accordance with this authority, during Fiscal 2020, the Compensation Committee continued to retain the services of FW Cook as its outside independent compensation consultant to advise on matters related to CEO and other executive compensation. The services provided by FW Cook are subject to a written agreement with the Compensation Committee. The Compensation Committee has sole authority to terminate the relationship. The Compensation Committee reviewed its relationship with FW Cook and determined that there are no conflicts of interest pursuant to applicable SEC and NYSE requirements. FW Cook does not provide any other services to the Company. The Compensation Committee may engage other consultants as needed in order to provide analyses, recommendations, or other market data. Under the direction of the Compensation Committee, FW Cook interacts with members of the senior management team to provide insights into market practices and ensure that management is aware of emerging best practices and market trends. In Fiscal 2020, representatives from FW Cook contributed to this CD&A, evaluated the Company’s peer group and assisted with various matters related toCompany
| | ✓ We maintain robust executive compensation. During Fiscal 2020, management also engaged Korn Ferry to advise on market practices and provide market benchmarking relative to executive compensation. Response to 2020 Advisory Vote on Executive Compensation:
At our 2020 Annual Meeting of Stockholders, approximately 98% of shares present and voting supported, on an advisory basis, the compensation of our NEOs in Fiscal 2019. While this vote demonstrated a very high level of supportstock ownership guidelines (six times base salary for our compensation program, our executive team remained engaged with stockholders throughout Fiscal 2020. We welcome feedback and value regular dialogue with our stockholders. On a regular basis, we invite stockholders to meet with senior management. In Fiscal 2020, the Company continued to have extensive engagement with our stockholders. Throughout the year, our CEO, and senior management held numerous meetings with investors and participated in several virtual investor conferences, during which we met with current and prospective stockholders. These meetings were generally focused on Company performance, specific measures to successfully manage through the COVID-19 pandemic as well as long-term strategic initiatives aimed at driving growth and stockholder returns. Additionally, management hosted a virtual investor meeting in January 2021 during which we presentedthree times base salary for our Real Power. Real Growth value creation plan and unveiled our long-term financial outlook. The content of these meetings and discussions were reported to the Board, and management and the Board discussed comments and business insights provided by these stockholders. We expect to continue such discussions prior to the 2021 Annual Meeting and, as a matter of policy and practice, foster and encourage engagement with our stockholders on an ongoing basis. As a result of this engagement and the high level of support evidenced by our stockholders’ vote at the 2020 Annual Meeting of Stockholders, the Compensation Committee determined that our compensation incentive programs are achieving their respective goals and did not take any specific action in response to the 2020 say on pay vote or such engagement.
| | | | | 2021 Proxy Statement
| | |
| | 57 other NEOs) |
| COMPENSATION DISCUSSION AND ANALYSIS | |
Compensation Benchmarking
The nature of the retail industry is highly competitive✓ We pay for talent.performance. The challenges presented in Fiscal 2020 further intensified the competitive landscape. Talented leaders with proven capability and experience delivering results, like those on our team, became in higher demand than ever before. In 2020, the core group of competitors for talent was expanded beyond those in the specialty retail space to include retailers in the “essential” category who could benefit from the proven experience of the members of our leadership team. The retention of this talent is a primary element of our success and delivery of results to stockholders.
In determining NEO compensation, the Compensation Committee reviews and takes into account the compensation practices of comparable companies. The Compensation Committee considers three key factors in choosing the companies that compose our peer group:
Talent – Companies with which we compete for executive-level talent;
Size – Companies with comparable revenue; and
Comparability – Companies within the retail industry with which we compete for customers and investors.
Other selection criteria include e-commerce omni-channel retailing and a review of those companies listed as our peers by proxy advisory firms. We evaluate our peer group on an annual basis and propose changes when appropriate. For Fiscal 2020, our peer group consisted of 20 companies. We approximate the median of the peer group based on revenue, with our market capitalization within the second quartile of the peer group’s range. Peer group data also is supplemented as needed with additional data from various retail and general industry market surveys, as adjusted to reflect our revenue scope.
In the fourth quarter of Fiscal 2020, the Compensation Committee approved changes to our peer group effective for Fiscal 2021, based upon an analysis completed by FW Cook. One company, Kontoor Brands, was added to the peer group and three companies were removed due to bankruptcy (Ascena Retail Group, J. Crew Group, Inc., and Tailored Brands). The Company’s relative size, position near the median in revenue and second quartile in terms of market capitalization is maintained in the 2021 peer group.
| | | | | 58 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
How We Pay Our Executives and Why: Elements of Annual Compensation
Our executive annual compensation program includes fixed components (base salary, benefits, and limited executive perquisites) and variable components (annual bonus and long-term incentive awards), with the heaviest weight generally placed on the variable, or “at-risk,” components. For Fiscal 2020, a significant majority of our NEOs’ target annual directtotal compensation which includesopportunities are “at-risk”
| | ✓ Our long-term incentive plan does not allow for the payment of dividends or dividend equivalents on unearned PSU awards or unvested RSU awards | | ✓ We do not maintain (i) employment contracts of defined length with our NEOs, or (ii) multi-year guarantees for base salary target annual bonus,increases, bonuses, or long-term incentives | | ✓ We have robust clawback provisions with respect to both cash and equity incentive awards | | ✓ We maintain a stringent anti-hedging and anti-pledging policy, applicable to all employees and non-employee directors | | ✓ We do not provide tax gross-ups on change-in-control benefits | | ✓ We have double-trigger cash severance and long-term incentives, was weighted toward at-riskincentive vesting in the event of a change in control | | ✓ We discourage excessive risk-taking by having our Compensation Committee closely monitor the risks associated with our executive compensation as shown by the charts below.program and individual executive compensation decisions to determine that they do not encourage excessive risk-taking | | |
OUR EXECUTIVE COMPENSATION PROGRAM Fiscal 2022 Goal Setting Process Goal Setting: We remain committed to setting incentive goals that are aligned to delivering strong financial performance and returns to our stockholders, while also enabling the successful execution of our strategy. In the first quarter of Fiscal 2022, our Compensation Committee set the goal for the Annual Incentive Plan (“AIP”), measured on Earnings before Interest and Taxes (“EBIT”), informed by our strong financial performance in 2021 and initial optimism about the macro environment. EBIT is a non-GAAP measure, and when used in this CD&A, is defined as earnings before interest and taxes and excludes any asset impairment and restructuring charges, as determined by the Compensation Committee. Role of Our Compensation Committee: The Board has delegated authority to the Compensation Committee to develop and approve the overall compensation program for our NEOs, including the authority to establish and award annual base salaries, annual incentive bonuses, and long-term incentive awards pursuant to our stockholder-approved incentive plan. Furthermore, the Compensation Committee reviews and approves changes to our compensation peer group, as appropriate. In making its decisions, the Compensation Committee takes into consideration a variety of factors, including suggestions made by the CEO, compensation consultants, and the Company’s external advisory firms. The Compensation Committee acts in accordance with its charter, which can be found on our Investors website at investors.ae.com. | | | | | | | | | | | | 54 
| | | | | | | | | | | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
Role of Executive Officers in Compensation Decisions: Our CEO annually reviews the performance of each NEO and makes recommendations to the Compensation Committee with respect to each element of executive compensation for the NEOs, excluding himself. The CEO considers Company, brand, and individual performance and market positioning in his recommendations to the Compensation Committee with regard to total compensation for all NEOs. The Compensation Committee makes the final determination of individual compensation levels and awards, taking into consideration the CEO’s recommendations. CEO compensation is determined with input from the compensation consultant, FW Cook, informed by market benchmarking, and ultimately approved by the Compensation Committee. Role of Compensation Consultants: The Compensation Committee has the authority under its charter to retain outside consultants or advisors for assistance. In accordance with this authority, during Fiscal 2022 the Compensation Committee continued to retain the services of FW Cook as its outside independent compensation consultant to advise on matters related to CEO and other executive compensation. The services provided by FW Cook are subject to a written agreement with the Compensation Committee. The Compensation Committee has sole authority to terminate the relationship. The Compensation Committee reviewed its relationship with FW Cook and determined that there are no conflicts of interest pursuant to applicable SEC and NYSE requirements. FW Cook does not provide any other services to the Company. The Compensation Committee may engage other consultants as needed in order to provide analyses, recommendations, or other market data. Under the direction of the Compensation Committee, FW Cook interacts with members of the senior management team to provide insights into market practices and ensure that management is aware of emerging best practices and market trends. In Fiscal 2022, representatives from FW Cook contributed to this CD&A and assisted with various matters related to executive compensation. Response to 2022 Advisory Vote on Executive Compensation and Stockholder Engagement: At our 2022 Annual Meeting of Stockholders, approximately 92% of shares present and voting supported, on an advisory basis, the compensation of our NEOs in Fiscal 2021. This vote was consistent our historically high levels of stockholder support for Say on Pay and reinforced the support for our compensation program design changes in 2021 and pay and performance alignment. We invite stockholders to meet with senior management on a regular basis. In Fiscal 2022, the Company continued to have extensive engagement with our stockholders and met with approximately 30% of our top 100 stockholders, who collectively owned approximately 50% of the total shares outstanding as of January 28, 2023. Throughout the year our CEO and senior management held numerous meetings and calls with investors and participated in several investor conferences, during which they met with current and prospective stockholders. These meetings were generally focused on Company performance as well as long-term strategic initiatives aimed at driving growth and stockholder returns. We expect to continue such discussions prior to the 2023 Annual Meeting and, as a matter of policy and practice, foster and encourage engagement with our stockholders on an ongoing basis. Compensation Benchmarking In determining NEO compensation, the Compensation Committee reviews and takes into account the compensation practices of comparable companies. The Compensation Committee considers three key factors in choosing the companies that compose our peer group: Talent – Companies with which we compete for executive-level talent; Size – Companies with comparable revenue; and Comparability – Companies within the retail industry with which we compete for customers and investors. Other selection criteria include e-commerce omni-channel retailing and a review of those companies listed as our peers by proxy advisory firms. We evaluate our peer group on an annual basis and propose changes when appropriate. For Fiscal 2022, our peer group consisted of 19 companies. We approximate the median of the peer group based on revenue and market capitalization Peer group data also is supplemented as needed with additional data from various retail and general industry market surveys, as adjusted to reflect our revenue scope. For Fiscal 2023, the Peer Group has been updated to remove Fossil and Bath & Body Works, which will result in 17 companies. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 55 |
| | | | COMPENSATION DISCUSSION AND ANALYSIS | | | 2021 Proxy Statement
|
How We Pay Our Executives and Why: Elements of Annual Compensation Our executive annual compensation program includes fixed components (base salary, benefits, and limited executive perquisites) and variable components (annual incentive bonus and long-term incentive awards), with the heaviest weight generally placed on the variable, or “at risk,” components. For Fiscal 2022, a significant majority of our NEOs’ target annual direct compensation, which includes base salary, target annual incentive bonus, and a long-term incentive award, was weighted toward at-risk compensation, as shown by the charts below. 
Standard Elements of Compensation: The compensation for our NEOs is –
| COMPENSATION DISCUSSION AND ANALYSIS |
Standard Elements of Compensation:
The compensation for our NEOs is (i) balanced to provide a mix of cash and long-term incentive awardsawards; and (ii)
|
| • | | focused on both annual and long-term performance to ensure that executives are held accountable and rewarded for achievement of both annual and long-term financial and strategic objectives. | | | | | | | | | | | Element of
Compensation | | Form and Objective | | Fiscal 2020 Information | | Alignment to Strategic Plan | | | | | | | | Base Salary
| | • Delivered in cash.
• Provides a baseline compensation level that delivers cash income to each NEO, and reflects his or her job responsibilities, experience, skill set, and contribution to the Company.
| | • Our CEO did not receive a base salary increase for Fiscal 2020, for the fifth year in a row.
• The balance of the NEO’s did not receive a base salary increase in 2020, with the exception of promotional increases for Ms. Foyle and Mr. Mathias.
| | • Base salaries set at competitive market levels that enable us to attract and retain qualified, high-caliber executive officers to lead and implement our strategy.
| | | | | | | | Annual Incentive Bonus
| | • Delivered in cash.
• Provides an opportunity for additional income to NEOs if pre-established performance goals are attained, which focuses our NEOs on key annual objectives.
| | • For Fiscal 2020, the incentive bonus was based 50% upon the Company achieving quantitative second half EBIT goals at pre-determined threshold, target and stretch performance levels and 50% upon the achievement of qualitative business objectives at target and stretch performance levels.
• Performance was realized at stretch levels on both the quantitative and qualitative objectives, resulting in a payout at 200% of target.
| | • Annually, the Compensation Committee establishes performance metrics and goals that align with our strategic plan.
• The 2020 Annual Incentive Bonus structure, combining and equally weighting both quantitative and qualitative elements for Fiscal 2020 reflected the Compensation Committee’s responsiveness to the unique challenges, risks and uncertainties of the COVID-19 pandemic and its impact on the business.
| | | | | | | | Annual Long-Term
Incentive Awards
| | • Delivered in PSUs, RSUs, and stock options.
• Aligns our NEOs’ financial interests closely with those of our stockholders.
• Links compensation to the achievement of multi-year financial or relative TSR goals.
| | • PSUs represented 33% of the annual target grant values for Fiscal 2020 equity awards and vest between threshold and stretch level only to the extent that the pre-established, three-year performance goals are met. If performance falls below the threshold, the award is forfeited in full.
• RSUs represented 42% of the annual equity grant target value for Fiscal 2020 equity awards. 60% of RSUs were granted in March 2020. These RSUs vest ratably over three years from the grant date based on continued service. Approximately 40% of RSUs were granted in June 2020. These RSUs cliff vest in March 2023, based upon continued service. In each case, these RSUs serve as a retention tool for our NEOs.
• In 2020, stock options represent 25% of the annual equity grant target value, vest ratably over three years from the grant date and provide compensation only to the extent that our share price appreciates.
| | • Aligns NEO compensation with our longer-term performance objectives and changes in stockholder value over time.
• In 2020, the long-term incentive award mix was modified in response to the unique challenges to the business and our compensation structure presented by the COVID-19 pandemic. The Compensation Committee determined to modify the traditional PSU value of 50% and increase the relative number of RSUs granted. The Compensation Committee believes that this equity delivery mix served to maintain a strong performance focus while also delivering a long-term focus on retention to ensure leadership continuity.
• In 2021, the long-term incentive award mix will be an equity blend of 50% PSUs, 30% stock options, and 20% RSUs.
|
| | | | | 60 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
| | | | | | | | | | | | 56 Fiscal 2020 Compensation
| | | | | The following provides additional details regarding our compensation components and related decisions for Fiscal 2020. Our executive compensation program places a considerable amount of compensation at risk to cultivate a pay-for-performance environment.
Base Salary
Base salaries, on average, represent approximately 20% of each NEO’s target total direct compensation. The Compensation Committee reviews NEO’s base salaries annually after considering the following factors:
| | | | | | |
The scope
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
| | | | | | | | | | | Element of
Compensation | | Form and responsibility ofObjective | | Fiscal 2022 Information | | Alignment to Strategic Plan | | | | | | | | Base Salary | | • Delivered in cash. • Provides a baseline compensation level that delivers a predictable level income to each NEO and reflects his or her job responsibilities, experience, skill set, and contribution to the NEO’s position;Company. | | The achievement of strategic and operational business goals;
The climate in the retail industry, general economic conditions, and other factors;
Each NEO’s experience, knowledge, skills, and personal contributions;
The level of overall compensation paid by competitors for similar positions in the retail industry; and
The appropriate balancing of base salary against “at risk” compensation.
• Base salary increases where applicable, typically are effective in the first quarter of the new fiscal year. For Fiscal 2020, our CEO did not receive a base salary increase for the fifth year in a row. The balance ofapproximately 3% to 10% were delivered to the NEOs did not receive a base salary increase(other than Mr. Schottenstein) for Fiscal 2020, with2022 to recognize their significant contributions, expertise, and the exception of a promotional base salary increase for Ms. Foylevery competitive talent market in our industry. | | • Base salaries enable us to attract and Mr. Mathias. Please see “Fiscal 2020 Promotions,” below, for an additional description of Ms. Foyle’sretain qualified, high-caliber executive officers to lead and Mr. Mathias’s base salary increases during Fiscal 2020.implement our strategy. | | | | | | | | Fiscal 2020 Annual Incentive Bonus
| | • Delivered in cash. Our• Provides bonus opportunities for NEOs if pre-established performance goals are eligible for annual cash incentive awards, the achievement of which is based upon the Company meeting pre-established performance goals. The Compensation Committee believes that setting these goals focuses the executive teamattained, focusing our NEOs on key annual objectives.
Consistent with these objectives,
| | • For Fiscal 2022, the Compensation Committee consideredincentive bonus was based 100% upon the impactCompany achieving annual EBIT goals at pre-determined threshold, target and stretch performance levels. • Actual performance fell short of the COVID-19 pandemicthreshold payout levels and related uncertainties on the Company’s operations and the retail industry in general and determined that certain adjustments to the Fiscal 2020 Annual Incentive Bonus design were necessary in order to continue to provide an appropriate incentive for performance as well as to motivate and focus the team. These adjustments include:a bonus was not earned. | | Bifurcating the performance goals based on achievement of qualitative performance goals (50%) and a quantitative performance goal of EBIT (50%); and
Evaluating achievement of EBIT based solely on performance during the second half of Fiscal 2020.
| | | | | 2021 Proxy Statement
| | |
| | 61 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Understanding the unique challenges and uncertainties faced during the year and the need to focus on innovative operational solutions and cash preservation as much as generating EBIT, the Compensation Committee chose to implement a blended annual incentive metric approach that included qualitative performance metrics.
During Fiscal 2020, management was focused on our “Pandemic Pillars,” which consisted of the three strategic business priorities described below and represented the goals for the qualitative portion of the Fiscal 2020 annual bonus program:
| | | 
PROTECT OUR PEOPLE + BUSINESS
| | • Protect AEO’s long-term interests in the face of global disruptions.
• Implement best-in-class health and safety measures to care for our associates, customers and partners.
• Manage critical relationships with landlords and vendors.
• Prioritize inclusion and diversity efforts to ensure a strong and diverse organization.
| 
PRESERVE CASH
| | • Ensure AEO has ample cash to manage through 2020 and beyond.
• Create a corporate culture that prioritizes cash returns on investments.
• Invest wisely and align merchandise expense with adjusted sales plans.
• Reduce short-term discretionary spend where possible and leverage learnings to make improvements in cost structure.
| 
PREPARE FOR A NEW FUTURE
| | • Fuel Aerie, strengthen AE, and seek opportunities to accelerate growth.
• Lean into our digital channel, while optimizing the store business through technology and leading customer experience.
• Leverage lease flexibility to evaluate future store needs.
• Innovate supply chain capabilities to increase speed and flexibility, while ensuring adequate staffing levels and continued productivity.
|
As in prior years, EBIT was chosen as the quantitative financial measure for the annual bonus as it reflects both sales growth and expense management initiatives. The Compensation Committee also believes that the selection of EBIT as a performance measure directly links the Company’s long-term growth with stockholder value. For 2020, EBIT was measured during the third and fourth quarters of Fiscal 2020.
Setting Target Bonus Opportunities
Early in the year,• Annually, the Compensation Committee establishes each NEO’sperformance metrics and goals that align with our strategic plan.
• The 2022 annual incentive bonus opportunity asstructure represented a percentagefocus on quantitative financial goals at 100%. | | | | | | | | Annual Long-Term Incentive Awards | | • Delivered in PSUs, RSUs, and stock options. • Aligns our NEOs’ financial interests closely with those of our stockholders. • Links compensation to the achievement of multi-year financial or relative TSR goals. | | • PSUs represented 50% of the NEO’s base salary.annual target grant values for Fiscal 2022 equity awards and vest between threshold and stretch level only to the extent that the pre-established, three-year performance goals are met. If performance falls below the threshold, the award is forfeited in full. For 2020, there were no increases to target bonus opportunities for any2022, the PSUs are measured on RTSR. • In 2022, stock options represented 30% of the NEOs, withannual equity grant target value, vest ratably over three years from the exceptiongrant date based on continued service and provide compensation only to the extent that our share price appreciates. • RSUs represented 20% of athe annual equity grant target bonus increasevalue for Ms. Foyle and Mr. Mathias consistent with their significant promotions duringFiscal 2022 equity awards. These RSUs vest ratably over three years from the year. Ms. Foyle’s target bonus increased from 130% to 140% of base salary and Mr. Mathias’s target bonus increased from 40% to 65% of base salary. Target bonus award opportunities typically constitute over 18% of each NEO’s target total direct compensation for the year. During Fiscal 2020, the target bonus award opportunities for the NEOs were set as follows:grant date based on continued service.
| | | • Aligns NEO compensation with our longer-term performance objectives and changes in stockholder value over time. | Executive Officer
|
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 57 |
| | | | COMPENSATION DISCUSSION AND ANALYSIS | | Target (as a Percentage of Base Salary) | CEO
| | 175% | CFO
| | 65% | Chief Creative Officer
| | 140% | Global Brand President, AE
| | 130% | COO
| | 90% | Former CFO(1)
| | — |
(1) | The Former CFO was ineligible for a Fiscal 2020 Annual Incentive Award.
Fiscal 2022 Compensation The following provides additional details regarding our compensation components and related decisions for Fiscal 2022. Our executive compensation program places a considerable amount of compensation “at risk” to cultivate a pay-for-performance environment. Base Salary Base salaries, on average, represent approximately 24% of each NEO’s target total direct compensation. The Compensation Committee reviews NEOs’ base salaries annually after considering the following factors: The scope and responsibility of the NEO’s position; The achievement of strategic and operational business goals; The climate in the retail industry, general economic conditions, and other factors; Each NEO’s experience, knowledge, skills, and personal contributions; The level of overall compensation paid by competitors for similar positions in the retail industry; | • | | Necessary adjustments to right-size compensation elements to market levels; and |
The appropriate balancing of base salary against “at risk” compensation. Base salary increases, where applicable, typically are effective in the first quarter of the new fiscal year. For Fiscal 2022, our NEOs received the following increases to base salary, based on our competitive review of market information and merit, as outlined below. | | | | | | | | | Executive Officer | | Fiscal 2021
Base Salary | | | Fiscal 2022
Base Salary | | Context | | | | | | Mr. Schottenstein: CEO | | $ | 1,750,000 | | | $1,750,000:
no base
salary
increase | | • Mr. Schottenstein’s contributions to our financial success have been significant. His extensive experience has been instrumental in helping AEO manage through unprecedented times, especially in the dynamic retail landscape we have been experiencing since 2020. • Mr. Schottenstein’s leadership was key to shaping our swift actions taken at the start of Fiscal 2022 to set the business up for improved financial performance in the second half of the year. • Given Mr. Schottenstein’s competitive base salary position as compared to market, no changes were made to his salary for Fiscal 2022. | | | | | | Mr. Mathias: CFO | | $ | 725,000 | | | $800,000 | | • Mr. Mathias served a crucial role in leading the actions taken to drive a second half rebound in our Fiscal 2022 financial results. This includes strengthening inventory management, expense controls and an improvement in free cash flow generation. • Mr. Mathias’ base salary was increased to continue to align his compensation competitively to market levels. |
| | | | | | | | | | | | 58 | | | | | | | | | | | |
| 62 | | |
| |
|
| | COMPENSATION DISCUSSION AND ANALYSIS | COMPENSATION DISCUSSION AND ANALYSIS |
| | | | | | | | | | | Executive Officer | | Fiscal 2021
Base Salary | | | Fiscal 2022
Base Salary | | | Context | | | | | | Ms. Foyle: President | | $ | 1,300,000 | | | $ | 1,400,000 | | | • Ms. Foyle also took on additional responsibilities in leading the American Eagle brand in late 2020. Under her leadership, the brand has driven improvements to merchandise, marketing and inventory management. Fiscal 2022 segment operating profit increased versus Fiscal 2019 reflecting the brand’s focus on profitable sales. • Ms. Foyle’s base salary increase is a result of her contributions to our powerful brand portfolio. Aerie continues to be on a strong multi-year growth trajectory, reaching a new milestone at $1.5 billion in revenue in Fiscal 2022. Since Fiscal 2019, revenue has nearly doubled with segment adjusted operating profit up close to 150%. | | | | | | Mr. Rempell: COO | | $ | 950,000 | | | $ | 1,050,000 | | | • Mr. Rempell strives to bolster innovation, seeking new tools and technologies to create efficiencies across AEO’s supply chain, enhance the customer experience and improve our operating model. • Mr. Rempell’s base salary increase recognizes his leadership in enhancing our digital channel and his expanded responsibility for the Todd Snyder brand. | | | | | | Ms. Baldwin: CHRO | | $ | 525,000 | | | $ | 570,000 | | | • Ms. Baldwin plays an important role in leading AEO’s strong corporate culture. In Fiscal 2022, the Company further enhanced its inclusion and diversity initiatives and continued to support important causes through the AEO foundation and corporate giving program. Ms. Baldwin is also responsible for our ESG strategy, including the publication of our inaugural ESG report in Fiscal 2022. | | | | | | Mr. McLean: Former CCO | | $ | 950,000 | | | $ | 985,000 | | | • Mr. McLean’s base salary increase recognized his strong leadership across AEO’s robust store fleet, his focus on innovation, and his International expertise provided valuable contributions in Fiscal 2022. |
Fiscal 2022 Annual Incentive Bonus Our NEOs are eligible for annual cash incentive awards, the achievement of which is based upon the Company meeting pre-established performance goals. For 2022, 100% of the AIP was based upon the achievement of annual EBIT goals. As in prior years, EBIT was chosen as the financial measure for the AIP as it reflects both sales growth and margin and expense management initiatives. EBIT represents operating income, as reported in our consolidated financial statements, before interest expense and income taxes. The Compensation Committee also believes that the selection of EBIT as a performance measure directly links the Company’s long-term growth with stockholder value. Setting of Fiscal 2020 Performance Goals
Based upon pre-established goals and achievement of the same, actual annual incentive bonus payments for Fiscal 2020 were calculable as follows, with straight-line interpolation between points for the quantitative EBIT goal:
Quantitative Bonus Opportunity As discussed above, EBIT was chosen as the quantitative financial measure as it reflects both sales performance and expense management initiatives, is controllable by the NEOs, and directly links the Company’s long-term growth with stockholder value. The Compensation Committee established the following EBIT performance goals, with threshold, target, and stretch goals linked to payouts of 12.5%25%, 50%100%, and 100%200% of target bonus amounts, respectively. The goals were designed to be challenging inwithin the context of the need to preserve cash and generate EBIT. These goals also were set against the backdrop of the Company’s COVID-19 impacted EBIT loss of $202 million for the first and second quarters of Fiscal 2020 and the expectation that a quantitative incentive bonus would not be paid unless the Company produced profitable results for the second half of Fiscal 2020. Achievement of these EBIT levels required both sales and margin improvement from trends at the time the goals were set, as well as expense reduction. | | | | | | Fiscal 2020 EBIT Performance Goals(1)(2) | Threshold | | Target | | Stretch | | | | $10 million
| | $40 million | | $100 million |
(1) | Measured based on Company performance during the third and fourth quarters of Fiscal 2020.
|
(2) | Performance between levels interpolated.
|
Our EBIT performance for the third and fourth quarters of Fiscal 2020 of $214 million far exceeded our expectations and exceeded stretch-level goals.
Qualitative Bonus Opportunity
The Company tracked progress against its strategic pandemic pillars throughout Fiscal 2020, and management shared all of the specific business and operational achievements from fiscal 2020 with the Compensation Committee so that they could evaluate what level of payout was achieved. The Compensation Committee assessed the nature of the initiatives, the speed with which they were realized, the innovation applied and ultimately, the quality and business impact of each of the primary goals described below under “Fiscal 2020 Annual Incentive Payout” when making the determination that a stretch level of payout was earned. Mr. Schottenstein did not participate in any discussions relating to the achievement of goals relating to his performance or bonus payout.
| | | | | | | | | | | 2021 2023 Proxy Statement
| | | | | 63 59 |
| COMPENSATION DISCUSSION AND ANALYSIS |
Fiscal 2020 Annual Incentive Payout
Quantitative Half of Fiscal 2020 Annual Incentive Bonus
Back-half 2020 performance period (Aug 2020-Jan 2021)
| | | | | 64 | | |
| |
|
| | COMPENSATION DISCUSSION AND ANALYSIS | | |
Based on Setting Target Bonus Opportunities
Early in the above performance results,year, the Compensation Committee establishes each NEO’s annual incentive bonus opportunity as a percentage of the NEO’s base salary. Each NEO’s target annual incentive bonus opportunity reflects his or her role and responsibilities as well as market competitiveness and internal equity considerations. Target bonus award opportunities typically constitute over 20% of each NEO’s target compensation for the year. During Fiscal 2022, the target bonus award opportunities for the NEOs received the below 2020 annual incentive payouts.were set as follows: | | | | | | | | | Executive Officer | | 2020 Target Annual Incentive Awards | | | 2020 Actual Annual Incentive Award Payouts | | CEO | | $ | 2,625,000 | | | $ | 5,250,000 | | CFO | | $ | 360,125 | | | $ | 720,250 | | Chief Creative Officer | | $ | 1,303,885 | | | $ | 2,607,769 | | Global Brand President, AE | | $ | 1,222,000 | | | $ | 2,444,000 | | COO | | $ | 751,500 | | | $ | 1,503,000 | | Former CFO (1) | | | — | | | | — | |
| | | | | | | | | Executive Officer | | Fiscal 2021 Target (as a Percentage of Base Salary) | | | Fiscal 2022 Target (as a Percentage of Base Salary) | | Jay Schottenstein, CEO | | | 175 | % | | | 175 | % | Michael Mathias, CFO | | | 65 | % | | | 90 | % | Jennifer Foyle, President | | | 140 | % | | | 140 | % | Michael Rempell, COO | | | 90 | % | | | 100 | % | Marisa Baldwin, CHRO | | | 60 | % | | | 70 | % | Andrew McLean, Former CCO(1) | | | 90 | % | | | 90 | % |
| (1) | TheFollowing his separation from servicein September 2022, the Former CFOCCO was ineligible for a Fiscal 2020 Annual Incentive Award.2022 annual incentive bonus.
|
Recognition Bonuses
Fiscal 2022 EBIT Performance EBIT performance of $280 million for Fiscal 2022 fell below our threshold level of $500 million; accordingly, no bonus payouts were earned under the AIP. The Compensation Committee approved recognition bonuses to the NEOs in Fiscal 2020 to acknowledge their significant and extraordinary contributions to stabilize the business, quickly produce innovative solutions to complicated business challenges, and lead their teams through unprecedented times. The payments were also made with consideration for the incredibly competitive retail landscape that existed in 2020 from both our traditional peer frame and also companies from an expanded group of competitors in the essential retail space. The Compensation Committee believes that each NEO has a key role in the achievement of our short and long-term business objectives, and it determined that these grants were necessary to retain their continued service. Our impressive results in 2020 were driven by our talented teams, whose retention is critical for our success. These grants also were designed to reward the superior performance described above during Fiscal 2020. For the amounts payable to the NEOs during Fiscal 2020, please refer to the “Bonus” column in the Summary Compensation Table on page 73.
| | | | | Executive Officer | | Fiscal 2022 Target Annual Incentive Awards | | Fiscal 2022 Actual Annual Incentive Award Payouts | Jay Schottenstein, CEO | | $3,062,500 | | $0 | Michael Mathias, CFO | | $720,000 | | $0 | Jennifer Foyle, President | | $1,960,000 | | $0 | Michael Rempell, COO | | $1,050,000 | | $0 | Marisa Baldwin, CHRO | | $399,000 | | $0 | Andrew Mc Lean, Former CCO(1) | | $886,500 | | $0 |
| (1) | Following his separation from service in September 2022, the Former CCO was ineligible for a Fiscal 2022 annual incentive bonus. |
Fiscal 2020 Promotions During Fiscal 2020, Ms. Foyle was promoted to Chief Creative Officer, AEO, and Global Brand President, Aerie, and Mr. Mathias was promoted to EVP-Chief Financial Officer. In connection with her promotion, Ms. Foyle received a 12% increase to her base salary to recognize her significantly expanded scope and also received an RSU grant valued at $1,000,000 in connection with her elevation to her current position. Mr. Mathias received a 66% base salary increase as part of his promotion to his current role, which includes significantly expanded responsibilities, and his base salary now approximates the 25th percentile of the peer group. Mr. Mathias’s equity awards were granted partially in the first fiscal quarter of the year prior to his promotion. The balance of his equity awards were granted in the second fiscal quarter based upon his new role.
Fiscal 20202022 Long-Term Incentive Awards
Overview and Mix of Awards We utilize a combination of at-risk and time- and performance-based long-term incentive awards, which are granted on an annual basis, to focus management on long-term corporate performance and sustainable earnings growth. Long-term incentive awards generally constitute the majority of aan NEO’s target total direct compensation. Historically, we have awarded a combination of PSUs (50%), RSUs (25%), and stock options (25%) to our NEOs. InThe Fiscal 2020, the Compensation Committee modified the2022 equity blend of our long-term incentive awards as follows:was:
Stock options stillPSUs represented 25%50% (at target) of total long-term equity awards;
PSUs represented 33% (at target)Stock options represent 30% of total long-term equity awards; and
RSUs represented 42%20% of total long-term equity awards. The Compensation Committee determined to increase the portion of RSU awards for Fiscal 2020 in recognition of (i) the significant uncertainty surrounding the Company’s business and industry at the time of grant and (ii) the retentive nature of these awards. Sixty percent of RSUs were delivered in March 2020 in an award with a three-year ratable vesting schedule and 40% of RSUs were delivered in June 2020 in an award that cliff-vests in March 2023, subject in each case to continued employment. In connection with Mr. Mathias’s transition and promotion during the year, his equity distribution for Fiscal 2020 differed slightly from that of the other NEOs, and was composed of 15% stock options, 33% PSUs, and 52% RSUs.
| | | | | | | | | | | | 60 2021 Proxy Statement
| | | | | |
| | 65 | | | | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
This mix is representative for all NEO’s other than Mr. Mathias.
Fiscal 20202022 Long-Term Incentive Award Grants The Compensation Committee established the following Fiscal 20202022 target regular cycle long-term incentive opportunities for each NEO based on his or her overall responsibilities, contributions to the business, market position and market position.internal pay equity. With respect to Mr. Schottenstein, the Compensation Committee determined his long termlong-term incentive award grant value within the context of his expertise, sizeable contributions to the success of the business, and overall compensation position relative to peers, and lack of a target annual cash compensation increase in 2017 through 2020.peers. The following table summarizes Fiscal 20202022 long-term incentive award grants.grants; actual amounts earned for the PSUs, if any, will depend on the Company’s relative TSR performance results spanning Fiscal 2022 through Fiscal 2024. | | | | | | | | | | | | | | | | | | | | | Executive Officer | | 2020 Target Long-Term Incentive: PSU Awards | | | 2020 Long-Term Incentive: RSU Awards (March 2023 Cliff
Vest) | | | 2020 Long-Term Incentive: RSU Awards (Three year
Ratable Vesting) | | | 2020 Long-Term Incentive: Stock Option Awards | | | 2020 Target Total Long-Term Incentive Award | | CEO | | $ | 2,125,000 | | | $ | 1,062,500 | | | $ | 1,593,750 | | | $ | 1,593,750 | | | $ | 6,375,000 | | CFO | | $ | 333,333 | | | $ | 166,667 | | | $ | 350,000 | | | $ | 150,000 | | | $ | 1,000,000 | | Chief Creative Officer | | $ | 1,016,667 | | | $ | 508,333 | | | $ | 1,762,500 | | | $ | 762,500 | | | $ | 4,050,000 | | Global Brand President, AE | | $ | 1,016,667 | | | $ | 508,333 | | | $ | 762,500 | | | $ | 762,500 | | | $ | 3,050,000 | | COO | | $ | 833,333 | | | $ | 416,667 | | | $ | 625,000 | | | $ | 625,000 | | | $ | 2,500,000 | | Former CFO (1) | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | Executive Officer | | Fiscal 2022 Target Long-Term Incentive: PSU Awards | | | Fiscal 2022 Long-Term Incentive: RSU Awards | | | Fiscal 2022 Long-Term Incentive: Stock Option Awards | | | Fiscal 2022 Target Total Long-Term Incentive Award | | Jay Schottenstein, CEO | | $ | 3,900,000 | | | $ | 1,560,000 | | | $ | 2,340,000 | | | $ | 7,800,000 | | Michael Mathias, CFO | | $ | 750,000 | | | $ | 300,000 | | | $ | 450,000 | | | $ | 1,500,000 | | Jennifer Foyle, President | | $ | 2,000,000 | | | $ | 800,000 | | | $ | 1,200,000 | | | $ | 4,000,000 | | Michael Rempell, COO | | $ | 1,500,000 | | | $ | 600,000 | | | $ | 900,000 | | | $ | 3,000,000 | | Marisa Baldwin, CHRO | | $ | 325,000 | | | $ | 130,000 | | | $ | 195,000 | | | $ | 650,000 | | Andrew McLean, Former CCO(1) | | $ | 875,000 | | | $ | 350,000 | | | $ | 525,000 | | | $ | 1,750,000 | |
| (1) | All equity awards for our Former CFO were forfeited uponFollowing his separation from service.service in September 2022, the Former CCO’s awards were forfeited.
|
PSUs The grant of PSUs supports the Compensation Committee’s desire to create a stronger and more visible link between executive pay and Company performance and further aligns our executives’ interests with those of our stockholders. PSUs represent 50% of the value of the NEOs’ annual long-term incentive award. We determine the number of target PSUs based on the overall dollar grant value of the award divided by the estimated fair value of our common stock utilizing a Monte Carlo simulation on the date of the grant. Dividend equivalents on the PSUs are reinvested in additional units and paid out only to the extent that the associated PSUs vest. Annual PSU grants cliff vest, if at all, at the end of a three-year performance period upon achievement of pre-established goals. For Fiscal 2020,2022, the Compensation Committee selected relative TSR, measured against the S&P 1500 Specialty Retail Index, over a three-year performance period as the performance metric for PSUs. The selection of a relative performance metric ensures that the recipients will be measured against industry performance and provides for an additional diversity of metrics amongencourages a balanced compensation program as the annual incentive bonus and long-term incentive awards. | | | | | 66 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
awards are based on multiple metrics, without any overlap. Vesting of the PSUs ranges from 0% of the target amount for below threshold performance, 50% of the target amount at threshold performance, 100% of the target amount at target performance, and 150% of the target amount if we achieve stretch goals. Threshold performance is attained at the 25th percentile of the peer group,Index, target is attained at the 50th percentile and stretch is attained at the 75th percentile or higher. If threshold performance is met or exceeded, performance and award pay-outspayouts will be determined through interpolation. If the Company’s absolute TSR is negative over the three yearthree-year period, vesting is capped at target (100%), regardless of performance relative to the peer index.Index. RSUs
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 61 |
| | | | COMPENSATION DISCUSSION AND ANALYSIS | | |
RSUs are subject to time-based vesting and provide a retention incentive for our NEOs and an incentive to increase stockholder value. We determine the number of RSUs in each grant based on the overall dollar grant value of the award divided by the closing price per share of our common stock on the grant date. Dividend equivalents on RSUs are reinvested in additional RSUs and paid only to the extent that the associated RSUs vest. In March 2020, 60% of RSUs were delivered in an award with a three-year ratable vesting schedule and, in June 2020, 40% of RSUs were delivered with awards that cliff-vest in March 2023, subject in each case to continued employment.
Stock Options The grant of stock options supports the Compensation Committee’s philosophy that stock price appreciation should be a significant determinant of the economic return received by our executives from equity compensation. Stock options represent approximately 25%30% of the value of aneach NEO’s annual long-term incentive award. We determine the number of stock options for each grant based on the overall dollar grant value of the award divided by the estimated fair value of our common stock, utilizing the Black Scholes option pricing model on the grant date. Annual stock option grants have an exercise price per share equal to the fair market value of a share of stock on the grant date and vest ratably over three years from the grant date, assuming continued employment, and provide compensation to NEOs only to the extent that our share price appreciates from grant date to exercise date. | | | | | 2021 Proxy Statement
| | |
| | 67 |
| COMPENSATION DISCUSSION AND ANALYSIS |
RSUs are subject to time-based vesting and provide a retention incentive for our NEOs and an incentive to increase stockholder value. RSUs represent only 20% of the value of NEOs’ annual long-term incentive award. We determine the number of RSUs in each grant based on the overall dollar grant value of the award divided by the closing price per share of our common stock on the grant date. Dividend equivalents on RSUs are reinvested in additional RSUs and paid only to the extent that the associated RSUs vest. RSUs vest with a three-year ratable vesting schedule, subject to continued employment. Fiscal 20182020 PSU Payouts In Fiscal 2018,2020, the Compensation Committee granted Messrs. Schottenstein, Mathias, Kessler, and Rempell and Ms. Foyle PSUs that cliff-vested at the end of a three-year performance period ending January 30, 2021. 27, 2023. A 96% payout of performance-based share unitsthat were granted in Fiscal 2020 and vested at the end of Fiscal 2022, was earned. Payout of the Fiscal 20182020 PSUs was subject to the achievement of Earnings Before Taxes (EBT) Growth. The chart and detail set forth below representrelative TSR, measured against the applicable performance goals, realized performance andS&P 1500 Specialty Retail Index. AEO’s relative TSR was at the 48th percentile, resulting payout amounts for the Fiscal 2018 PSUs. The Compensation Committee did not adjust this target or the Company’s achievement of the same, including asin a result of the impact of the COVID-19 pandemic on the Company’s business. 
Based upon the performance achieved as shown in thediscussed above, chart, Messrs. Schottenstein, Mathias, Kessler, and Rempell and Ms. Foyle received the following payouts with respect to their Fiscal 20182020 PSU awards, which represented 50%96% of target vesting: | | | | | | | | | | | NEO | | Target 2018 PSU Award (# of Shares) | | 2018 PSU Payout (# of Shares)(1) | CEO | | | | 137,117 | | | | | 70,031 | | CFO | | | | 4,861 | | | | | 2,585 | | Chief Creative Officer | | | | 63,776 | | | | | 33,968 | | Global Brand President, AE | | | | 63,776 | | | | | 33,968 | | COO | | | | 38,265 | | | | | 20,381 | | Former CFO (2) | | | | — | | | | | — | |
| | | | | | | | | NEO | | Target Fiscal 2020 PSU Award (# of Shares) | | | Fiscal 2020 PSU Payout (# of Shares)(1) | | | | | Jay Schottenstein, CEO | | | 132,564 | | | | 127,261 | | | | | Michael Mathias, CFO | | | 20,794 | | | | 19,962 | | | | | Jennifer Foyle, President | | | 63,423 | | | | 60,886 | | | | | Michael Rempell, COO | | | 51,986 | | | | 49,907 | | | | | Andrew McLean, Former CCO(2) | | | 28,592 | | | | — | |
| (1) | PSU Payout (# of Shares) includes accrued dividends. Pursuant to the terms of the award agreements, participants are eligible to receive dividend equivalents with respect to dividends paid prior to the settlement of the award. The earned shares reported in this table do not include additional shares acquired through the deemed reinvestment of dividend equivalents prior to settlement of the award. The earned shares, including shares acquired through the deemed reinvestment of dividends through January 28, 2023, are reported in the 2022 Option Exercises and Stock Vested Table. PSU award recipients receive fractional shares upon settlement; however, for purposes of this table, share numbers have been rounded to the nearest whole share. |
| (2) | All equity awards for our Former CFOCCO were forfeited upon his separation from service. |
| | | | | | | | | | | 68 62 | | | | | | | | | | | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
COMPANY COMPENSATION POLICIES AND PRACTICES Other Practices and Policies Incentive Plan Clawback Policy: Recovery and Adjustments to AwardProvisions The Compensation Committee believes that it is appropriate that our cash and long-term incentive awards be subject to financial penalties or clawbacks in the event of misconduct. Pursuant to ourOur incentive plans, equity and cashincluding the proposed 2023 Stock Plan, include compensation recoupment, or “clawback,” provisions that would allow the Company to recover payment relating to any awards are subject to additionalgranted under such plans. Any such forfeiture conditions. Forfeiture and recovery willwould be determined by the Compensation Committee in its discretion.
In October 2022, the SEC adopted new Rule 10D-1 under the Exchange Act, which requires national securities exchanges, including the NYSE, to establish listing standards relating to executive officer incentive clawback and triggered indisclosure rules. We are monitoring the event of misconduct related to (a) acts in competition with the Company, (b) disclosure of confidential or proprietary information, (c) failure to cooperate with the Company in regard to a legal suit, or (d) restatement of financial statements. The forfeiture will be triggered upon the occurrence of anydevelopment and adoption of the aforementioned events at any time during active employmentNYSE’s final listing standards and resulting in termination of employment, or duringplan to adopt a clawback policy that reflects the one-year period following termination. If anyrequirements of the above events occur, the unexercised portion (vested or unvested) of an option, and any other award not settled, will immediately cancel and forfeit. Additionally, the NEO will be required to repay to the Company the total amount of the award gain realized upon each exercise of an option or award settlement that occurred on or after the date that is one year prior to either (a) the forfeiture event or (b) the termination date.NYSE’s final listing standards. Prohibition Against Hedging Transactions and Pledging Employees (including our executive officers) and members of the Board are prohibited from engaging in transactions in financial instruments designed to hedge or offset any decrease in the market value of our stock. Our policy prohibits transactions in such instruments as prepaid variable forward contracts, equity swaps, collars or exchange funds, as well as any other hedging instrument. Employees and members of the Board are also prohibited from holding our stock in a margin account as collateral for a margin loan or otherwise pledging our stock as collateral. Benefits and Perquisites Executives generally are eligible for the same health and welfare plans as other full-time Company employees, including medical, dental, life and disability insurance, and retirement plans. We also provide limited perquisites for our NEOs, as set forth in the Summary Compensation Table, which we believe are reasonable and justified by market practice, personal safety and convenience that enhances productivity. Perquisites historically have consisted For Fiscal 2022, perquisites primarily consist of a security benefit to Mr. Schottenstein. In the past, NEOs have also made limited use of Company-owned or chartered airplanes for personal trips. In light of the COVID-19 pandemic and travel concerns, there was limited personal aircraft use during Fiscal 2020. We believe that the perquisites we provide our NEOs are consistent with market practices and are reasonable and consistent with our compensation objectives.
Compensation Risk Assessment Annually, the Compensation Committee, together with management, conducts an analysis to determine whether any risks arising from compensation policies and practices are reasonably likely to have a material adverse effect on the Company in light of our overall business, strategy, and objectives. Management, in concert with the Compensation Committee, reviews and evaluates both cash and equity incentive plans across executive and non-executive employee populations, as well as other compensation-related policies to which our employees are subject. This assessment evaluates both (i) material enterprise risks related to our business that may be exacerbated by compensation policies and practices and (ii) the potential risks arising from attributes in our compensation practices, performance criteria, pay mix, and verification of performance results. Based on this assessment, the Compensation Committee has determined that the risks arising from the Company’s compensation plans and policies are not reasonably likely to have a material adverse effect on the Company. Management Stock Ownership Requirements Management havehas stock ownership requirements to establish a commonality of interest between the teams and stockholders. Eligible members of Managementmanagement are required to own the equivalent value of a multiple of their salary. For Mr. Schottenstein, the multiple is six times and for the other NEOs three times. The requirement can be met through various forms of equity, including personal holdings and equity incentive awards such as restricted stock units. Unearned performance awards and unexercised stock options do not count toward ownership requirement attainment. Executives not meeting their requirement must retain 50% of their after tax shares acquired through stock sales until the requirement is reached. TheAs of the Record Date of this Proxy Statement, the CEO and the other NEOs are in compliance with their requirements.requirements, with the exception of Mr. Mathias and Ms. Baldwin, each of whom have been appointed as executive officers within the last five years. Mr. Mathias became an executive officer in 2020 and Ms. Baldwin was hired in 2021. Both executives are on track to meet the requirement within a reasonable timeline and are subject to trading restrictions until the requirement has been met. Additional information regarding stock ownership requirements can be found on page 84.93. | | | | | | | | | | | | | | | | | 2021 2023 Proxy Statement
| | | | | 69 63 |
| | | | COMPENSATION DISCUSSION AND ANALYSIS | | |
Change in Control and Other Agreements Our NEOs are entitled to receive consideration upon the termination of the executive’s employment with us under specified circumstances; including a change in control (“CIC”) related termination. These arrangements provide essential protections to the NEO to assist us in attracting and retaining qualified executives in a competitive environment. At the same time, we obtain certain agreements that preserve our valuable assets by imposing non-competition and non-solicitation restrictions, confidentiality obligations, and cooperation covenants on our NEOs. Change in Control Provisions The Company has entered into CIC agreements (each, a “CIC Agreement”) with all of our NEOs, with the exception of Mr. Schottenstein, our CEO. The CIC Agreements are designed to motivate executives to continue to work for the best interests of the Company and our stockholders in a potential CIC situation. The CIC Agreements contain “double-trigger” provisions for severance and other benefits. In the event of a CIC, and within 18 months of such event, if a NEO’s employment is terminated by the Company other than for Cause, Disability, or as a result of the NEO’s death, or if the executive terminates his or her employment for Good Reason (each capitalized term as defined in the applicable CIC Agreement), the NEO is entitled to receive: a lump-sum cash payment of all earned and determinable, but unpaid, current salary and unused paid time off;
| • | | a lump-sum cash payment of all earned and determinable, but unpaid, current salary and unused paid time off; |
a lump-sum severance payment equal to one and one-half times the NEO’s base salary, annualized for any partial year amount, and annual incentive cash bonus amount, at target;
| • | | a lump-sum severance payment equal to one and one-half times the NEO’s base salary, annualized for any partial year amount, and annual incentive cash bonus amount, at target; |
a prorated amount of the NEO’s then-current annual incentive cash bonus, at target; and upon the NEO’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the reimbursement by the Company of the portion of premiums of the executive’s group health insurance, including coverage for eligible dependents, for the period that the executive is entitled to coverage under COBRA, not to exceed 12 months. The CIC Agreements also provide that any unvested or restricted awards, including stock options, RSUs, and PSUs, will vest and become exercisable to the extent set forth in the applicable award agreement. Severance Payments Ms. Foyle isand Ms. Baldwin are eligible to receive post-employment payments. Generally, if both Ms. Foyle’sFoyle and Ms. Baldwin’s respective employment is involuntarily terminated without “Cause” by the Company and not due to death or Disability, in exchange for Ms. Foyle’sthe execution and non-revocation of a general release of claims in a form provided by the Company, Ms. Foyle’sFoyle and Ms. Baldwin respectively will be entitled to a severance payment. Additionally, in the event of termination of employment, Messrs. Schottenstein, Kessler, andMr. Rempell and Ms. Foyle, who have executed non-competition agreements with the Company (each, a “Non-Compete“Non-Compete Agreement”), may be eligible to receive a pro-rataprorata portion of their PSUs following termination of employment, based on actual days worked and performance goals being met for the full performance period, but not at an amount above the “target” award level. For a description and quantification of these severance benefits, please refer to the “Post-Employment Compensation” section. The NEOs also agreed to certain provisions under the Non-Compete Agreement, with the exception of Mr. Schottenstein, who has not entered into a Non-Compete Agreement, including the following: (i) not to use trade secrets, intellectual property, and other confidential or proprietary information of the Company for his or her own benefit, or for the benefit of any third party, including a competitor; (ii) to provide the Company with at least 30 days’ written notice of any resignation; (iii) an 18-month non-solicit provision following any termination of employment; (iv) a waiver relating to the development of intellectual property during the executive’s tenure with the Company; and (v) a non-compete provision following any termination of employment (12 months for Messrs. Schottenstein,Mr. Mathias and Mathias.Ms. Baldwin and 24 months for Messrs. Kessler andMr. Rempell and Ms. Foyle). The breach of any of the foregoing provisions may result in the NEO forfeiting unvested equity awards. Mr. Madore was also eligible for post-employment payments upon his departure from the Company, which are described in detail on page 81.
| | | | | 70 | | |
| |
|
| COMPENSATION DISCUSSION AND ANALYSIS |
Tax Matters Section 162(m) of the Code (“Section 162(m)”) generally limits deductibility of compensation that a publicly traded company pays to certain “covered employees,” up to $1 million per year. Covered employees for this purpose include the Company’s Chief Executive Officer, Chief Financial Officer, the next three most highly compensated executive officers, and any such “covered employee” for a year after 2016. | | | | | | | | | | | | 64 | | | | | | | | | | | |
| | | | | COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Committee believes in the importance of retaining flexibility to approve compensation arrangements that promote the objectives of our compensation program, even if such arrangements may not qualify for full or partial tax deductibility. Accordingly, the Compensation Committee reserves the right to continue to award or approve compensation that is not tax deductible or otherwise limited as to tax deductibility in order to provide competitive levels of total compensation to our executive officers in a manner designed to incentivize achievement of our strategic goals and objectives and in furtherance of our compensation principles described above. | | | | | 2021 Proxy Statement
| | |
| | 71 |
COMPENSATION COMMITTEE REPORT The Compensation Committee has adopted and implemented core principles that form the basis for our executive compensation program: performance, competitiveness, affordability, and transparency. We believe that our executive compensation program supports our financial and strategic goals, aligns executive pay with stockholder value creation, and appropriately discourages unnecessary or excessive risk taking. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, which describes the Compensation Committee’s decisions regarding our named executives’NEOs’ compensation for Fiscal 20202022 and how those decisions support and implement our principles. Based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. This report is not soliciting material, is not deemed to be filed with the SEC and is not to be incorporated by reference in any filing of American Eagle Outfitters, Inc. under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. This report has been furnished by the Compensation Committee of the Board of Directors. Cary D. McMillan (Chair) Sujatha Chandrasekaran Deborah A. Henretta Thomas R. Ketteler
Janice E. Page David M. Sable Noel J. Spiegel | | | | | | | | | | | 72 | | | | | | | 2023 Proxy Statement
| | |
| | 65 |
COMPENSATION TABLES AND RELATED INFORMATION General The following table setstables set forth information concerning the compensation awarded to, earned by, or paid to ourthe following NEOs for the years indicated below: | | | | | 1) Mr. Schottenstein, our Chief Executive Officer; | | | 2) Mr. Mathias, our Executive Vice President – Chief Financial Officer; | | | 3) Ms. Foyle, our ChiefPresident, Executive Creative Officer, AEO Inc.AE and Global Brand President, Aerie; | | | 4) Mr. Kessler,Rempell, our Global Brand President – AE;Chief Operations Officer; | | | 5) Mr. Rempell,Ms. Baldwin, our Chief OperationsHuman Resources Officer; and | | | 6) Mr. Madore,McLean, our Former Executive Vice President – Chief FinancialCommercial Officer. |
| Summary Compensation Table | Summary Compensation Table | Summary Compensation Table | | | Name and Principal Position | | Fiscal Year(1) | | Base Salary(2) | | Bonus(3) | | Stock Awards(4) | | Option Awards(5) | | Non-Equity Incentive Plan Compensation(6) | | All Other Compensation(7) | | Total | | Fiscal Year(1) | | Base Salary(2) | | Bonus | | Stock Awards(3) | | Option Awards(4) | | Non-Equity Incentive Plan Compensation(5) | | All Other Compensation(6) | | Total | | Jay L. Schottenstein Chief Executive Officer | | | 2020 | | | $ | 1,500,000 | | | | 1,500,000 | | | $ | 4,781,254 | | | $ | 1,593,750 | | | | 5,250,000 | | | | $ 159,284 | | | $ | 14,784,288 | | | | 2022 | | | $ | 1,750,000 | | | | — | | | $ | 5,459,994 | | | $ | 2,340,002 | | | | — | | | $ | 226,544 | | | $ | 9,776,540 | | | | 2019 | | | $ | 1,500,000 | | | | — | | | $ | 4,781,249 | | | $ | 1,593,751 | | | | — | | | | $ 211,131 | | | $ | 8,086,131 | | | | 2021 | | | $ | 1,750,000 | | | | — | | | $ | 4,899,981 | | | $ | 2,100,003 | | | $ | 5,889,423 | | | $ | 236,040 | | | $ | 14,875,447 | | | | 2018 | | | $ | 1,500,000 | | | | — | | | $ | 4,031,248 | | | $ | 1,343,749 | | | $ | 3,150,000 | | | | $ 186,183 | | | $ | 10,211,180 | | | | 2020 | | | $ | 1,500,000 | | | $ | 1,500,000 | | | $ | 4,781,254 | | | $ | 1,593,750 | | | $ | 5,250,000 | | | $ | 159,284 | | | $ | 14,784,288 | | Michael A. Mathias Chief Financial Officer | | | 2020 | | | $ | 554,038 | | | $ | 250,000 | | | $ | 849,991 | | | $ | 150,002 | | | $ | 720,250 | | | | $ 10,639 | | | $ | 2,534,920 | | | | 2022 | | | $ | 779,808 | | | | — | | | $ | 1,049,985 | | | $ | 450,001 | | | | — | | | $ | 10,154 | | | $ | 2,289,948 | | Jennifer M. Foyle Chief Creative Officer, AEO Inc. and Global Brand President, Aerie | | | 2020 | | | $ | 931,346 | | | | 750,000 | | | $ | 3,287,498 | | | $ | 762,500 | | | | 2,607,769 | | | | $ 10,240 | | | $ | 8,349,353 | | | | | 2019 | | | $ | 895,000 | | | | — | | | $ | 2,287,488 | | | $ | 762,502 | | | | — | | | | $ 10,067 | | | $ | 3,955,057 | | | | | 2018 | | | $ | 850,000 | | | $ | 222,824 | | | $ | 3,875,012 | | | $ | 624,999 | | | $ | 1,294,517 | | | | $ 10,152 | | | $ | 6,877,504 | | | Charles F. Kessler Global Brand President, AE | | | 2020 | | | $ | 940,000 | | | | 200,000 | | | $ | 2,287,499 | | | $ | 762,500 | | | | 2,444,000 | | | | $ 145,635 | | | $ | 6,779,634 | | | | | 2019 | | | $ | 940,000 | | | | — | | | $ | 2,287,488 | | | $ | 762,502 | | | | — | | | | $ 25,410 | | | $ | 4,015,400 | | | | | 2018 | | | $ | 900,000 | | | $ | 244,490 | | | $ | 3,875,012 | | | $ | 624,999 | | | $ | 1,383,168 | | | | $ 32,470 | | | $ | 7,060,139 | | | Michael A. Mathias Chief Financial Officer | | | | 2021 | | | $ | 725,000 | | | | — | | | $ | 898,627 | | | $ | 385,123 | | | $ | 898,750 | | | $ | 10,356 | | | $ | 2,917,856 | | | | | 2020 | | | $ | 554,038 | | | $ | 250,000 | | | $ | 849,991 | | | $ | 150,002 | | | $ | 720,250 | | | $ | 10,639 | | | $ | 2,534,920 | | | | | 2022 | | | $ | 1,373,077 | | | | — | | | $ | 2,799,997 | | | $ | 1,200,002 | | | | — | | | $ | 10,445 | | | $ | 5,383,521 | | Jennifer M. Foyle President, Executive Creative Officer AE and Aerie | | | | 2021 | | | $ | 1,300,000 | | | | — | | | $ | 2,799,994 | | | $ | 1,199,998 | | | $ | 3,413,846 | | | $ | 10,803 | | | $ | 8,724,641 | | | | | 2020 | | | $ | 931,346 | | | $ | 750,000 | | | $ | 3,287,498 | | | $ | 762,500 | | | $ | 2,607,769 | | | $ | 10,240 | | | $ | 8,349,353 | | | | 2020 | | | $ | 835,000 | | | | 450,000 | | | $ | 1,875,006 | | | $ | 624,998 | | | | 1,503,000 | | | | $ 9,938 | | | $ | 5,297,942 | | | | 2022 | | | $ | 1,023,077 | | | | — | | | $ | 2,100,008 | | | $ | 900,002 | | | | — | | | $ | 10,226 | | | $ | 4,033,313 | | Michael R. Rempell Chief Operations Officer | | | 2019 | | | $ | 835,000 | | | | — | | | $ | 1,590,011 | | | $ | 530,000 | | | | — | | | | $ 10,038 | | | $ | 2,965,049 | | | | 2021 | | | $ | 950,000 | | | | — | | | $ | 1,983,629 | | | $ | 850,121 | | | $ | 1,654,269 | | | $ | 10,269 | | | $ | 5,448,288 | | | | 2018 | | | $ | 800,000 | | | $ | 152,145 | | | $ | 3,124,982 | | | $ | 374,999 | | | $ | 845,100 | | | | $ 10,123 | | | $ | 5,307,349 | | | | 2020 | | | $ | 835,000 | | | $ | 450,000 | | | $ | 1,875,006 | | | $ | 624,998 | | | $ | 1,503,000 | | | $ | 9,938 | | | $ | 5,297,942 | | | | 2020 | | | $ | 630,000 | | | | — | | | $ | — | | | $ | — | | | | — | | | | td,011,813 | | | $ | 1,641,813 | | | Robert L. Madore Former Chief Financial Officer | | | 2019 | | | $ | 910,000 | | | | — | | | $ | 918,741 | | | $ | 306,251 | | | | — | | | | $ 10,207 | | | $ | 2,145,199 | | | | | 2018 | | | $ | 875,000 | | | $ | 166,175 | | | $ | 2,749,976 | | | $ | 250,001 | | | $ | 937,731 | | | | $ 10,167 | | | $ | 4,989,050 | | | | | | 2022 | | | $ | 557,885 | | | | — | | | $ | 455,010 | | | $ | 195,002 | | | | — | | | $ | 1,955 | | | $ | 1,209,852 | | Andrew J. McLean Former Chief Commercial Officer | | | | 2022 | | | $ | 634,315 | | | | — | | | $ | 1,225,010 | | | $ | 524,998 | | | | — | | | $ | 102,457 | | | $ | 2,486,780 | | | | | 2021 | | | $ | 950,000 | | | | — | | | $ | 1,143,630 | | | $ | 490,122 | | | $ | 1,654,269 | | | $ | 10,203 | | | $ | 4,248,224 | |
| (1) | 20202022 refers to the 52-week period ended January 30, 2021.28, 2023.
|
| (2) | Both Mr. Mathias and Ms. FoyleNew Base Salaries were promoted in 2020. This amount represents total base salary earned for the year.effective April 24, 2022.
|
| (3) | For 2020, these amounts represent cash recognition bonuses awarded to the NEOs.
|
| | | | | 2021 Proxy Statement
| | |
| | 73 |
| COMPENSATION TABLES AND RELATED INFORMATION |
(4) | Amounts in this column for Fiscal 20202022 consist of PSU and RSU awards based on the aggregate grant date fair value determined in accordance with Accounting Standards Codification 718, Compensation-Stock Compensation (“ASC 718”). For assumptions used in determining these values, see Note 1213 of the Consolidated Financial Statements contained in our Fiscal 20202022 Annual Report on Form 10-K. Amounts shown in this column for Fiscal 20202022 include the following, with the values of the PSU awards shown at target: |
| | | | 2020 RSU Awards (a) | | | 2020 PSU Awards (At Target) (a) | | | 2022 RSU Awards | | | 2022 PSU Awards (At Target) (a) | | Jay L. Schottenstein | | $ | 2,656,253 | | | $ | 2,125,001 | | | $ | 1,559,996 | | | $ | 3,899,998 | | Michael A. Mathias | | $ | 516,663 | | | $ | 333,328 | | | $ | 299,993 | | | $ | 749,992 | | Jennifer M. Foyle | | $ | 2,270,827 | | | $ | 1,016,671 | | | $ | 800,005 | | | $ | 1,999,992 | | Charles F. Kessler | | $ | 1,270,828 | | | $ | 1,016,671 | | | Michael R. Rempell | | $ | 1,041,670 | | | $ | 833,336 | | | $ | 600,004 | | | $ | 1,500,004 | | Robert L. Madore | | $ | — | | | $ | — | | | Marisa A. Baldwin | | | $ | 130,007 | | | $ | 325,003 | | Andrew J. McLean | | | $ | 350,006 | | | $ | 875,004 | |
| | (a) | Represents Fiscal 2020 long-term incentive awards granted to the NEOs in March 2020 (with respect to RSUs) and June 2020 (with respect to PSUs and RSUs). The maximum value of the PSU awards granted in June 2020on March 30, 2022 is $3,187,501$5,849,997 for Mr. Schottenstein, $499,992$1,124,998 for Mr. Mathias, $1,525,006 each$2,999,988 for Ms. Foyle, $2,250,006 for Mr. KesslerRempell, $487,505 for Ms. Baldwin and Ms. Foyle, and $1,250,003$1,312,506 for Mr. Rempell.McLean.
|
| | | | | | | | | | | | 66 | | | | | | | | | | | |
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
(5)(4) | The value of the time-based stock option awards included in the Summary Compensation Tablethis column is based on the aggregate grant date fair value computed in accordance with ASC 718. Additional information regarding assumptions are available in Note 1213 of the Consolidated Financial Statements contained in our Fiscal 20202022 Annual Report on Form 10-K. |
| (5) | For Fiscal 2021 and Fiscal 2020, non-equity incentive compensation represents the annual incentive bonus paid to each NEOs. For Fiscal 2022, no annual incentive bonuses were paid to the NEOs. |
| (6) | For Fiscal 2020, non-equity incentive plan compensation represents the annual incentive bonus paid to each NEO. |
| | (a) | For Mr. Schottenstein, the amount represents the aggregate incremental cost to the Company of security arrangements in addition to those provided during working days and for business travel. We provide a comprehensive security benefit to the CEO, a portion of which, based upon the disclosure rules, is deemed to be personal, although we believe there is a legitimate business reason for providing such a benefit. The incremental cost calculation for personal use security benefit includes driver overtime, fuel, tolls, driver public transportation and rental car use, maintenance and other incidental costs incurred in connection with such personal use. |
| | (b) | For Mr. Mathias, the amount consists of $10,639$10,154 in employer contributions to the 401(k) plan. |
| | (c) | For Ms. Foyle, the amount consists of $10,240 in employer contributions to the 401(k) plan. |
| (c) | For Mr. Kessler, the amount consists of $9,938$10,226 in employer contributions to the 401(k) plan, and $134,697 for personalan additional $219, which represents the aggregate incremental costs of certain additional limited benefits used by the NEO, including use of the Company aircraft and/or chartered jet expenses. Incrementalcorporate airplane for business travel for which she was accompanied by family members. Aggregate incremental cost of use of our aircraftassociated with these additional passengers was $219. Because the airplane is calculated pursuant to a formulaused primarily for business travel, this methodology excludes fixed costs that takes into account costs to us, including fuel costs, mileage, trip-related maintenance, landing/ramp fees and other miscellaneous costs.do not change based on usage.
|
| | (d) | For Mr. Rempell, the amount consists of $9,938$10,226 in employer contributions to the 401(k) plan. |
| | (e) | For Mr. Madore,Ms. Baldwin, the amount consists of $910,000 in paid and accrued severance, $73,500 in earned paid time-off balance payout, $21,000 in paid and accrued COBRA reimbursement and $7,312$1,955 in employer contributions to the 401(k) plan. |
| | | | | 74 | (f) | |For Mr. McLean, the amount consists of $7,745 in employer contributions to the 401(k) plan, $18,942 in earned paid time-off balance payout, and a $75,769 payment related to the 30-day notice period provided pursuant to his Confidentiality, Non-Competition Agreement.
| |
|
| COMPENSATION TABLES AND RELATED INFORMATION |
| Grants of Plan-Based Awards – Fiscal 2020 | | Grants of Plan-Based Awards – Fiscal 2022 | | Grants of Plan-Based Awards – Fiscal 2022 | | | | | | | | | Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards | | Estimated Future Payout Under Equity Incentive Plan
Awards | | All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | Exercise
or Base
Price of
Option
Awards
($/Sh) | | Grant Date
Fair Value
of Stock and
Option
Awards ($)(8) | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payout Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(5) | | Name | | | | Grant
Date | | Threshold
($) | | Target ($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | Jay L. Schottenstein | | (1) | | | | — | | | $ | 656,250 | | | $ | 2,625,000 | | | $ | 5,250,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (1) | | | | — | | | $ | 765,625 | | | $ | 3,062,500 | | | $ | 6,125,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | 66,282 | | | 132,564 | | | 198,846 | | | | — | | | | — | | | | — | | | $ | 2,125,001 | | | | | (3) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 184,890 | | | | — | | | | — | | | $ | 1,593,752 | | | | | (4) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 86,172 | | | | — | | | | — | | | $ | 1,062,501 | | | (2) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | 99,035 | | | 198,070 | | | 297,105 | | | | — | | | | — | | | | — | | | $ | 3,899,998 | | | | (5) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 347,142 | | | $ | 8.62 | | | $ | 637,500 | | | (3) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 90,487 | | | | — | | | | — | | | $ | 1,559,996 | | | | | (6) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 258,000 | | | $ | 12.33 | | | $ | 956,250 | | | (4) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 396,848 | | | $ | 17.24 | | | $ | 2,340,002 | | Michael A. Mathias | | (1) | | | | — | | | $ | 90,031 | | | $ | 360,125 | | | $ | 720,249.40 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (1) | | | | — | | | $ | 180,000 | | | $ | 720,000 | | | $ | 1,440,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | 10,397 | | | 20,794 | | | 31,191 | | | | — | | | | — | | | | — | | | $ | 333,328 | | | (2) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | 19,045 | | | 38,090 | | | 57,135 | | | | — | | | | — | | | | — | | | $ | 749,992 | | | | (3) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 40,603 | | | | — | | | | — | | | $ | 349,998 | | | (3) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 17,401 | | | | — | | | | — | | | $ | 299,993 | | | | (4) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 13,517 | | | | — | | | | — | | | $ | 166,665 | | | (4) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 76,317 | | | $ | 17.24 | | | $ | 450,001 | | | | | (6) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 40,471 | | | $ | 12.33 | | | $ | 150,002 | | | Jennifer M. Foyle | | (1) | | | | — | | | $ | 325,971 | | | $ | 1,303,884 | | | $ | 2,607,768.80 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (1) | | | | — | | | $ | 490,000 | | | $ | 1,960,000 | | | $ | 3,920,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | 31,712 | | | 63,423 | | | 95,135 | | | | — | | | | — | | | | — | | | $ | 1,016,671 | | | | | (3) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 88,457 | | | | — | | | | — | | | $ | 762,499 | | | | | (4) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 41,227 | | | | — | | | | — | | | $ | 508,329 | | | | | (7) | | | 10/8/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 64,683 | | | | — | | | | — | | | $ | 999,999 | | | | | (5) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 166,084 | | | $ | 8.62 | | | $ | 305,001 | | | | | | (6) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 123,435 | | | $ | 12.33 | | | $ | 457,499 | | | Charles F. Kessler | | (1) | | | | — | | | $ | 305,500 | | | $ | 1,222,000 | | | $ | 2,444,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | (2) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | 31,712 | | | 63,423 | | | 95,135 | | | | — | | | | — | | | | — | | | $ | 1,016,671 | | | | | (3) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 88,457 | | | | — | | | | — | | | $ | 762,499 | | | | | (4) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 41,227 | | | | — | | | | — | | | $ | 508,329 | | | (2) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | 50,787 | | | 101,574 | | | 152,361 | | | | — | | | | — | | | | — | | | $ | 1,999,992 | | | | (5) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 166,084 | | | $ | 8.62 | | | $ | 305,001 | | | (3) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 46,404 | | | | — | | | | — | | | $ | 800,005 | | | | | (6) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 123,435 | | | $ | 12.33 | | | $ | 457,499 | | | (4) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 203,512 | | | $ | 17.24 | | | $ | 1,200,002 | | Michael R. Rempell | | (1) | | | | — | | | $ | 187,875 | | | $ | 751,500 | | | $ | 1,503,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | (1) | | | | — | | | $ | 262,500 | | | $ | 1,050,000 | | | $ | 2,100,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | 25,993 | | | 51,986 | | | 77,979 | | | | — | | | | — | | | | — | | | $ | 833,336 | | | (2) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | 38,091 | | | 76,181 | | | 114,272 | | | | — | | | | — | | | | — | | | $ | 1,500,004 | | | | (3) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 72,506 | | | | — | | | | — | | | $ | 625,002 | | | (3) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 34,803 | | | | — | | | | — | | | $ | 600,004 | | | | (4) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,793 | | | | — | | | | — | | | $ | 416,668 | | | (4) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 152,634 | | | $ | 17.24 | | | $ | 900,002 | | Marisa A. Baldwin | | | (1) | | | | — | | | $ | 99,750 | | | $ | 399,000 | | | $ | 798,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (5) | | | 3/26/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 136,134 | | | $ | 8.62 | | | $ | 250,000 | | | (2) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | 8,253 | | | 16,506 | | | 24,759 | | | | — | | | | — | | | | — | | | $ | 325,003 | | | | | (6) | | | 6/4/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 101,176 | | | $ | 12.33 | | | $ | 374,998 | | | (3) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 7,541 | | | | — | | | | — | | | $ | 130,007 | | | | | | (4) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 33,071 | | | $ | 17.24 | | | $ | 195,002 | | Andrew J. McLean | | | (1) | | | | — | | | $ | 221,625 | | | $ | 886,500 | | | $ | 1,773,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | (2) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | 22,220 | | | 44,439 | | | 66,659 | | | | — | | | | — | | | | — | | | $ | 875,004 | | | | | (3) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 20,302 | | | | — | | | | — | | | $ | 350,006 | | | | | | (4) | | | 3/30/2022 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 89,036 | | | $ | 17.24 | | | $ | 524,998 | |
| (1) | Amount represents the Fiscal 20202022 annual incentive cash bonus established under our 2020 Plan. Mr. McLean was not entitled to receive any payout as he was separated from employment at the time any earned payment would have been made. |
| (2) | Amount represents a grant of PSUs under our 2020 Plan with vesting based on achievement of RTSRrelative TSR performance goals.goals over a three-year performance period. |
| (3) | Amount represents a grant of time-based RSUs with a three-year vesting period under our 20172020 Plan. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 67 |
| | | | COMPENSATION TABLES AND RELATED INFORMATION | | |
| (4) | Amount represents a grant of time-based RSU with a three-year cliff vesting under our 2020 Plan.
|
(5) | Amount represents a grant of time-based stock options with a three-year vesting period under our 2017 Plan.
|
(6) | Amount represents a grant of time-based stock options with a three-year vesting period under our 2020 Plan. |
(7) | Amount represents a grant of time-based RSUs with a three-year vesting period under our 2020 Plan.
|
(8)(5) | Amounts have been calculated based on aggregate grant date fair value determined in accordance with ASC 718 for the respective award types. The grant date fair value of the PSUs has been calculated based on the probable outcome of performance conditions. |
| | | | | 2021 Proxy Statement
| | |
| | 75 |
| COMPENSATION TABLES AND RELATED INFORMATION |
| Outstanding Equity Awards at Fiscal 2020 Year – End | | Outstanding Equity Awards at Fiscal 2022 Year – End | | Outstanding Equity Awards at Fiscal 2022 Year – End | | | | | | | Option Awards | | Stock Awards (1) | | | | Option Awards | | Stock Awards (1) | | | | | | | Number of Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of Securities
Underlying
Unexercised
Options (#) Unexer- cisable | | Equity
Incentive
Plan
Awards: Number of Securities
Underlying
Unexercised
Unearned
Options (#) | | Option
Exercise
Price ($) | | Option
Expiration
Date | | Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested ($) | | Equity
Incentive Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#) | | Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned Shares,
Units or Other
Rights That
Have Not
Vested ($) | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexer- cisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Jay L. Schottenstein | | (4) | | | 227,937 | | | | — | | | | — | | | $14.59 | | | 3/8/24 | | | | — | | | | — | | | | — | | | | — | | | (4) | | | 227,937 | | | | — | | | | — | | | $14.59 | | | 3/8/24 | | | | — | | | | — | | | | — | | | | — | | | | | (5) | | | 235,526 | | | | — | | | | — | | | $19.60 | | | 3/14/25 | | | | — | | | | — | | | | — | | | | — | | | | | (6) | | | 266,719 | | | | — | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | | (5) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 146,062 | | | $ | 3,314,135 | | | | — | | | | — | | | (7) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 65,168 | | | $ | 1,020,537 | | | | — | | | | — | | | | (6) | | | 157,017 | | | 78,509 | | | | — | | | $19.60 | | | 3/14/25 | | | | — | | | | — | | | | — | | | | — | | | (8) | | | 231,428 | | | 115,714 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | | (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 19,614 | | | $ | 445,042 | | | | — | | | | — | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 140,174 | | | $ | 2,195,124 | | | | (11) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 154,653 | | | $ | 3,509,080 | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 91,119 | | | $ | 1,426,920 | | | | — | | | | — | | | | (12) | | | 88,906 | | | 177,813 | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | (11) | | | 172,000 | | | 86,000 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 62,414 | | | $ | 1,416,167 | | | | — | | | | — | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 91,808 | | | $ | 1,437,710 | | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 186,154 | | | $ | 4,223,838 | | | | — | | | | — | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 29,946 | | | $ | 468,962 | | | | — | | | | — | | | | (15) | | | | — | | | 347,142 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | (15) | | | 57,674 | | | 115,349 | | | | — | | | $32.58 | | | 4/9/28 | | | 43,817 | | | $ | 981,500 | | | | — | | | | — | | | | (16) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 38,260 | | | $ | 868,120 | | | (19) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 200,985 | | | $ | 3,147,428 | | | | (17) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 86,761 | | | $ | 1,968,611 | | | | — | | | | — | | | (20) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 91,819 | | | $ | 1,437,882 | | | | — | | | | — | | | | | (18) | | | | — | | | 258,000 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | (21) | | | | — | | | 396,848 | | | | — | | | $17.24 | | | 3/30/29 | | | | — | | | | — | | | | — | | | | — | | Michael A. Mathias | | (5) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 4,077 | | | $ | 92,499 | | | | — | | | | — | | | (7) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 14,312 | | | $ | 224,127 | | | | — | | | | — | | | | (7) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 1,094 | | | $ | 24,831 | | | | — | | | | — | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 21,988 | | | $ | 344,327 | | | | (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 1,460 | | | $ | 33,136 | | | | — | | | | — | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 14,293 | | | $ | 223,828 | | | | — | | | | — | | | | (11) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 4,852 | | | $ | 110,095 | | | (11) | | | 26,980 | | | 13,491 | | | | — | | | $12.33 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 3,917 | | | $ | 88,867 | | | | — | | | | — | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 16,837 | | | $ | 263,662 | | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 40,881 | | | $ | 927,581 | | | | — | | | | — | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 5,492 | | | $ | 86,008 | | | | — | | | | — | | | | (16) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 20,936 | | | $ | 475,042 | | | (15) | | | 10,577 | | | 21,154 | | | | — | | | $32.58 | | | 4/9/28 | | | | — | | | | — | | | | — | | | | — | | | | (17) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 13,609 | | | $ | 308,798 | | | | — | | | | — | | | (19) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 38,651 | | | $ | 605,269 | | | | | (18) | | | | — | | | 40,471 | | | | — | | | $12.33 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | (20) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 17,657 | | | $ | 276,510 | | | | — | | | | — | | | | | | (21) | | | | — | | | 76,317 | | | | — | | | $17.24 | | | 3/30/29 | | | | — | | | | — | | | | — | | | | — | | Jennifer M. Foyle | | (2) | | | 140,427 | | | | — | | | | — | | | $15.72 | | | 5/23/23 | | | | — | | | | — | | | | — | | | | — | | | (2) | | | 140,427 | | | | — | | | | — | | | $15.72 | | | 5/23/23 | | | | — | | | | — | | | | — | | | | — | | | | (4) | | | 54,271 | | | | — | | | | — | | | $14.59 | | | 3/8/24 | | | | — | | | | — | | | | — | | | | — | | | (4) | | | 54,271 | | | | — | | | | — | | | $14.59 | | | 3/8/24 | | | | — | | | | — | | | | — | | | | — | | | | (5) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 67,936 | | | $ | 1,541,474 | | | | — | | | | — | | | (5) | | | 73,032 | | | | — | | | | — | | | $19.60 | | | 3/14/25 | | | | — | | | | — | | | | — | | | | — | | | | (6) | | | 36,516 | | | 36,516 | | | | — | | | $19.60 | | | 3/14/25 | | | | — | | | | — | | | | — | | | | — | | | | | (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 9,124 | | | $ | 207,015 | | | | — | | | | — | | | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 38,260 | | | $ | 868,120 | | | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 40,451 | | | $ | 917,843 | | | | — | | | | — | | | | | (11) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 73,991 | | | $ | 1,678,845 | | | | | (12) | | | 42,535 | | | 85,072 | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 29,861 | | | $ | 677,547 | | | | — | | | | — | | | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 89,062 | | | $ | 2,020,813 | | | | — | | | | — | | | | | (15) | | | | — | | | 166,084 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | | | (16) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 63,857 | | | $ | 1,448,907 | | | | | (17) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 41,509 | | | $ | 941,837 | | | | — | | | | — | | | | | (18) | | | | — | | | 123,435 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | | | | (19) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 65,125 | | | $ | 1,477,692 | | | | — | | | | — | | | Charles F. Kessler | | (2) | | | 140,427 | | | | — | | | | — | | | $15.72 | | | 5/23/23 | | | | — | | | | — | | | | — | | | | — | | | | | (5) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 67,936 | | | $ | 1,541,474 | | | | — | | | | — | | | (6) | | | 127,607 | | | | — | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | | (6) | | | 73,031 | | | 36,516 | | | | — | | | $19.60 | | | 3/14/25 | | | | — | | | | — | | | | — | | | | — | | | (7) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 31,180 | | | $ | 488,273 | | | | — | | | | — | | | | (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 9,124 | | | $ | 207,015 | | | | — | | | | — | | | (8) | | | 110,722 | | | 55,362 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 38,260 | | | $ | 868,120 | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 67,064 | | | $ | 1,050,220 | | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 40,451 | | | $ | 917,843 | | | | — | | | | — | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 43,594 | | | $ | 682,677 | | | | — | | | | — | | | | (11) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 73,991 | | | $ | 1,678,845 | | | (11) | | | 82,290 | | | 41,145 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | | (12) | | | 42,535 | | | 85,072 | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | (12) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 22,800 | | | $ | 357,043 | | | | — | | | | — | | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 29,861 | | | $ | 677,547 | | | | — | | | | — | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 52,462 | | | $ | 821,548 | | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 89,062 | | | $ | 2,020,813 | | | | — | | | | — | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 17,112 | | | $ | 267,978 | | | | — | | | | — | | | | (15) | | | | — | | | 166,084 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | (15) | | | 32,956 | | | 65,914 | | | | — | | | $32.58 | | | 4/9/28 | | | | — | | | | — | | | | — | | | | — | | | | (16) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 63,857 | | | $ | 1,448,907 | | | (19) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 103,069 | | | $ | 1,614,060 | | | | (17) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 41,509 | | | $ | 941,837 | | | | — | | | | — | | | (20) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 47,087 | | | $ | 737,382 | | | | — | | | | — | | | | | (18) | | | | — | | | 123,435 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | (21) | | | | — | | | 203,512 | | | | — | | | $17.24 | | | 3/30/29 | | | | — | | | | — | | | | — | | | | — | | Michael R. Rempell | | (3) | | | 138,675 | | | | — | | | | — | | | $15.89 | | | 6/2/23 | | | | — | | | | — | | | | — | | | | — | | | (3) | | | 138,675 | | | | — | | | | — | | | $15.89 | | | 6/2/23 | | | | — | | | | — | | | | — | | | | — | | | | (4) | | | 65,125 | | | | — | | | | — | | | $14.59 | | | 3/8/24 | | | | — | | | | — | | | | — | | | | — | | | (6) | | | 88,697 | | | | — | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | | (5) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 40,761 | | | $ | 924,870 | | | | — | | | | — | | | (7) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 25,557 | | | $ | 400,224 | | | | — | | | | — | | | | (6) | | | 43,818 | | | 21,910 | | | | — | | | $19.60 | | | 3/14/25 | | | | — | | | | — | | | | — | | | | — | | | (8) | | | 90,756 | | | 45,378 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | | (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 5,474 | | | $ | 124,209 | | | | — | | | | — | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 54,970 | | | $ | 860,835 | | | | (9) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 38,260 | | | $ | 868,120 | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 35,733 | | | $ | 559,578 | | | | — | | | | — | | | | (10) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 40,451 | | | $ | 917,843 | | | | — | | | | — | | | (11) | | | 67,450 | | | 33,726 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | | (11) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 51,430 | | | $ | 1,166,951 | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 37,166 | | | $ | 582,015 | | | | (12) | | | 29,565 | | | 59,132 | | | | — | | | $21.41 | | | 3/26/26 | | | | — | | | | — | | | | — | | | | — | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 12,124 | | | 189,864 | | | | — | | | | — | | | | (13) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 20,757 | | | $ | 470,971 | | | | — | | | | — | | | (15) | | | 23,347 | | | 46,696 | | | | — | | | $32.58 | | | 4/9/28 | | | | — | | | | — | | | | — | | | | — | | | | (14) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 73,002 | | | $ | 1,656,410 | | | | — | | | | — | | | (19) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 77,302 | | | $ | 1,210,553 | | | | (15) | | | | — | | | 136,134 | | | | — | | | $8.62 | | | 3/26/27 | | | | — | | | | — | | | | — | | | | — | | | (20) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 35,315 | | | 553,037 | | | | — | | | | — | | | | (16) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 133,470 | | | $ | 3,028,443 | | | (21) | | | | — | | | 152,634 | | | | — | | | $17.24 | | | 3/30/29 | | | | — | | | | — | | | | — | | | | — | | Marisa A. Baldwin | | | (16) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 3,934 | | | $ | 61,605 | | | | (17) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 34,024 | | | $ | 772,006 | | | | — | | | | — | | | (17) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 1,284 | | | $ | 20,105 | | | | — | | | | — | | | | | (18) | | | | — | | | 101,176 | | | | — | | | $12.33 | | | 6/4/27 | | | | — | | | | — | | | | — | | | | — | | | (18) | | | 2,485 | | | 4,970 | | | | — | | | $27.01 | | | 9/13/28 | | | | — | | | | — | | | | — | | | | — | | | | | (19) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 16,749 | | | $ | 262,288 | | | | | (20) | | | | — | | | | — | | | | — | | | | — | | | | — | | | 7,652 | | | $ | 119,830 | | | | — | | | | — | | | | | | (21) | | | | — | | | 33,071 | | | | — | | | $17.24 | | | 3/30/29 | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | 76 68 | | | | | | | | | | | |
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
| (1) | All stock awards include dividend equivalents. The market value was determined by multiplying the closing market price for AEO common stock on January 29, 202127, 2023 ($22.69)15.66), the last trading day of Fiscal 2020,2022, by the number of shares underlying the award. |
| (2) | Amount represents an award of time-based stock options granted on May 23, 2016, under our 2014 Plan that are exercisable at the fair market value on the grant date and vestvested ratably over three years.on May 23, 2017, May 23, 2018 and May 23, 2019. |
| (3) | Amount represents an award of time-based stock options granted on June 2, 2016, under our 2014 Plan that are exercisable at the fair market value on the grant date and vestvested ratably over three years.on June 2, 2017, June 2, 2018 and June 2, 2019. |
| (4) | Amount represents an award of time-based stock options granted on March 8, 2017, under our 2014 Plan that are exercisable at the fair market value on the grant date and vestvested ratably over three years.on March 8, 2018, March 8, 2019 and March 8, 2020. |
| (5) | Amount represents a grantan award of time-based stock options granted on March 14, 2018, under our 2017 Plan. The Compensation Committee established performance goals based on EBT by the end of Fiscal 2020. Vesting of the PSU ranges from 0% of the shares if threshold performance is not attained, to 25% of the shares at threshold performance, to 100% of the shares at target performance and 150% of the sharesPlan that are exercisable at the maximum goal achievement. Onfair market value on the grant date and vested ratably on March 2, 2021, the Compensation Committee certified a payout of 50% of target.14, 2019, March 14, 2020 and March 14, 2021. |
| (6) | Amount represents an award of time-based stock options granted on March 26, 2019, under our 2017 Plan that are exercisable at the fair market value on the grant date and vestvested ratably over three years.on March 26, 2020, March 26, 2021 and March 26, 2022. |
| (7) | Amount represents a grant on June 6, 2018 under our 2017 Plan. The Compensation Committee established performance goals based on EBT by the end of Fiscal 2020. Vesting of the PSU ranges from 0% of the shares if threshold performance is not attained, to 25% of the shares at threshold performance, to 100% of the shares at target performance and 150% of the shares at the maximum goal achievement. On March 2, 2021, the Compensation Committee certified a payout of 50% of target. |
(8) | Amount represents a grant on June 6, 201826, 2020 of time-based RSUs under our 2017 Plan with a three-year vesting period. On June 6, 2020, the second thirdeach of March 26, 2021 and March 26, 2022, one-third of the RSUsRSU plus respective dividends vested. The remaining third will vest in accordance with its terms on the third anniversary of the grant date.
|
| (8) | Amount represents an award of time-based stock options granted on March 26, 2020, under our 2017 Plan that are exercisable at the fair market value on the grant date and have a three-year vesting period. On each of March 26, 2021 and March 26, 2022, one-third of the stock options vested. The remaining third will vest in accordance with its terms on the third anniversary of the grant date. |
| (9) | Amount represents a grant on August 6, 2018June 4, 2020 under our 20172020 Plan. The Compensation Committee established performance goals based on AEOsrelative TSR relative to the average TSR of the members of the S&P 1500 Specialty Retail (Industry) Index by July 1, 2021.over a three-year performance period. Vesting of the PSU rangesranged from 0% of the shares if threshold performance is not attained, to 75%50% of the shares at threshold performance, to 100% of the shares at target performance and 125%150% of the shares at the maximum goal achievement. On February 7, 2023, the Compensation Committee certified a payout of 96% of target. |
| (10) | Amount represents a grant on August 6, 2018June 4, 2020 of time-based RSUs under our 20172020 Plan with a three-year cliff vesting. The RSUs plus respective dividends will vest in accordance with their terms on March 1, 2023. |
| (11) | Amount represents an award of time-based stock options granted on June 4, 2020 under our 2020 Plan that are exercisable at the fair market value on the grant date and have a three-year vesting period On each of June 4, 2021 and June 4, 2022, one-third of the stock options vested. The remaining third will vest in accordance with its terms on the third anniversary of the grant date. |
(11)(12) | Amount represents a grant on March 26, 2019October 8, 2020 of time-based RSUs under our 20172020 Plan with a three-year vesting period. On each of October 8, 2021 and October 8, 2022, one-third of the RSU plus respective dividends vested. The remaining third will vest in accordance with its terms on the third anniversary of the grant date. |
| (13) | Amount represents a grant on April 9, 2021 under our 2020 Plan. The Compensation Committee established performance goals based on EBT by the end of Fiscal 2021.relative TSR over a three-year performance period. Vesting of the PSU ranges from 0% of the shares if threshold performance is not attained, to 25%50% of the shares at threshold performance, to 100% of the shares at target performance and 150% of the shares at the maximum goal achievement. |
(12) | Amount represents an award of time-based stock options granted under our 2017 Plan that are exercisable at the fair market value on the grant date and vest ratably over three years.
|
(13)(14) | Amount represents a grant on June 6, 2019April 9, 2021 of time-based RSUs under our 20172020 Plan with a three-year vesting period. One June 6, 2020, the first thirdOn April 9, 2022, one-third of the RSUsRSU plus respective dividends vested. The remaining two-thirds will vest in accordance with its terms on the second and third anniversary of the grant date. |
(14) | Amount represents a grant on March 26, 2020 of time-based RSUs under our 2017 Plan with a three-year vesting period. The RSUs plus respective dividends will vest in accordance with its terms on the first, second and third anniversaries of the grant date.
|
| (15) | Amount represents an award of time-based stock options granted on April 9, 2021 under our 20172020 Plan whichthat are exercisable at the fair market value on the grant date and have a three-year vesting period. On April 9, 2022, one-third of the stock options vested. The remaining two-thirds will vest ratably over three years.in accordance with its terms on the second and third anniversaries of the grant date. |
| (16) | Amount represents a grant on June 4, 2020September 13, 2021 under our 2020 Plan. The Compensation Committee established performance goals based on RTSRrelative TSR over a three-year performance period. Vesting of the PSU ranges from 0% of the shares if threshold performance is not attained, to 50% of the shares at threshold performance, to 100% of the shares at target performance and 150% of the shares at the maximum goal achievement. |
| (17) | Amount represents a grant on June 4, 2020September 13, 2021 of time-based RSUs under our 2020 Plan with a three-year cliff vesting. The RSUsvesting period. On September 13, 2022, one-third of the RSU plus respective dividends vested. The remaining two-thirds will vest in accordance with theirits terms on March 1, 2023.the second and third anniversaries of the grant date. |
| (18) | Amount represents an award of time-based stock options granted on September 13, 2021 under our 2020 Plan that are exercisable at the fair market value on the grant date and have a three-year vesting period. On September 13, 2022 one-third of the stock options vested. The remaining two-thirds will vest ratably over three years.in accordance with its terms on the second and third anniversaries of the grant date. |
| (19) | Amount represents a grant on October 8,March 30, 2022 under our 2020 Plan. The Compensation Committee established performance goals based on relative TSR over a three-year performance period. Vesting of the PSU ranges from 0% of the shares if threshold performance is not attained, to 50% of the shares at threshold performance, to 100% of the shares at target performance and 150% of the shares at the maximum goal achievement. Target performance is represented in the table, as the Company’s previous fiscal year’s performance exceeded threshold. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 69 |
| | | | COMPENSATION TABLES AND RELATED INFORMATION | | |
| (20) | Amount represents a grant on March 30, 2022 of time-based RSUs under our 2020 Plan with a three-year vesting period. The RSUs plus respective dividends will vest in accordance with their terms on the first, second and third anniversaries of the grant date. |
| | | | | 2021 Proxy Statement
| (21) | |
| | 77 Amount represents an award of time-based stock options granted on March 30, 2022 under our 2020 Plan that are exercisable at the fair market value on the grant date and have a three-year vesting period. The award will vest in thirds in accordance with its terms on the first, second and third anniversaries of the grant date. |
| COMPENSATION TABLES AND RELATED INFORMATION |
The following table sets forth the actual value received by the NEOs upon exercise of stock options or vesting of stock awards in 2020.Fiscal 2022. | Option Exercises and Stock Vested – Fiscal 2020 | | Option Exercises and Stock Vested – Fiscal 2022 | | Option Exercises and Stock Vested – Fiscal 2022 | | | | | Option Awards (1) | | Stock Awards (2) | | Option Awards (1) | | | Stock Awards (2) | | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) | | Jay L. Schottenstein | | | | — | | | | | — | | | | | 133,825 | | | | $ | 1,751,657 | | | | — | | | | — | | | | 190,497 | | | $ | 3,384,569 | | Michael A. Mathias | | | | — | | | | | — | | | | | 3,275 | | | | $ | 44,041 | | | | — | | | | — | | | | 21,324 | | | $ | 366,125 | | Jennifer M. Foyle | | | | — | | | | | — | | | | | 83,844 | | | | $ | 1,093,287 | | | | — | | | | — | | | | 115,312 | | | $ | 1,880,937 | | Charles F. Kessler | | | | 108,542 | | | | $ | 588,775 | | | | | 83,844 | | | | $ | 1,093,287 | | | Michael R. Rempell | | | | | | | | | | 39,528 | | | | $ | 517,647 | | | | — | | | | — | | | | 68,245 | | | $ | 1,209,634 | | Robert L. Madore | | | | 84,568 | | | | $ | 162,891 | | | | | 29,915 | | | | $ | 390,652 | | | Marisa A. Baldwin | | | | — | | | | — | | | | 641 | | | $ | 6,769 | | Andrew J. McLean | | | | 43,507 | | | $ | 237,259 | | | | 39,210 | | | $ | 734,271 | |
| (1) | Amounts represent the number of shares acquired upon exercise of stock options. The amounts shown in the Value Realized on Exercise column are calculated based on the difference between the market price of the stock underlying the options at the time of exercise and the option exercise price. For Mr. Kessler, theThe amount represents stock option exercises from 2017 awards. For Mr. Madore, the amount represents stock option exercises from 2017 and 2018Fiscal 2020 awards. |
| (2) | Amounts represent the number of shares and related value for Stock Awardsstock awards that vested on applicable vesting dates, prior to the withholding of shares to satisfy taxes. Consistent with Company policy, upon the vesting of these awards, the Company withheld a portion of the otherwise distributable shares in respect of taxes. Accordingly, after shares were withheld for taxes, the NEOs acquired the following net share amounts: Mr. Schottenstein – 113,248; Mr. Mathias – 12,768; Ms. Foyle – 51,541; Mr. Rempell – 33,404; Ms. Baldwin – 409; and Mr. Mclean – 18,482. The amounts shown in the Value Realized on Vesting column are calculated based on the closing market price of the stock on the date the RSUs vested. Values include the vesting of RSU awards granted in 2017, 2018,Fiscal 2019, Fiscal 2020, and 2019,Fiscal 2021, as well as PSU awards granted in 2017.Fiscal 2019. Amounts are inclusive of dividend equivalent units that vested during Fiscal 2022. |
| Nonqualified Deferred Compensation |
We have a nonqualified deferred compensation program that allows eligible participants to defer a portion of their salary and/or bonus on an annual basis into the plan. Participants can defer up to 90% of their annual salary (with a minimum annual deferral of $2,000) and up to 100% of their annual performance-based bonus into the plan. Distributions from the plan automatically occur upon retirement, termination of employment, disability, or death during employment. Participants may also choose to receive a scheduled distribution payment while they are still employed. In 2020,Fiscal 2022, there were no NEOs participating in the nonqualified deferred compensation plan. Post-Employment Compensation Except as described below,with respect to Mr. McLean, the following tables set forth the expected benefit to be received by each of the respective NEOs in the event of his or her termination resulting from various scenarios, assuming a termination date of January 29, 2021,27, 2023, the last businesstrading day of Fiscal 2020,2022, and a closing stock price per share of $22.69$15.66 on that date. For Mr. McLean, narrative disclosure is provided regarding amounts that Mr. McLean actually received (or is entitled to receive) in connection with his employment separation on September 12, 2022. For each NEO, the payments and benefits detailed in the tables below are in addition to any payments and benefits under our plans and arrangements that are offered or provided generally to all salaried employees on a non-discriminatory basis and any accumulated vested benefits for each NEO, including any stock options vested as of January 29, 202128, 2023 (which are set forth in the “Outstanding“Outstanding Equity Awards at Fiscal 2020 2022 Year-End” table). The tables assume that each executive will take all action necessary or appropriate for such person to receive the maximum available benefit, such as execution of a release of claims. | | | | | | | | | | | | 70 | | | | | | | | | | | |
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
In the event of a CIC, if an acquiring entity does not assume or issue substitute awards for outstanding equity awards, the vesting of all outstanding equity awards will be accelerated on the CIC date and performance-based awards will be paid, either based on performance to the CIC date or based on the target level value, depending on the portion of the performance period completed prior to the CIC. For a description of our change in controlCIC benefits and the restrictive covenants and other obligations of the NEOs, please refer to the section above titled “Compensation“Compensation Discussion and Analysis – Change in Control and Other Agreements.Agreements.” | | | | | 78 | | |
| |
|
| COMPENSATION TABLES AND RELATED INFORMATION |
Jay L. Schottenstein | | | | Death or
Disability | | | Retirement | | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger)(5) | | | Death or Disability | | | Retirement | | | Termination without Cause | | | Termination for Cause | | | Change in Control (Double- Trigger)(5) | | Cash Payments | | | | | | | | | | | | | | | | | | | | | Base | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Bonus (1) | | $ | 5,250,000 | | | | — | | | $ | 5,250,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Stock Option Vesting (2) | | $ | 8,027,361 | | | $ | 8,027,361 | | | $ | 8,027,361 | | | | — | | | $ | 8,027,361 | | | $ | 1,101,007 | | | $ | 1,101,007 | | | $ | 1,101,007 | | | | — | | | $ | 1,101,007 | | RSU Vesting (3) | | $ | 2,420,161 | | | $ | 2,420,161 | | | $ | 2,420,161 | | | | — | | | $ | 8,053,659 | | | $ | 2,830,482 | | | $ | 2,830,482 | | | $ | 2,830,482 | | | | — | | | $ | 4,354,301 | | PSU Vesting (4) | | $ | 8,194,591 | | | $ | 8,194,591 | | | $ | 8,194,591 | | | | — | | | $ | 8,194,591 | | | $ | 6,692,457 | | | $ | 6,692,457 | | | $ | 6,692,457 | | | | — | | | $ | 6,692,457 | | Total | | $ | 23,892,113 | | | $ | 18,642,113 | | | $ | 23,892,113 | | | | — | | | $ | 24,275,611 | | | $ | 10,623,945 | | | $ | 10,623,945 | | | $ | 10,623,945 | | | | — | | | $ | 12,147,764 | |
| (1) | In the event of a termination following a death or disability or termination without Cause, this assumes that the Compensation Committee will pay the annual incentive bonus to the extent that the performance goals were met. |
| (2) | In the event of a termination following a change in controlCIC (i.e., double trigger)double-trigger) and in the event of death or Disability, the Company is obligated to immediately vest any unvested NSO.non-qualified stock option (“NSO”). In the event of a Voluntary Retirement or Termination without Cause, given Mr. Schottenstein’s retirement eligibility under the definition in the plan, unvested options continue to vest on their regular schedule. |
| (3) | Amount reflects a prorated RSU vesting for death or Disability, Voluntary Retirement or Termination without Cause and a full vesting in the event of a double-trigger Change in Control.CIC. |
| (4) | Amount based upon 50%the 2020 PSUs vesting at 96% of the 2018 PSUs, reflectingtarget, which reflects the extent that the performance goals were met. Any remaining PSUs outstanding are assumed to vest at target. If the performance goal is not achieved, the PSUs will forfeit.be forfeited. |
| (5) | Although Mr. Schottenstein does not have a change in control agreement,CIC Agreement, the amounts shown represent what he would be entitled to pursuant to the terms of our 2017 Plan and 2020 Plan. |
Michael A. Mathias | | | | Death or
Disability | | | Voluntary
Separation | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger) | | | Death or Disability | | | Voluntary Separation | | | Termination without Cause | | | Termination for Cause | | | Change in Control (Double- Trigger) | | Cash Payments | | | | | | | | | | | | | | | | | | | | | Base (1) | | | — | | | — | | $ | 600,000 | | | | — | | | $ | 1,485,000 | | | | — | | | | — | | | $ | 800,000 | | | | — | | | $ | 2,280,000 | | Bonus (2) | | $ | 720,250 | | | — | | $ | 720,250 | | | | — | | | $ | 360,125 | | | | — | | | | — | | | | — | | | | — | | | $ | 720,000 | | Stock Option Vesting (3) | | $ | 419,280 | | | — | | | — | | | | — | | | $ | 419,280 | | | $ | 44,925 | | | | — | | | | — | | | | — | | | $ | 44,925 | | RSU Vesting (4) | | $ | 387,296 | | | — | | | — | | | | — | | | $ | 927,581 | | | $ | 560,205 | | | | — | | | | — | | | | — | | | $ | 810,474 | | PSU Vesting (5) | | $ | 643,802 | | | — | | | — | | | | — | | | $ | 643,802 | | | $ | 1,199,485 | | | | — | | | | — | | | | — | | | $ | 1,199,485 | | Health-Care Coverage (6) | | | — | | | — | | $ | 20,918 | | | | — | | | $ | 20,918 | | | | — | | | | — | | | $ | 22,160 | | | | — | | | $ | 22,160 | | Total | | $ | 2,170,628 | | | — | | $ | 1,341,168 | | | | — | | | $ | 3,856,706 | | | $ | 1,804,615 | | | | — | | | $ | 822,160 | | | | — | | | $ | 5,077,044 | |
| (1) | Amount represents one year of base salary in the event of termination without Cause. In the event of a termination following a change in controlCIC (i.e., double-trigger), the amount represents one and one-half times the sum of base salary and annual incentive bonus at target. |
| (2) | In the event of a termination following a death or Disability or termination without Cause, this amount assumes that the Compensation Committee will pay the annual incentive bonus to the extent that the performance goals were met. In the event of termination following a change in controlCIC (i.e., double-trigger), the amount represents Mr. Mathias’s annual incentive bonus at target. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 71 |
| | | | COMPENSATION TABLES AND RELATED INFORMATION | | |
| (3) | In the event of a termination following a change in controlCIC (i.e., double trigger)double-trigger) and in the event of death or Disability, the Company is obligated to immediately vest any unvested NSO. |
| (4) | Amount reflects the vesting of the June 6, 2018, June 6, 2019,RSU awards granted on March 26, 2020, and June 4, 2020, RSU awards,April 9, 2021 and March 30, 2022, prorated based on service in the event of death or Disability. In the event of a termination following a change in controlCIC (i.e., double-trigger), the Company is obligated to fully vest any outstanding RSUs. |
| (5) | In the event of death, Disability or change in control,CIC, this amount is based upon 50%the 2020 PSUs vesting at 96% of the 2018 PSUs, reflectingtarget, which, reflect the extent that the performance goals were met. Any remaining PSUs outstanding are assumed to vest at target. If the performance goal is not achieved, the PSUs will forfeit.be forfeited. In the event of voluntary termination or termination without Cause, awards will forfeit.be forfeited. |
| | | | | 2021 Proxy Statement
| | |
| | 79 |
| COMPENSATION TABLES AND RELATED INFORMATION |
| (6) | The amounts shown in this row represent 12 months of health-care coverage determined on the basis of the coverage elections made by the executive officer,NEO, assuming that such elections were made at the maximum rate. |
Jennifer M. Foyle | | | | Death or
Disability | | | Voluntary
Separation | | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger) | | | Death or
Disability | | | Voluntary
Separation | | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger) | | Cash Payments | | | | | | | | | | | | | | | | | | | | | Base (1) | | | — | | | | — | | | $ | 1,000,000 | | | | — | | | $ | 3,600,000 | | | | — | | | | — | | | $ | 1,400,000 | | | | — | | | $ | 5,040,000 | | Bonus (2) | | $ | 2,607,769 | | | | — | | | $ | 2,607,769 | | | | — | | | $ | 1,303,884 | | | | — | | | | — | | | | — | | | | — | | | $ | 1,960,000 | | Stock Option Vesting (3) | | $ | 3,837,315 | | | | — | | | | — | | | | — | | | $ | 3,837,315 | | | $ | 526,761 | | | | — | | | | — | | | | — | | | $ | 526,761 | | RSU Vesting (4) | | $ | 2,068,966 | | | | — | | | | — | | | | — | | | $ | 6,242,747 | | | $ | 1,495,060 | | | | — | | | | — | | | | — | | | $ | 2,533,354 | | PSU Vesting (5) | | $ | 4,766,609 | | | $ | 2,095,172 | | | $ | 2,095,172 | | | | — | | | $ | 4,766,609 | | | $ | 3,443,820 | | | $ | 1,833,817 | | | $ | 1,833,817 | | | | — | | | $ | 3,443,820 | | Health-Care Coverage (6) | | | — | | | | — | | | $ | 20,918 | | | | — | | | $ | 20,918 | | | | — | | | | — | | | $ | 22,160 | | | | — | | | $ | 22,160 | | Total | | $ | 13,280,660 | | | $ | 2,095,172 | | | $ | 5,723,859 | | | | — | | | $ | 19,771,473 | | | $ | 5,465,641 | | | $ | 1,833,817 | | | $ | 3,255,977 | | | | — | | | $ | 13,526,095 | |
| (1) | Amount represents one year of base salary in the event of termination without Cause. In the event of a termination following a change in controlCIC (i.e., double-trigger), the amount represents one and one-half times the sum of base salary and annual incentive bonus at target. |
| (2) | In the event of a termination following a death or Disability or termination without Cause, the amount assumes that the Compensation Committee will pay the annual incentive bonus to the extent the performance goals were met. In the event of termination following a change in controlCIC (i.e., double-trigger), the amount represents Ms. Foyle’s annual incentive bonus at target. |
| (3) | In the event of a termination following a change in controlCIC (i.e., double trigger)double-trigger) and in the event of death or Disability, the Company is obligated to immediately vest any unvested NSO. |
| (4) | Amount reflects the vesting of the June 6, 2018 , August 6, 2018, June 6, 2019,RSU awards grants on March 26, 2020, June 4, 2020, and October 8, 2020, RSU awards;April 9, 2021 and March 30, 2022; prorated based on service in the event of death or disability. In the event of a termination following a change in controlCIC (i.e., double-trigger), the Company is obligated to fully vest any outstanding RSUs. |
| (5) | In the event of death, Disability or change in control,CIC, this amount is based upon 50%the 2020 PSUs vesting at 96% of the 2018 PSUs, reflectingtarget, which reflects the extent that the performance goals were met, and any remaining PSUs outstanding are assumed to vest at target. If the performance goal is not achieved, the PSUs will forfeit.be forfeited. In the event of voluntary termination or termination without Cause, annual awards will be prorated based on service in the performance period, with the exception of the August 6, 2018 award, which will forfeit.period. |
| (6) | The amounts shown in this row represent 12 months of health-care coverage determined on the basis of the coverage elections made by the executive officer,NEO, assuming that such elections were made at the maximum rate. |
Charles F. Kessler
| | | | | | | | | | | | 72 | | | | | | | | | | | |
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
Michael R. Rempell | | | | Death or
Disability | | | Voluntary
Separation | | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger) | | | Death or
Disability | | | Retirement | | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger) | | Cash Payments | | | | | | | | | | | | | | | | | | | | | Base (1) | | | — | | | | — | | | $ | 940,000 | | | | — | | | $ | 3,243,000 | | | | — | | | | — | | | $ | 1,050,000 | | | | — | | | $ | 3,150,000 | | Bonus (2) | | $ | 2,444,000 | | | | — | | | $ | 2,444,000 | | | | — | | | $ | 1,222,000 | | | | — | | | | — | | | | — | | | | — | | | $ | 1,050,000 | | Stock Option Vesting (3) | | $ | 3,837,315 | | | | — | | | | — | | | | — | | | $ | 3,837,315 | | | $ | 431,769 | | | | 431,769 | | | | 431,769 | | | | — | | | $ | 431,769 | | RSU Vesting (4) | | $ | 1,915,128 | | | | — | | | | — | | | | — | | | $ | 4,765,055 | | | $ | 1,109,387 | | | | 1,109,387 | | | | 1,109,387 | | | | — | | | $ | 1,702,703 | | PSU Vesting (5) | | $ | 4,766,609 | | | $ | 2,095,172 | | | $ | 2,095,172 | | | | — | | | $ | 4,766,609 | | | $ | 2,618,969 | | | $ | 2,618,969 | | | $ | 2,618,969 | | | | — | | | $ | 2,618,969 | | Health-Care Coverage (6) | | | — | | | | — | | | $ | 20,918 | | | | — | | | $ | 20,918 | | | | — | | | | — | | | $ | 22,160 | | | | — | | | $ | 22,160 | | Total | | $ | 12,963,053 | | | $ | 2,095,172 | | | $ | 5,500,090 | | | | — | | | $ | 17,854,897 | | | $ | 4,160,125 | | | $ | 4,160,125 | | | $ | 5,232,285 | | | | — | | | $ | 8,975,601 | |
| (1) | Amount represents one year of base salary in the event of termination without Cause. In the event of a termination following a change in controlCIC (i.e., double-trigger), the amount represents one and one-half times the sum of base salary and annual incentive bonus at target. |
| (2) | In the event of a termination following a death or Disability or termination without Cause, this amount assumes that the Compensation Committee will pay the annual incentive bonus to the extent that the performance goals were met. In the event of termination following a change in controlCIC (i.e., double-trigger), the amount represents Mr. Kessler’sRempell’s annual incentive bonus at target. |
| | | | | 80 | | |
| |
|
| COMPENSATION TABLES AND RELATED INFORMATION |
| (3) | In the event of a termination following a change in controlCIC (i.e., double trigger)double-trigger) and in the event of death or Disability, the Company is obligated to immediately vest any unvested NSO. In the event of Retirement or Termination without Cause, given Mr. Rempell’s retirement eligibility under the definition in the plan, unvested options continue to vest on their regular schedule. |
| (4) | Amount reflects the vesting of the June 6, 2018 , August 6, 2018, June 6, 2019,RSU awards granted on March 26, 2020, and June 4, 2020, RSU awards,April 9, 2021 and March 30, 2022, prorated based on service in the event of death or Disability. In the event of a termination following a change in controlCIC (i.e., double-trigger), the Company is obligated to fully vest any outstanding RSUs. |
| (5) | In the event of death, Disability or change in control,CIC, this amount is based upon 50%the 2020 PSUs vesting at 96% of the 2018 PSUs,target, which, reflecting the extent that the performance goals were met and any remaining PSUs outstanding are assumed to vest at target. If the performance goal is not achieved, the PSUs will forfeit.be forfeited. In the event of voluntary terminationRetirement or terminationTermination without Cause, annual awards will be prorated based on service in the performance period, with the exception of the August 6, 2018 award, which will forfeit.period. |
| (6) | The amounts shown in this row represent 12 months of health-care coverage determined on the basis of the coverage elections made by the executive officer,NEO, assuming that such elections were made at the maximum rate. |
Michael R. RempellMarisa A. Baldwin
| | | | Death or Disability | | | Voluntary Separation | | | Termination without Cause | | | Termination for Cause | | | Change in Control (Double- Trigger) | | | Death or
Disability | | | Voluntary
Separation | | | Termination
without
Cause | | | Termination
for Cause | | | Change in
Control
(Double-
Trigger) | | Cash Payments | | | | | | | | | | | | | | | | | | | | | Base (1) | | | — | | | | — | | | $ | 835,000 | | | | — | | | $ | 2,379,750 | | | | — | | | | — | | | $ | 570,000 | | | | — | | | $ | 1,453,500 | | Bonus (2) | | $ | 1,503,000 | | | | — | | | $ | 1,503,000 | | | | — | | | $ | 751,500 | | | | — | | | | — | | | | — | | | | — | | | $ | 399,000 | | Stock Option Vesting (3) | | $ | 3,106,980 | | | | — | | | | — | | | | — | | | $ | 3,106,980 | | | | — | | | | — | | | | — | | | | — | | | | — | | RSU Vesting (4) | | $ | 1,633,748 | | | | — | | | | — | | | | — | | | $ | 3,941,439 | | | $ | 57,456 | | | | — | | | | — | | | | — | | | $ | 139,935 | | PSU Vesting (5) | | $ | 3,685,134 | | | $ | 1,425,431 | | | $ | 1,425,431 | | | | — | | | $ | 3,685,134 | | | $ | 323,893 | | | | — | | | | — | | | | — | | | $ | 323,893 | | Health-Care Coverage (6) | | | — | | | | — | | | $ | 20,918 | | | | — | | | $ | 20,918 | | | | — | | | | — | | | $ | 22,160 | | | | — | | | $ | 22,160 | | Total | | $ | 9,928,862 | | | $ | 1,425,431 | | | $ | 3,784,349 | | | | — | | | $ | 13,885,721 | | | $ | 381,349 | | | | — | | | $ | 592,160 | | | | — | | | $ | 2,338,488 | |
| (1) | Amount represents one year of base salary in the event of termination without Cause. In the event of a termination following a change in controlCIC (i.e., double-trigger), the amount represents one and one-half times the sum of base salary and annual incentive bonus at target. |
| (2) | In the event of a termination following a death or Disability or termination without Cause, this amount assumes that the Compensation Committee will pay the annual incentive bonus to the extent that the performance goals were met. In the event of termination following a change in controlCIC (i.e., double-trigger), the amount represents Mr. Rempell’sMs. Baldwin’s annual incentive bonus at target. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 73 |
| | | | COMPENSATION TABLES AND RELATED INFORMATION | | |
| (3) | In the event of a termination following a change in controlCIC (i.e., double trigger)double-trigger) and in the event of death or Disability, the Company is obligated to immediately vest any unvested NSO. |
| (4) | Amount reflects the vesting of the June 6, 2018, August 6, 2018, June 6, 2019,RSU awards granted September 13, 2021 and March 26, 2020 and June 4, 2020 RSU awards,30, 2022, prorated based on service in the event of death or Disability. In the event of a termination following a change in controlCIC (i.e., double-trigger), the Company is obligated to fully vest any outstanding RSUs. |
| (5) | In the event of death, Disability or change in control, this amount is based upon 50% vesting of the 2018 PSUs, reflecting the extent that the performance goals were met and any remainingCIC, PSUs outstanding are assumed to vest at target. If the performance goal is not achieved, the PSUs will forfeit.be forfeited. In the event of voluntary termination or termination without Cause, annual awards will be prorated based on service in the performance period, with the exception of the August 6, 2018 award, which will forfeit.forfeited. |
| (6) | The amounts shown in this row represent 12 months of health-care coverage determined on the basis of the coverage elections made by the executive officer,NEO, assuming that such elections were made at the maximum rate. |
Robert L. MadoreAndrew J. McLean
Mr. Madore separated fromMcLean’s employment with the Company terminated effective as of September 29, 2020 (the “Separation Date”). Pursuant11, 2022. As Mr. McLean voluntarily resigned, he was not entitled to any payments in connection with the termination of his employment, other than a one-time, lump sum, cash payment of $75,769, which related to the terms30-day notice period provided pursuant to his Confidentiality, Non-Competition Agreement. Additionally, all of Mr. Madore’s offer letter dated September 21, 2016, the Company provided him with severance payments and benefits of 12 months’ base salary, or $910,000, paid in bi-weekly installments, and reimbursement of COBRA premiums for a period of up to 12 months following his departure, in exchange for a customary release of claims against the Company. Mr. Madore agreed to confidentiality and protection of intellectual property covenants and, for one year following his departure from the Company, not to solicit the Company’s employees or provide services to a competitor of the Company. Alloutstanding unvested equity forfeited as of the Separation Date, and Mr. Madore had 90 days from his separation to exercise outstanding vested stock options.awards were forfeited. | | | | | 2021 Proxy Statement
| | |
| | 81 |
| COMPENSATION TABLES AND RELATED INFORMATION |
CEO Pay Ratio American Eagle Outfitters, Inc. is a multi-nationalmultinational apparel company with associates in the Americas and Asia. We conduct business globally and focus on ensuring the delivery of market-based compensation and benefit offerings for our associates. We also endeavor to create a flexible work environment that allows flexibility to ensureso that our teamsassociates can balance their work and life. As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the ratio of the annual total compensation of our CEO, Mr. Schottenstein, to that of our median employee. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. SEC rules provide that we may use the same median employee for three years before identifying a new median employee. In Fiscal 2020,2021, we identified a new median employee, as we had used the samehowever, that employee or a similarly situated employee basedwas no longer employed on our initial 2017 statistical sampleFiscal 2022 determination date. Therefore, as allowed under SEC rules, we identified a new median employee for Fiscal years 2017, 2018 and 2019. Additionally, SEC rules allow us2022 whose compensation was substantially similar to select methodologies, employ certain exemptions, and make adjustments or assumptions for identifying ourthe original median employee in a manner that is most appropriate based on our size, organizational structure, and compensation plans, policies and procedures. Below is a brief explanation of the methodologies, exemptions and adjustments we used for calculating our Fiscal 2020 median employee: We excluded employees who were active in our payroll system on January 29, 2021, the determination date (which is within the last three months of our last completed fiscal year) but did not earn any wages from AEOselected in Fiscal 2020. On January 29,2021.
Similar to Fiscal 2021, our global employee population was approximately 36,000 but only 35,454 of those employees earned wages in the fiscal year. Given our number of part-time and seasonal employees, we believe this methodology was reasonable for purposes of identifying the median employee. For theorder to measure Fiscal 2022 compensation, measure, we used annual “gross compensation” as reflected in our payroll records (excluding Mr. Schottenstein). For this purpose, “gross compensation” is taxable wages for Fiscal 2020.2022.
Additionally, for the compensation measure, we annualized the compensation of permanent employees employed with us on January 29, 2021 but who worked for less than the full fiscal year. For our permanent employees, we also accounted for any time that our stores were closed due to local COVID-19 restrictions by making adjustments toThe Fiscal 2020 compensation to account for the period of closure when permanent employees were furloughed by the Company.
As allowed by SEC regulations, we excluded all of our non-U.S. employees in Mexico, Hong Kong and China who make up less than 5% of our total employee population. All of our Canadian employees were included in the analysis as they make up more than 5% of our total employee population.
We then identified our 2020 median associate from our associate population using this compensation measure, which was consistently applied to all our associates included in the calculation. Based on the methodologies, adjustments and exclusions described above, the2022 median employee is a part-time retail associate employed in a store in the United States. The median employee works an average of less than 15approximately 12 hours per week and is able to take advantage of scheduling flexibility. We calculated all of the elements of the median employee’s compensation for Fiscal 20202022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our Fiscal 20202022 Summary Compensation Table.Table in accordance with SEC rules.
The estimated values are as follows for Fiscal 2020:2022: Mr. Schottenstein’s annual total compensation: $14,784,288.$9,776,540 Our median employee’s annual total compensation: $6,536.$8,106. Ratio of Mr. Schottenstein’s annual total compensation to our median employee’s annual total compensation: 2,262:1,206:1. This pay ratio may not be comparable to our peer companies’ reported pay ratios due to differences in organizational structure and the assumptions and methodologies in calculating the ratio. | | | | | | | | | | | 82 74 | | | | | | | | | | | |
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
Pay Versus Performance In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing the following disclosure regarding executive Compensation Actually Paid (“CAP”), as calculated under applicable SEC rules, for our principal executive officer (“PEO”) and other named executive officers(“Non-PEO NEOs”) and Company performance for the fiscal years listed below.The methodology for calculating CAP to our PEO and CAP to ourNon-PEO NEOs, including details regarding the amounts that were deducted from, and added to, the SCT totals to arrive at the values presented for CAP, are provided in the footnotes to the table. A discussion of the relationship between CAP and the Company performance measures (i) listed in the table below and (ii) that the Company has deemed most important in linking CAP during Fiscal 2022 to Company performance is also presented below. Note that forNon-PEO NEOs, compensation is reported as an average. The Compensation Committee does not utilize CAP as the basis for making compensation decisions. For information related to how the Compensation Committee assessed the Company’s performance and established compensation for the NEOs, see the CD&A section of this proxy statement and in the proxy statements for Fiscal 2020 and Fiscal 2021. | | | | | | | | | | | | | | | | | Pay Versus Performance Table | | | Summary Compensation Table Total for PEO (1) ($) | | Compensation Actually Paid to PEO (1)(2)(3) ($) | | Average Summary Compensation Table Total for Non-PEO NEOs (1) ($) | | Average Compensation Actually Paid to Non-PEO NEOs (1)(2)(3) ($) | | Value of Initial Fixed $100 Investment based on (4) | | Net Income (Loss) ($ Millions) (5) | | Adjusted Earnings Before Interest and Taxes ($ Millions) (6) | | | Total
Shareholder
Return
($) | | Peer Group
Total
Shareholder
Return
($) | | 2022 | | $9,776,540 | | $1,499,742 | | $3,080,683 | | $726,957 | | $115.0 | | $126.1 | | $125 | | $280 | | 2021 | | $14,875,447 | | $15,274,358 | | $5,334,752 | | $5,623,793 | | $160.4 | | $132.9 | | $420 | | $617 | | 2020 | | $14,784,288 | | $29,296,913 | | $4,920,732 | | $9,134,036 | | $158.7 | | $119.8 | | ($209) | | $12 |
| (1) | Jay Schottenstein was our PEO for each year presented. The individuals comprising theNon-PEO NEOs for each year presented are listed below. |
| | | | | | | | | | | Michael Mathias | | Michael Mathias | | Michael Mathias | | Jennifer Foyle | | Jennifer Foyle | | Jennifer Foyle | | Michael Rempell | | Michael Rempell | | Michael Rempell | | Charles Kessler | | Andrew McLean | | Marisa Baldwin | | Robert Madore | | | | Andrew McLean |
| (2) | The amounts shown for CAP have been calculated in accordance with Item 402(v) of RegulationS-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the SCT totals with certain adjustments as described in footnote 3 below. |
| (3) | CAP reflects the exclusions and inclusions of certain amounts for the PEO and theNon-PEO NEOs as set forth below. Equity values are calculated in accordance with ASC 718. Amounts in the “Exclusion of Stock Awards and Option Awards for PEO” column are based on the amounts set forth in the “Stock Awards” and “Option Awards” columns included in the SCT for the applicable year. Amounts in the “Average Exclusion of Stock Awards and Option Awards forNon-PEO NEOs” column are based on average amounts set forth in “Stock Awards” and “Option Awards” columns included in the SCT for the applicable year. Amounts for the varyingnon-PEO NEOs serving during Fiscal 2021 and Fiscal 2020 are based on the Summary Compensation Table included in our Proxy Statement for the respective fiscal year. |
| | | COMPENSATION TABLES AND RELATED INFORMATION | | |
| | | | | | | | | PEO SCT Total Compensation to CAP Reconciliation | | | Summary Compensation
Table Total for PEO
($) | | Exclusion of Stock
Awards and Option
Awards for PEO
($) | | Inclusion of Equity
Values for PEO
($) | | Compensation Actually
Paid to PEO
($) | | 2022 | | $9,776,540 | | ($7,799,996) | | ($476,802) | | $1,499,742 | | 2021 | | $14,875,447 | | ($6,999,984) | | $7,398,895 | | $15,274,358 | | 2020 | | $14,784,288 | | ($6,375,004) | | $20,887,629 | | $29,296,913 |
| | | | | | | | | Average Non-PEO NEOs SCT Total Compensation to CAP Reconciliation | | | Average Summary Compensation Table Total for Non-PEO NEOs ($) | | Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs ($) | | Average Inclusion of Equity Values for Non-PEO NEOs ($) | | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2022 | | $3,080,683 | | ($2,180,003) | | ($173,723) | | $726,957 | | 2021 | | $5,334,752 | | ($2,437,811) | | $2,726,852 | | $5,623,793 | | 2020 | | $4,920,732 | | ($2,119,999) | | $6,333,303 | | $9,134,036 |
The amounts in the “Inclusion of Equity Values for PEO” and “Average Inclusion of Equity Values forNon-PEO NEOs” columns of the tables above are derived from the amounts set forth in the following tables: | | | | | | | | | | | | | | | | | Fiscal Year-End Fair Value of Equity Awards Granted During Fiscal Year That Remained Unvested as of Last Day of Fiscal Year for PEO ($) | | plus,
Change in Fair
Value from Last
Day of Prior
Fiscal Year to
Last Day of
Fiscal Year of
Unvested
Equity Awards
for PEO
($) | | plus, Vesting-Date Fair Value of Equity Awards Granted During Fiscal Year that Vested During Fiscal Year for PEO ($) | | plus,
Change in Fair
Value from Last
Day of Prior
Fiscal Year to
Vesting Date of
Unvested
Equity Awards
that Vested
During Fiscal
Year for PEO
($) | | minus,
Fair Value at
Last Day of
Prior Fiscal
Year of Equity
Awards that
Failed to Meet
Applicable
Vesting
Conditions
During Fiscal
Year for PEO
($) | | plus,
Value of
Dividends or
Other Earnings
Paid on Stock
or Option
Awards Not
Otherwise
Included for
PEO
($) | | Total -
Inclusion of
Equity Values
for PEO
($) | | 2022 | | $7,336,961 | | ($5,395,462) | | — | | ($2,418,301) | | — | | — | | ($476,802) | | 2021 | | $3,965,380 | | ($230,046) | | — | | $3,663,561 | | — | | — | | $7,398,895 | | 2020 | | $18,151,526 | | $3,390,971 | | — | | ($654,868) | | — | | — | | $20,887,629 |
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
| | | | | | | | | | | | | | | | | Average Fiscal Year-End Fair Value of Equity Awards Granted During Fiscal Year That Remained Unvested as of Last Day of Fiscal Year for Non-PEO NEOs ($) | | plus, Average Change in Fair Value from Last Day of Prior Fiscal Year to Last Day of Fiscal Year of Unvested Equity Awards for Non-PEO NEOs ($) | | plus, Average Vesting-Date Fair Value of Equity Awards Granted During Fiscal Year that Vested During Fiscal Year for Non-PEO NEOs ($) | | plus, Average Change in Fair Value from Last Day of Prior Fiscal Year to Vesting Date of Unvested Equity Awards that Vested During Fiscal Year for Non-PEO NEOs ($) | | minus, Average Fair Value at Last Day of Prior Fiscal Year of Equity Awards that Failed to Meet Applicable Vesting Conditions During Fiscal Year for Non-PEO NEOs ($) | | plus, Average Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Non-PEO NEOs ($) | | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) | | 2022 | | $1,721,366 | | ($1,178,896) | | — | | ($561,504) | | ($154,689) | | — | | ($173,723) | | 2021 | | $1,380,983 | | ($52,866) | | — | | $1,398,735 | | — | | — | | $2,726,852 | | 2020 | | $5,662,119 | | $1,227,588 | | — | | ($223,666) | | ($332,738) | | — | | $6,333,303 |
| (4.) | The Company’s peer group used for compensation benchmarking purposes was utilized for purposes of calculating Peer Group TSR (the “Peer Group”), as follows: |
| For Fiscal 2022: Abercrombie & Fitch Co.; Bath and Body Works, Inc.; Burberry Group PLC; Capri Holdings Limited; Chico’s FAS, Inc.; Express, Inc., Fossil Group, Inc.; The Gap, Inc.; Guess?, Inc.; Hanesbrands Inc.; Kontoor Brands; Levi Strauss & Co.; lululemon athletica, inc.; PVH CORP.; Ralph Lauren Corporation; Tapestry, Inc.; Under Armour Inc.; Urban Outfitters, Inc; and Victoria’s Secret & Co.; |
| For Fiscal 2021: Abercrombie & Fitch Co., Burberry Group PLC, Capri Holdings Limited, Chico’s FAS, Inc., Express, Inc., Fossil Group, Inc., The Gap, Inc., Guess?, Inc., Hanesbrands Inc., Kontoor Brands, L Brands Inc., Levi Strauss & Co., lululemon athletica, inc., PVH CORP., Ralph Lauren Corporation, Tapestry, Inc., Under Armour Inc., and Urban Outfitters, Inc.; and for |
| Fiscal 2020: Abercrombie & Fitch Co., Ascena Retail Group. Inc., Burberry Group PLC, Capri Holdings Limited, Chico’s FAS, Inc., Express, Inc., Fossil Group, Inc., The Gap, Inc., Guess?, Inc., Hanesbrands Inc., J. Crew Group, Inc., L Brands Inc., Levi Strauss & Co., lululemon athletica, inc., PVH CORP., Ralph Lauren Corporation, Tailored Brands, Inc., Tapestry, Inc., Under Armour Inc., and Urban Outfitters, Inc. |
| TSR for both the Company and the Peer Group is based on an initial $100 investment, measured on a cumulative basis from the market close on January 31, 2020, through and including the end of the fiscal year for which TSR is being presented in the table. TSR calculations reflect reinvestment of dividends. Historical stock performance is not necessarily indicative of future stock performance. |
| (5.) | Amounts shown are Net Income (Loss) attributable to the Company, as reflected in the Company’s Consolidated Statements of Operations for each of Fiscal 2020, Fiscal 2021, and Fiscal 2022. |
| (6.) | Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”) is anon-GAAP measure. See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use ofnon-GAAP or adjusted measures. We have identified Adjusted EBIT as our Company-Selected Measure (“CSM”) that represents, in our view, the most important financial performance measure used to link CAP to our performance for Fiscal 2022. This financial performance measure may not have been the most important financial performance measure for Fiscal 2021 and Fiscal 2020, and we may determine a different financial performance measure to be the most important financial performance measure in future years. |
| | | COMPENSATION TABLES AND RELATED INFORMATION | | |
Relationship between CAP and Financial Performance Measures The following charts show graphically the relationships over the past three fiscal years of CAP to PEO and Average CAP toNon-PEO NEOs, as compared to our cumulative TSR, net income (loss) and Adjusted EBIT, as well as the relationship between Company TSR and Peer Group TSR. In addition to reviewing this discussion and the Pay Versus Performance Table above, we encourage you to read the CD&A section of this Proxy Statement, which explains our executive compensation philosophy and programs and compensation decisions relating to Fiscal 2022 compensation for our NEOs. CAP versus Total Shareholder Return: Company and Peer Group The following chart sets forth the relationship between CAP to PEO, Average CAP toNon-PEO NEOs, the Company’s cumulative TSR, and the cumulative TSR of our Peer Group over the three most recently completed fiscal years. CAP versus Net Income (Loss) SEC rules require that net income be presented as a performance measure in the Pay Versus Performance Table above. The Company does not use net income (loss) to determine compensation levels or incentive plan payouts, and therefore there was not total alignment between CAP and net income (loss). Specifically, CAP is not aligned with performance of net loss as a financial performance measure for Fiscal 2020. While the Company reported net income of $125 million and $420 million for Fiscal 2022 and Fiscal 2021, respectively, the Company reported a net loss of $209 million for Fiscal 2020. Fiscal 2020 CAP is significantly higher than CAP for both Fiscal 2021 and Fiscal 2022, primarily due to the Company’s stock price at January 30, 2021 versus the Company’s stock price on the grant dates of our Fiscal 2020 equity awards (i.e., versus March 26, 2020 and June 4, 2020), and the resulting increase in fair value of these awards.
| | | | | COMPENSATION TABLES AND RELATED INFORMATION |
CAP vs. CSM: Adjusted EBIT The following chart sets forth the relationship between CAP to PEO, Average CAP toNon-PEO NEOs, and our CSM, Adjusted EBIT(1) , during the three most recently completed fiscal years. Important Financial Performance Measures The following table sets forth an unranked list of the most important financial performance measures, including the CSM, used by the Company to link CAP (for all NEOs) to Company performance for Fiscal 2022. | (1) | See Appendix A of this Proxy Statement for additional detail on adjusted results and other important information regarding the use ofnon-GAAP or adjusted measures. |
PROPOSAL FOUR: ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION As required by Section 14A of the Exchange Act, we are providing stockholders with an advisory vote, commonly known as a “Say on Frequency” vote, to indicate how frequently the Company should hold future advisory votes on the compensation of our NEOs. Stockholders may indicate whether they would prefer to have future advisory votes on the compensation of our NEOs every year, every two years, every three years, or they may abstain from voting on this proposal. As discussed in greater detail below, the Board believes that an annual frequency (i.e., one year) is the optimal frequency for the Say on Pay vote. Stockholders are not voting to approve or disapprove the Board’s recommendation. The Company’s current policy provides for an annual Say on Pay vote. The Board believes that holding an advisory vote on the compensation of our NEOs every year is the most appropriate policy for the Company at this time and recommends that stockholders approve a continued annual advisory vote on NEO compensation. An annual advisory vote allows stockholders to assess and provide feedback on our executive compensation program on a regular basis and facilitates strong communication with and accountability to our stockholders. The Say on Frequency vote is advisory, and therefore will not be binding on the Company or the Board. The Company currently expects to hold an advisory vote on the compensation of our NEOs in accordance with the option of one, two or three years that receives the highest number of votes cast by stockholders. However, the Board may decide in the future that it is in the Company’s and stockholders’ best interests to hold such an advisory vote more or less frequently, as applicable, than the option approved by our stockholders. Following the Say on Frequency vote at the 2023 Annual Meeting, the next Say on Frequency vote is expected at the 2029 Annual Meeting of Stockholders. The Board of Directors recommends that the stockholders vote for a frequency of every “ONE YEAR”. | | | | | | | | | | | | 80 | | | | | | | | | | | |
PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN Background and Summary of 2023 Plan At the 2023 Annual Meeting, stockholders will be asked to approve the adoption of the American Eagle Outfitters, Inc. 2023 Stock Award and Incentive Plan (the “2023 Plan”) to serve as the successor to the 2020 Stock Award and Incentive Plan (the “2020 Plan”). The Board believes that equity awards are a critical part of our compensation program and that the 2020 Plan and its predecessors, the 2017 Stock Award and Incentive Plan, as Amended and Restated (the “2017 Plan”) and the 2014 Stock Award and Incentive Plan (the “2014 Plan”) (collectively, the “Prior Plans”), have been effective in attracting and retaining employees, non-employee directors, and consultants of outstanding ability. Our compensation philosophy emphasizes equity-based awards because they align the interests of our executive officers, directors, and key employees with those of our stockholders, encourage long-term retention, and incentivize long-term value creation. To enable the Company to continue offering meaningful equity-based incentives to key employees, non-employee directors, and consultants, the Board believes that it is both necessary and appropriate to increase the number of shares available for these purposes. As a result, on April 24, 2023, our Board, on the recommendation of the Compensation Committee, unanimously approved and adopted the 2023 Plan, subject to stockholder approval. If approved by stockholders at the 2023 Annual Meeting, the 2023 Plan will be effective upon such approval (the “Effective Date”). If approved by stockholders, the 2023 Plan will replace the 2020 Plan, and no further awards will be made under the 2020 Plan after the Effective Date. However, each outstanding award under the Prior Plans, as applicable, will remain outstanding under the applicable plan and will continue to be governed under its terms and any applicable award agreement. If the 2023 Plan is not approved by the Company’s stockholders, the 2020 Plan will remain in effect as it existed immediately prior to the 2023 Annual Meeting, and awards may continue to be made thereunder until the 2020 Plan terminates or is superseded. The Board believes that the 2023 Plan will promote the interests of stockholders and is consistent with principles of good corporate governance, including: | ✓ | Reserve Shares for Future Equity Awards. The 2023 Plan will reserve a sufficient number of shares to enable us to grant equity awards, which is a critical component of our compensation program that is designed to attract, motivate, and retain employees, including our executive officers, non-employee directors, and consultants, whom we expect will contribute to our financial success. |
| ✓ | Independent Committee. The 2023 Plan will be administered by our Compensation Committee, which is composed entirely of independent directors who meet NYSE standards for independence. |
| ✓ | No Discounted Options or SARs. All options and stock appreciation rights (“SARs”) awarded under the 2023 Plan must have an exercise or base price that is not less than the fair market value of a share of common stock on the date of grant. |
| ✓ | Limits on Non-Employee Director Awards. The 2023 Plan contains a limit on the aggregate value of equity awards that may be made, together with any cash fees that may be paid, to non-employee directors in a year. |
| ✓ | Minimum Vesting. Under the 2023 Plan, awards generally may not vest in less than one year from the date of grant, subject to certain exceptions discussed below. |
| ✓ | No Repricing. The 2023 Plan prohibits any repricing of options and SARs or cash buyouts of underwater options and SARs, unless approved by stockholders or in connection with a corporate transaction involving the Company. |
| ✓ | No Liberal Share Recycling of Options or SARs. Shares underlying options and SARs issued under the 2023 Plan will not be recycled into the share pool under the 2023 Plan if they are withheld in payment of the exercise price of the award or to satisfy tax withholding obligations in respect of the such awards. |
| ✓ | Restrictions on Dividends and Dividend Equivalents. The 2023 Plan prohibits participants from receiving current dividends or dividend equivalents that are paid before the underlying award vests and is paid. |
| ✓ | Performance Awards. Under the 2023 Plan, the Compensation Committee may grant performance-based awards to ensure alignment between the interests of award recipients with those of our stockholders. |
| ✓ | Clawback Policy. Awards under the 2023 Plan will be subject to clawback under any Company clawback policy or as required by law. |
| ✓ | No Tax Gross-Ups. The 2023 Plan does not provide for tax gross-ups with respect to awards. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 81 |
| | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN | | |
Determination of Shares To Be Available for Issuance Increase in Share Pool The aggregate number of shares of the Company’s common stock that may be issued under the 2023 Plan is (i) 10,617,000 shares, plus (ii) any shares that remained available for issuance under the 2020 Plan as of immediately prior to the Effective Date, plus (iii) any Returning Shares (as defined below), subject to proportionate adjustment in the event of stock splits and similar events. Such shares may be used for all forms of awards under the 2022 Plan and also may be used to settle awards outstanding under a Prior Plan, to the extent shares are not available under the applicable Prior Plan. When deciding on the number of shares to be available for awards under the 2023 Plan, the Board considered a number of factors, including the number of shares available under the 2020 Plan, the number of shares needed for future awards, a dilution analysis, and the current and future accounting expenses associated with our equity award practices. Based on our current equity award practices, the Board estimates that the authorized shares under the 2023 Plan may be sufficient to provide us with an opportunity to grant equity awards for approximately three years, in amounts determined appropriate by the Compensation Committee, which will administer the 2023 Plan (as discussed below). This is only an estimate, and circumstances could cause the share reserve to be used more quickly or more slowly. These circumstances include, but are not limited to, the future price of shares of our common stock, the mix of cash, options and full value awards provided as long-term incentive compensation, grant amounts provided by our competitors, payout of performance-based awards in excess of target in the event of superior performance, hiring activity, and promotions during the next few years. Overhang as of January 28, 2023 The following table sets forth certain information as of January 28, 2023, unless otherwise noted, with respect to the Company’s equity compensation plans: | | | | | Stock Options/SARs Outstanding | | | 3,949,586 | | Weighted-Average Exercise Price of Outstanding Stock Options/SARs | | $ | 17.01 | | Weighted-Average Remaining Term of Outstanding Stock Options/SARS | | | 3.96 years | | Total Stock-Settled Full-Value Awards Outstanding | | | 4,322,510 | | Remaining shares available for grant under the 2020 Plan* | | | 4,841,412 | | Additional shares being requested under the 2023 Plan | | | 10,617,000 | | Basic common shares outstanding as of the record date (April 14, 2023) | | | 197,343,131 | |
| * | For reference purposes, the remaining shares available for grant under the 2020 Plan is denoted as of January 28, 2023. The number of shares to be rolled-over into the 2023 Plan will be equal to the actual number of shares which remain available for grant under the 2020 Plan as of the Effective Date. Upon stockholder approval of the 2022 Plan, no further awards will be made under the 2020 Plan or any Prior Plans. |
Dilution Analysis Our Board recognizes the impact of dilution on our stockholders and has evaluated this share request carefully in the context of the need to motivate, retain, and ensure that our leadership team and key employees are focused on our strategic priorities. The total fully-diluted overhang as of January 28, 2023, would be 10.8%. In this context, fully-diluted overhang is calculated as the sum of grants outstanding and shares available for future awards (numerator) divided by the sum of the numerator and basic common shares outstanding, with all data effective as of January 28 2023. The Board believes that this number of shares of common stock represents a reasonable amount of potential equity dilution, which will allow us to continue awarding the equity awards that are vital to our equity compensation program. | | | | | | | | | | | | 82 | | | | | | | | | | | |
| | | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN |
Burn Rate The table below sets forth the following information regarding the awards granted under the 2020 Plan: (i) the burn rate for each of the last three calendar years and (ii) the average burn rate over the last three calendar years. The burn rate for a year has been calculated as follows: | | | | | All Stock Options Granted in the Applicable Year | | ÷ | | Weighted Average Number of Shares of Common Stock Outstanding for the Applicable Year | + | All Full Value Awards Granted in the Applicable Year (time-based awards valued when granted and performance-based awards valued when earned/vested) |
| | | | | | | | | | | | | | | | | | | | Burn Rate | | Award Type | | 2020 | | | 2021 | | | 2022 | | | 3-Yr. Avg. | | A) Stock Options Granted | | | 1,705,000 | | | | 478,000 | | | | 1,094,000 | | | | | | B) Restricted Stock Granted | | | 2,729,000 | | | | 724,000 | | | | 1,609,000 | | | | | | C) Performance Shares Earned | | | 319,000 | | | | 418,000 | | | | 257,000 | | | | | | D) Total Full-Value Shares (Performance Shares Earned) (B+C) | | | 3,048,000 | | | | 1,142,000 | | | | 1,866,000 | | | | | | E) Total Grants (Performance Shares Earned) (A+D) | | | 4,753,000 | | | | 1,620,000 | | | | 2,960,000 | | | | | | F) Weighted Avg. Shares Outstanding | | | 166,455,000 | | | | 168,156,000 | | | | 181,778,000 | | | | | | Burn Rate % (Performance Shares Earned) (E ÷ F) | | | 2.86 | % | | | 0.96 | % | | | 1.63 | % | | | 1.82 | % |
The Board believes that our compensation program, and particularly the granting of equity awards, allows us to align the interests of eligible participants who are selected to receive awards with those of our stockholders. The 2023 Plan is designed to enable us to formulate and implement a compensation program that will attract, motivate and retain executive officers and other key employees, non-employee directors, and consultants who we expect will contribute to our financial success. The Board believes that awards granted pursuant to the 2023 Plan are a vital component of our compensation program and, accordingly, that it is important that an appropriate number of shares of stock be authorized for issuance under the 2023 Plan. Description of the 2023 Plan A copy of the 2023 Plan is attached to this Proxy Statement as Appendix B. The following description of certain features of the 2023 Plan is qualified in its entirety by reference to the full text of the 2023 Plan. Purpose The purpose of the 2023 Plan is to aid the Company in attracting, retaining, motivating, and rewarding eligible employees, non-employee directors, and consultants. The 2023 Plan aims to provide for equitable and competitive compensation opportunities, recognize individual contributions, reward achievement of Company goals, and promote the creation of long-term value for stockholders. Plan Administration The 2023 Plan will be administered by the Compensation Committee (for purposes of this Proposal No. 5, the “Committee”) or such other committee of the Board as may be designated by the Board to administer the 2023 Plan. Each member of such Committee must be a “non-employee director” as defined in Rule 16b-3 under the Exchange Act, and an independent director under the NYSE listing standards. The full Board may perform any function of the Committee except to the extent limited by NYSE rules, in which case the term Committee refers to the Board. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 83 |
| | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN | | |
The Committee has the authority under the 2023 Plan to (i) select eligible persons to become participants; (ii) grant awards; (iii) determine the type and number of awards, the dates on which awards may be exercised and on which the risk of forfeiture ordeferral or restricted period relating to awards will lapse or terminate, the acceleration of any such dates, the expiration date of any award, whether, to what extent, and under what circumstances an award may be settled, or the exercise price of an award may be paid, in cash, shares of common stock, other awards, or other property, and other terms and conditions of, and all other matters relating to, awards; (iv) prescribe award agreements and rules and regulations for the administration of the 2023 Plan and, in each case, applicable amendments; (v) construe and interpret the 2023 Plan and award agreements and correct defects, supply omissions, or reconcile inconsistencies; and (vi) make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the 2023 Plan. Decisions of the Committee with respect to the administration and interpretation of the 2023 Plan will be final, conclusive, and binding. Authorized Shares The aggregate number of shares of the Company’s common stock that may be issued under the 2023 Plan is (i) 10,617,000 shares, plus (ii) any shares that remained available for issuance under the 2020 Plan as of immediately prior to the Effective Date, plus (iii) any Returning Shares (as defined below), subject to proportionate adjustment in the event of stock splits and similar events. Shares of common stock to be issued under the 2023 Plan may be authorized but unissued shares of our common stock or previously-issued shares acquired by the Company. As of March 31, 2023, the closing price of a share of our common stock was $13.44. Share Counting Provisions Each share underlying stock-settled awards will count as one share against the aggregate number of shares available for issuance under the 2023 Plan. For purposes of share counting, the number of shares to which an award relates will be counted against the aggregate share reserve at the grant date of the award, unless such number of shares cannot be determined at that time, in which case the number of shares actually distributed pursuant to the award shall be counted against the share reserve at the time of distribution. Awards related to or retroactively added to, or granted in tandem with, substituted for or converted into, other awards will be counted or not counted against the share reserve in accordance with procedures adopted by the Committee or its designee so as to ensure appropriate counting, but to avoid double counting. Shares subject to awards, or outstanding awards under a Prior Plan, that terminate or expire unexercised, or are canceled, forfeited, or lapse for any reason, shares underlying awards that are ultimately settled in cash or property other than shares, and shares that are tendered by the participant or withheld by the Company to satisfy any tax withholding obligation with respect to an award other than an option or SAR (collectively, “Returning Shares”), will again become available for future grants of awards under the 2023 Plan. Under the 2023 Plan, the following shares will not be used to replenish the plan share reserve: (i) shares delivered by the participant or withheld from an option to pay the exercise price; (ii) shares delivered or withheld for the purpose of satisfying a tax withholding obligation relating to an option or SAR; (iii) shares not issued or delivered as a result of the net settlement of an outstanding option or SAR; and (iv) shares repurchased on the open market with the proceeds of option exercises. Eligibility The Committee selects participants from among the employees, non-employee directors, and consultants of the Company and its affiliates. As of March 31, 2023, approximately 550 employees and six non-employee directors would be eligible to participate in the 2023 Plan. Based upon Company practice, we do not currently expect to grant equity awards to consultants under the 2023 Plan. As of March 31, 2023, 508 employees and six non-employee directors held awards granted under the Prior Plans. Because our executive officers and non-employee directors are eligible to receive awards under the 2023 Plan, they may be deemed to have a personal interest in the approval of this Proposal No. 5. Limitations on Awards to Non-Employee Directors Notwithstanding any other provision of the 2023 Plan to the contrary, the maximum number of shares subject to awards granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year in respect of such director’s service as a member of the Board during such year (including service as a member or chair of any committees of the Board), cannot exceed $750,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes). The Committee may make exceptions | | | | | | | | | | | | 84 | | | | | | | | | | | |
| | | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN |
to this limit for a non-executive chair of the Board or, in extraordinary circumstances, for other individual non-employee directors, as the Committee may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation. Types of Awards The 2023 Plan provides for grants of options, SARs, restricted stock, restricted stock units, and other awards convertible into or otherwise based on shares of our stock. Any award may be granted as a performance-based award. Dividend equivalents may also be provided in connection with an award under the 2023 Plan, other than with respect to options or SARs. Such dividend equivalents will be subject to the same vesting terms as applied to the original award to which it relates. | • | | Stock options provide the holder with the option to purchase shares of Company common stock and may be designated under the Internal Revenue Code of 1986, as amended (the “Code”), as nonstatutory stock options (which may be granted to all participants) or incentive stock options (which may be granted to officers and employees, but not to non-employee directors). The exercise price of an option cannot be less than the fair market value of a share of common stock on the grant date, and the term of an option cannot exceed 10 years from the date of grant. |
| • | | SARs give the holder the right to receive the difference (payable in cash or stock, as specified in the award agreement) between the fair market value per share of Company common stock on the date of exercise over the base price of the award. The base price of a SAR cannot be less than the fair market value of a share of common stock on the grant date, and the term of a SAR cannot exceed 10 years from the date of grant. |
| • | | Restricted stock is subject to restrictions on transferability and subject to forfeiture on terms set by the Committee. |
| • | | Restricted stock units represent the right to receive shares of common stock (or an equivalent value in cash or other property, as specified in the award agreement) at a designated time in the future (i.e., following the end of a specified restricted period). |
| • | | Performance-based awards represent restricted stock, restricted stock units, or other awards that provide the holder with right to receive cash, shares of common stock, or other property, or any combination thereof, based on the achievement, or the level of achievement, of one or more performance goals during a specified performance period, as established by the Committee. |
| • | | Awards in lieu of obligations. The Committee may grant stock as a bonus or grant awards in lieu of other obligations of the Company to pay cash or deliver other property under the 2023 Plan or other plans or compensatory arrangements, subject to terms as established by the Committee. |
| • | | Dividend equivalents entitle the participant to payments (or an equivalent value payable in stock or other property) equal to any dividends paid on the shares underlying an award other than a stock option or SAR. No dividends or dividends equivalents may be paid before the underlying award vests. |
| • | | Other stock-based awards may be granted under the 2023 Plan, which are denominated or payable in, valued in whole or in part by reference to, or otherwise based on shares of our common stock. Cash awards also may be granted under the 2023 Plan. |
Minimum Vesting Requirement The Committee has the authority to determine the vesting schedule applicable to each award. Awards granted under the 2023 Plan will include vesting schedules under which no portion of the award will vest earlier than one year from the date of grant, other than: (i) substitute awards granted in connection with awards that are assumed, converted, or substituted pursuant to a merger, acquisition, or similar transaction; (ii) shares delivered in lieu of fully vested cash obligations; (iii) awards to non-employee directors that vest on earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting; and (iv) any additional awards, up to a maximum of 5% of the available share reserve authorized for issuance under the 2023 Plan (subject to adjustment). The Compensation Committee has discretion to provide for accelerated exercisability or vesting of any award, including in cases of termination of service, death, disability, or a change in control, in the terms of the award agreement or otherwise. No Repricing Except in connection with an equitable adjustment or a change in control, without the prior approval of the Company’s stockholders, no option or SAR may be amended to reduce the exercise price or base price, as applicable, below the exercise or base price as of the date the option or SAR was granted. In addition, and except in connection with an equitable adjustment or a change in control, without the prior approval of the Company’s stockholders, no option or SAR may be cancelled or surrendered in exchange for another award or cash when the exercise or base price, as applicable, exceeds the fair market value of one share of stock, and no option or SAR may be granted in exchange for, or in connection with, the cancellation or surrender of an option or SAR having a higher exercise or base price. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 85 |
| | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN | | |
Termination of Service The Committee determines the effect of termination of employment or service on an award. Unless otherwise provided by the Committee, except in connection with a change in control, upon a termination of employment all unvested options and SARs will terminate, and all other unvested awards will be forfeited. Performance Criteria The performance criteria used by the Committee in establishing goals for performance-based awards may consist of one or more criteria as determined by the Committee, including, without limitation: | • | | Earnings or profitability measures (which include (i) net income; (ii) operating income; (iii) income (loss) per common share from continuing operations, either basic or fully diluted; (iv) net income (loss) per common share, either basic or fully diluted; (v) earnings before interest, taxes, depreciation, and amortization; (vi) earnings before interest and taxes; (vii) any pre-established derivative of revenue (gross, operating, or net); (viii) pre-tax operating income; (ix) inventory turnover or inventory shrinkage; (x) sales growth and volumes; (xi) percentage increase in total net revenue or comparable sales; and (xii) economic profit or value created); |
| • | | Expense and efficiency measures (which include (i) gross margins, cost of goods sold, mark-ups or mark-downs; (ii) operating margins; (iii) selling, general and administrative (SG&A) expense; and (iv) other pre-established operating expenses); |
Return measures (which include (i) total stockholder return; (ii) stock price; (iii) return on assets; (iv) return on investment; (v) return on capital; and (vi) return on equity); Cash flow measures (which include (i) cash flow; (ii) free cash flow; (iii) cash flow return on investment; and (iv) net cash provided by operations); Achievement of balance sheet, income statement, or cash-flow statement objectives; Strategic or operational business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic expansion or new concept development goals; cost targets; customer satisfaction; employee satisfaction; human resources goals, including staffing, training and development and succession planning; supervision of litigation and information technology; corporate values measures that may be objectively determined, including ethics compliance, environmental, diversity commitment, and safety; and goals relating to acquisitions or divestitures of affiliates; and Other financial, operational, strategic, or individual performance criteria. Performance criteria may be established on a Company-wide basis or with respect to one or more business units, divisions, or affiliates and may be expressed in absolute terms, or relative to (i) current internal targets or budgets, (ii) past performance of the Company (including the performance of one or more business units, divisions, or affiliates), (iii) performance of one or more peer companies, (iv) performance of a broad market index or an index covering a peer group of companies, or (v) other internal or external measures of the selected performance criteria, including on an individual basis, as appropriate. Performance criteria that are financial metrics may be determined in accordance with GAAP or financial metrics that are based on, or able to be derived from GAAP, and may be adjusted when established or at any time thereafter to include or exclude any items otherwise includable or excludable under GAAP. Without limiting the generality of the immediately preceding sentence, the determination of performance with respect to a performance criteria may include or exclude: (i) items that are unusual in nature and items that are infrequently occurring; (ii) changes in applicable laws, regulations, or accounting principles; (iii) other events such as restructurings, discontinued operations, asset write-downs, significant litigation or claims, judgments, or settlements, acquisitions or divestitures, reorganizations or changes in the corporate structure or capital structure of the Company, foreign exchange gains and losses, change in the fiscal year of the Company, business interruption events, unbudgeted capital expenditures, unrealized investment gains and losses, and impairments; or (iv) such other factors as the Committee may determine. Transferability In general, awards under the 2023 Plan may not be transferred except by will or by the laws of descent and distribution, unless (for awards other than incentive stock options) otherwise provided by the Committee in accordance with the terms of the 2023 Plan. For the avoidance of doubt, no awards may be transferred for value or consideration. Forfeiture Provisions and Clawback; Hedging and Pledging Policies The Committee may condition an award (or the right to receive underlying shares, cash, or other property) upon the participant’s compliance with non-compete, non-solicit, non-disparagement, and confidentiality provisions. | | | | | | | | | | | | 86 | | | | | | | | | | | |
| | | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN |
Awards also are subject to forfeiture in the event that a participant engages in misconduct that causes or partially causes the need for restatement of financial statements that would have resulted in a lower award where the payment was predicated upon the achievement of certain financial results. Awards granted under the 2023 Plan are subject to the terms of the Company’s recoupment, clawback, or similar policy as it may be in effect from time to time or as required by law, as well as any other policy of the Company that applies to awards, such as anti-hedging or pledging policies, as they may be in effect from time to time. Change in Control Provisions Unless otherwise provided in the award agreement or another operative agreement, the following provisions will apply in the case of a “Change in Control” of the Company (as defined in the 2023 Plan): With respect to awards assumed by the surviving entity or otherwise equitably converted or substituted in connection with a Change in Control, if within 18 months after the effective date of the Change in Control, a participant’s employment is terminated without “Cause” (as such term is defined in the 2023 Plan), then: all of the participant’s outstanding options, SARs, and other outstanding awards (including awards equitably converted or substituted in connection with a Change in Control) pursuant to which the participant may have exercise rights will become fully vested and remain exercisable for a period of 90 days (or such longer period as provided in the award agreement) or until the earlier expiration of the original term of the option or SAR; all time-based vesting restrictions on the participant’s outstanding awards will lapse as of the date of termination, and payment of such awards will be made within 30 days after the date of the participant’s termination; and in the case of a performance-based award, the value of such award will be converted into time-based restricted stock or RSUs and will vest at the end of the performance period, subject to the provisions set forth immediately above, with the value of the award measured as follows: (i) if 50% or more of the applicable performance period has been completed as of the date of the Change in Control, then the value of such award will be converted into restricted stock or RSUs based on performance as of the time of the Change in Control (if reasonably determinable); or (ii) if (x) less than 50% of the performance period has been completed as of the date of the Change in Control or (y) performance is not reasonably determinable as of the date of the Change in Control, then the value of such award will be converted into restricted stock or RSUs based on the award’s target level value. Upon the occurrence of a change of control in which awards are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change of control: | • | | all outstanding options, SARs, and other outstanding awards to which participants may have exercise rights will become fully vested and remain exercisable for a period of 90 days (or such longer period as provided in the award agreement) or until the earlier expiration of the original term of the option or SAR, provided that the Committee may instead provide for payment equal to the difference between the consideration (consisting of cash or other property (including securities of a successor or parent corporation) received by holders of stock in the Change in Control transaction and the exercise price of the applicable option or SAR, if such difference is positive; provided, further, however, that any option or SAR whose exercise price is greater than the per share consideration received by holders of the underlying shares of stock in connection with the Change in Control shall be canceled without payment of any consideration; |
time-based vesting restrictions on outstanding awards will lapse, and payment of such awards will be made at the time of the Change in Control; and all performance criteria and other conditions to payment of outstanding performance-based awards will be deemed to be achieved or fulfilled, measured as follows: (i) if 50% or more of the applicable performance period has been completed as of the date of the Change in Control, then the value of such award will be based on performance as of the time of the Change in Control (if reasonably determinable); or (ii) if (x) less than 50% of the performance period has been completed as of the date of the Change in Control or (y) performance is not reasonably determinable as of the date of the Change in Control, then the value of such award will be based on the award’s target level value, and payment of such awards on the applicable basis shall be made or otherwise settled at the time of the Change in Control. Notwithstanding the foregoing, to the extent required by Code Section 409A, an award will vest on the basis described above but remain payable on the date(s) provided in the underlying award agreements. Adjustment In the event of a merger, reorganization, recapitalization, stock dividend, stock split, or other change in corporate structure affecting our common stock, the Committee shall make adjustments in the aggregate number and kind of shares reserved for | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 87 |
| | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN | | |
issuance under the 2023 Plan, in the maximum number of shares that may be granted in any calendar year to any participant, in the number, kind, and exercise price of shares subject to outstanding awards, and such other adjustments as it may determine to be appropriate to ensure that participants are treated equitably and there is no dilution or enlargement of rights. Amendment and Termination Unless earlier terminated by action of the Board, the authority of the Committee to make grants under the 2023 Plan shall terminate on the tenth anniversary of the Effective Date. The Board may amend, suspend, or terminate the 2023 Plan at any time, except that no amendment, suspension, or termination may be made without the approval of the Company’s stockholders if required by applicable law or stock exchange listing requirement, or if the amendment, alteration, or other change materially increases the benefits accruing to participants, increases the number of shares available under the 2023 Plan, or if the Board in its discretion determines that obtaining such stockholder approval is for any reason advisable. For avoidance of doubt, the rights of a participant will not be deemed to have been altered or impaired in any materially adverse respect if, without the consent of the participant, the Committee amends an award to: (i) clarify the manner of exemption from, or to bring the award into compliance with, Code Section 409A; (ii) to correct clerical or typographical errors; or (iii) to comply with other applicable laws. Without the prior approval of the Company’s stockholders, the 2023 Plan may not be amended to permit the repricing of options or SARs, directly or indirectly. The Committee may amend or terminate outstanding awards; however, such amendments may require the consent of the participant. Certain Material U.S. Federal Income Tax Consequences The following is a brief summary of the principal U.S. federal income tax consequences with respect to the Company and 2023 Plan participants and is based upon an interpretation of present U.S. federal income tax laws, regulations and decisions, all of which are subject to change. This summary is intended for general information only and does not purport to be a complete analysis of all of the potential tax effects of the 2023 Plan or constitute tax advice to the participants. State, local, and foreign tax consequences are not discussed, and may vary from jurisdiction to jurisdiction. Tax consequences may vary with the identity of the recipients and the method of payment or settlement. The Company does not provide tax advice to participants and each participant should rely on his or her own tax advisers regarding federal income tax treatment under the 2023 Plan. To the extent that any awards under the 2023 Plan are subject to Code Section 409A, the following discussion assumes that such awards will be designed to conform to the requirements of Code Section 409A and the regulations promulgated thereunder (or an exception thereto); provided, however, the Company makes no representation that any or all of the awards or payments under the 2023 Plan will be exempt from or comply with Code Section 409A, and makes no undertaking to preclude Code Section 409A from applying. The 2023 Plan is not subject to the protective provisions of the Employee Retirement Income Security Act of 1974 and is not qualified under Code Section 401(a). Nonstatutory Stock Options There will be no federal income tax consequences to the optionee or to the Company upon the grant of a nonstatutory stock option under the 2023 Plan. When the optionee exercises a nonstatutory stock option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the stock received upon exercise of the stock option at the time of exercise over the exercise price, and the Company will be allowed a corresponding federal income tax deduction, subject to any applicable limitations under Code Section 162(m). Any gain (or loss) that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain (or loss), depending on how long the shares were held. The capital gain (or loss) will be short-term if the option shares are disposed of within one year after the nonstatutory stock option is exercised, and long-term if the option shares are disposed of more than 12 months as of the sale date. Incentive Stock Options Options issued under the 2023 Plan and designated as incentive stock options are intended to qualify as such under Code Section 422. Under the provisions of Code Section 422 and the related regulations promulgated thereunder, there will be no federal income tax consequences to the optionee or to the Company upon the grant or exercise of an incentive stock option (note, however, that the difference between the fair market value of the option shares at the time of exercise and the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income). If the optionee holds the option shares for the required holding period of at least two years after the date of grant and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term | | | | | | | | | | | | 88 | | | | | | | | | | | |
| | | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN |
capital gain or loss, and the Company will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange or other disqualifying disposition before the required holding period ends, in general, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price (and capital gain on the excess, if any, of the amount realized on the disqualifying disposition over the fair market value of the shares of common stock at the time of exercise), and the Company generally will be allowed a federal income tax deduction equal to such amount, subject to any applicable limitations under Code Section 162(m). Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the optionee held the shares. Stock Appreciation Rights SARs are treated very similarly to non-statutory stock options for federal tax purposes. A participant receiving a SAR under the 2023 Plan will not recognize income, and the Company will not be allowed a federal income tax deduction, at the time the award is granted. When the participant exercises the SAR, however, he or she will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of stock (or cash) received upon exercise of the SAR at the time of exercise over the exercise price, and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). If the SAR is paid in stock, then any gain (or loss) that the participant realizes when he or she later sells or disposes of the SAR shares will be short-term or long-term capital gain (or loss), depending on how long the shares were held. The capital gain (or loss) will be short-term if the SAR shares are disposed of within one year after the SAR is exercised, and long-term if the SAR shares were held for more than 12 months after exercise. Restricted Stock Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and the Company will not be allowed a federal income tax deduction, at the time a restricted stock award is granted, provided that the restricted stock is nontransferable and has not vested (i.e., is no longer subject to a substantial risk of forfeiture). When the restrictions lapse, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the vested stock as of that date (less any amount, if any, he or she paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). If the participant files an election with the Internal Revenue Service under Code Section 83(b), with adequate notice to the Company, within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant, as if the stock was unrestricted, equal to the fair market value of the stock as of that date (less any amount paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be entitled to any deduction, refund, or loss for tax purposes with respect to the tax previously paid pursuant to the Code Section 83(b) election. If an election under Code Section 83(b) has not been made, any dividends received with respect to the restricted stock award prior to the lapse of the restrictions will be treated as additional compensation that is taxable as ordinary income to the participant. The Company will be entitled to a deduction in the same amount and at the same time that the participant recognizes ordinary income. Upon the sale of the vested common stock, the participant will realize short-term or long-term capital gain or loss depending on the holding period. The holding period generally begins when the restriction period expires. If the recipient timely made an election under Code Section 83(b), the holding period commences on the date of the grant. Restricted Stock Units A participant will not recognize income, and the Company will not be allowed a federal income tax deduction, at the time of grant of a restricted stock unit. Rather, upon receipt of cash, stock or other property in settlement of a restricted stock unit award, the participant will recognize ordinary income equal to the fair market value of the stock or other property as of that date (less any amount he or she paid for the stock or other property), and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). If the recipient receives shares of stock upon settlement, then, upon disposition of such shares, appreciation or depreciation after the settlement date is treated as either short-term or long-term capital gain, depending on how long the shares have been held. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 89 |
| | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN | | |
Performance-Based Awards. A participant will not recognize income, and the Company will not be allowed a federal income tax deduction, at the time a performance-based award is granted (for example, when the performance goals are established). Upon receipt of cash, stock, or other property in settlement of a performance-based award, the participant will recognize ordinary income equal to the cash, stock, or other property received, and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Other Equity-Based Awards and Other Cash Awards A participant will recognize ordinary income upon receipt of cash pursuant to a cash award and the Company will generally be entitled to a deduction equal to the amount of ordinary income realized by the participant, subject to any applicable limitations under Code Section 162(m). The federal income tax consequences of other equity-based awards will depend on how the awards are structured. Generally, the Company will be entitled to a deduction with respect to other equity-based awards only to the extent that the recipient realized compensation income in connection with such awards. Code Section 409A Section 409A of the Code (“Section 409A”) applies to compensation that individuals earn in one year but that is not paid until a future year. This is referred to as nonqualified deferred compensation. Section 409A, however, does not apply to qualified plans (such as a Section 401(k) plan) and certain welfare benefits. If deferred compensation covered by Section 409A meets the requirements of Section 409A, then Section 409A has no effect on the individual’s taxes. The compensation is taxed in the same manner as it would be taxed if it were not covered by Section 409A. If a deferred compensation arrangement does not meet the requirements of Section 409A, the compensation is subject to accelerated taxation in the year in which such compensation is no longer subject to a substantial risk of forfeiture and certain additional taxes, interest, and penalties, including a 20% additional income tax. Section 409A has no effect on Federal Insurance Contributions Act (Social Security and Medicare) tax. The 2023 Plan permits the grant of various types of incentive awards, which may or may not be exempt from Section 409A. Restricted stock awards, and stock options and SARs that comply with the terms of the 2023 Plan, are designed to be exempt from the application of Section 409A. Restricted stock units and cash incentive awards granted under the 2023 Plan, whether time-based or performance-based, would be subject to Section 409A unless they are designed to satisfy the short-term deferral exemption from such law. If not exempt, such awards must be specially designed to meet the requirements of Section 409A in order to avoid early taxation, certain additional taxes and/or interest charges. Awards under the 2023 Plan are intended to comply with the requirements of Section 409A or an exception thereto. Notwithstanding, Section 409A may impose upon a participant certain taxes or interest charges for which the participant is responsible. Section 409A does not impose any penalties on the Company and does limit the Company’s deduction with respect to compensation paid to a participant, though the Company does have an obligation to withhold, remit, and report income and related taxes in compliance with the requirements of Section 409A. Company Deduction The Company generally may deduct any compensation or ordinary income recognized by the recipient of an award under the 2023 Plan when recognized, subject to the limits of Code Section 162(m). Prior to 2018, Code Section 162(m) imposed a $1 million limit on the amount that a public company may deduct for compensation paid to a company’s chief executive officer or any of the company’s three other most highly compensated executive officers (other than the chief financial officer) who are employed as of the end of the year. This limitation did not apply to compensation that met Code requirements for “qualified performance-based compensation.” The performance-based compensation exemption, the last day of the year determination date, and the exemption of the chief financial officer from Code Section 162(m)’s deduction limit have all been repealed under the Tax Cuts and Jobs Act of 2017 (“Tax Reform”), effective for taxable years beginning after December 31, 2017, such that awards paid under the 2023 Plan to our covered current and former executive officers may not be deductible for such taxable years due to the application of the $1 million deduction limitation. However, under Tax Reform transition relief, compensation provided under a written binding contract in effect on November 2, 2017 that is not materially modified after that date continues to be subject to the performance-based compensation exception. As in prior years, while deductibility of executive compensation for federal income tax purposes is among the factors the Committee considers when structuring our executive compensation, it is not the sole or primary factor considered. Our Board and the Committee retain the flexibility to authorize compensation that may not be deductible if they believe it is in our best interests. | | | | | | | | | | | | 90 | | | | | | | | | | | |
| | | | | PROPOSAL FIVE: APPROVAL OF THE 2023 STOCK AWARD AND INCENTIVE PLAN |
Consequences of Change of Control If a change of control of the Company causes awards under the 2023 Plan to accelerate vesting or is deemed to result in the attainment of performance goals, the participants could, in some cases, be considered to have received “excess parachute payments,” which could subject participants to a 20% excise tax on the excess parachute payments and result in a disallowance of the Company’s deductions under Code Section 280G. Tax Withholding The Company and its affiliates have the right to deduct or withhold, or require a participant to remit to the Company and its affiliates, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the 2023 Plan. New Plan Benefits No awards have been granted under the 2023 Plan. All future awards under the 2023 Plan will be made at the discretion of the Committee and Board, as applicable. Therefore, the benefits and amounts that will be received or allocated under the 2023 Plan in the future are not determinable at this time. The Board recommends that the stockholders vote “FOR” the approval of the 2023 Stock Award and Incentive Plan. Equity Compensation Plan Table The following table sets forth additional information as of the end of Fiscal 2022 about shares of our common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements. The information includes the number of shares covered by, and the weighted average exercise price of, outstanding options and other rights and the number of shares remaining available for future grants excluding the shares to be issued upon exercise of outstanding options, warrants, and other rights. | | | | | | | | | | | | | | | | Column (a) | | | Column (b) | | | Column (c) | | | | | Number of securities
to be issued upon
exercise of outstanding
options,
warrants and rights | | | Weighted-average
exercise price of
outstanding options,
warrants and
rights | | | Number of securities
remaining available
for issuance under
equity compensation
plans (excluding
securities reflected
in column (a)) | | Equity compensation plans approved by stockholders (1) | | | 3,949,586 | | | $ | 17.01 | | | | 4,841,412 | | Equity compensation plans not approved by stockholders (2) | | | — | | | | — | | | | 4,882,020 | | Total | | | 3,949,586 | | | $ | 17.01 | | | | 9,723,432 | |
| (1) | Equity compensation plans approved by stockholders include the 2020 Plan, the 2017 Plan, and the 2014 Plan. |
| (2) | Equity compensation plan not approved by stockholders includes the Employee Stock Purchase Plan which was instituted prior to the NYSE listing requirement for stockholder approval of such plans and related to the open market purchase of Company stock by our employees through payroll deductions with a Company match of 15% on contributions up to $100 per payroll period as elected by such participating employees and pursuant to the terms of such plan. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 91 |
OWNERSHIP OF OUR SHARES The following table shows, as of April 1, 2021,2023, unless otherwise noted, certain information with regard to the beneficial ownership of our common stock by:by (i) each person known by us to own beneficially more than 5% of the outstanding shares of common stock; (ii) each of our directors; (iii) each named executive officer listed in the Summary Compensation Table; and (iv) all directors and current executive officers as a group. | | | | | | | | | | | | | | | | | | | | | | | | Shares Beneficially Owned | | | | Common Stock(1) | | Right to Acquire(2) | | Total | | Percent(3) | 5% Beneficial Owners | | | | | | | | | | | | | | | | | | | | | FMR LLC (4) | | | | 24,958,328 | | | | | — | | | | | 24,958,328 | | | | | 14.9 | % | BlackRock, Inc.(5) | | | | 16,402,031 | | | | | — | | | | | 16,402,031 | | | | | 9.8 | % | The Vanguard Group(6) | | | | 13,386,409 | | | | | — | | | | | 13,386,409 | | | | | 8.0 | % | Jay L. Schottenstein(7) | | | | 10,957,960 | | | | | 756,990 | | | | | 11,714,950 | | | | | 7.0 | % | Cooke & Bieler LP(8) | | | | 10,759,643 | | | | | — | | | | | 10,759,643 | | | | | 6.4 | % | Melvin Capital Management LP (9) | | | | 9,000,000 | | | | | — | | | | | 9,000,000 | | | | | 5.4 | % | Directors and Executive Officers(10) | | | | | | | | | | | | | | | | | | | | | Sujatha Chandrasekaran | | | | 30,580 | | | | | — | | | | | 30,580 | * | | | | | | Steven A. Davis | | | | — | | | | | 5,708 | | | | | 5,708 | * | | | | | | Jennifer M. Foyle | | | | 102,956 | | | | | 408,136 | | | | | 511,092 | * | | | | | | Deborah A. Henretta | | | | — | | | | | 24,744 | | | | | 24,744 | * | | | | | | Charles F. Kessler | | | | 98,568 | | | | | 249,980 | | | | | 348,548 | * | | | | | | Thomas R. Ketteler | | | | 9,014 | | | | | 66,131 | | | | | 75,145 | * | | | | | | Robert L. Madore (11) | | | | TBD | | | | | TBD | | | | | TBD | * | | | | | | Michael A. Mathias | | | | 15,144 | | | | | — | | | | | 15,144 | * | | | | | | Cary D. McMillan | | | | — | | | | | 133,458 | | | | | 133,458 | * | | | | | | Janice E. Page | | | | 69,083 | | | | | 3,215 | | | | | 72,298 | * | | | | | | Michael R. Rempell | | | | 183,663 | | | | | 308,913 | | | | | 492,576 | * | | | | | | David M. Sable | | | | 29,171 | | | | | 41,369 | | | | | 70,540 | * | | | | | | Noel J. Spiegel | | | | 10,000 | | | | | 105,067 | | | | | 115,067 | * | | | | | | All current directors and current executive officers as a group (16 persons in group) | | | | 11,550,406 | | | | | 2,278,556 | | | | | 13,828,962 | | | | | 8.2 | % |
| | | | | | | | | | | | | | | | | | | | Shares Beneficially Owned | | | | | Common Stock(1) | | | Right to Acquire(2) | | | Total | | | Percent(3) | | 5% Beneficial Owners | | | | | | | | | | | | | | | | | BlackRock, Inc. (4) | | | 32,726,792 | | | | — | | | | 32,726,792 | | | | 16.7 | % | FMR LLC (5) | | | 28,110,838 | | | | — | | | | 28,110,838 | | | | 14.3 | % | The Vanguard Group (6) | | | 19,051,233 | | | | — | | | | 19,051,233 | | | | 9.7 | % | Jay L. Schottenstein (7) | | | 10,984,671 | | | | 1,511,927 | | | | 12,496,598 | | | | 6.3 | % | | | | | | Directors and Executive Officers (8) | | | | | | | | | | | | | | | | | Marisa A. Baldwin | | | 2,020 | | | | 13,508 | | | | 15,528 | | | | | * | Sujatha Chandrasekaran | | | 49,440 | | | | — | | | | 49,440 | | | | | * | Jennifer M. Foyle | | | 218,260 | | | | 715,803 | | | | 934,063 | | | | | * | Deborah A. Henretta | | | — | | | | 44,947 | | | | 44,947 | | | | | * | Michael A. Mathias | | | 69,170 | | | | 76,319 | | | | 145,489 | | | | | * | Andrew J. McLean (9) | | | 56,457 | | | | — | | | | 56,457 | | | | | * | Cary D. McMillan | | | — | | | | 158,586 | | | | 158,586 | | | | | * | Janice E. Page | | | 87,943 | | | | 3,360 | | | | 91,303 | | | | | * | Michael R. Rempell | | | 183,525 | | | | 534,591 | | | | 718,116 | | | | | * | David M. Sable | | | 42,189 | | | | 43,243 | | | | 85,432 | | | | | * | Noel J. Spiegel (10) | | | 40,000 | | | | 128,909 | | | | 168,909 | | | | | * | All current directors and current executive officers as a group (12 persons in group) | | | 11,694,222 | | | | 3,232,262 | | | | 14,926,484 | | | | 7.5 | % |
| * | Represents less than 1% of our shares of common stock. |
| (1) | Unless otherwise indicated, each of the stockholders has sole voting power and power to sell with respect to the shares of common stock beneficially owned. |
| (2) | Includes (a) shares for options exercisable within 60 days of April 1, 20212023 and (b) total deferred share units as well as the respective dividend equivalents. |
| (3) | Percent is based upon the 167,214,693196,201,341 shares outstanding at April 1, 20212023 and the shares that such director or executive officer has the right to acquire upon options exercisable within 60 days of April 1, 2021,2023, share units and dividend equivalents, if applicable. |
| (4) | In a Schedule 13G/A filed with the SEC on January 5, 2023, BlackRock, Inc. reported beneficial ownership and sole dispositive power of an aggregate amount of 32,726,792 shares. BlackRock, Inc. has sole voting power with respect to 32,169,100 shares, shared voting power with respect to 0 shares, sole dispositive power of 32,726,792 shares and shared dispositive power with respect to 0 shares. The address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. |
| (5) | In a Schedule 13G/A filed with the SEC on February 10, 2021,9, 2023, FMR LLC reported beneficial ownership and sole dispositive power of an aggregate amount of 24,958,32828,110,838 shares. FMR LLC has sole voting power with respect to 1,340,70428,052,616 shares and shared voting power and shared dispositive power with respect to 0 shares. The address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. |
(5) | In a Schedule 13G/A filed with the SEC on February 5, 2021, BlackRock, Inc. reported beneficial ownership and sole dispositive power of an aggregate amount of 16,694,487 shares. BlackRock, Inc. has sole voting power with respect to 16,402,031 shares, shared voting power with respect to 0 shares, and shared dispositive power with respect to 0 shares. The address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.
|
| | | | | 2021 Proxy Statement
| | |
| | 83 |
| (6) | In a Schedule 13G/A filed with the SEC on FebruaryJanuary 10, 2021,2023, The Vanguard Group reported beneficial ownership of an aggregate amount of 13,386,40919,051,233 shares. The Vanguard Group has sole voting power with respect to 0 shares, shared voting power with respect to 154,494109,435 shares, sole dispositive power with respect to 13,106,85918,777,799 shares, and shared dispositive power with respect to 279,550273,434 shares. The address for The Vanguard Group is 100 Vanguard Blvd.,Boulevard, Malvern, PAPennsylvania 19355. |
| (7) | For Mr. Schottenstein, the 11,914,95012,496,598 shares disclosed in the table above consist of the following for which he has voting power: (1) sole power to vote and dispose as trustee of a trust that owns 6,300 sharesshares; (2) shared power to vote and dispose of a revocable trust that owns 1,258,2511,602,031 shares; (2)(3) shared power to vote and dispose for trusts that own 3,593,903 shares; (3)(4) sole power to vote 756,990and dispose of 1,496,954 shares for options exercisable within 60 days of April 1, 2021; (4)2023; (5) sole power to vote and dispose of 14,323 shares for restricted stock units |
| | | | | | | | | | | | 92 | | | | | | | | | | | |
| vesting within 60 days of April 1, 2023; (6) 2,971,202 shares held by SEI, Inc. (SEI). Mr. Schottenstein serves as Chairman of SEI Inc. and has or shares voting power for 60.6% of SEI, Inc.; (5)SEI; (7) 2,611,235 shares held by Schottenstein SEI, LLC. Mr.LLC (SSEI). (Mr. Schottenstein has or sharesis the voting power for 60.6%manager of Schottenstein SEI, LLCSSEI); and serves as Chairman of SEI, Inc., its sole member; and (6)(8) sole power to vote 517,069200,000 shares held by family members pursuant to the terms of a share exchangevoting agreement that are included under his name in the table. Excluded from the table are an aggregate of 4,835,370 shares held by various family trusts and a limited liability company of which Mr. Schottenstein’s wife, Jean R. Schottenstein, has or shares voting power and of which Mr. Schottenstein is not deemed the beneficial owner. Together, Mr. and Mrs. Schottenstein are deemed the beneficial owners of 16,750,320 shares or 10% of the Company’s common stock as of April 1, 2021. |
Excluded from the table are an aggregate of 4,835,370 shares held by various family trusts and a limited liability company of which Mr. Schottenstein’s wife, Jean R. Schottenstein, has or shares voting power and of which Mr. Schottenstein is not deemed the beneficial owner. Together, Mr. and Mrs. Schottenstein are deemed the beneficial owners of 17,331,968 shares or 8.8% of the Company’s common stock as of April 1, 2023. | (8) | In a Schedule 13G filed with the SEC on February 16, 2021, Cooke & Bieler LP reported beneficial ownership and shared dispositive power of an aggregate amount of 10,759,643 shares. Cooke & Bieler LP has sole voting power with respect to 0 shares, shared voting power with respect to 8,805,053 shares, and sole dispositive power with respect to 0 shares. The address for Cooke & Bieler LP is 2001 Market Street, Suite 4000, Philadelphia, PA 19103.
|
(9) | In a Schedule 13G/A filed with the SEC on February 16, 2021, Melvin Capital Management LP reported beneficial ownership, shared voting power and shared dispositive power of an aggregate amount of 9,000,000 shares. Melvin Capital Management LP has sole voting power and sole dispositive power with respect to 0 shares. The address for Melvin Capital Management LP is 535 Madison Avenue, 22nd Floor, New York, NY 10022.
|
(10) | The address of each director and executive officer shown in the table above is c/o American Eagle Outfitters, Inc., 77 Hot Metal Street, Pittsburgh, PAPennsylvania 15203. Executive officers and directors are subject to stock ownership requirements. Please see the “Stock Ownership Requirements” section for a discussion of executive officer and director stock ownership requirements. |
(11)(9) | Mr. Madore,McLean, former Executive Vice President, Chief FinancialCommercial Officer, ceased serving as an executive officer effective April 20,2020.September 12, 2022. Shares of common stock were calculated based on the Company’s stock records as of April 20, 2020.September 12, 2022. No further ownership information was available to the Company after Mr. MadoreMcLean ceased to be a Section 16 reporting person. |
| (10) | For Mr. Spiegel, the 40,000 shares disclosed in the table above consist of shares held by Mr. Spiegel’s wife of which Mr. Spiegel is not deemed the beneficial owner. |
Stock Ownership Requirements Board of Directors Our Board has determined that each director should own common stock of the Company and has established the following ownership guidelines. Within five years of joining the Board, eachnon-employee director must hold stock of the Company worth at least five times the current annual cash base retainer amount of $65,000, or $325,000. The following forms of equity interests in the Company count toward the stock ownership requirement: shares purchased on the open market; shares obtained through stock option exercise; shares held as deferred stock units; shares held in benefit plans; shares held in trust for the economic benefit of the director or spouse or dependent children of the director; and shares owned jointly or separately by the spouse or dependent children of the director. Stock options do not count toward the stock ownership requirement. As of the end of Fiscal 2020,2022, each director owned shares in excess of the applicable guideline or was within the five year ramp-up period.these guidelines. Management We have adopted stock ownership requirements to establish commonality of interest between management and stockholders, as well as to encourage executives to think and act like owners. By encouraging executives to accumulate and hold a minimum level of ownership, our compensation program ensures that pay remains at risk not only with regard to outstanding awards but also with regard to appreciation of vested awards. Eligible executives are required to own the equivalent value of a multiple of their salary. For Mr. Schottenstein, this multiple is six times and for the other NEOs, three times. This requirement can be met through various forms of equity, including personal holdings and equity incentive awards such as restricted stock units. Unearned performance awards and unexercised stock options do not count toward ownership guideline attainment. Executives not meeting their requirement must retain 50% of their after-tax shares acquired through stock sales until the requirement is reached. The CEO considers compliance with the ownership requirements when recommending annual long-term incentive awards for the executives, including the NEOs, to the Compensation Committee. If an executive does not hold half of after-tax gains in our stock, he or she jeopardizes eligibility for future stock grants or awards. TheAs of the Record Date of this Proxy Statement, the CEO and the other NEOs are in compliance with their requirement. | | | | | 84 | | |
| |
|
requirement with the exception of Mr. Mathias and Ms. Baldwin, each of whom have either joined the company or have been appointed as an executive officer within the last three years. Mr. Mathias became an executive officer in 2020 and Ms. Baldwin joined the Company in 2021. Both executives are on track to meet the requirements within a reasonable timeline and are subject to trading restrictions until the requirement has been met. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our executive officers, directors or persons who are beneficial owners of more than ten percent of our common stock (“reporting persons”) to file reports of ownership and changes in ownership with the SEC. Reporting persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by them. Based onsolely upon our review of the copiesForms 3, 4, and 5, as applicable, filed on EDGAR and the representations of the Section 16(a) forms received by us, we believe that during Fiscal 2020, all reporting persons, compliedfor Fiscal 2022, we have determined that our executive officers, directors and greater-than-ten-percent beneficial owners filed their beneficial ownership and changes in ownership reports with the applicable filing requirements with the exception of Jennifer M. Foyle inadvertently filingSEC in a timely manner, other than one late Form 4 reporting one transaction. All reports in Fiscal 2021 have beenfor Mr. Sable, which was inadvertently filed on a timely basis as of April 14, 2021.late due to an administrative error. | | | | | | | | | | | | | | | | | 2021 2023 Proxy Statement
| | | | | 85 93 |
INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING Who is entitled to vote? Stockholders of record at the close of business on April 7, 2021,14, 2023, the record date for the 20212023 Annual Meeting, are entitled to vote at the 20212023 Annual Meeting. As of the record date, there were 167,214,693197,343,131 shares of common stock, par value $0.01 per share, outstanding and entitled to vote. Each share that you own entitles you to one vote. How does the Board recommend I vote on these proposals? The Board recommends a vote: FOR the nominees for Class II directorI directors listed in this Proxy Statement; FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 29, 2022;28, 2023; FOR Fiscal 2022 Say on Pay Vote; ONE YEAR for advisory vote on the approval,frequency of future advisory votes on a non-binding, advisory basis,executive compensation; and FOR approval of the compensation of our named executive officers.2023 Stock Award and Incentive Plan. Why did I receive a Notice of Internet Availability of Proxy Materials? In order to both save money and protect the environment, we have elected to provide access to our proxy materials and Fiscal 20202021 Annual Report on Form 10-K (“Annual Report”) on the Internet, instead of mailing the full set of printed proxy materials, in accordance with the rules of the SEC for the electronic distribution of proxy materials. On April 21, 2021,26, 2023, we mailed to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to gain access to our Proxy Statement and Annual Report and how to vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request it. Instead, the Notice instructs you on how to obtain and review all of the important information contained in the Proxy Statement and Annual Report. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. How do I vote my shares? We encourage stockholders to vote before the 20212023 Annual Meeting. If your shares are registered directly in your name (i.e., you are a “registered stockholder”), you received a Notice. You should follow the instructions on the Notice in order to ensure that your vote is counted. Alternatively, you may attend and vote at the virtual annual meeting. If you are a beneficial owner of shares registered in the name of your broker, bank or other agent (i.e., your shares are held in “street name”), you should receive either a Notice or a voting instruction form (“VIF”) along with a Proxy Statement. You should follow the instructions on the Notice or the VIF in order to ensure that your vote is counted. Have your Notice, proxy card or voting instruction form available when you access the virtual meeting website. Can I change or revoke my proxy? Yes. If you are a registered stockholder, you may revoke your proxy at any time before it is voted by delivering written notice of revocation to the Company (Attention: Jennifer B. Stoecklein, Corporate Secretary). Such written notice should be received by the Company prior to the 20212023 Annual Meeting. You may also change or revoke your proxy by submitting a properly executed proxy bearing a later date or by attending the meeting virtually and voting on-line.online. If your shares are held in street name, you may revoke your proxy by submitting new voting instructions to your broker or, if you have obtained a legal proxy from your broker, by virtually attending the 20212023 Annual Meeting and voting on-line.online. | | | | | | | | | | | 86 94 | | | | | | | | | | | |
| | | | | INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING |
What constitutes a quorum? A quorum of stockholders is necessary to transact business at the 20212023 Annual Meeting. A quorum will be present if a majority of the outstanding shares of the Company’s common stock, as of the close of business on the record date, are represented by stockholders present at the meeting or by proxy. At the close of business on the record date, there were 167,214,693197,343,131 shares of common stock outstanding and entitled to vote. Abstentions and broker non-votes will count as present in determining whether there is a quorum. Broker non-votes occur when brokers, who hold their customers’ shares in street name, sign and submit proxies for such shares and vote such shares on some matters but not others. This would occur when brokers have not received any instructions from their customers, in which case the brokers, as the holders of record, are permitted to vote on “routine” matters, which include the ratification of the appointment of an independent registered public accounting firm, but not on “non-routine”“non-routine” matters, such as the election of directors, or the non-binding, advisory approval of the compensation of our named executive officers. Therefore, if you do not instruct your broker how to vote on Proposals 1 and 3, your shares will not be counted for those proposals. We urge you to give voting instructions to your broker on all voting items. What vote is required to approve each proposal? The Company is incorporated in the State of Delaware.Delaware and our shares are listed on the NYSE. As a result, the Delaware General Corporation Law (“DGCL”) and the NYSE listing standards govern the voting standards applicable to actions taken by our stockholders. Under our Bylaws, in an uncontested election, each director is to be elected by stockholders by the vote of a majority of votes cast. Our Bylaws provide that a majority of votes cast means that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Under our Bylaws, votes cast include votes “against” and exclude “abstentions” with respect to that director’s election. Under the DGCL, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter is required to approve Items 2, 3, 4 and 5 appearing on the proxy card. The following discussiontable outlines the voting requirements applicable to each proposal being submitted for stockholder approval at the 20212023 Annual Meeting, as well as the impact of abstentions and broker non-votes. Once a quorum is established, the following voting requirements and related effect of abstentions and broker non-votes on each item for stockholder proposalapproval apply. | | | | | | | | | | | | | | Voting Options | | Board
Recommendation | | Vote Required to Adopt the
Proposal | | Effect of Abstentions and
(1) | | Effect of Broker
Non-Votes(2) | Item 1 – Election of Class III Directors | | “For,” “Against,” or “Abstain” for each nominee | | FOR each nominee | | Majority of the votes cast | | None | | None | Item 2 – Ratify the appointment of EY as independent registered public accounting firm for Fiscal 20212023 | | “For,” “Against,” or “Abstain” | | FOR | | Majority of the shares of common stock present at the meeting, in person or by proxy, and entitled to vote on Item 2 | | Abstentions are treated as votes “against.” | | Brokers have discretion to vote on this item.Item 2 | Item 3 – Advisory Approval of Named Executive Officer Compensation for Fiscal 20202022 Say on Pay Vote | | “For,” “Against,” or “Abstain” | | FOR | | Majority of the shares of common stock present at the meeting, in person or by proxy, and entitled to vote on Item 3 | | Abstentions are treated as votes “against.” | | None |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | 95 |
| | | | INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING | | |
| | | | | | | | | | | | | Voting Options | | Board
Recommendation | | Vote Required to Adopt the
Proposal | | Effect of Abstentions(1) | | Effect of Brokernon-votes
Non-Votes(2) | | Item 4 – Advisory vote on the frequency of future advisory votes on executive compensation | | “One Year,” “Two Years” or “Three Years” or “Abstain” | | 1 YEAR | | Majority of the shares of common stock present at the meeting, in person or by proxy, and entitled to vote on Item 4 | | Abstentions are treated as votes “against.” | | None | | Item 5 – Approval of the 2023 Stock Award and Incentive Plan | | “For,” “Against,” or “Abstain” | | FOR | | Majority of the shares of common stock present at the meeting, in person or by proxy, and entitled to vote on Item 5 | | Abstentions are treated as votes “against.” | | None |
| (1) | Under the DGCL, shares that abstain with respect to Items 2, 3, 4 and 5 constitute shares that are present and entitled to vote and, accordingly, have no effect.the practical effect of being voted “against” such items. |
| (2) | Under NYSE rules, Item 2 is considered a “routine” proposal on which brokers are permitted to vote in their discretion even if the beneficial owners do not provide voting instructions. However, Items 1, 3, 4 and 5 are not considered to be routine matters and brokers will not be entitled to vote thereon unless beneficial owners provide voting instructions. Accordingly, broker non-votes will not be counted toward the tabulation of votes on Items 1, 3, 4 and 5. |
How can I participate in the virtual Annual Meeting? Due to concerns relating to COVID-19, the 2021The 2023 Annual Meeting will be virtual-only. You will be able to attend the virtual meeting by first registering at http://viewproxy.com/ae/2021/2023/htype.asp. You will receive a meeting invitation by e-mailemail with your unique join link along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual meeting.
We have created and implemented the virtual format in order to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from any location around the world, at no cost. However, you will bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies. A virtual Annual Meeting makes it possible for more stockholders (regardless of size, resources or physical location) to have direct access to information more quickly, while saving the company and our stockholders time and money, especially as physical attendance at meetings has dwindled. We also believe that the online tools we have selected will increase stockholder communication. For | | | | | 2021 Proxy Statement
| | |
| | 87 |
| INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING |
example, the virtual format allows stockholders to communicate with us in advance of, and during, the Annual Meeting so they can ask questions of our Board or management. During the live Q&A session of the Annual Meeting, we may answer questions as they come in and address those asked in advance, to the extent relevant to the business of the Annual Meeting and as time permits. Both stockholders of record and street name stockholders will be able to attend the Annual Meeting via live audio webcast, submit their questions during the meeting and vote their shares electronically at the Annual Meeting. If you are a registered holder, your virtual control number will be on your Notice of Internet Availability of Proxy Materials or proxy card. If you hold your shares beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the annual meeting.Annual Meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the 2021 Annual Meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at http://viewproxy.com/ae/2021/2023/htype.asp. On the day of the annual meeting,Annual Meeting, you may only vote during the meeting by e-mailingemailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting. | | | | | | | | | | | | 96 | | | | | | | | | | | |
| | | | | INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING |
How can I request technical assistance during the Annual Meeting? There will be technicians ready to assist you with any technical difficulties you may have accessing the annual meetingAnnual Meeting live audio webcast. Please be sure to check in by 10:45 a.m. ET on June 3, 2021, (157, 2023 (15 minutes prior to the start of the meeting is recommended)recommended), the day of the meeting, so that any technical difficulties may be addressed before the annual meetingAnnual Meeting live audio webcast begins. If you encounter any difficulties accessing the webcast during the check-in or meeting time, please email VirtualMeeting@viewproxy.com or call 866-612-8937. Who bears the costs of this solicitation? The Company bears the cost of the solicitation of proxies, including the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of stock. Our representatives may solicit proxies by mail, telephone, or personal interview. To solicit proxies, we request the assistance of banks, brokerage houses, and other custodians and, upon request, reimburse such organizations for their reasonable expenses in forwarding soliciting materials to beneficial owners and in obtaining authorization for the execution of proxies. Could other matters be decided at the Annual Meeting? We do not know of any other matters that will be considered at the Annual Meeting. If any matter other than those described in this Proxy Statement arises at the Annual Meeting, the proxies will be voted at the discretion of the proxy holders. Where and when will I be able to find the voting results? You can find the official results of the voting at the Annual Meeting in our Current Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting. If the official results are not available at that time, we will provide preliminary voting results in the Form 8-K and will provide the final results in an amendment to the Form 8-K as soon as they become available. | | | | | | | | | | | 88 | | | | | | | 2023 Proxy Statement
| | |
| | 97 |
SUBMISSION OF DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS Can I nominate someone for election to the Board? Yes, for election at the 20222024 Annual Meeting.Meeting of Stockholders. You may do so by delivering to the Corporate Secretary, no earlier than March 5, 2022February 8, 2024 and no later than April 4, 2022,March 9, 2024, a notice stating:stating (i) the name and address of the stockholder who intends to make the nomination; (ii) the name, age, business address and, if known, residence address of each nominee; (iii) the principal occupation or employment of each nominee; (iv) the number of shares of stock of the Company that are beneficially owned by each nominee and the nominating stockholder; and (v) the other information specified in Article Tenth (b) of our Amended and Restated Certificate of Incorporation.Incorporation (our “Certificate of Incorporation”) and Section 10 of our Bylaws. Our Certificate of Incorporation isand Bylaws are available on our Investor website at investors.ae.com. Additionally, you may recommend a nominee for consideration by our Nominating Committee. Recommendations should be submitted to our Nominating Committee in accordance with the procedures described below. In order for stockholder recommendations regarding possible candidates for director to be considered by the Nominating Committee: Such recommendations must be submitted to the Nominating Committee in care of: Corporate Secretary at our principal executive offices at American Eagle Outfitters, Inc., 77 Hot Metal Street, Pittsburgh, PA 15203; To be timely, a stockholder’s notice generally must be delivered not earlier than the close of business on the 90th day, and not later than the close of business on the 60th day, prior to the first anniversary of the preceding year’s annual meeting (i.e., with respect to the 20212023 Annual Meeting, no earlier than March 5, 20229, 2024 and no later than April 4, 2022)9, 2024); The nominating stockholder must meet the eligibility requirements to submit a valid stockholder proposal under Rule 14a-8 of the Exchange Act of 1934, as amended; and
| • | | The nominating stockholder must meet the eligibility requirements to submit a valid stockholder proposal under Rule 14a-8 under the Exchange Act (“Rule 14a-8”); and |
The stockholder must describe the qualifications, attributes, skills or other qualities of the recommended director candidate. May I submit a stockholder proposal for next year’s Annual Meeting? Yes. Stockholder proposals to be included in the proxy statement for the 20222024 Annual Meeting of Stockholders pursuant to Rule 14a-8 must be received by the Company (addressed to the attention of the Corporate Secretary) by December 22, 202128, 2023 at our principal executive offices at American Eagle Outfitters, Inc., 77 Hot Metal Street, Pittsburgh, PA 15203. We may omit from the proxy statement and form of proxy any proposals that are not received by the Corporate Secretary by December 22, 202128, 2023 at our principal executive offices as specified herein. Any stockholder proposal submitted outside the processes of Rule 14a-8 under the Exchange Act for presentation at our 20222024 Annual Meeting of Stockholders will be considered untimely under our Bylaws if notice thereof is received before March 5, 2022February 8, 2024 or after April 4, 2022.March 9, 2024. To be submitted at the meeting, any such proposal must be a proper subject for stockholder action under the laws of the State of Delaware and must otherwise conform to applicable requirements of the proxy rules of the SEC and our Certificate of Incorporation and Bylaws. | | | | | | | | | | | | 98 2021 Proxy Statement
| | | | | |
| | 89 | | | | |
OTHER MATTERS The only business that management intends to present at the meeting consists of the matters set forth in this statement. Management knows of no other matters to be brought before the meeting by any other person or group. If any other matter should properly come before the meeting, the proxy enclosed confers upon the persons designated herein authority to vote thereon in their discretion. HOUSEHOLDING In order to reduce expenses, we are taking advantage of certain SEC rules, commonly known as “householding,” that permit us to deliver, in certain cases, only one Notice, Annual Report or Proxy Statement, as applicable, to multiple stockholders sharing the same address, unless we have received contrary instructions from one or more of the stockholders. If you received a householded mailing this year and would like to have additional copies of the Notice, Annual Report, Proxy Statement or other proxy materials sent to you, please submit your request directed to our Corporate Secretary, at our principal executive offices located at 77 Hot Metal Street, Pittsburgh, Pennsylvania 15203, (412) 432-3300 and we will deliver the requested materials promptly. If you hold your stock in street name, you may revoke your consent to householding at any time by notifying your broker. If you are currently a stockholder sharing an address with another of our stockholders and wish to have your future proxy statements and annual reports householded, or if your materials are currently householded and you would prefer to receive separate materials in the future, please contact our Corporate Secretary at the above address or telephone number. ADDITIONAL INFORMATION We will furnish without charge to each person whose proxy is being solicited, upon request of any such person, a copy of the Company’s Annual Report on Form 10-K for Fiscal 2020,2022, as filed with the SEC, including the financial statements and schedules thereto. In addition, such report is available, free of charge, under “Financials & Filings” on our investors website at investors.ae.com. A request for a copy of such report should be directed to Judy Meehan, our Senior Vice President of Corporate Communications and Investor Relations, at our principal executive offices located at 77 Hot Metal Street, Pittsburgh, Pennsylvania 15203, (412) 432-3300. | | | | | | | | | | | 90 | | | | | | | 2023 Proxy Statement
| | |
| | 99 |
APPENDIX A Description and Reconciliation of Non-GAAP Measures This Proxy Statement and stockholder letter include information on non-GAAP financial measures (“non-GAAP” or “adjusted”), including free cash flowconsolidated and consolidatedsegment adjusted operating income and EBIT, excluding non-GAAP items. These financial measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The Company believes that this non-GAAP information is useful as an additional means for investors to evaluate the Company’s operating performance, when reviewed in conjunction with the Company’s GAAP consolidated financial statements. These amounts are not determined in accordance with GAAP and therefore should not be used exclusively in evaluating the company’s business and operations.operations ADJUSTED OPERATING INCOME
GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands) (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | | | | | | | | | | 2022 | | | 2022 | | | 2022 | | | 2019 | | | 2022 | | | 2019 | | | | | | | | | Operating Income | | $ | 41,902 | | | $ | 14,014 | | | $ | 117,548 | | | $ | 103,102 | | | $ | 73,582 | | | $ | 476 | | | | | | | | | Adjustment(1) | | | — | | | | — | | | | — | | | | — | | | | 22,209 | | | | 76,223 | | | | | | | | | Adjusted Operating Income | | $ | 41,902 | | | $ | 14,014 | | | $ | 117,548 | | | $ | 103,102 | | | $ | 95,791 | | | $ | 76,699 | |
| (1) | For Q4 2022, $22.2 million pre-tax impairment and restructuring charges. For Q4 2019, $76.2 million pre-tax impairment and restructuring charges. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | A-1 |
OPERATING INCOME BY SEGMENT GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands) (unaudited) | | | | | | | | | | | | | | | | | | | | American
Eagle | | | Aerie | | | Corporate
and Other(1) | | | Total | | | | | | | 52 Weeks Ended January 28, 2023 | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 528,369 | | | $ | 163,915 | | | $ | (445,237 | ) | | $ | 247,047 | | | | | | | Impairment and restructuring charges | | $ | 13,037 | | | $ | 3,552 | | | $ | 5,620 | | | $ | 22,209 | | | | | | | Adjusted operating income (loss) | | $ | 541,406 | | | $ | 167,467 | | | $ | (439,617 | ) | | $ | 269,256 | | | | | | | % of Revenue | | | 16.6 | % | | | 11.1 | % | | | | | | | 5.4 | % | | | | | | 52 Weeks Ended January 29, 2022 | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 785,729 | | | $ | 212,287 | | | $ | (406,951 | ) | | $ | 591,065 | | | | | | | Asset impairment charges | | $ | 10,231 | | | $ | 1,713 | | | $ | — | | | $ | 11,944 | | | | | | | Adjusted operating income (loss) | | $ | 795,960 | | | $ | 214,000 | | | $ | (406,951 | ) | | $ | 603,009 | | | | | | | % of Revenue | | | 22.4 | % | | | 15.5 | % | | | | | | | 12.0 | % | | | | | | 52 Weeks Ended January 30, 2021 | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 93,029 | | | $ | 60,298 | | | $ | (424,672 | ) | | $ | (271,345 | ) | | | | | | Impairment, restructuring and COVID-19 related charges | | $ | 144,486 | | | $ | 52,849 | | | $ | 82,491 | | | $ | 279,826 | | | | | | | Adjusted operating income (loss) | | $ | 237,515 | | | $ | 113,147 | | | $ | (342,181 | ) | | $ | 8,481 | | | | | | | % of Revenue | | | 8.7 | % | | | 11.4 | % | | | | | | | 0.2 | % | | | | | | 52 Weeks Ended February 1, 2020 | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 484,078 | | | $ | 47,465 | | | $ | (298,198 | ) | | $ | 233,345 | | | | | | | Impairment and restructuring charges | | $ | 41,657 | | | $ | 20,261 | | | $ | 18,576 | | | $ | 80,494 | | | | | | | Adjusted operating income (loss) | | $ | 525,735 | | | $ | 67,726 | | | $ | (279,622 | ) | | $ | 313,839 | | | | | | | % of Revenue | | | 15.1 | % | | | 8.5 | % | | | | | | | 7.3 | % |
| (1) | Corporate and Other includes revenue and operating results of the Todd Snyder and Unsubscribed brands, and the Supply Chain Platform, which have been identified as operating segments but are not material to disclose as separate reportable segments. Corporate operating costs represents certain costs that are not directly attributable to another reportable segment. |
| | | | | | | | | | | | A-2 | | | | | | | | | | | |
EARNINGS BEFORE INTEREST AND TAXES GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands) (unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | Operating Income | | $ | (358,240 | ) | | $ | 47,846 | | | $ | (12,237 | ) | | $ | 81,922 | | | $ | 95,551 | | | $ | 103,102 | | | $ | 3,584 | | | $ | 476 | | Adjustment (1) | | | 155,619 | | | | 1,543 | | | | 14,611 | | | | 2,728 | | | | 6,955 | | | | — | | | | 102,639 | | | | 76,223 | | Adjusted Operating Income | | $ | (202,621 | ) | | $ | 49,389 | | | $ | 2,374 | | | $ | 84,650 | | | $ | 102,506 | | | $ | 103,102 | | | $ | 106,223 | | | $ | 76,699 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal 2020 | | | Fiscal 2021 | | | Fiscal 2022 | | | | | GAAP | | | Adjustment(1) | | | NON-GAAP | | | GAAP | | | Adjustment(1) | | | NON-GAAP | | | GAAP | | | Adjustment(1) | | | NON-GAAP | | | | | | | | | | | | Income before taxes | | $ | (292,273 | ) | | $ | (292,097 | ) | | $ | (176 | ) | | $ | 558,922 | | | $ | 42,372 | | | $ | 601,294 | | | $ | 178,494 | | | $ | 86,930 | | | $ | 265,424 | | | | | | | | | | | | Add back: Interest income, net | | $ | 24,610 | | | | 12,272 | | | $ | 12,338 | | | $ | 34,632 | | | | 18,519 | | | | 16,113 | | | $ | 14,297 | | | | — | | | $ | 14,297 | | | | | | | | | | | | Earnings Before Interest and Taxes | | $ | (267,663 | ) | | $ | 279,825 | | | $ | 12,162 | | | $ | 593,554 | | | $ | 23,853 | | | $ | 617,407 | | | $ | 192,791 | | | $ | 86,930 | | | $ | 279,721 | |
(1) • | For Q1Fiscal 2020, $155.6$279.8 million pre-tax impairment, COVID-19 and restructuring charges and $12.5 million of non-cash interest expense |
| For Fiscal 2021, $11.9 million pre-tax impairment charges, $11.9 million of reorganization charges and $18.5 million of non-cash interest expense |
| For Fiscal 2022, $22.2 million pretax impairment and restructuring charges. For Q1 2019, $1.5charges and $64.7 million of pre-tax corporate restructuring charges.debt related charges |
For Q2 2020, $14.6 million of COVID-19 related expenses and restructuring charges. For Q2 2019, $2.7 million of pre-tax corporate restructuring charges.
For Q3 2020, $7.0 million of COVID-19 related expenses and restructuring charges.
For Q4 2020, $102.6 million of pre-tax impairment charges & COVID-19 related expenses. For Q4 2019, $76.2 million pre-tax impairment and restructuring charges.
FREE CASH FLOW
GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | Net Cash provided by operating activities from continuing operations | | $ | (209,894 | ) | | $ | 7,719 | | | $ | 173,475 | | | $ | 109,878 | | | $ | 26,025 | | | $ | 60,603 | | | $ | 212,892 | | | $ | 237,216 | | Capital Expenditures | | | (33,910 | ) | | | (36,574 | ) | | | (27,492 | ) | | | (55,219 | ) | | | (31,189 | ) | | | (58,073 | ) | | | (35,384 | ) | | | (60,494 | ) | Acquisition of Intangible Assets | | | (190 | ) | | | (203 | ) | | | (182 | ) | | | (91 | ) | | | (139 | ) | | | (160 | ) | | | (459 | ) | | | (308 | ) | | | | (34,100 | ) | | | (36,777 | ) | | | (27,674 | ) | | | (55,310 | ) | | | (31,328 | ) | | | (58,233 | ) | | | (35,843 | ) | | | (60,802 | ) | Free Cash Flow | | $ | (243,994 | ) | | $ | (29,058 | ) | | $ | 145,801 | | | $ | 54,568 | | | $ | (5,303 | ) | | $ | 2,370 | | | $ | 177,049 | | | $ | 176,414 | |
| | | | | | | | | | | | | | | | | 2021 2023 Proxy Statement
| | | | | A-1 A-3 |
CORPORATE & STOCK INFORMATION Website INFORMATION REGARDING AMERICAN EAGLE OUTFITTERS, INC.
2023 STOCK AWARD AND OUR PRODUCTS IS AVAILABLE ON OUR WEBSITES: WWW.AEO-INC.COM, WWW.AE.COM AND WWW.AERIE.COMINCENTIVE PLAN 1. Purpose. The purpose of this 2023 Stock Data SHARES OF AMERICAN EAGLE OUTFITTERS, INC. COMMON STOCK ARE TRADED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL “AEO” Investor Inquiries IF YOU WOULD LIKE GENERAL INFORMATION ON AMERICAN EAGLE OUTFITTERS, INC. ASAward and Incentive Plan (as amended from time to time, the “Plan”) is to aid American Eagle Outfitters, Inc., a Delaware corporation (together with its successors and assigns, the “Company”), in attracting, retaining, motivating, and rewarding Employees, Consultants, and Non-Employee Directors of the Company or its Affiliates, provide for equitable and competitive compensation opportunities, recognize individual contributions and reward achievement of Company goals, and promote the creation of long-term value for stockholders by closely aligning the interests of Participants (as defined below) with those of the Company’s stockholders. 2. Definitions. In addition to the terms defined in Section 1 above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section: (a) “Affiliate” means (i) any Subsidiary or Parent or (ii) an entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company, as determined by the Committee. (b) “Award” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, or any combination of the foregoing, together with any related right or interest, granted to a Participant under the Plan. (c) “Beneficiary” means the legal representative of the Participant’s estate entitled by will or the laws of descent and distribution to receive the benefits under a Participant’s Award upon a Participant’s death, provided that, if and to the extent authorized by the Committee, a Participant may be permitted to designate a Beneficiary, in which case the “Beneficiary” instead will be the person, persons, trust or trusts (if any are then surviving) that have been designated by the Participant in the Participant’s most recent written and duly filed beneficiary designation to receive the benefits specified under the Participant’s Award upon such Participant’s death. (d) “Board” means the Company’s Board of Directors. (e) “Cause” means, unless otherwise determined by the Committee, or otherwise provided in an Award document, as defined in any employment agreement or severance agreement, plan or policy with respect to the Participant and the Company or an Affiliate of the Company then in effect: | (i) | the Participant’s willful and continued failure to substantially perform Participant’s duties; |
| (ii) | any fraudulent conduct by the Participant in connection with the Participant’s duties; |
| (iii) | an act that constitutes misconduct resulting in a restatement of the Company’s financial statements due to material non-compliance with any financial reporting requirement; |
| (iv) | conviction of, or entrance of a plea of guilty or no contest to a felony under federal or state law; or |
| (v) | the willful violation by the Participant of the Company’s written policies that could reasonably be expected to result in material harm to the business condition or reputation of the Company or any of its Affiliates; |
provided, however, that for purposes of this definition, no act or failure to act shall be deemed “willful” unless effected by the Participant not in good faith and without a reasonable belief that such action or failure to act was in or not opposed to the Company’s best interests, and no act or failure to act shall be deemed “willful” if it results from any incapacity of the Participant due to physical or mental illness. As to the grounds stated in the above-mentioned clauses (i) and (v), such grounds will only constitute Cause once the Company has provided Participant with written notice and Participant has failed to cure such issue within 30 days. (f) A PUBLICLY TRADED COMPANY, PLEASE VISIT OUR INVESTOR RELATIONS SECTION LOCATED AT WWW.AEO-INC.COM Transfer Agent COMPUTERSHARE TRUST COMPANY, N.A. PO BOX 43078 PROVIDENCE, RI 02940 1-877-581-5548 Independent Auditors ERNST & YOUNG LLP 2100 ONE PPG PLACE PITTSBURGH, PA 15222 Corporate Headquarters AMERICAN EAGLE OUTFITTERS, INC. 77 HOT METAL STREET PITTSBURGH, PA 15203 412-432-3300 BOARD OF DIRECTORS Jay L. Schottenstein EXECUTIVE CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER Sujatha Chandrasekaran DIRECTOR Steven A. Davis DIRECTOR Deborah A. Henretta DIRECTOR Thomas R. Ketteler DIRECTOR Cary D. McMillan DIRECTOR Janice E. Page DIRECTOR David M. Sable DIRECTOR Noel J. Spiegel DIRECTOR“Change in Control” shall be deemed to have occurred if, after the Effective Date, there shall have occurred any of the following: | (i) | The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, or successor provisions (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or successor provisions (“beneficial ownership”)) of more than 50% or more of either (1) the |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-1 |
| then-outstanding shares (the “Outstanding Shares”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Shares”); provided, however, that for purposes of this definition, the following acquisitions will not constitute a Change in Control: (A) any acquisition directly from the Company; (B) any acquisition by the Company; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate of the Company or a successor; or (D) any acquisition by any entity pursuant to a transaction that complies with subsections (v)(A), (B), and (C) below; |
| (ii) | During the twelve (12) month period ending on the date of the most recent acquisition, the acquisition by a Person of beneficial ownership of 30% or more of the Outstanding Voting Shares; provided, however, that for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate of the Company or a successor, or (D) any acquisition by any entity pursuant to a transaction that complies with subsections (v)(A), (B), and (C) below; |
| (iii) | During the twelve (12) month period ending on the date of the most recent acquisition, the acquisition by a Person of assets of the Company having a total gross fair market value equal to or more than 40% of the total gross fair market value of the Company’s assets immediately before such acquisition; provided, however, that for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate of the Company or a successor, or (B) any acquisition by any entity pursuant to a transaction that complies with subsections (v) (A), (B), and (C) below; |
| (iv) | A majority of individuals who serve on the Board as of the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director after the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without counting the member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; |
| (v) | Consummation of a reorganization, merger, recapitalization, reverse stock split, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Shares and the Outstanding Voting Shares immediately before such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (a “CIC Parent”)) in substantially the same proportions as their ownership immediately before such Business Combination of the Outstanding Shares and the Outstanding Voting Shares, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or a CIC Parent or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or CIC Parent) beneficially owns, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock of the ultimate parent entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of more than 50% existed before the Business Combination, and (C) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business Combination or a CIC Parent were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the board providing for such Business Combination; or |
| (vi) | Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. |
Notwithstanding the foregoing, solely with respect to an Award the Committee determines is subject to the provisions of Section 409A (and not exempted therefrom), and a Change in Control is a distribution event for purposes of an Award, the foregoing definition of Change in Control shall be interpreted, administered, limited and construed in a manner necessary to ensure that the occurrence of any such event shall result in a Change in Control only if such event qualifies as a “change in control event,” within the meaning of Treasury Regulation Section 1.409A-3(i)(5). | | | | | | | | | | | | B-2 | | | | | | | | | | | |
(g) “Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation thereunder shall include any successor provisions and regulations, and reference to regulations includes any applicable guidance or pronouncement of the Department of the Treasury and Internal Revenue Service. (h) “Committee” means the Compensation Committee of the Board or such other committee of directors as may be designated by the Board from time to time, which shall consist of two or more members who are not current or former officers or employees of the Company, who are “Non-Employee Directors” to the extent required by and within the meaning of Rule 16b-3 and who are independent directors pursuant to the listing requirements of the New York Stock Exchange (“NYSE”). The members shall be appointed by the Board, and any vacancy on the Committee shall be filled by the Board. The inadvertent failure of any member of the Committee to meet the qualification requirements of a “Non-Employee Director” under Rule 16b-3 or an independent director under NYSE rules shall not invalidate or otherwise impair any actions taken or awards granted by the Committee. The full Board may perform any function of the Committee hereunder except to the extent limited under NYSE rules, in which case as used in this Plan the term “Committee” shall refer to the Board. (i) “Consultant” means any consultant or advisor who is a natural person and who provides services to the Company or any Subsidiary, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction, (ii) does not directly or indirectly promote or maintain a market for the Company’s securities and (iii) otherwise qualifies as a de facto employee or consultant under the applicable rules of the Securities and Exchange Commission for registration of shares of stock on a Form S-8 registration statement. (j) “Disability” means, except as otherwise defined in an Award document, that the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s employer; provided, however, to the extent necessary to avoid tax penalties under Section 409A of the Code, “Disability” means “disability” as defined in Section 409(a)(2)(C) of the Code. If the determination of Disability relates to an Incentive Stock Option, Disability means Permanent and Total Disability as defined in Section 22(e)(3) of the Code. (k) “Dividend Equivalent” means a right, granted under this Plan, to receive cash, Stock, other Awards or other property equal in value to all or a specified portion of the dividends paid with respect to a specified number of shares of Stock. Dividend Equivalents shall not be permitted on Options and SARs. An adjustment referenced in Section 11(c) shall not be considered a “Dividend Equivalent.” (l) “Effective Date” means the effective date specified in Section 11(o). (m) “Eligible Person” has the meaning specified in Section 5. (n) “Employee” means any person treated as an employee (including an officer of the Company or member of the Board who also is treated as an employee) in the records of the Company or any Affiliate of the Company, and with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Code Section 422; provided, however, that neither Service as a member of the Board nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. The term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant, or such other person not on the payroll of the Company or any Affiliate of the Company. The Company will determine in good faith and in its sole discretion whether a person has become or ceased to be an Employee, and the effective dates of such person’s employment and termination of employment. (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to any provision of the Exchange Act or rule (including a proposed rule) thereunder shall include any successor provisions and rules. (p) “Fair Market Value” means the fair market value of Stock, Awards or other property as determined in good faith by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock shall be the closing sale price per share of Stock reported on a consolidated basis for securities listed on the principal stock exchange or market on which Stock is traded on the day as of which such value is being determined or, if there is no sale on that day, then on the last previous day on which a sale was reported; provided however, that Fair Market Value relating to the exercise price or base price of any Non-409A Option or SAR shall conform to requirements so as to exempt them from Code Section 409A. (q) “409A Awards” means Awards that constitute a deferral of compensation under Code Section 409A and regulations thereunder. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-3 |
(r) “Incentive Stock Option” or “ISO” means any Option designated as an incentive stock option within the meaning of Code Section 422 and qualifying thereunder. (s) “Option” means a right, granted under this Plan, to purchase Stock. (t) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h). (u) “Outstanding Prior Plan Awards” mean Awards that were granted under a Prior Plan that remain outstanding as of the Effective Date. (v) “Non-409A Awards” means Awards other than 409A Awards. Although the Committee retains authority under the Plan to grant Options, SARs and Restricted Stock on terms that will qualify those Awards as 409A Awards, Options, SARs, and Restricted Stock are intended to be Non-409A Awards unless otherwise expressly specified by the Committee. (w) “Non-Employee Director” means a member of the Board who is not a common law employee of the Company or any of its Subsidiaries or Affiliates. (x) “Parent” means a corporation, limited liability company, partnership or other entity that owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the foregoing, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code. (y) “Participant” means a person who has been granted an Award under the Plan, which Award remains outstanding. (z) “Prior Plans” means the 2014 Stock Award and Incentive Plan, 2017 Stock Award and Incentive Plan as Amended and Restated and the 2020 Stock Award and Incentive Plan. (aa) “Restricted Stock” means Stock granted under this Plan which is subject to certain restrictions and to a risk of forfeiture. (bb) “Restricted Stock Unit” or “RSU” means a right, granted under this Plan, to receive Stock or other Awards or a combination thereof at the end of a specified restricted period. (cc) “Retirement” means, in the case of an Employee, a termination of Service (other than by death, Disability or for Cause) at or after having achieved a combination of years of age and years of employment by the Company or any Affiliate which equal or exceed 70 years, or such other combination of age and years of Service as may be fixed from time to time by the Committee. With respect to a Non-Employee Director, “Retirement” means termination of Service on the Board with the consent of the remaining Directors. Consultants are not eligible for Retirement under the Plan. (dd) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. (ee) “Service” means a Participant’s work with the Company or an Affiliate of the Company as an Employee or Consultant or as a Non-Employee Director. For purposes of determining when payment of a 409A Award should be made, a Participant will be considered to have terminated or separated from Service in accordance with Code Section 409A and the guidance promulgated thereunder. (ff) “Stock” means the Company’s Common Stock, par value $0.01 per share, and any other equity securities of the Company that may be substituted or resubstituted for Stock pursuant to Section 11(c). (gg) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Section 6(c). (hh) “Subsidiary” means any corporation, limited liability company, partnership or other entity in an unbroken chain of entities beginning with the Company, if each of the entities other than the last entity in the chain owns stock or other ownership interests possessing at least fifty percent (50%) of the total combined voting power in one (1) of the other entities in the chain. Notwithstanding the foregoing, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code. 3. Administration. (a) Authority of the Committee. The Plan shall be administered by and under the direction of the Committee, which shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants; to grant Awards; to determine the type and number of Awards, the dates on which Awards may be exercised and on which the risk of forfeiture or deferral or restricted period relating to Awards shall lapse or terminate, the acceleration of any such dates, the expiration date of any Award, whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property, and other terms and conditions of, and all other matters relating to, Awards; to prescribe documents evidencing or setting terms of Awards | | | | | | | | | | | | B-4 | | | | | | | | | | | |
(such Award documents need not be identical for each Participant), amendments thereto, and rules and regulations for the administration of the Plan and amendments thereto; to construe and interpret the Plan and Award documents and correct defects, supply omissions or reconcile inconsistencies therein; and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. Decisions of the Committee with respect to the administration and interpretation of the Plan shall be final, conclusive, and binding upon all persons interested in the Plan, including Participants, Beneficiaries, transferees under Section 11(b) and other persons claiming rights from or through a Participant, and stockholders. The foregoing notwithstanding, the Board may perform the functions of the Committee for purposes of granting Awards under the Plan to Non-Employee Directors. (b) Manner of Exercise of Committee Authority. Except as provided below, the Committee may, to the extent that any such action will not prevent the Plan or any award under the Plan from complying with Rule 16b-3, the rules of the NYSE applicable to companies listed for trading thereon or any other law, delegate any of its authority hereunder to such persons as it deems appropriate. The Committee shall not delegate its authority to amend, suspend or terminate the Plan. (c) Limitation of Liability. The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or Employee, the Company’s independent registered public accounting firm, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or Employee acting at the direction or on behalf of the Committee or a delegatee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. 4. Stock Subject to Plan. (a) Shares Authorized. The maximum number of shares of Stock that may be issued in respect of Awards granted under this Plan shall be (i) 10,617,000 shares, plus (ii) any shares that remained available for issuance under the 2020 Stock Award and Incentive Plan as of immediately prior to the Effective Date, plus (iii) any Returning Shares (as defined below), subject to adjustment as provided in Section 11(c) (collectively, the “Share Reserve”). The Share Reserve may be used for all forms of Awards hereunder and may also be used to settle Outstanding Prior Plan Awards to the extent shares are not available under the applicable Prior Plan. Each share issued under this Plan pursuant to an Award, or to settle an Outstanding Prior Plan Award, shall reduce the Share Reserve by one share. From and after the Effective Date, no further awards shall be granted under the Prior Plans and the Prior Plans shall remain in effect only so long as Outstanding Prior Plan Awards shall remain outstanding. (b) Share Counting. | (i) | For purposes of Section 4(a), the number of shares to which an Award relates shall be counted against the Share Reserve at the grant date of the Award, unless such number of shares cannot be determined at that time, in which case the number of shares actually distributed pursuant to the Award shall be counted against the Share Reserve at the time of distribution; provided, however, that Awards related to or retroactively added to, or granted in tandem with, substituted for or converted into, other Awards shall be counted or not counted against the Share Reserve in accordance with procedures adopted by the Committee or its designee so as to ensure appropriate counting, but to avoid double counting. |
| (ii) | If any shares to which an Award relates or, on or after the Effective Date, shares subject to any Outstanding Prior Plan Awards are (A) forfeited, cancelled or payment is made to the Participant in the form of cash, cash equivalents or other property other than shares; (B) tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award other than an Option or SAR, or an Outstanding Prior Plan Award other than an option or SAR; or (C) otherwise terminate without payment being made to the Participant in the form of shares, such shares shall be added back to the Share Reserve (such shares, the “Returning Shares”). |
| (iii) | Notwithstanding the foregoing, the following shares shall not be added back to the Share Reserve: (A) shares previously owned or acquired by the Participant that are delivered to the Company, or withheld from an Option , to pay the exercise price, (B) shares that are delivered or withheld for purposes of satisfying a tax withholding obligation relating to an Option or SAR, (C) shares not issued or delivered as a result of the net settlement of an outstanding Option or SAR, or (D) shares repurchased on the open market with the proceeds of the exercise price of an Option. |
| (iv) | Subject to applicable stock exchange requirements, substitute awards shall not count against the Share Reserve, nor shall shares subject to a substitute award again be available for Awards under the Plan to the extent of any forfeiture, expiration or cash settlement as provided in Section 4(b)(ii). |
| (v) | Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-5 |
5. Eligibility. (a) Eligibility. Awards may be granted under the Plan only to Eligible Persons. For purposes of the Plan, an “Eligible Person” means an Employee, a Consultant, a Non-Employee Director of the Company or any Affiliate of the Company, and potential Employees who have been extended an offer of employment by the Company or an Affiliate of the Company, provided that such prospective Employee may not receive any payment or exercise any right relating to an Award until such person has commenced employment with the Company or an Affiliate of the Company. Eligible Persons who are service providers to an Affiliate may be granted Options or SARs under this Plan only if the Affiliate qualifies as an “eligible issuer of service recipient stock” within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Section 409A of the Code. An Employee on leave of absence may be considered as still in the employ of the Company or an Affiliate of the Company for purposes of eligibility for participation in the Plan. Holders of awards granted by a company or business (i) acquired by the Company or an Affiliate of the Company, or (ii) with which the Company or an Affiliate combines, are eligible for grants of substitute awards as provided in Section 8(a) granted in assumption of or in substitution for such outstanding awards previously granted under such other plans in connection with such acquisition or combination transaction. (b) Limit on Awards to Non-Employee Directors. Notwithstanding any other provision of the Plan to the contrary, the maximum number of shares of Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year in respect of such director’s service as a member of the Board during such year (including service as a member or chair of any committees of the Board), shall not exceed $750,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes). The Committee may make exceptions to this limit for a non-executive chair of the Board or, in extraordinary circumstances, for other individual non-employee directors, as the Committee may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation. 6. Specific Terms of Awards. (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Sections 11(e) and 11(j)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of Service by the Participant and terms permitting a Participant to make elections relating to their Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan. The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law and may otherwise require payment of consideration for an Award except as limited by the Plan. (b) Options. The Committee is authorized to grant Options to Participants on the following terms and conditions: | (i) | Exercise Price. The exercise price per share of Stock purchasable under an Option (including both ISOs and non-statutory Options) shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option. Notwithstanding the foregoing, any substitute award granted in assumption of or in substitution for an outstanding award granted by a company or business (x) acquired by the Company or an Affiliate of the Company, or (y) with which the Company or an Affiliate of the Company combines may be granted with an exercise price per share of Stock other than as required above, provided that such substitute award is granted in a manner consistent with Code Section 409A or, in the case of Incentive Stock Options, Code Section 422. |
| (ii) | Option Term; Time and Method of Exercise. The Committee shall determine the term of each Option, provided that in no event shall the term of any Option exceed a period of ten years from the date of grant. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future Service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment (subject to Sections 11(j) and 11(k)), including, without limitation, cash, Stock (including by withholding Stock deliverable upon exercise), other Awards or awards granted under other plans of the Company or any Affiliate of the Company, or other property (including through broker-assisted “cashless exercise” arrangements, to the extent permitted by applicable law), and the methods by or forms in which Stock will be delivered or deemed to be delivered in satisfaction of Options to Participants (including, in the case of 409A Awards, deferred delivery of shares subject to the Option, as mandated by the Committee, with such deferred shares subject to any vesting, forfeiture or other terms as the Committee may specify). Notwithstanding the foregoing, the Committee may provide that if on the last day of the Option term, the Fair Market Value of a share of Common Stock exceeds the exercise price by a specified amount, the Participant has not exercised the Option and the Option has not expired, the Option shall be deemed to have been exercised by the Participant on such day with payment made by |
| | | | | | | | | | | | B-6 | | | | | | | | | | | |
| withholding shares otherwise issuable in connection with the exercise of the Option. In such event, the Company shall deliver to the Participant the number of shares for which the Option was deemed exercised, less the number of shares required to be withheld for the payment of the total purchase price and required withholding taxes. Notwithstanding the foregoing, in the event that on the last business day of the term of an Option (other than an ISO) (i) the exercise of the Option is prohibited by applicable law or (ii) shares of Stock may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the Option shall be extended for a period of thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement, provided that no extension will be made if the Fair Market Value of a share of Stock relating to such Option at the date the initial term would otherwise expire is below the exercise price of the Option. |
| (iii) | ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Code Section 422. As such, ISOs may be granted only to Employees. ISOs may not be granted to any Employee that would permit the aggregate Fair Market Value (determined on the date of grant) of the Stock with respect to which ISOs are exercisable for the first time by such Employee during any calendar year to exceed $100,000. Any excess shall be deemed to be a non-statutory Option. if Stock acquired upon exercise of an ISO is disposed of by an Employee before the expiration of either two (2) years from the date of grant of such ISO or one year from the transfer of Stock to such Employee pursuant to the exercise of such ISO, or in any other disqualifying disposition within the meaning of Code Section 422, such Employee shall notify the Committee in writing of the date and terms of such disposition and shall cooperate with the Committee with respect to any tax withholding required or resulting from such disqualifying dispositions. |
(c) Stock Appreciation Rights. The Committee is authorized to grant SARs to Participants on the following terms and conditions: | (i) | Right to Payment. A SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee. The grant price of a SAR shall not be less than the Fair Market Value of a share of Stock on the grant date of such SAR; provided, however, that the grant price of a SAR that is granted subsequent to the related Option may be less than Fair Market Value on the grant date if it is equal to the exercise price of the related Option so long as such subsequently granted SAR does not cause a Non-409A Award to become subject to Code Section 409A or cause a 409A Award to violate Code Section 409A. Notwithstanding the foregoing, any substitute award granted in assumption of or in substitution for an outstanding award granted by a company or business (x) acquired by the Company or an Affiliate of the Company, or (y) with which the Company or an Affiliate of the Company combines may be granted with a grant price per share of Stock other than as required above, provided that such substitute award is granted in a manner consistent with Code Section 409A. |
| (ii) | Other Terms. The Committee shall determine the term of each SAR, provided that in no event shall the term of a SAR exceed a period of ten years from the date of grant. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future Service requirements), the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be free-standing or in tandem or combination with any other Award, and whether or not the SAR will be a 409A Award or Non-409A Award. The Committee may require that an outstanding Option be exchanged for a SAR exercisable for Stock having vesting, expiration, and other terms substantially the same as the Option, so long as such exchange will not result in additional accounting expense to the Company. Notwithstanding the foregoing, the Committee may provide that if on the last day of the term of a SAR the Fair Market Value of one Share exceeds the grant price per Share of the SAR, the Participant has not exercised the SAR or the tandem Option (if applicable), and neither the SAR nor the Option has expired, the SAR shall be deemed to have been exercised by the Participant on such day. In such event, the Company shall make payment to the Participant in accordance with this Section, reduced by the number of shares (or cash) required for withholding taxes. Notwithstanding the foregoing, in the event that on the last business day of the term of a SAR (i) the exercise of the SAR is prohibited by applicable law or (ii) shares of Stock may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the SAR shall be extended for a period of thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement, provided that no extension will be made if the Fair Market Value of a share of Stock relating to such SAR at the date the initial term would otherwise expire is below the grant price of the SAR. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-7 |
(d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions: | (i) | Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future Service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award document relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon. |
| (ii) | Forfeiture. Except as otherwise determined by the Committee, upon termination of Service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes. |
| (iii) | Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock. |
| (iv) | Dividends and Splits. Subject to Section 8(e), as a condition to the grant of an Award of Restricted Stock, the Committee may require that any dividends paid on a share of Restricted Stock shall be either (A) paid with respect to such Restricted Stock in cash, which shall be subject to the same vesting terms as applied to the original Restricted Stock to which it relates, or (B) automatically reinvested in additional Restricted Stock or held in kind, which shall be subject to the same vesting terms as applied to the original Restricted Stock to which it relates, or (C) deferred as to payment, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in RSUs, other Awards or other investment vehicles, subject to the same vesting terms as applied to the original Restricted Stock to which it relates and to such other terms as the Committee shall determine or permit a Participant to elect. |
(e) Restricted Stock Units. The Committee is authorized to grant RSUs to Participants, subject to the following terms and conditions: | (i) | Award and Restrictions. Unless otherwise specified by the Committee, issuance of Stock will occur upon expiration of the restricted period specified for an Award of RSUs by the Committee (or, if permitted by the Committee, as elected by the Participant in accordance with a valid election pursuant to the terms set forth in Section 8(c)). In addition, RSUs shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the expiration of the restricted period or at earlier specified times (including based on achievement of performance goals and/or future Service requirements), separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. RSUs may be satisfied by delivery of Stock, other Awards, or a combination thereof, as determined by the Committee at the date of grant or thereafter. |
| (ii) | Forfeiture. Except as otherwise determined by the Committee, upon termination of Service during the applicable restricted period or portion thereof to which forfeiture conditions apply (as provided in the Award document evidencing the RSU), all RSUs that are at that time subject to such forfeiture conditions shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award document, or may determine in any individual case, that restrictions or forfeiture conditions relating to RSUs will lapse in whole or in part, including in the event of terminations resulting from specified causes. |
(f) Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the Company or an Affiliate of the Company to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee. (g) Dividend Equivalents. Subject to Section 8(e), the Committee is authorized to grant Dividend Equivalents to a Participant in connection with the grant of an Award (other than Options or SARs). Such dividend equivalents shall be subject to the same vesting terms as applied to the original Award to which it relates. (h) Other Stock Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise | | | | | | | | | | | | B-8 | | | | | | | | | | | |
based on, or related to, Stock or factors that may influence the value of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified Affiliates or other business units of the Company. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, notes, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 6(h). 7. Performance-Based Awards. (a) Performance-Based Awards Generally. Any form of Award permitted under this Plan may be granted as a performance-based Award. Performance-based Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards (or a combination) that may be earned upon achievement or satisfaction of performance conditions specified by the Committee. In addition, the Committee may specify that any other Award shall constitute a performance-based Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such performance criteria and other measures of performance as it may deem appropriate in establishing any performance conditions and may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions. Subject to Section 8(e), Dividend Equivalents distributed in connection with performance-based Awards shall be subject to restrictions and a risk of forfeiture to the same extent as the underlying Award with respect to which Stock or other property has been distributed. (b) Performance Goals and Criteria. | (i) | Performance Goals. The performance goal(s) for performance-based Awards may be based on a targeted level or levels of performance with respect to one or more objective or subjective performance criteria, as specified by the Committee. The Committee may determine that a performance-based Award shall be granted, exercised and/or settled upon achievement of one or more performance goals as a condition to the grant, exercise and/or settlement of such performance-based Award. Performance goals may differ for performance-based Awards granted to any one Participant or to different Participants. |
| (ii) | Performance Criteria. The performance criteria used by the Committee in establishing goals for performance-based Awards may consist of one or more criteria as determined by the Committee, including, without limitation: |
| (A) | Earnings or profitability measures (which include (i) net income, (ii) operating income, (iii) income (loss) per common share from continuing operations, either basic or fully diluted; (iv) net income (loss) per common share, either basic or fully diluted; (v) earnings before interest, taxes, depreciation, and amortization; (vi) earnings before interest and taxes, (vii) any pre-established derivative of revenue (gross, operating, or net), (viii) pre-tax operating-income, (ix) inventory turnover or inventory shrinkage, (x) sales growth and volumes, (xi) percentage increase in total net revenue or comparable sales, and (xii) economic profit or value created); |
| (B) | Expense and efficiency measures (which include (i) gross margins, cost of goods sold, mark-ups or mark-downs; (ii) operating margins; (iii) selling, general and administrative (SG&A) expense; and (iv) other pre-established operating expenses); |
| (C) | Return measures (which include (i) total stockholder return, (ii) stock price, (iii) return on assets, (iv) return on investment, (v) return on capital, and (vi) return on equity); |
| (D) | Cash flow measures (which include (i) cash flow, (ii) free cash flow, (iii) cash flow return on investment, and (iv) net cash provided by operations); |
| (E) | Achievement of balance sheet, income statement, or cash-flow statement objectives; |
| (F) | Strategic or operational business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic expansion or new concept development goals; cost targets; customer satisfaction; employee satisfaction; human resources goals, including staffing, training and development and succession planning; supervision of litigation and information technology; corporate values measures that may be objectively determined, including ethics compliance, environmental, diversity commitment, and safety and goals relating to acquisitions or divestitures of Affiliates; and |
| (G) | Other financial, operational, strategic or individual performance criteria. |
| | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-9 |
Performance criteria may be established on a Company-wide basis or with respect to one or more business units, divisions, or Affiliates and may be expressed in absolute terms, or relative to (i) current internal targets or budgets, (ii) the past performance of the Company (including the performance of one or more business units, divisions, or Affiliates), (iii) the performance of one or more peer companies, (iv) the performance of a broad market index or an index covering a peer group of companies, or (v) other internal or external measures of the selected performance criteria, including on an individual basis, as appropriate. Performance criteria that are financial metrics may be determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”) or financial metrics that are based on, or able to be derived from GAAP, and may be adjusted when established or at any time thereafter to include or exclude any items otherwise includable or excludable under GAAP. Without limiting the generality of the immediately preceding sentence, the determination of performance with respect to a performance criteria may include or exclude (i) items that are unusual in nature and items that are infrequently occurring, (ii) changes in applicable laws, regulations, or accounting principles, (iii) other events such as restructurings; discontinued operations; asset write-downs; significant litigation or claims, judgments or settlements; acquisitions or divestitures; reorganizations or changes in the corporate structure or capital structure of the Company; foreign exchange gains and losses; change in the fiscal year of the Company; business interruption events; unbudgeted capital expenditures; unrealized investment gains and losses; and impairments; or (iv) such other factors as the Committee may determine. | (iii) | Performance Period. Achievement of performance goals in respect of performance-based Awards shall be measured over a performance period, as specified by the Committee. |
| (iv) | Settlement of Performance Awards; Other Terms. Settlement of performance-based Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, increase or reduce the amount of a settlement otherwise to be made in connection with such performance-based Awards. The Committee shall specify the circumstances in which such performance-based Awards shall be paid or forfeited in the event of termination of employment by the Participant or other event (including a Change in Control) prior to the end of a performance period or settlement of such performance-based Awards. |
(c) Written Determinations. Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of performance-based Awards, the level of actual achievement of the specified goals relating to performance-based Awards, and the amount of any final performance-based Award shall be recorded in writing. 8. Certain Provisions Applicable to Awards. (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate of the Company, or any business entity to be acquired by the Company or an Affiliate of the Company or with which the Company or an Affiliate of the Company combines, or any other right of a Participant to receive payment from the Company or any Affiliate of the Company; provided, however, that (i) a 409A Award may not be granted in tandem with a Non-409A Award and (ii) such Awards are subject to the prohibitions in the second and third sentences of Section 11(e) with respect to Options and SARs. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. (b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee, subject to the express limitations set forth in Sections 6(b)(ii), 6(c)(ii) and 8 or elsewhere in the Plan. (c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan (including Sections 11(j) and (k)) and any applicable Award document, payments to be made by the Company or an Affiliate of the Company upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events, subject to Sections 11(j) and (k) and so long as such an acceleration does not cause a Non-409A Award to become subject to Code Section 409A. Subject to Section 11(k), installment or deferred payments may be required by the Committee (subject to Section 11(e)) or permitted at the election of the Participant on terms and conditions established by the Committee and consistent with the requirements of Code Section 409A. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. In the case of any 409A Award that is vested and no longer subject to a risk of forfeiture (within the meaning of Code Section 83), such Award will be distributed to the Participant, upon | | | | | | | | | | | | B-10 | | | | | | | | | | | |
application of the Participant, if the Participant has had an unforeseeable emergency within the meaning of Code Sections 409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), in accordance with Section 409A(a)(2)(B)(ii). (d) Minimum Vesting Requirement. Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based Awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, that the following Awards shall not be subject to the foregoing minimum vesting requirement: any (i) substitute awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its Subsidiaries, (ii) shares of Stock delivered in lieu of fully vested cash obligations, (iii) Awards to Non-Employee Directors that vest on earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to Section 4 (subject to adjustment under Section 11(c)); and, provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of termination of Service, death, Disability or a Change in Control, in the terms of the Award document or otherwise. (e) Treatment of Dividends and Dividend Equivalents on Unvested Awards. Notwithstanding any other provision of the Plan to the contrary, with respect to any Award that provides for or includes a right to dividends or dividend equivalents, if dividends are declared during the period that an equity Award is unvested, such dividends (or dividend equivalents) shall either (i) not be paid or credited with respect to such Award or (ii) be accumulated but remain subject to vesting requirement(s) to the same extent as the applicable Award and shall only be paid at the time or times such vesting requirement(s) are satisfied. In no event shall dividends or dividend equivalents be paid with respect to Options or SARs. 9. Change in Control. (a) Effect of “Change in Control.” The provisions of this Section 9 shall apply in the case of a Change in Control, unless otherwise provided in the Award document or another written agreement, plan or policy with a Participant governing an Award. | (i) | Awards Assumed or Substituted by Surviving Entity. With respect to Awards assumed by the surviving entity of the Change in Control (the “Surviving Entity”) or otherwise equitably converted or substituted in connection with a Change in Control, if within 18 months after the effective date of the Change of Control, a Participant’s employment or service is terminated by the Company without Cause (excluding voluntary resignation, death, Disability, or Retirement), then: |
| (A) | all of the Participant’s outstanding Options, SARs and other outstanding Awards (including Awards equitably converted or substituted in connection with a Change in Control) pursuant to which the Participant may have exercise rights shall become fully exercisable as of the date of such termination, and shall thereafter remain exercisable until the earlier of (1) the expiration of the original term of the Award and (2) the later of (i) ninety (90) days from the termination of employment or service and (ii) such longer period provided by the applicable Award document; |
| (B) | all time-based vesting restrictions on the Participant’s outstanding Awards (other than Options, SARs and other Awards pursuant to which the Participant may have exercise rights) shall lapse as of the date of the Participant’s termination, and such Awards shall be settled or paid within thirty (30) days after the date of the Participant’s termination; and |
| (C) | in the case of a performance-based Award, then the value of such Award will be converted into Restricted Stock or RSUs and will vest at the end of the performance period, subject to the provisions set forth in Section 9(a)(i)(B) in the event of Participant’s termination, with the value of the Award measured as follows: (i) if 50% or more of the applicable performance period has been completed as of the date of the Change in Control, then the value of such Award will be converted into Restricted Stock or RSUs based on performance as of the time of the Change in Control (if reasonably determinable); or (ii) if (x) less than 50% of the performance period has been completed as of the date of the Change in Control or (y) performance is not reasonably determinable as of the date of the Change in Control, then the value of such Award will be converted into Restricted Stock or RSUs based on the Award’s target level value; |
provided, however, that if such Awards constitute deferred compensation under Section 409A of the Code, the Awards shall vest on the basis described above but shall be settled or paid on the date(s) provided in the underlying Award documents to the extent required by Section 409A of the Code. To the extent that this provision causes Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be non-statutory Options. | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-11 |
| (ii) | Awards not Assumed or Substituted by Surviving Entity. Upon the occurrence of a Change in Control, and except with respect to any Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection with the Change in Control in a manner approved by the Committee or the Board: |
| (A) | all outstanding Options, SARs and other outstanding Awards pursuant to which Participants may have exercise rights shall become fully exercisable as of the time of the Change in Control, and shall thereafter remain exercisable for a period of ninety (90) days or until the earlier expiration of the original term of the Award; provided, however, that the Committee may instead provide that the Participant shall receive a payment equal to the difference between the consideration (consisting of cash or other property (including securities of a successor or parent corporation)) received by holders of Stock in the Change in Control transaction and the exercise price of the applicable Option or SAR, if such difference is positive; provided further, however, that any Option or SAR whose exercise price is greater than the per share consideration received by holders of the underlying shares of Stock in connection with the Change in Control shall be cancelled without payment of any consideration; |
| (B) | all time-based vesting restrictions on outstanding Awards shall lapse as of the time of the Change in Control, and such Awards shall be settled or paid at the time of the Change in Control; and |
| (C) | all performance criteria and other conditions to payment of outstanding performance-based Awards shall be deemed to be achieved or fulfilled, measured as follows: (i) if 50% or more of the applicable performance period has been completed as of the date of the Change in Control, then the value of such Award will be based on performance as of the time of the Change in Control (if reasonably determinable); or (ii) if (x) less than 50% of the performance period has been completed as of the date of the Change in Control or (y) performance is not reasonably determinable as of the date of the Change in Control, then the value of such Award will be based on the Award’s target level value, and payment of such Awards on the applicable basis shall be made or otherwise settled at the time of the Change in Control; |
provided, however, that if such Awards constitute deferred compensation under Section 409A of the Code, the Awards shall vest on the basis described above but shall be settled or paid on the date(s) provided in the underlying Award documents to the extent required by Section 409A of the Code. To the extent that this provision causes Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be non-statutory Options. | (iii) | For the purposes of this Plan, an Award shall be considered assumed by the surviving entity or otherwise equitably converted or substituted if following the applicable transaction the Award confers the right to purchase or receive, for each share of Stock subject to the Award immediately prior to the applicable transaction, on substantially the same vesting and other terms and conditions as were applicable to the Award immediately prior to the applicable transaction, the consideration (whether Stock, cash or other securities or property) received in the applicable transaction by holders of shares of Stock for each share of Stock held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the applicable transaction is not solely common stock of the successor company or its parent or subsidiary, the Committee may, with the consent of the successor company or its parent or subsidiary, provide that the consideration to be received upon the exercise or vesting of an Award, for each share subject thereto, will be solely common stock of the successor company or its parent or subsidiary substantially equal in fair market value to the per share consideration received by holders of shares in the applicable transaction. The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. |
10. Additional Award Forfeiture Provisions. The Committee may condition an Eligible Person’s right to receive a grant of an Award, or a Participant’s right to exercise an Award, to retain Stock, cash or other property acquired in connection with an Award, or to retain the profit or gain realized by a Participant in connection with an Award, including cash or other property received upon sale of Stock acquired in connection with an Award, upon the Participant’s compliance with specified conditions relating to non-competition, confidentiality of information relating to the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its officers, Directors and Affiliates, or other requirements applicable to the Participant, as determined by the Committee, at the time of grant or otherwise, including during specified periods following termination of Service. In the event that the Participant engages in misconduct that causes or partially causes the need for restatement of financial statements that would have resulted in a lower Award where the payment was predicated upon the achievement of certain financial results that were the subject of the restatement, to the extent of the reduction in amount of such Award as determined by | | | | | | | | | | | | B-12 | | | | | | | | | | | |
the Committee (i) the Award will be cancelled and (ii) the Participant will forfeit (A) the shares of Stock received or payable on the vesting or exercise of the Award and (B) the amount of the proceeds of the sale or gain realized on the vesting or exercise of the Award (and the Participant may be required to return or pay such shares of Stock or amount to the Company). The determination of the lower Award must be made by the Committee no later than the end of the third fiscal year following the year for which the inaccurate financial results were measured; provided, that if steps have been taken within such period to restate the Company’s financial or operating results, the time period shall be extended until such restatement is completed. The provisions of this Section 10 shall be amended to the extent necessary to comply with final rules issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act by the Securities and Exchange Commission and the principal stock exchange or market on which the Stock is traded. Without limiting the generality of the foregoing, Awards granted under the Plan are subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any other policy of the Company that applies to Awards, such as anti-hedging or pledging policies, as they may be in effect from time to time. By accepting Awards under the Plan, Participants agree and acknowledge that they are obligated to cooperate with, and provide any and all assistance necessary to, the Company to recover or recoup any Award or amounts paid under the Plan subject to clawback pursuant to such law, government regulation, stock exchange listing requirement or Company policy. Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation necessary to recover or recoup any Award or amounts paid under the Plan from a Participant’s accounts, or pending or future compensation or Awards. 11. General Provisions. (a) Compliance with Legal and Other Requirements. The Company may, to the extent deemed necessary or advisable by the Committee and subject to Section 11(j), postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, regulations, listing requirements, or other obligations. The foregoing notwithstanding, in connection with a Change in Control, the Company shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Change in Control. (b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Company or an Affiliate thereof), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or their guardian or legal representative, except that Awards and other rights (other than ISOs) may be transferred to one or more transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee, subject to any terms and conditions which the Committee may impose thereon (which may include limitations the Committee may deem appropriate in order that offers and sales under the Plan will meet applicable requirements of registration forms under the Securities Act of 1933 specified by the Securities and Exchange Commission), and provided further, that no transfer for value or consideration will be permitted. A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award document applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee. (c) Adjustments. In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, Stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate and, in the case of any outstanding Award, necessary in order to prevent dilution or enlargement of the rights of the Participant, then the Committee shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the number and kind of shares of Stock which (1) are authorized for grant under Section 4(a), (2) the number and kind of shares of Stock subject to or deliverable in respect of outstanding | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-13 |
Awards, and (3) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including performance-based Awards and performance goals and any hypothetical funding pool relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence, as well as acquisitions and dispositions of businesses and assets) affecting the Company, any Affiliate of the Company or other business unit of the Company, or the financial statements of the Company or any Affiliate, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Affiliate or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant. (d) Tax Provisions. | (i) | Withholding. The Company and any Affiliate of the Company is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s withholding obligations, either on a mandatory or elective basis in the discretion of the Committee, or in satisfaction of other tax obligations. Other provisions of the Plan notwithstanding, only the minimum amount of Stock deliverable in connection with an Award necessary to satisfy statutory withholding requirements will be withheld, unless (x) withholding of any additional amount of Stock will not result in additional accounting expense to, or adverse tax compliance implications for, the Company and (y) is otherwise permitted by the Company. |
| (ii) | Required Consent to and Notification of Code Section 83(b) Election. No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award document or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision. |
| (iii) | Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (i.e., a disqualifying disposition), such Participant shall notify the Company of such disposition within ten days thereof. |
(e) Changes to the Plan. The Board may amend, suspend or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of stockholders or Participants; provided, however, that any amendment to the Plan shall be submitted to the Company’s stockholders for approval not later than the earliest annual meeting for which the record date is at or after the date of such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of the NYSE or any other stock exchange or automated quotation system on which the Stock may then be listed or quoted, or if such amendment would materially increase the number of shares reserved for issuance and delivery under the Plan (other than in connection with an equitable adjustment pursuant to Section 11(c) above) or amend any other provision of the Plan that expressly requires stockholder approval, and the Board may otherwise, in its discretion, determine to submit other amendments to the Plan to stockholders for approval; and provided further, that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any outstanding Award unless the Committee determines that such amendment, alteration, suspension, discontinuance or termination either is required or advisable in order for the Company, the Plan or the Award to satisfy any applicable law or regulation. For avoidance of doubt, the rights of a Participant will not be deemed to have been altered or impaired in any materially adverse respect if, without the consent of the Participant, the Committee amends an Award to: (i) clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A, (ii) to correct clerical or typographical errors, or (iii) to comply with other applicable laws. Notwithstanding any provision in this Plan to the contrary except in connection with an equitable adjustment under Section 11(c) or a Change in Control, without the prior approval of the Company’s stockholders, no Option or SAR may be amended to reduce the exercise price per share of the shares of Stock subject to such Option or the grant price of such SAR, as applicable, below the exercise price or grant price as of the date the Option or SAR is granted. In addition, and except in connection with an equitable | | | | | | | | | | | | B-14 | | | | | | | | | | | |
adjustment under Section 11(c) or a Change in Control, without the prior approval of the Company’s stockholders, no Option or SAR may be cancelled or surrendered in exchange for another Award or cash when the exercise or grant price per share of Stock exceeds the Fair Market Value of one share of Stock and no Option or SAR may be granted in exchange for, or in connection with, the cancellation or surrender of an Option or SAR having a higher exercise or grant price. (f) Right of Setoff. The Company or any Affiliate of the Company may, to the extent permitted by applicable law and Section 409A, deduct from and set off against any amounts the Company or an Affiliate of the Company may owe to the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section 11(f). (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. (h) Non-Exclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, and such other arrangements may be either applicable generally or only in specific cases. (i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (j) Certain Limitations on Awards to Ensure Compliance with Section 409A. For purposes of this Plan, references to an Award term or event (including any authority or right of the Company or a Participant) being “permitted” under Section 409A mean, for a 409A Award, that the term or event will not cause the Participant to be liable for payment of interest or a tax penalty under Section 409A and, for a Non-409A Award, that the term or event will not cause the Award to be treated as subject to Section 409A. Other provisions of the Plan notwithstanding, the terms of any 409A Award and any Non-409A Award, including any authority of the Company and rights of the Participant with respect to the Award, shall be limited to those terms permitted under Section 409A or an applicable exception, and any terms not permitted under Section 409A shall be automatically modified and limited to the extent necessary to conform with Section 409A. For this purpose, other provisions of the Plan notwithstanding, the Company shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under Section 409A, any distribution subject to Section 409A(a)(2)(A)(i) (separation from Service) to a “key employee” as defined under Section 409A(a)(2)(B)(i), shall not occur earlier than the earliest time permitted under Section 409A(a)(2)(B)(i), and any authorization of payment of cash to settle a Non-409A Award shall apply only to the extent permitted under Section 409A for such Award. Notwithstanding anything in the Plan or any Award document to the contrary, each Participant shall be solely responsible for the tax consequences of Awards, and in no event shall the Company have any responsibility or liability if an Award does not meet any applicable requirements of Section 409A. Although the Company intends to administer the Plan to prevent taxation under Section 409A, the Company does not represent or warrant that the Plan or any Award complies with Section 409A or any other provision of federal, state, local or other tax law. (k) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award document shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable provisions of federal law. (l) Awards to Participants Outside the United States. The Committee may modify the terms of any Award under the Plan made to or held by a Participant who is then resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. An Award may be modified under this Section 11(1) in a manner that is inconsistent with the express terms of | | | | | | | | | | | | | | | | | 2023 Proxy Statement | | | | | B-15 |
the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) of the Exchange Act for the Participant whose Award is modified. (m) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or Service of the Company or an Affiliate of the Company, (ii) interfering in any way with the right of the Company or an Affiliate of the Company to terminate any Eligible Person’s or Participant’s Service at any time (subject to the terms and provisions of any separate written agreements), (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and Employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award or an Option is duly exercised. Except as expressly provided in the Plan and an Award document, neither the Plan nor any Award document shall confer on any person other than the Company and the Participant any rights or remedies thereunder.The Company makes no representation that any or all of the Awards or payments under this Plan will be exempt from or comply with Section 409A, and makes no undertaking to preclude Section 409A from applying. (n) Severability; Entire Agreement. If any of the provisions of this Plan or any Award document is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award documents contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof. (o) Plan Effective Date and Termination. The Plan shall become effective on June 7, 2023, provided that the Plan is approved by the stockholders of the Company at a stockholders’ meeting held on such date (or, if the meeting or vote is postponed, such later date that a stockholder vote is taken to approve the Plan) (the “Effective Date”). If the Plan is not so approved at such meeting, then the Prior Plan as in effect immediately prior to the Effective Date shall remain in effect. Upon effectiveness, no further awards shall be granted under the Prior Plans, but any outstanding awards under the Prior Plans shall continue in accordance with their terms. Unless earlier terminated by action of the Board of Directors, the authority of the Committee to make grants under the Plan shall terminate on the tenth anniversary of the Effective Date. (unless the Plan is re-approved by the Company’s stockholders prior to such date), and the Plan will remain in effect until such time as no Stock remains available for delivery under the Plan and the Company has no further rights or obligations under the Plan with respect to outstanding Awards under the Plan. (p) Establishment of Sub-plans. The Committee shall have the discretionary authority to adopt and implement from time to time such addenda or sub-plans to the Plan as it may deem necessary in order to bring the Plan into compliance with applicable laws and regulations of any foreign jurisdictions in which Awards are to be made under the Plan and/or to obtain favorable tax treatment in those foreign jurisdictions for the individuals to whom the Awards are made. For the avoidance of doubt, no such addenda or sub-plans as described in this Section 10(p) shall include any provisions that are inconsistent with the terms of the Plan as then in effect, unless the Plan could have been amended to eliminate such inconsistency without further approval by the Company’s stockholders. | | | | | | | | | | | | B-16 | | | | | | | | | | | |
AEO INC. PROXY REPORT 2021
AMERICAN EAGLE OUTFITTERS, INC. The undersigned Stockholder of American Eagle Outfitters, Inc. hereby appoints Michael A. Mathias, Stacy B. Siegal,Beth Henke, and Jennifer B. Stoecklein, or any of them individually, as attorneys and proxies with full power of substitution to vote all of the shares of Common Stock of American Eagle Outfitters, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders of American Eagle Outfitters, Inc. to be held via virtual meeting on Thursday,Wednesday, June 3, 20217, 2023 at 11:00 a.m.,AM Eastern Daylight Savings Time, and at any adjournment or adjournments thereof. In order to attend the meeting, you must register at http://viewproxy. com/viewproxy.com/ae/2021/2023/htype.asp by 11:59 PM ET on May 31, 2021.June 4, 2023. On the day of the Annual Meeting of Stockholders, if you have properly registered, you may enter the meeting by clicking on the link provided and the password you received via email in your registration confirmations. Further instructions on how to attend and vote at the Annual Meeting of Stockholders are contained in the Proxy Statement in the section titled “Information About This Proxy Statement and the Annual Meeting.” This proxy is solicited on behalf of the Board of Directors. (Continued, and to be dated and signed, on the other side) •
p PLEASE DETACH PROXY CARD HERE • p Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held June 3, 2021.7, 2023. The Proxy Statement and our Fiscal 20202022 Annual Report are available at: http://viewproxy.com/ae/2021/2023/
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
| | | | | | | | 1. ProposalOne. Election of Directors.
| | | | | | | | FOR | | AGAINST | | ABSTAIN | 01 Janice E. Page
02 David M. Sable
03 Noel J. Spiegel
| | FOR
☐
☐
☐
| | AGAINST
☐
☐
☐
| | ABSTAIN
☐
☐
☐
| | | | 2. Proposal Two. Ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 29, 2022.
3. Proposal Three. Hold an advisory vote on the compensation of our named executive officers.
| | ☐
☐
| | ☐
☐
| | ☐
☐
| | | | | | | | | | | | | | | | | IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED “FOR”
PROPOSALS 1, 2, AND 3.
| | | | | | | | | | | | | | | | | Please sign and date this Proxy below and return in the enclosed envelope. | | | | | | | | | | | | | | | | | Signature(s) must agree with the name(s) printed on this proxy. If signing as attorney, executor, administrator, trustee or guardian, please give your full title as such.
|
| | | | | | | | | | (Signature) | | | | | | | | | | (Signature of joint owner) |
•PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | 1. | | Proposal One. Election of Directors. | | | | | | 3. | | Proposal Three. Hold an advisory vote on the compensation of our named executive officers. | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | | | | | | | | | | | | | | | | 01 Jay L. Schottenstein | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | 02 Sujatha Chandrasekaran | | ☐ | | ☐ | | ☐ | | | | | | | | | | 1 Year | | 2 Years | | 3 Years | | ABSTAIN | | | | | | | | | | | | | | | 2. | | Proposal Two. Ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 3, 2024. | | ☐ | | ☐ | | ☐ | | | | | | 4. | | Proposal Four. Hold an advisory vote on the frequency of future say on pay votes. | | ☐ | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | | | | | | | | | | | | 5. | | Proposal Five. Approve the Company’s 2023 Stock Award and Incentive Plan. | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED “FOR” | | | | | DO NOT PRINT IN THIS AREA (Shareholder Name & Address Data) | | | | | | PROPOSALS 1, 2, 3, AND 5 AND FOR “ONE YEAR” ON PROPOSAL 4. | | | | | | | | | Please sign and date this Proxy below and return in the enclosed envelope. | | | | | | | | | Signature(s) must agree with the name(s) printed on this proxy. If signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. | | | | | | | | | | | | | | | | | | Date , 2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Signature of joint owner) | | | | | | | | | | | | | | | | | VIRTUAL CONTROL NUMBER | | | | | | | | |  | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
p PLEASE DETACH PROXY CARD HERE •p  
PROXY VOTING INSTRUCTIONS Please have your 11 digit control number ready when voting by Internet or Telephone or when voting during the Virtual Annual Meeting
| | | | | | | | | | | | | | | | | |  | | | |  | | | |  | 
INTERNET
| | | | TELEPHONE | | | | MAIL | Vote Your Proxy on the Internet: | | | | Vote Your Proxy by Phone: | | | | Vote Your Proxy by Mail: | | | | | | Go to www.AALvote.com/AEO Have your proxy card available
when you access the above
website. Follow the prompts to
vote your shares.
| | | | 
TELEPHONE
Vote Your Proxy by
Phone: Call 1 (866) 804-804-9616
| | | | | | | | | | Have your proxy card available 9616
| | | | Use any touch-tone telephone to | | | | Mark, sign, and date your proxy | when you access the above | | | | vote your proxy. Have your proxy | | | | card, available when you call. then detach it, and return | website. Follow the voting instructionsprompts to vote your shares.
| | | | 
MAIL
Vote Your Proxy by Mail:
Mark, sign, and date your proxy
card then detach it, and return available when you call. | | | | it in the postage-paid envelope | vote your shares. | | | | Follow the voting instructions to | | | | provided. | | | | | vote your shares. | | | | |
|
|
|
|
|
