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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
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o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
THE BON-TON STORES, INC. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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2801 East Market Street
York, PA 17402
www.bonton.com
May 7, 20136, 2014
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders to be held at the Company's offices, 2801 East Market Street, York, Pennsylvania on Tuesday, June 18, 2013,17, 2014, beginning at 9:00 a.m.
We are using the Securities and Exchange Commission rule that allows companies to furnish proxy materials over the internet. The proxy materials consist of our official notice of meeting, the proxy statement and our 20122013 Annual Report. We are mailing to many of our shareholders a notice that the proxy materials including our 2012 Annual Report, are available on our website rather than sending a paper copy of this proxy statement and our 20122013 Annual Report. We believe this electronic proxy process will expedite shareholders' receipt of proxy materials, conserve valuable natural resources and reduce the Company's costs of printing and distributing proxy materials.
Your vote is important to us. Even if you plan to attend the meeting, please vote your shares by telephone or over the internet, or, alternatively, if you elect to receive a paper copy of the proxy card by mail, by signing, dating and mailing the proxy card in the postage-paid envelope provided. Instructions regarding these three methods of voting are contained in our proxy materials. If you attend the meeting, you may continue to have your shares voted as previously indicated or you may withdraw your proxy at the meeting and vote the shares in person.
Sincerely, | ||
|
2801 East Market Street
York, PA 17402
www.bonton.com
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of The Bon-Ton Stores, Inc. will be held on Tuesday, June 18, 2013,17, 2014, at 9:00 a.m., at the Company's offices, 2801 East Market Street, York, Pennsylvania.
The purposes of the meeting are:
Shareholders who owned shares of our stock at the close of business on April 19, 201317, 2014 may attend and vote at the meeting. You may vote by telephone or over the internet or, if you elect to receive a paper copy of the proxy card by mail, you may vote by signing, dating and mailing the proxy card in the postage-paid envelope provided. Any shareholder attending the meeting may vote in person, even if he or she has already returned a proxy card or voted by telephone or over the internet.
J. Gregory Yawman Vice |
York, Pennsylvania
May 7, 20136, 2014
Please vote by telephone or over the internet as instructed on the proxy card or, if you have elected to receive a paper copy of our proxy materials by mail, complete, sign and date the proxy card as promptly as possible and return it in the envelope provided. If you vote by telephone or over the internet, do not return your proxy card.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON JUNE 18, 201317, 2014
This proxy statement and the Company's Annual Report for the fiscal year ended February 2, 20131, 2014 are both available in the Investor Relations section of the Company's website at www.bonton.com.
| Page | |||
---|---|---|---|---|
Voting Procedures and Security Ownership | 1 | |||
Outstanding Shares and Voting Rights | 1 | |||
Principal Shareholders | ||||
Security Ownership of Directors and Executive Officers | ||||
Proposal One: Election of Directors | ||||
Corporate Governance and Board of Directors Information | ||||
Governing Documents | ||||
Code of Conduct | ||||
Director Independence | ||||
Leadership Structure | ||||
Meetings of the Board of Directors | ||||
Board Committees | ||||
Role of the | ||||
Role of the Board in Risk Oversight | ||||
Director Nominations Process and Director Qualifications | ||||
Director Attendance at Annual Meetings | ||||
Shareholder Communication with the Board of Directors | ||||
Compensation of Directors | ||||
Share Ownership Guidelines | ||||
Proposal Two: Approval, on an Advisory Basis, of Compensation of the Named Executive Officers | ||||
Proposal Three: Ratification of the Appointment of the Independent Registered Public Accounting Firm | ||||
Report of the Audit Committee | ||||
Executive Compensation | 21 | |||
Compensation Discussion and Analysis | 21 | |||
Report of the Human Resources and Compensation Committee | 33 | |||
Risk Considerations in our Compensation Policies | ||||
Summary Compensation Table | ||||
Grants of Plan-Based Awards | ||||
Outstanding Equity Awards at Fiscal Year-End | ||||
| 38 | |||
Option Exercises and Stock Vested During | 39 | |||
Summary of Employment Agreements with Named Executive Officers | ||||
Potential Payments Upon Termination or Change in Control | ||||
Equity Compensation Plan Information | ||||
Section 16(a) Beneficial Ownership Reporting Compliance | ||||
Related Party Transactions | ||||
Shareholder Proposals | ||||
Householding of Proxy Materials |
THE BON-TON STORES, INC.
PROXY STATEMENT
We are providing this proxy statement to solicit your proxy for use at the Annual Meeting of Shareholders (the "meeting"), which will be held at 9:00 a.m. on Tuesday, June 18, 2013.17, 2014. The proxy materials, which consist of the 20122013 Annual Report, the Notice of Annual Meeting, this proxy statement and the proxy card, are being made available to our shareholders on or about May 7, 2013.6, 2014.
The Company is furnishing proxy materials over the internet pursuant to rules adopted by the Securities and Exchange Commission (the "SEC"). We are mailing to many of our shareholders a notice that the proxy materials are available on our website. The notice provides instructions on accessing the proxy materials and submitting your proxy on-line. The notice also provides instructions for requesting paper copies of the proxy materials, which are available free of charge.
We do not anticipate that any matters will be raised at the meeting other than those described in the Notice of Annual Meeting. If any other matters come before the meeting, your proxies will be authorized to act in accordance with their best judgment.
When your proxy card is signed and returned, or you have submitted your proxy over the internet or by telephone, your shares will be voted in accordance with your instructions. If your proxy card is signed and returned without specifying choices, your shares will be voted "for" the Board nominees, "for" the approval of the compensation of the Named Executive Officers, and "for" ratification of the appointment of KPMG LLP as independent registered public accounting firm.
You may revoke your proxy before its exercise by notifying the Secretary of the Company in writing, by delivering a properly executed, later-dated proxy card, by submitting your proxy again over the internet or by telephone or by voting in person at the meeting.
Your proxy is being solicited by the Board of Directors (the "Board"). We will bear the cost of this solicitation, including the charges of brokerage houses, nominees and fiduciaries in forwarding these materials to beneficial owners. This solicitation may be made in person, by telephone or by other means of communication by our directors, officers or employees.
References in this proxy statement to a year refer to our fiscal year, which is the 5252- or 53 week53-week period ending on the Saturday nearer to January 31 of the following calendar year (for example, a reference to 20122013 is a reference to the fiscal year ended February 2, 2013)1, 2014).
VOTING PROCEDURES AND SECURITY OWNERSHIP
Outstanding Shares and Voting Rights
Shareholders of record at the close of business on April 19, 201317, 2014 are entitled to vote at the meeting. At that time, there were 17,396,08217,576,267 shares of common stock and 2,951,490 shares of Class A common stock outstanding. The common stock and the Class A common stock vote together on all matters. Holders of common stock are entitled to one vote per share and holders of Class A common stock are entitled to ten votes per share. There are no other classes of voting securities outstanding. In the election of directors, shareholders do not have cumulative voting rights.
The presence at the meeting, in person or by proxy, of persons entitled to cast a majority of the shareholder votes will constitute a quorum.
For Proposal One, the nominees receiving a majority of the votes cast will be elected. (A majority of votes cast means that the number of votes cast "for" a director must exceed the number of votes cast "against" that director.) A proxy marked "withhold" with respect to the election of a director will
not be voted as to the director indicated, but will be counted for purposes of determining whether there is a quorum.
For Proposal Two, an affirmative vote of the majority of the votes cast by shareholders present in person or represented by proxy at the meeting and entitled to vote on Proposal Two is required to
approve, on an advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement.proxy statement.
For Proposal Three, an affirmative vote of the majority of the votes cast by shareholders present in person or represented by proxy at the meeting and entitled to vote on Proposal Three is required to approve the ratification of the appointment of KPMG LLP as our independent registered public accounting firm.
Because your vote on Proposal Two is advisory, it will not bind the Board or the Human Resources and Compensation Committee of the Board. However, the Board and the Human Resources and Compensation Committee will review the voting results and take the results into consideration in making future determinations on executive compensation.
Abstentions and broker non-votes are counted to determine whether a quorum is present at the meeting but are not counted as a vote in favor of or against a particular matter. A
If a broker, bank or other nominee holds your common stock for your benefit but not in your name, your shares are held in "street name." If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute "broker non-vote" occursnon-votes." Generally, broker non-votes occur on a matter when a holder of record for abroker is not permitted to vote on that matter without instructions from the beneficial owner doesand instructions are not given. Brokers are not entitled to vote on a particular matter because the holderelection of record does not have discretionary voting power asdirectors or the advisory proposal to that item and has not receivedapprove the compensation of our Named Executive Officers unless they receive voting instructions from the beneficial owner.
The rules that guide how most brokers vote your stock have changed over the last several years. The rules provide that brokerage firms or other nominees may not vote your shares with respect to matters that are not "routine" under the rules. The rules now provide that the election of directors is not a "routine" matter. Accordingly, most brokerage firms or other nominees may not vote your shares with respect to the election of directors without specific instructions from you as to how your shares are to be voted. As required by Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), an advisory vote on executive compensation is also considered a non-routine matter for which brokers do not have discretionary authority to vote shares held by account holders. The ratification and appointment of our independent registered public accounting firm for 2013 is considered a "routine" matter under the rules and, therefore, brokerage firms and other nominees have the authority under the rules to vote your unvoted shares with respect to this matter if you have not furnished voting instructions within a specified period of time prior to the meeting.
If you own common stock in your own name, you are an "owner of record." This means you may direct the persons named as proxies how to vote your shares. If you fail to return your proxy, the proxies cannot vote your shares at the meeting.
You have four voting options:
If a broker, bank or other nominee holds your common stock for your benefit but not in your name, your shares are held in "street name." In that case,street name, your bank, broker or other nominee will send you a voting instruction form to use in voting your shares. The availability of internet and
telephone voting depends on their voting processes. Please follow the voting instruction form sent to you by your bank, broker or other nominee.
If you are a participant in The Bon-Ton Stores, Inc. Retirement Contribution Plan (the "401(k) Plan"), your proxy will incorporate all shares you own through the 401(k) Plan, assuming all your shares are registered in the same name. Your proxy will serve as a voting instruction for the trustee of
the 401(k) Plan. If you own shares through the 401(k) Plan and you do not vote, the 401(k) Plan trustee will vote your shares in the same proportion as shares for which instructions were received from other shareholders under the 401(k) Plan.
The NASDAQ Stock Market listing standards provide that if more than 50% of the voting power in a company is held by an individual, group or another company, the company is a "controlled" company. Bon-Ton is a "controlled" company because Tim Grumbacher, a directorChairman of the Board and Strategic Initiatives Officer of the Company, is the beneficial owner of shares of common stock and Class A common stock entitled to vote more than 50% of the votes entitled to be cast at the meeting. Mr. Grumbacher has indicated that he will vote "for" each of the nominees for director, "for" the approval of the compensation of the Named Executive Officers and "for" ratification of the appointment of KPMG LLP. Consequently, the election of each nominee for director, the approval of the compensation of the Named Executive Officers, and the ratification of the appointment of KPMG LLP are assured.
This table shows owners of 5% or more of the Class A common stock or common stock as of March 15, 2013.14, 2014. Each person listed has sole voting power and sole investment power as to the shares indicated unless otherwise noted.
| Class A Common Stock | Common Stock(1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Address | Number of Shares | Percent of Class | Number of Shares | Percent of Class | |||||||||
Tim Grumbacher | 2,951,490 | 100.00 | % | 4,619,424 | 23.39 | % | |||||||
2801 E. Market Street | |||||||||||||
FMR, LLC | 2,221,409 | (2) | 13.22 | % | |||||||||
82 Devonshire St. | |||||||||||||
Lombard Odier Asset Management (USA) Corp. | 1,619,394 | (2) | 9.64 | % | |||||||||
888 7th Avenue | |||||||||||||
Morgan Stanley | 1,225,501 | (2) | 7.29 | % | |||||||||
1585 Broadway | |||||||||||||
Michael L. Gleim | 994,652 | (3) | 5.92 | % | |||||||||
2801 E. Market Street | |||||||||||||
Gamco Investors, Inc. | 861,500 | (2) | 5.13 | % | |||||||||
One Corporate Center |
| Class A Common Stock | Common Stock(1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Address | Number of Shares | Percent of Class | Number of Shares | Percent of Class | |||||||||
Tim Grumbacher | 2,951,490 | 100.00 | % | 4,330,266 | 21.22 | % | |||||||
Gamco Investors, Inc. | — | 2,080,681 | (2) | 11.92 | % | ||||||||
Lombard Odier Asset Management (USA) Corp. | — | 1,366,194 | (2) | 7.83 | % | ||||||||
Michael L. Gleim | — | 994,652 | (3) | 5.70 | % | ||||||||
Berylson Capital Partners, LLC | — | 887,118 | (2) | 5.08 | % |
This table shows, as of March 15, 2013,14, 2014, the holdings of Byron L. Bergren, our Chief Executive Officer, through February 6, 2012; Brendan L. Hoffman, our Chief Executive Officer since February 7, 2012; our Chief Financial Officer;Officer, the three other most highly compensated executive officers during 20122013 (collectively, the "Named Executive Officers");, each director;director, and all directors and executive officers as a group. Each person listed has sole voting power and sole investment power with respect to the shares indicated unless otherwise noted.
| Class A Common Stock | Common Stock(1) | Class A Common Stock | Common Stock(1) | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Shares Beneficially Owned | Percent of Class | Shares Beneficially Owned(2) | Percent of Class | Shares Beneficially Owned | Percent of Class | Shares Beneficially Owned(2) | Percent of Class | ||||||||||||||||||
Tim Grumbacher | 2,951,490 | 100.00 | % | 4,619,424 | 23.39 | % | 2,951,490 | 100.00 | % | 4,330,266 | (3) | 21.22 | % | |||||||||||||
Michael L. Gleim | — | 994,652 | (3) | 5.92 | % | — | 994,652 | (4) | 5.70 | % | ||||||||||||||||
Brendan L. Hoffman | — | 511,060 | 3.04 | % | — | 809,563 | 4.64 | % | ||||||||||||||||||
Byron L. Bergren | — | 440,756 | 2.62 | % | ||||||||||||||||||||||
Anthony J. Buccina | — | 306,944 | 1.81 | % | ||||||||||||||||||||||
Keith E. Plowman | — | 262,907 | (5) | 1.50 | % | |||||||||||||||||||||
Stephen R. Byers | — | 206,759 | 1.22 | % | — | 221,177 | 1.26 | % | ||||||||||||||||||
Keith E. Plowman | — | 187,907 | (4) | 1.11 | % | |||||||||||||||||||||
Luis Fernandez | — | 58,660 | * | |||||||||||||||||||||||
Lucinda M. Baier | — | 10,000 | * | — | 10,000 | * | ||||||||||||||||||||
Philip M. Browne | — | 8,600 | * | — | 8,600 | (6) | * | |||||||||||||||||||
Marsha M. Everton | — | 860 | * | |||||||||||||||||||||||
Todd C. McCarty | — | — | * | — | — | — | ||||||||||||||||||||
Jeffrey B. Sherman | — | — | * | — | — | — | ||||||||||||||||||||
All directors and executive officers as a group (14 persons) | 2,951,490 | 100.00 | % | 7,168,719 | (5) | 35.75 | % | |||||||||||||||||||
Steven B. Silverstein | — | — | — | |||||||||||||||||||||||
All directors and executive officers as a group (11 persons) | 2,951,490 | 100.00 | % | 6,500,302 | 31.68 | % |
and the Amended and Restated 2009 Omnibus Incentive Plan (together, the "Stock Incentive Plan"). For awards in years prior to 2012, RSUs do not confer on the non-employee director voting or dispositive control over common shares until one year following termination of Board service and, for awards in 2012 and thereafter, RSUs do not confer voting or dispositive control over common shares until three months following termination of Board service. The
following table sets forth the number of options exercisable within 60 days of March 15, 2013,14, 2014, and the number of Restricted Shares and RSUs held by each person:
Name | Options Exercisable Within 60 Days of March 15, 2013 | Restricted Shares | Restricted Stock Units | Options Exercisable Within 60 Days of March 14, 2014 | Restricted Shares | Restricted Stock Units | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tim Grumbacher | — | — | — | — | — | — | ||||||||||||||
Michael L. Gleim | — | — | 74,433 | — | — | 78,284 | ||||||||||||||
Byron L. Bergren | — | — | 23,478 | |||||||||||||||||
Brendan L. Hoffman | — | 450,000 | — | — | 700,000 | — | ||||||||||||||
Anthony J. Buccina | 157,019 | — | — | |||||||||||||||||
Keith E. Plowman | 51,019 | 95,000 | — | |||||||||||||||||
Stephen R. Byers | 82,519 | 21,000 | — | 61,019 | 53,500 | — | ||||||||||||||
Keith E. Plowman | 51,019 | 45,000 | — | |||||||||||||||||
Luis Fernandez | — | 52,500 | — | |||||||||||||||||
Lucinda M. Baier | — | — | 59,823 | — | — | 63,193 | ||||||||||||||
Philip M. Browne | — | — | 72,320 | — | — | 75,930 | ||||||||||||||
Marsha M. Everton | — | — | 72,320 | |||||||||||||||||
Todd C. McCarty | — | — | 59,900 | — | — | 63,510 | ||||||||||||||
Jeffrey B. Sherman | — | — | — | — | — | 4,679 | ||||||||||||||
All directors and executive officers as a group (14 persons) | 297,444 | 547,000 | 362,274 | |||||||||||||||||
Steven B. Silverstein | — | �� | — | 4,649 | ||||||||||||||||
All directors and executive officers as a group (11 persons) | 112,038 | 901,000 | 290,245 |
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board proposes the following nominees for election as directors to hold office until the 20142015 Annual Meeting of Shareholders and until their respective successors have been elected. Each is currently a director and has agreed to serve if elected. Should a nominee become unable or decline to serve before the meeting, the proxies may vote for a substitute recommended by the Governance and Nominating Committee of the Board, unless the Board reduces the number of directors.
Byron L. Bergren and Marsha M. Everton are not nominees for re-election as directors this year. Mr. Bergren served as President and Chief Executive Officer of Bon-Ton from August 2004 to February 2012, when he retired as President and Chief Executive Officer and was named Chairman of the Board of Directors. He has served as a director since 2004. Ms. Everton has been a director since 2003. The Company thanks Mr. Bergren and Ms. Everton for their service to the Company.
LUCINDA M. BAIERBAIER——Director since 2007. Age 4849
Ms. Baier has served as Executive Vice President of Navigant Consulting, Inc., a specialized, global expert services firm, since February 2013, and became Chief Financial Officer in March 2013. She had been Executive Vice President, Chief Financial Officer and Chief Administrative Officer of Central Parking System, Inc., a leading firm in parking management and marketing, from August 2011 to October 2012, having previously served as Senior Vice President and Chief Financial Officer since September 2010. Prior to that, Ms. Baier was Executive Vice President and Chief Financial Officer of Movie Gallery, Inc., a home entertainment specialty retailer, from July 2008 to February 2010. In February 2010, Movie Gallery, Inc. filed for reorganization under Chapter 11 of the Bankruptcy Code. Ms. Baier served from 2006 until July 2008 as Chief Financial Officer of World Kitchen, LLC.
In determining that Ms. Baier should serve as a director of the Company, the Board considered her significant experience as a chief financial officer of a public company, her expertise and background with regard to accounting and financial matters, as well as her expertise in financial and strategic planning, regulatory compliance and reporting and corporate financing.
PHILIP M. BROWNEBROWNE——Director since 2002. Age 5354
Mr. Browne has served as Managing Director, Finance and Administration, of Franklin Square Capital Partners, a sponsor and distributor of investment products, since April 2012. Prior to that, he was Senior Vice President and Chief Financial Officer of Advanta Corp., one of the nation's largest credit card issuers in the small business market, from June 1998 to March 2011. In November 2009, Advanta Corp. filed for reorganization under Chapter 11 of the Bankruptcy Code. Prior to that, Mr. Browne was a partner at Arthur Andersen LLP, where he was employed for more than 15 years. Mr. Browne serves on the national Boardboard of Directorsdirectors and as the treasurerTreasurer of Living Beyond Breast Cancer.
In determining that Mr. Browne should serve as a director of the Company, the Board considered his significant experience as a chief financial officer of a public company, his expertise and background with regard to accounting and financial matters, as well as his expertise in financial and strategic planning, regulatory compliance and reporting and corporate financing.
MICHAEL L. GLEIMGLEIM——Director since 1991. Age 7071
Mr. Gleim has beenwas elected Vice Chairman of the Board of Directors in November 2013, having served as the Company's Lead Director since January 2010. He was Vice Chairman and Chief Operating Officer of Bon-Ton from December 1995 to February 2002. From 1991 to December 1995 he was Senior Executive Vice President of Bon-Ton, and from 1989 to 1991 he was Executive Vice President of Bon-Ton.
In determining that Mr. Gleim should serve as a director of the Company, the Board considered his numerous years of executive leadership with the Company and management experience in the department store industry as well as his expertise in strategic planning, business expansion, financing and corporate governance.
TIM GRUMBACHERGRUMBACHER——Director since 1967. Age 7374
Mr. Grumbacher is currently Chairman of the Board and Strategic Initiatives Officer. He was named Chairman of the Board of Directors in June 2013. Mr. Grumbacher served as Executive Chairman of the Board of Directors of Bon-Ton from February 2005 to February 2012, when he was named Chairman Emeritus and Strategic Initiatives Officer. He served as Chairman of the Board of Directors of Bon-Ton from August 1991 to February 2005. He was Chief Executive Officer of Bon-Ton from 1985 to 1995 and in positions of senior management since 1977.
In determining that Mr. Grumbacher should serve as a director of the Company, the Board considered his numerous years of executive leadership with the Company and management experience in the department store industry as well as his expertise in strategic planning, business expansion, financing and corporate governance and his significant ownership interest in the Company.
BRENDAN L. HOFFMANHOFFMAN——Director since February 2012. Age 4445
Mr. Hoffman became President and Chief Executive Officer of Bon-Ton onin February 7, 2012. Mr. Hoffman served as President and Chief Executive Officer of Lord & Taylor, a division of Hudson's Bay Trading Company, from October 2008 to January 2012. Prior to that, Mr. Hoffman served for six years as President and Chief Executive Officer of Neiman Marcus Direct, where he oversaw the growth of neimanmarcus.com and the launch and growth of bergdorfgoodman.com. Mr. Hoffman has served as a director of Pier 1 Imports, Inc. since January 2011.
In determining that Mr. Hoffman should serve as a director of the Company, the Board considered his current role as President and Chief Executive Officer, his numerous years of executive leadership in the retail department store industry as well as his expertise in strategic planning, business expansion, merchandising, marketing, financing and corporate governance.
Mr. Hoffman has announced that he will not renew his contract upon its expiration in February 2015. The Board will undertake a national search to find a chief executive officer to succeed Mr. Hoffman.
TODD C. MCCARTYMCCARTY——Director since 2007. Age 4748
Mr. McCarty has served as Senior Vice President, Global Human Resources of Las Vegas Sands Corporation since September 2012. He had beenwas Senior Vice President, Human Resources of The New York Times Company from December 2009 to September 2012. Prior to that, Mr. McCarty served as Senior Vice President, Global Human Resources of Readers Digest Association, Inc. from March 2008 to December 2009. In August 2009, Readers Digest Association, Inc. filed for reorganization under Chapter 11 of the Bankruptcy Code. From 2005 to February 2008, he served as Senior Vice President—Human Resources of Rite Aid Corporation.
In determining that Mr. McCarty should serve as a director of the Company, the Board considered his many years of experience as a senior executive in the field of human resources, including specialized knowledge beneficial to the Board of Directors in its formulation of compensation strategies and objectives.
JEFFREY B. SHERMANSHERMAN——Director since March 2013. Age 6465
Mr. Sherman has been the President of The Echo Design Group, Inc., a company that designs, manufactures and distributes accessories and home products, since 2010. From 2008 to 2010, he served as President and Chief Executive Officer of Hudson's Bay Trading Company, a retailer with over 600 retail locations in Canada and the United States. Prior to that, Mr. Sherman served as President and Chief Operating Officer of the Polo Retail Group of Ralph Lauren Corporation, as Chief
Executive Officer of Limited Stores and in positions of increasing responsibility for over thirty years with Federated Department Stores, including President and Chief Operating Officer of Bloomingdale's.
Mr. Sherman serves on the Boardboard of Directorsdirectors of United Way, New York City.
Mr. Sherman was recommendedCity and as senior advisor to the Board by Mr. Hoffman, the Company's President and Chief Executive Officer.board of directors of Bluefly Holdings, Inc.
In determining that Mr. Sherman should serve as a director of the Company, the Board considered his numerous years of executive leadership with companies in the department store and retail industries as well as his expertise in strategic planning, business expansion, merchandising, marketing, distribution, brand development and financing.
STEVEN B. SILVERSTEIN—Director since September 2013. Age 54
Mr. Silverstein has been President and Chief Executive Officer of Spencer Spirit Holdings, Inc., a company that operates two retail brands, Spencer Gifts and Spirit Halloween, since 2003. From 1992 to 2003, Mr. Silverstein served in positions of increasing responsibility at Linens 'n Things, Inc., including the position of President. Prior to that, he served as a Divisional Merchandise Manager of Bloomingdale's. Mr. Silverstein serves on the board of Wave Hill Botanic Garden in Bronx, New York.
In determining that Mr. Silverstein should serve as a director of the Company, the Board considered his numerous years of executive leadership with companies in the retail industry as well as his expertise in strategic planning, business expansion, merchandising, marketing, distribution, brand development and financing.
CORPORATE GOVERNANCE AND BOARD OF DIRECTORS INFORMATION
The key documents that constitute our corporate governance framework are our:
Each of the committee charters and the Code of Ethical Standards and Business Practices is available on our website at www.bonton.com by clicking on "Investor Relations," then "Corporate Governance."
The Company maintains a Code of Ethical Standards and Business Practices (the "Code of Conduct") that sets forth the Company's policies and expectations. The Code of Conduct, which applies to every Company director, officer and employee, addresses a number of topics, including conflicts of interest, relationships with others, corporate payments, disclosure policy, compliance with laws, corporate opportunities and the protection and proper use of the Company's assets. The Code of Conduct meets the NASDAQ Stock Market's requirements for a code of conduct as well as the SEC's definition of a code of ethics applicable to the Company's senior officers.
The Board of Directors has determined that each of Messrs. Browne, Gleim, McCarty, Sherman and ShermanSilverstein and Ms. Baier is an "independent" director as that term is defined in the listing standards of the NASDAQ Stock Market. In determining independence, the Board of Directors carefully reviewed any possible related party transactions between the Company or any of its affiliates and each of the independent directors and determined there were no transactions that would compromise such director's independence. As discussed above,Although the Board consists of a majority of independent directors, the Company is, as discussed on page 3, a "controlled company" and, as such, the Company may elect under Rule 5615(c) of the listing standards of the NASDAQ Stock Market not to have a majority of the Board consist of independent directors.
Since 2004, theThe Company has chosen to separate the roles of Chairman of the Board and Chief Executive Officer. The Company believesOfficer, believing that this structure allows the Chairman of the Board to focus on leadership of the Board and to ensure that the Board fulfills its duties and responsibilities while the Chief Executive Officer focuses on leadership of the Company, including its strategic direction, the quality of its management and continuous operational improvement to enhance shareholder value. In addition, beginning January 2010,To further strengthen the Company institutedBoard's governance structure, the positionCompany's Corporate Governance Policies provide for an independent Vice Chairman of Lead Director.the Board. The role of the Lead DirectorVice Chairman is described on page 13.12.
Meetings of the Board of Directors
During 2012,2013, the Board of Directors held tensix meetings and took action by unanimous consent without a meeting twofour times. No director attended fewer than 75% of the total number of meetings of the Board and committees on which he or she served while in office. At each meeting of the Board, of Directors, the independent directors also meet in executive session, at which only the independent directors are present.
The Board has an Audit Committee, a Human Resources and Compensation Committee, a Governance and Nominating Committee and an Executive Committee. The primary functions of each committee, its members, the number of times the committee met during 2012,2013, and certain other information regarding each committee, are described below. The membership of each committee is as of the date of this proxy statement.
Audit Committee
The members of the Audit Committee are Philip M. Browne (Chair), Lucinda M. Baier and Todd C. McCarty. The Board has determined that each of Mr. Browne and Ms. Baier is an "audit committee financial expert" as defined by applicable SEC rules and the listing standards of the NASDAQ Stock Market. The Audit Committee is comprised entirely of "independent" directors as defined by applicable SEC rules and NASDAQ Stock Market listing standards and operates under a charter that was adopted by the Board. This charter is posted in the Investor Relations section of the Company's website at www.bonton.com.
The Audit Committee appoints and establishes the compensation for the Company's independent registered public accounting firm and approves in advance all engagements with the independent registered public accounting firm to perform audit or non-audit services. The Audit Committee oversees (1) the integrity of the Company's financial statements, (2) the Company's system of internal control over financial reporting and disclosure controls, (3) the Company's compliance with legal and regulatory requirements, (4) the qualification, independence and performance of the Company's independent registered public accounting firm and (5) the performance of the Company's internal audit function. The Audit Committee also oversees the financial reporting processes of the Company and the audits of the Company's financial statements. To assist it in carrying out its responsibilities, the Audit Committee is authorized to retain the services of independent advisors.
The Audit Committee met sevensix times during 2012.2013.
Human Resources and Compensation Committee
The members of the Human Resources and Compensation Committee (referred to in this proxy statement as the "HRCC") are Marsha M. Everton (Chair), Todd C. McCarty and(Chair), Jeffrey B. Sherman.Sherman and Steven B. Silverstein. The HRCC is comprised entirely of "independent" directors, as defined by the listing standards of the NASDAQ Stock Market, and all members are "non-employee directors" as defined by applicable SEC rules and "outside directors" as defined by applicable rules under the Internal Revenue Service Rules.Code. The HRCC operates under a charter that was adopted by the Board. This charter is posted in the Investor Relations section of the Company's website at www.bonton.com.
The HRCC reviews and evaluates the Company's overall compensation strategy to ensure that it promotes shareholder interests, supports the Company's strategic objectives and provides for appropriate rewards and incentives for the Company's management and employees. The HRCC reviews, evaluates and provides recommendations to the Board regarding the plans, policies and programs relating to the compensation of the Company's executive officers, the general compensation
policies of the Company, succession planning, management development, and termination policies and arrangements. In addition, the HRCC reviews and approves the structure of the Company's bonus plans, administers the Company's stock incentive plans and oversees the Company's retirement, defined benefit and health and welfare plans.
At the end of each year, the HRCC evaluates the performance of the President and Chief Executive Officer and the other executive officers of the Company with respect to approved goals and objectives, and establishes the compensation levels for the executive officers, including base pay, annual incentive compensation, long-term incentive plan participation, entrance into an agreement regarding employment and any special or supplemental benefits. The HRCC also establishes compensation levels for any newly-hired executive officer. (See "Compensation Discussion and Analysis" on page 21 for additional discussion of the elements of executive officer compensation.) The compensation of the President and Chief Executive Officer is also reviewed by the full Board. The HRCC annually reviews with the President and Chief Executive Officer the performance of the other executive officers and approves their compensation for the next year. The HRCC establishes the corporate goals underassociated with the Company's Cash Bonus Plan, and Management Incentive Plan and performance-based restricted stock awards and has the authority to determine whether the requirements for receipt of a bonus or performance-based restricted stock should be waived.
The HRCC may delegate its authority to a subcommittee comprised solely of its members. To assist it in carrying out its responsibilities, the HRCC is authorized to retain the services of advisors. During 2012,2013, the HRCC engaged Meridian Compensation Partners, LLC ("Meridian") to provide counsel on executive compensation matters. The nature and scope of services rendered by Meridian were:
The HRCC did not direct Meridian to perform the above services in any particular manner or under any particular method. The HRCC has the final authority to hire and terminate the consultant, and the HRCC evaluates the consultant periodically.
(See "Compensation Discussion and Analysis" on page 21 for additional discussion of the processes and procedures for the consideration and determination of executive officer compensation.)
During 2012,2013, the HRCC met eightseven times and took action by unanimous consent without a meeting once.
Governance and Nominating Committee
The members of the Governance and Nominating Committee (referred to in this proxy statement as the "Governance Committee") are Michael L. Gleim (Chair), Marsha M. Everton and Tim Grumbacher. Mr. Grumbacher is not an independent director. As discussed above,on page 3, the Company is a "controlled company" and, as such, the Company may elect, and has elected, under Rule 5615(c) of the listing standards of the NASDAQ Stock Market, not to have a Governance Committee comprised solely of independent directors.
The Governance Committee reviews, develops and makes recommendations to the Board regarding the Company's governance processes and procedures. It also recommends candidates for election to fill vacancies on the Board, including renominations of members whose terms are due to expire. The Governance Committee is also responsible for making recommendations to the Board regarding the compensation of its non-employee members. The Governance Committee operates under
a charter that was adopted by the Board. This charter is posted in the Investor Relations section of the Company's website at www.bonton.com.
The Governance Committee met four times during 2012.2013.
Executive Committee
The members of the Executive Committee are Byron L. BergrenTim Grumbacher (Chair), and Michael L. Gleim and Tim Grumbacher.Gleim. The Executive Committee has the authority to act in place of the Board on specified matters.
The Executive Committee has the following responsibilities: to propose the Board meeting schedule for each year and to refine the agenda prior to each Board meeting, to keep the members of the Board informed of pertinent issues that arise between regularly scheduled quarterly Board meetings and to act as a sounding board for the Company's Chief Executive Officer when appropriate. The Executive Committee Charter under which the Executive Committee operates was adopted by the Board and is posted in the Investor Relations section of the Company's website at www.bonton.com.
During 2012,2013, the Executive Committee met nine12 times.
Ad Hoc Leadership Transition Committee
The Ad Hoc Leadership Transition Committee, which reviews, develops and makes recommendations to the Board regarding Chief Executive Officer succession, was established by the Board in May 2008 and completed its initial charge in November 2008. At the behest of the Board, the Committee was reconstituted in December 2009. The members of the Ad Hoc Leadership Transition Committee are Michael L. Gleim (Chair), Philip M. Browne and Todd C. McCarty. The Ad Hoc Leadership Transition Committee met four times during 2012 and completed its duties upon the appointment of Mr. Hoffman as Chief Executive Officer in the first quarter of 2012.
Role of the Lead DirectorVice Chairman
In January 2010, the Board elected Michael L. Gleim as Lead Director of the Board, and in November 2013, the Board elected Mr. Gleim as Vice Chairman of the Board. The primary duties of the Vice Chairman, which are similar to those of the former position of Lead Director, are, among other things, to:
Role of the Board in Risk Oversight
The Board as a whole has responsibility for risk oversight. The oversight responsibility of the Board and the Board committees is facilitated by management reporting processes designed to provide information to the Board concerning the identification, assessment and management of critical risks and management's risk mitigation strategies and practices. These areas of focus include compensation, financial (including accounting, reporting, credit, liquidity and tax), operational, legal, regulatory, environmental, political and strategic risks. The full Board (or the appropriate Board committee), in concert with the appropriate management within the Company, reviews management reports to formulate risk identification, management and mitigation strategies. When a Board committee initially reviews management reports, the Chairman of the relevant Board committee briefs the full Board on the specifics of the matter at the next Board meeting. Additional review or reporting of risks is conducted as needed or as requested by the Board or relevant Board committee. This process enables
the Board to coordinate the risk oversight role, particularly with respect to risks spanning more than one operational area.
Director Nominations Process and Director Qualifications
The Governance Committee considers any appropriate recommendations for candidates for the Board. Any candidate recommended for the Board shall, at a minimum, possess a background that includes a solid education, sufficient business, professional or academic experience and the requisite reputation, character, integrity, skills, judgment and temperament and such other relevant characteristics, which, in the Governance Committee's view, have prepared him or her for dealing with the multi-faceted financial, business and other issues that confront a board of directors of a corporation with the size, complexity and reputation of the Company. The Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Candidates for Board membership are reviewed in the context of the current Board composition, the operating requirements of the Company and the long-term interests of the Company's shareholders. The Governance Committee seeks to ensure that backgrounds and qualifications of the Company's directors, as a group, provide significant breadth of experience, knowledge and abilities that will assist the Board in fulfilling its responsibilities to shareholders.
Although the Governance Committee does not have a formal written policy regarding diversity in composition of the Board, the Governance Committee does consider the contribution of a candidate to the overall diversity of the Board. Diversity is considered broadly and includes variety in personal and professional backgrounds, experience and skills, geographic location, as well as differences in gender, race, ethnicity and age.
Each candidate for Board membership commits to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and participation in, meetings of the Board and the Board committees of which he or she is a member.
When considering whether candidates for Board membership have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively, the Governance Committee focuses on the information provided in each of the Director's individual work histories set forth on pages 76 through 9.8.
The Governance Committee will consider shareholder recommendations for candidates for the Board from any shareholder who has been a continuous record owner of at least 3% of the common stock of the Company for at least one year prior to submission of the recommendation and who provides a written statement that the shareholder intends to continue share ownership through the date of the meeting at which directors are to be elected. Any such shareholder recommendation should be sent to the Governance and Nominating Committee, c/o Office of the Secretary, The Bon-Ton
Stores, Inc., 2801 East Market Street, Building E, York, Pennsylvania 17402. No shareholder recommendations have been received since the June 12, 201218, 2013 shareholder meeting.
In addition, the Governance Committee considers potential candidates recommended by current directors, Company officers, employees and others. When appropriate, the Governance Committee may retain executive recruitment firms to assist in identifying suitable candidates. The Governance Committee screens all potential candidates in the same manner regardless of the source of the recommendation.
In re-nominating incumbent directors to continue for an additional term, the Governance Committee determines whether the incumbent director is willing to stand for re-election. If so, the Governance Committee evaluates his or her performance in office to determine suitability for continued service, taking into consideration the value of continuity and familiarity with the Company's business.
Director Attendance at Annual Meetings
The Company has adopted a policy that encourages Board members who reside in the York area to attend the annual meeting of shareholders. FourThree of the (then) eightseven members of the Board attended the 20122013 Annual Meeting of Shareholders.
Shareholder Communication with the Board of Directors
Any shareholder who wishes to communicate with the Board of Directors or any individual director may do so by directing correspondence, which prominently displays the fact that it is a shareholder-board communication, to such director or directors, c/o Office of the Secretary, The Bon-Ton Stores, Inc., 2801 East Market Street, Building E, York, Pennsylvania 17402. Until and unless a procedure is adopted by a majority of the independent members of the Board whereby it may be deemed unnecessary or inappropriate to relay certain shareholder communications to the appropriate parties, all shareholder communications will be relayed to the intended director or directors.
During 2012,2013, Messrs. Grumbacher and Hoffman were employees of the Company and were not paid any separate compensation for serving as directors. Messrs. Grumbacher and Hoffman are the only current employees who serve as directors.
Each non-employee director receives both cash compensation and stock compensation comprised of the following:
The RSUs issued to directors are distributable after the applicable period following termination of Board service. The current grant documents provide for a period of three months following termination of Board service.
One of the Company's non-employee directors, currently Lucinda M. Baier, serves as the Board's representative on the committee that oversees the Company's retirement contribution plan. For her service on this committee, Ms. Baier receives $5,000 annually.
In January 2010, the Board elected Mr. Gleim serves as Lead Director of the Board. For his service as Lead Director, Mr. Gleim receives a supplemental fee of $140,000 per year.
In February 2012, the Board elected Mr. Bergren asVice Chairman of the Board. For his service as Vice Chairman, of the Board, Mr. BergrenGleim receives a supplemental fee of $170,000$165,000 in cash per year.
During 2012, in recognition of the significant additional work performed by Ms. Everton as chair of the HRCC in the process of selecting a new Chief Executive Officer and negotiating the terms of such employment, the Board authorized an additional cash payment to Ms. Everton of $20,000.
Directors may defer all or any part of their cash compensation into additional RSUs.
The following table presents the compensation provided by the Company during 20122013 to each non-employee director:
Name | Fees earned or paid in cash ($) | Stock Awards ($)(1) | Change in pension value and nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | Fees earned or paid in cash ($) | Stock Awards ($)(1) | Change in pension value and nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lucinda M. Baier | 55,000 | 70,000 | — | 5,000 | (2) | 130,000 | 55,000 | 70,000 | — | 5,000 | (2) | 130,000 | ||||||||||||||||||||
Byron L. Bergren | 110,000 | 137,200 | — | 170,000 | (3) | 417,200 | ||||||||||||||||||||||||||
Philip M. Browne | 66,250 | 75,000 | — | — | 141,250 | 65,000 | 75,000 | — | — | 140,000 | ||||||||||||||||||||||
Marsha M. Everton | 70,000 | 75,000 | — | 20,000 | (4) | 165,000 | ||||||||||||||||||||||||||
Michael L. Gleim | 98,750 | 80,000 | — | (5) | 140,000 | (6) | 318,750 | 241,250 | (3) | 80,000 | — | (4) | — | 321,250 | ||||||||||||||||||
Todd C. McCarty | 61,250 | 70,000 | — | — | 131,250 | 62,500 | 75,000 | — | — | 137,500 | ||||||||||||||||||||||
Jeffrey B. Sherman | 55,000 | 70,000 | — | — | 125,000 | |||||||||||||||||||||||||||
Steven B. Silverstein | 13,750 | 52,000 | — | — | 65,750 |
The aggregate number of RSUs held by each non-employee director as of February 2, 20131, 2014 was:
59,823 63,193 held by Ms. Baier23,478 75,930 held by Mr. BergrenBrowne59,900 78,284 held by Mr. Gleim
63,510 held by Mr. McCarty72,320 held by each of Ms. Everton and Mr. Browne74,433 4,679 held by Mr. GleimShermanNone 4,649 held by Mr. ShermanSilverstein
In December 2007, the Company adopted guidelines requiring each non-employee director to maintain an equity stake in the Company equal to three times the annual cash retainer paid to the director. This links the directors' interests with those of other shareholders. Shares of common stock actually owned and time-based RSUs count towards the equity ownership requirement. Each director is required to achieve this share ownership level by the later of five years after joining the Board or five years after adoption of the guideline. Accordingly, each non-employee director standing for election in 2013, with the exception of Mr. Sherman, wasMs. Baier and Messrs. Browne, Gleim and McCarty were required to meet, and did meet, this guideline by December 2012. Mr.Messrs. Sherman and Silverstein will be required to meet this guideline by March 2018.2018 and September 2018, respectively.
Share ownership requirements for 20122013 were measured based on a share price of $11.45, the average price of the Company's common stock during 2010. Share ownership requirements and the share price for measure are reviewed annually by the HRCC. The share price for measurement purposes is adjusted by the HRCC from time to time based on changes in the Company stock price.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ELECTION OF THE NOMINEES LISTED ABOVE
APPROVAL, ON AN ADVISORY BASIS, OF COMPENSATION
OF THE NAMED EXECUTIVE OFFICERS
The Dodd-Frank Act provides that the Company's shareholders have the opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of the Company's Named Executive Officers as disclosed in this proxy statement in accordance with the SEC's rules. At the 2011 Annual Meeting, the shareholders voted, on an advisory basis, to approve on an advisory basis the compensation of the Company's Named Executive Officers annually, and the Company determined to present such matter for vote annually. Pursuant to Section 14A of the Securities Exchange Act, the Company is presenting the following "say on pay" proposal, which gives shareholders the opportunity to approve or not approve, on an advisory basis, the Company's compensation program for Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, by voting for or against the resolution set out below. While our Board intends to carefully consider the shareholder vote resulting from this proposal, the final vote will not be binding on the Company and is advisory in nature. The Company submits the following proposal:
"RESOLVED, that the compensation paid to the Company's Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED."
As described in the "Executive Compensation" section, the Company's executive compensation programs are designed to attract, motivate and retain talented executives. In addition, the programs are structured to create an alignment of interests between the Company's executives and shareholders. The Board and the HRCC monitor executive compensation programs and adopt changes to reflect the competitive market in which the Company competes for talent, as well as general economic, regulatory and legislative developments affecting executive compensation. The HRCC will continue to emphasize compensation arrangements that align the financial interests of our executives with the interests of long-term shareholders. Accordingly, we believe that the Company's executive compensation programs are appropriately designed and work to ensure that management's interests are closely aligned with shareholders' interests to create long-term value. Please refer to the section entitled "Executive Compensation" of this proxy statement for a detailed discussion of the Company's executive compensation practices and philosophy.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL,
ON AN ADVISORY
BASIS, OF COMPENSATION OF THE
NAMED EXECUTIVE OFFICERS
RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has recommended ratification of its appointment of KPMG LLP ("KPMG"), which has served as our independent registered public accounting firm in 2012,since 2002, to serve as our independent registered public accounting firm for 2013.2014.
In making its selectionA representative of KPMG is expected to be present at the Audit Committee considered whethermeeting, will have the non-audit services provided by KPMG are compatible with maintaining KPMG's independence.opportunity to make a statement if he or she so desires, and will be available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Set forth below are the fees paid or accrued for the services of KPMG in 2013 and 2012:
| 2012 | 2011 | 2013 | 2012 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees(1) | $ | 1,912,506 | $ | 1,800,578 | $ | 1,933,781 | $ | 1,912,506 | ||||||
Audit-Related Fees | — | — | 57,700 | 53,100 | ||||||||||
Tax Fees | 55,345 | 238,931 | 55,416 | 55,345 | ||||||||||
All Other Fees | — | — | — | — |
The Audit Committee is responsible for the pre-approval of all audit services and non-audit services performed by the Company's independent registered public accounting firm. All of the fees shown in the chart above were pre-approved by the Audit Committee. The Audit Committee may delegate to one of its members the authority to grant such pre-approvals, and any such approvals are presented to the full Audit Committee at its next scheduled meeting.
A representative of KPMG is expected to be present at the meeting, will have the opportunity to make a statement if he or she so desires, and will be available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDSVOTING "FOR" RATIFICATION OF THE APPOINTMENTOF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is comprised of three independent directors. TheInformation regarding the members of the Audit Committee are not professionally engaged in the practice of auditing or accounting, and rely, without independent verification, on the information provided to them and on the representations made to them by management and the Company's independent registered public accounting firm.Audit Committee's role and responsibilities is set forth under "Election of Directors" beginning on page 6 and "Board Committees" on page 10.
The role of the Audit Committee is to assist the Board in its general oversight of the integrity of the Company's consolidated financial statements and compliance with legal and regulatory requirements. The Audit Committee is directly responsible for the appointment, compensation and oversight of the Company's independent registered public accounting firm, KPMG. Managementmanagement is responsible for the preparation, presentation and integrity of the Company's consolidated financial statements, for its accounting and financial reporting principles and for the establishment and effectiveness of internal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. KPMG is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB") and expressing an opinion as to the conformity of such consolidated financial statements with accounting principles generally accepted in the United States and an opinion on the effectiveness of internal control over financial reporting based on criteria established in the Internal Control-IntegratedControl—Integrated Framework issued by the Committee on Sponsoring Organizations of the Treadway Commission. The Audit Committee monitors and oversees these processes. The Audit Committee is directly responsible for the appointment, compensation and oversight of the Company's independent registered public accounting firm, KPMG. KPMG has free access to the Audit Committee to discuss any matter it deems appropriate.
In this context the Audit Committee met and held discussions with management, who represented to the Audit Committee that the Company's audited consolidated financial statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis. The Audit Committee has reviewed and discussed with management, the internal auditors and KPMG the audited consolidated financial statements, management's assessment of the effectiveness of the Company's internal control over financial reporting, and KPMG's evaluation of the Company's internal control over financial reporting. Management representedreporting with management, the Company's internal auditors and KPMG.
Prior to their issuance, the Audit Committee thatreviewed and discussed the Company's auditedquarterly and annual earnings press releases with management and the consolidated financial statements with management and KPMG. Disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" (including significant accounting policies and judgments) were prepared in accordancediscussed with accounting principles generally accepted in the United States,management on a quarterly basis and thewith KPMG at year-end. The Audit Committee has discussed with KPMG the matters required to be discussed by Statement onPCAOB Auditing StandardsStandard No. 61, as amended,16, "Communication with Audit Committees"Committees." The Audit Committee discussed with KPMG the overall scope and plans for their audit and approved the additionalterms of their engagement letter. The Audit Committee also reviewed the Company's internal audit plan. The Audit Committee met with KPMG and with the Company's internal auditors, in each case, with and without other members of management present, to discuss the results of their respective examinations, the evaluations of the Company's internal controls and overall quality and integrity of the Company's financial reporting. Additionally, the Audit Committee reviewed the performance, responsibilities, budget and staffing of the Company's internal auditors. The Audit Committee also established, and oversaw compliance with, procedures for the Company's receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters required to be discussed by Statement on Auditing Standards No. 114, as modifiedand its employees' confidential and anonymous submissions of concerns regarding questionable accounting or supplemented, "The Auditor's Communication with Those Charged with Governance."auditing matters.
KPMG also provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding KPMG's communications with the Audit Committee concerning independence, and the Audit Committee discussed KPMG's independence with them.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended February 2, 2013.1, 2014.
The Audit Committee has selected and appointed KPMG as the Company's independent registered public accounting firm for fiscal year 2014. In determining whether to reappoint KPMG as the Company's independent registered public accounting firm, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the quality of the Audit Committee's ongoing discussions with KPMG and an assessment of the professional qualifications, retail experience and past performance of the lead audit partner and the KPMG team. In accordance with SEC rules and KPMG policies, audit partners are subject to rotation requirements that limit the number of consecutive years to five that an individual partner may provide service to the Company. KPMG's lead audit partner reached this limit upon the completion of the 2013 audit. The process for selection of the Company's new lead audit partner involved a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussions by the full Audit Committee and by management. In addition, in making its selection of KPMG, the Audit Committee determined the non-audit services provided by KPMG were compatible with maintaining KPMG's independence.
Members of the Audit Committee:
Philip M. Browne, Chairperson
Lucinda M. Baier
Todd C. McCarty
Compensation Discussion and Analysis
This Compensation Discussion and Analysis ("CD&A") primarily addresses the compensation of the Company's Chief Executive Officer, the Chief Financial Officer and the three other highest paid executive officers in 2012.2013. These executive officers are referred to as the "Named Executive Officers" throughout this proxy statement:
Name | Title | |
---|---|---|
Brendan L. Hoffman | President and Chief Executive Officer | |
Stephen R. Byers | Executive Vice | |
Luis Fernandez | Executive Vice President—Chief Omnichannel Officer | |
Tim Grumbacher | Chairman of the Board and Strategic Initiatives Officer | |
Keith E. Plowman | Executive Vice |
The purpose of this CD&A is to provide shareholders with a description of the material elements of the Company's compensation program for its Named Executive Officers. The CD&A should be read in conjunction with the accompanying compensation tables, corresponding footnotes and narrative discussion, as they provide information and context to the compensation disclosures.
The Company's compensation program is designed to balance near-term results with long-term success in alignment with the interests of our shareholders and the achievement of our business strategy. Bon-Ton has a pay-for-performance philosophy that forms the foundation for decisions regarding compensation made by the Company's management and the HRCC. The Company believes that a meaningful portion of each executive officer's compensation must be at risk in order to invest our executive officer in the long-term success of the Company.
The framework of our executive compensation programsprogram includes the following governance features:
The Company's compensation program and related governance features are complemented by several specific elements designed to align the Company's executive compensation with long-term shareholder interests, including:
As described on the following pages, we require that the Company achieve a threshold level of performance to pay an annual cash bonus. Also, our long-term incentive program includes restricted stock awards that vest over time orand performance shares that vest only if performance targets are met. TheseIn 2013, we added a total shareholder return ("TSR") performance goal to certain of the performance-based restricted stock grants awarded to the Named Executive Officers. All equity grants are designed to align executive officer interests with shareholder interests, which we believe is crucial to our long-term success.
Fiscal 20122013 was a period during which the Company faced numerous challenges, resulting in our financial performance being below our expectations. Performance thresholds for annual cash incentive compensation and long-term incentive compensation were not met, resulting in no annual bonus payout or vesting of performance-based restricted stock with respect to 2012 results (except where contractually required).2013 results.
In accordance with new SEC proxy rules, at our 20122013 Annual Meeting, an advisory "say-on-pay" vote was held regarding say-on-pay, the approval of the compensation of our Named Executive Officers set forth in the summary compensation table and accompanying narrative disclosure contained in our 2012 Proxy Statement.2013 proxy statement. Executive compensation was approved by our shareholders by an overwhelming margin, with 96%97% of the votes for approval of Named Executive Officer compensation.
In addition, at our 2011 Annual Meeting, the Company provided to its shareholders the opportunity to vote on an advisory basis on the frequency of this say-on-pay"say-on-pay" vote. The Board of Directors had recommended that such vote be held on an annual basis, and the shareholders overwhelmingly approved such frequency. Following that vote, the Board of Directors determined that it will include an advisory shareholder vote on compensation of Named Executive Officers in its proxy statement annually until the next required vote on the frequency of shareholder voting on executive compensation.
We encourage you to read this CD&A for a detailed analysis of our executive compensation program, including information about the 20122013 compensation of the Named Executive Officers described in the tables that follow.
Our Compensation Philosophy and Objectives
The Company's philosophy is to directly link an increasing portion of an executive officer's compensation with corporate performance and in alignment with shareholder value. At the same time, an executive officer's base salary as a percentage of his or her total compensation decreases as his or her scope of responsibility increases. The following are the objectives that guide the HRCC's decisions regarding compensation:
of the Company. Equity grants are also designed to reward significant achievement of top performing executive officers and to attract new talent.
Based on the foregoing objectives, the HRCC has structured annual and long-term executive compensation to provide incentives to executive officers to achieve the business goals set by the Company and reward them for achieving such goals. In addition, in structuring compensation, especially performance-based compensation, the HRCC reviews a risk assessment conducted by the Company to ensure that the Company's compensation program does not encourage unreasonable risk.
In December 2007, the Company adopted share ownership guidelines for our executive officers. The guidelines help ensure that our executive officers maintain an equity stake in the Company, and by doing so, appropriately link their interests with those of other shareholders. Shares beneficially owned time-based restricted stock and time-based restricted stock units count towards the equity ownership requirement. Performance-based restricted stock and performance-based restricted stock units dodoes not count towards the requirement. Executive officers are required to achieve these share ownership levels within five years of becoming an executive officer, or by December 2012 for those who were executive officers at the time we adopted the guidelines. The guidelines are:
Position | Ownership Guideline | |||
---|---|---|---|---|
Chief Executive Officer | 3x base salary | |||
Executive Vice President | 1x base salary |
Share ownership requirements for 20122013 were measured based on a share price of $11.45, the average price of the Company's common stock during 2010. Share ownership requirements are reviewed annually by the HRCC.
Each of the Named Executive Officers currently owns shares sufficient to meet the requirement.
Role of the HRCC in Compensation Decisions
The HRCC's responsibilities include the following:
Role of Management in Compensation Decisions
The Chief Executive Officer annually prepares a review of his direct reports, including the Named Executive Officers (with the exceptionsexception of Messrs. Bergren andMr. Grumbacher) and other executive officers, compared to pre-determined, HRCC-approved performance metrics. The total compensation for the respective
executives, the performance appraisals and the recommendations made by the Chief Executive Officer are presented for HRCC approval.
Other members of management also support the HRCC in its work. Management assists the Chair of the HRCC in establishing the agendas for HRCC meetings and preparing materials for the review of HRCC members in advance of each meeting. With respect to most compensation and benefit matters, including compensation of the Named Executive Officers excluding the Chief Executive Officer, management provides recommendations to the HRCC. The HRCC relies on management and, as appropriate, the advice of outside experts to evaluate executive performance and to make recommendations for salary and bonus levels as well as for grants of stock options or awards of restricted stock. Management also works with the HRCC to establish performance goals under the Company's performance-based annual cash incentive compensation program. Members of management who provide this support include Brendan L. Hoffman; Dennis R. Clouser, Executive Vice President—Information Systems, Logistics and Administration; Paul A. Cortese, Senior Vice President—Compensation, Benefits and HRIS; Denise M. Domian, Senior Vice President—Human Resources; and J. Gregory Yawman, Vice President, President—General Counsel and Secretary, each of whom generally attends meetings of the HRCC. Each of them is excused from a meeting during deliberation and approval of matters regarding his or her own compensation and from regularly scheduled HRCC executive sessions.
The Company competes against a wide range of companies in retaining and attracting executive personnel. Each year, the Company compares salary, annual incentive compensation and long-term equity incentive values for its executive officers against various retail companies.
For its comparative analysis, the Company utilized compensation data from the Hay Associates 20122013 Retail Executive and Management Total Remuneration Report. From this data, the Company identified a subgroup of 2732 retail companies with median sales of $2.9 billion (the "Hay Subgroup"). This group was selected due to its similarity in size and scope to the Company and was considered representative of the market from which the Company would recruit executive talent. The companies in the Hay Subgroup are:
Abercrombie & Fitch Co. | J. Crew Group, Inc. | |||
American Eagle Outfitters Inc. | Limited Brands, Inc.—Bath and Body | |||
Ann Inc. | Limited Brands, Inc.—Victoria's Secrets | |||
Ascena Retail Group—Charming Shoppes | Macy's Inc.—Bloomingdale's | |||
Belk, Inc. | Michaels Stores, Inc. | |||
Cabela's, Inc. | Neiman Marcus, Inc. | |||
Chico's FAS, Inc. | Payless Holdings | |||
The Children's Place Retail Stores, Inc. | Petco Animal Supplies, Inc. | |||
Coach, Inc. | Pier 1 Imports, Inc. | |||
DSW, Inc. | Ralph Lauren—Polo | |||
Express, Inc. | Saks, Inc. | |||
The Finish Line, Inc. | Stage Stores, Inc. | |||
Fossil, Inc. | Tiffany & Co. | |||
hhgregg, Inc. | Ulta Salon Cosmetics & Fragrance, Inc. | |||
Hudson's Bay Company—Lord & Taylor | Williams-Sonoma, Inc. | |||
IKEA Systems, B.V. | ||||
Zale Corporation |
During 2012,2013, the HRCC strove to deliver total compensation at approximately the 50th percentile of the Hay Subgroup for each element of compensation. However, as the Company competes with many larger companies for the best executive-level talent, the HRCC may decide it is in the best interests of the Company and its shareholders to provide compensation for selected positions that exceeds the targeted compensation levels depending on the circumstances, including the Company's needs, market factors, the executive's experience, the contribution of the executive to the Company, and in the HRCC's view, the positive impact the executive may have on the Company as a whole.
In addition, in 2012, the HRCC reviewed proxy statement compensation data from specific retailers in its benchmarking effort with respect to compensation of the Chief Executive Officer. These retailers included Belk Inc.; Dillard's, Inc.; J.C. Penney Company, Inc.; Kohl's Corporation; Macy's, Inc.; Nordstrom, Inc.; and Saks, Inc. These companies were chosen because they are retailers with competitive assortments and a similar customer base as the Company. The HRCC recognizes that most of these retailers are larger in size than the Company, but the HRCC also believes that the Company competes directly with them for executive talent. The HRCC reviewed the compensation practices of, and the compensation packages provided by, these retailers. The data also provided context for ongoing deliberations of the HRCC.
Components of Named Executive Officer Compensation
The principal components of compensation for the Named Executive Officers are base salary, performance-based annual cash incentive compensation, long-term equity incentive compensation, perquisites, and retirement and other benefits. The HRCC has transitioned the Company's compensation program from its historical short-term orientation, which focused on base salary and annual cash incentive compensation, to a program with an increasing emphasis on long-term equity incentive compensation to better align the interests of the Named Executive Officers with the interests of shareholders in long-term growth. The HRCC does not have a pre-established policy for allocation between cash and non-cash or short-term and long-term incentive compensation. Rather, it evaluates the actual mix against market data and attempts to provide each Named Executive Officer with a balanced compensation package that addresses retention and competitive requirements.
The following table shows the components of Named Executive Officer compensation:
Component | Purpose | Characteristics | ||
---|---|---|---|---|
Base Salary | Compensate Named Executive Officers for performing their roles and assuming their levels of executive responsibility. Intended to provide a competitive level of compensation, it is a necessary component in recruiting and retaining executives. | Fixed component. Annually reviewed by the HRCC and adjusted as appropriate. | ||
Performance-based Annual Cash Incentive Compensation | Promote improvement of the Company's financial results and performance. Intended to drive performance in a particular year without being a deterrent to long-term Company goals and initiatives or encouraging unreasonable risk. | Cash bonus opportunity based on the achievement of certain goals, which may be individual performance goals, Company performance goals or a combination of the two. Where applicable, goals are typically established annually and bonus amounts awarded will vary based on performance. | ||
Long-Term Equity Incentive Compensation | Promote the achievement of the Company's long-term financial goals and stock price | Reviewed annually and granted, if appropriate, by the HRCC in the form of | ||
Perquisites and Other Benefits | Provide health and welfare benefits as available to all employees. Additional perquisites and benefits are designed to attract, retain and reward Named Executive Officers by providing an overall benefit package similar to those provided by comparable companies. | Health and welfare benefits are a fixed component that may vary based on employee elections. Perquisites and other benefits may vary from year to year. | ||
Retirement Benefits | Provide basic retirement benefits as available to all Company associates and supplemental coverage necessary to retain key executives. |
|
The HRCC has reviewed a summary, or "tally sheet," with all components of compensation of the Named Executive Officers, including base salary, performance-based cash and equity incentive compensation, long-term equity incentive compensation, accumulated realized and unrealized stock option and restricted stock gains,equity values, and the dollar value to the executive and cost to the Company of all perquisites and other benefits and obligations under the Company's supplemental executive retirement plans. The HRCC did not use the tally sheet in making individual pay decisions, but rather reviewed it to ensure the total package met the needs of both the Company and the executives. The HRCC believes the level of compensation of the Company's Named Executive Officers reflects the Company's performance and total compensation to each of the Named Executive Officers is appropriate.
Base Salary
The base salaries of the Company's Named Executive Officers are determined by evaluating their roles and responsibilities and compensation data compared with the Hay Subgroup. The base salary of each Named Executive Officer is reviewed annually. If appropriate, the Chief Executive Officer recommends salary increases for each of the Named Executive Officers other than himself. The HRCC's decision to increase base salary for any Named Executive Officer is based on the Company's compensation philosophy and takes into specific account the level of responsibility of the Named Executive Officer, the Company's performance, the Named Executive Officer's individual performance and the Named Executive Officer's compensation compared to similarly situated executives in the Hay Subgroup.
Minimum base salaries for Brendan L. Hoffman, Anthony J. Buccina and Stephen R. Byers and Luis Fernandez were established in employment agreements approved by the HRCC and, with respect to Mr. Hoffman's employment agreement, the Board at the recommendation of the HRCC. These minimum base salaries were based on a variety of factors, including market data from the Hay Subgroup and an evaluation of each person's capacity to positively affect the Company's performance. The HRCC decided that the currentIn its 2013 review of base salaries, the HRCC determined that increases for the Named Executive Officers, with the exception of Messrs. Hoffman and Grumbacher, were necessary to remain properly aligned with competitors and more emphasis should be placed on variable compensation linked to corporate performance.salaries of competitors.
Performance-Based Annual Cash Incentive Compensation
The Company has an annual incentive cash bonus plan (the "Cash Bonus Plan") in which the Named Executive Officers, with the exception of Mr. Grumbacher, participate. The payout of any cash bonus under the plan is dependent upon the achievement of pre-determined Company performance goals which are pre-approved by the HRCC.
For 2012,Pursuant to the 2013 Cash Bonus Plan, the HRCC selected the following levels of Adjusted EBITDA and Net Sales as financial goals in determining the annual bonus opportunity for the Named Executive Officers focused(with 75% weighting on the achievement of one or two of the following goals:Adjusted EBITDA and 25% weighting on Net Sales):
Goal | Threshold | Target | Maximum | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| ||||||||||
| ||||||||||
Adjusted EBITDA(1) | $ | $ | $230.0 million | |||||||
Net Sales | $2.931 billion | $2.986 billion | $3.098 billion |
The HRCC assigns goalsCash Bonus Plan financial metrics were selected for their focus on maximizing growth and weightingsoperating income. The Adjusted EBITDA metric is an effective measurement of how well the Company's business objectives and strategies are being executed in its goal to maximize operating income. Net Sales is a measure of growth, achievement of which provides opportunities for each Named Executive Officer dependingthe realization of various other financial measures, including Adjusted EBITDA. The heavier weighing for the Adjusted EBITDA objective reflects the Company's focus on the capacityprofitable growth. These performance levels are designed to be challenging yet achievable.
Table of the Named Executive Officer to influence the goal and the Named Executive Officer's area of responsibility. AContents
As noted above, a threshold level of performance is set for each measure. Performance must be at or above the threshold to receive any payment for that measure. In addition, payment of any portion of a bonus
under the Cash Bonus Plan is dependent upon the Company's achievement of at least the threshold level of net income.income (for 2013, $4.3 million). If the threshold level of net income is not achieved, there is no bonus payout under any of the goals for that year.
The HRCC reviewed and established competitive "threshold," "target" and "maximum" payout potentials under the Cash Bonus Plan for each Named Executive Officer. The following table sets forth (1) the approximate payouts, statedOfficer, as shown below for 2013 (as a percentage of base salary, which could be earned by each Named Executive Officer under the Cash Bonus Plan for 2012, and (2) the Cash Bonus Plan performance goals and the weighting of such goals for each Named Executive Officer for 2012:salary):
Name | Payout at Threshold | Payout at Target | Payout at Maximum | Bonus Criteria (weighting) | Payout at Threshold | Payout at Target | Payout at Maximum | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brendan L. Hoffman | 50 | % | 100 | % | 200 | % | Net income (75%) | 50 | % | 100 | % | 200 | % | ||||||||
Net sales (25%) | |||||||||||||||||||||
Anthony J. Buccina | 50 | % | 100 | % | 200 | % | Net sales (50%) | ||||||||||||||
Adjusted EBITDA (50%) | |||||||||||||||||||||
Stephen R. Byers | 25 | % | 50 | % | 100 | % | Net sales (50%) | 25 | % | 50 | % | 100 | % | ||||||||
Adjusted EBITDA (50%) | |||||||||||||||||||||
Luis Fernandez | 25 | % | 50 | % | 100 | % | |||||||||||||||
Keith E. Plowman | 37.5 | % | 75 | % | 150 | % | Net income (90%) | 37.5 | % | 75 | % | 150 | % | ||||||||
Net sales (10%) |
The net income threshold was not achieved in 20122013 and consequently no bonus compensation was paid to the Named Executive Officers (except where contractually stipulated, as discussed below).Officers.
In addition to bonuses that may be awarded under the Cash Bonus Plan, a cash bonus may be awarded at the discretion of the HRCC for extraordinary individual achievement or for other reasons, such as a signing bonus upon joining the Company or an executive extending the term of his or her employment agreement. In 2012,2013, Mr. Hoffman received a signingcash bonus of $1,000,000, and a minimum performance-based cash bonus of $500,000, both of which were awarded pursuant towas required under the terms of his employment agreement. No extraordinary bonuses were awarded to any of the other Named Executive Officers in 2012.2013.
Long-Term Equity Incentive Compensation
Another component of Named Executive Officer compensation is long-term incentive compensation in the form of stock options and time-based and performance-based restricted stock. The HRCC annually reviews the performance and compensation of the Named Executive Officers to determine whether annual grants of options or awards of restricted stock or RSUs are warranted. Equity awards are made periodically at the discretion of the HRCC but generally are made within the first quarter of each fiscal year. Grants and awards (other than to the Chief Executive Officer) are made on the recommendation of the Chief Executive Officer, primarily to reward significant individual achievement and to motivate and retain key talent. The proportion of long-term equity incentive compensation in relation to base salary is a function of the Named Executive Officer's level of responsibility and capacity to enhance shareholder value.
The HRCC has decided that grants made to the Chief Executive Officer should be directly aligned to the short- and long-term performance of the Company. In addition, the Chief Executive Officer and the other Named Executive Officers are awarded restricted stock as a retention tool. In light of his significant stock ownership, stock awards are not made to Mr. Grumbacher.
TheNo stock options were granted to the Named Executive Officers in 2013. However, if the HRCC were to grant options in the future, the exercise price of such options granted by the HRCC iswould usually be set at the closing price of the Company's common stock on the NASDAQ Stock Market on the date of the HRCC meeting at which the grant is approved. In certain instances, the HRCC has set the exercise price at the closing price on a grant date in the future to allow time to notify the grantee of the option grant or to set the grant
date and exercise price on the same date as the starting date of a new executive. If the HRCC sets a grant date and option exercise price based on the closing price on the NASDAQ Stock Market on a date in the future, the HRCC confirms that management does not anticipate any material announcements during the period from the HRCC meeting until such future date. No options were granted to the Named Executive Officers in 2012.
Pursuant to an employment agreement with Mr. Hoffman effective as of February 7, 2012, the HRCC granted Mr. Hoffman 300,000 time-based restricted shares of the Company's common stock, 100,000 of which vested on each of February 7, 2013 and February 7, 2014, and 100,000 of which vest on each of February 7, 2014 and February 7, 2015. In addition, Mr. Hoffman received a grant of 300,000 performance-based restricted shares, 50,000 and 125,000 of which were subject to vesting based on achievement of Company performance goals for 2012 and 2013, respectively, and 125,000 of which are subject to vesting based on achievement of Company performance goals for each of 2013 and 2014. As the performance goals for 2012 and 2013 were not attained, the restricted stock awardawards relating to 2012 and 2013 performance goals waswere forfeited.
On April 17, 2013, Mr. Hoffman was awarded a grant of 100,000 time-based restricted shares, all of which vest on April 17, 2016. In addition, Mr. Hoffman received a target grant of 300,000200,000 performance-based restricted shares which are subject to vestingis based on achievement of Company performance goals for the cumulative three-year period of 2013, 2014 and 2015. For vesting ofTo receive restricted shares above target for this cumulative three-year grant, the target amount of 200,000 shares, it is an additional requirement thatTSR for the total shareholder return ratio ("TSR")three-year period must be a positive number.positive.
Pursuant to an employment agreement dated April 30, 2012, wherebyOn May 6, 2013, Mr. Buccina chose to retire at the endHoffman received a target grant of the term of said agreement (February 15, 2013), Mr. Buccina was granted 37,50050,000 performance-based restricted shares of the Company's common stock. In consideration for such grant of performance-based restricted stock, Mr. Buccina forfeited 75,000 unvested shares of time-based restricted stock granted on April 18, 2011. As the performance goals for 2012 were not attained, the restricted stock award relating to 2012 performance goals was forfeited. On April 12, 2010, Mr. Buccina was awarded a grant of 20,000 shares of time-based restricted shares, 10,000 of which vested on April 12, 2011 and 10,000 of which vested on an accelerated basis on February 15, 2013 pursuant to the aforementioned employment agreement dated April 30, 2012.
On April 18, 2011, Mr. Buccina received a grant of 150,000 performance-based restricted shares, 50,000 of which were subject to vestingis based on achievement of Company performance goals for eachthe cumulative two-year period of 20112013 and 2012, and 50,000 of which were subject to vesting based on achievement of Company performance goals for 2013. As the performance goals for 2011 and 2012 were not attained, the restricted stock awards relating to 2011 and 2012 performance goals were forfeited. As Mr. Buccina retired as of February 15, 2013, the restricted stock award relating to 2013 performance goals was forfeited.
On April 12, 2010, Mr. Byers was awarded a grant of 11,500 time-based2014. To receive restricted shares 6,500 of which vested on April 12, 2011 and 5,000 of which vested on April 12, 2013.above target for this cumulative two-year grant, the TSR for the two-year period must be positive.
On April 18, 2011, Mr. Byers was awarded a grant of 10,000 time-based restricted shares, all of which vestvested on April 18, 2014. In addition, Mr. Byers received a grant of 12,000 performance-based restricted shares which were subject to vesting based on achievement of Company performance goals for 2011. As the performance goals for 2011 were not attained, the restricted stock award relating to 2011 performance goals was forfeited.
On April 17, 2012, Mr. Byers was awarded a grant of 6,000 time-based restricted shares, all of which vest on April 17, 2015. In addition, Mr. Byers received a grant of 10,000 performance-based restricted shares which were subject to vesting based on achievement of Company performance goals for 2012. As the performance goals for 2012 were not attained, the restricted stock award relating to 2012 performance goals was forfeited.
On April 17, 2013, Mr. Byers was awarded a grant of 15,000 time-based restricted shares, all of which vest on April 17, 2016. In addition, Mr. Byers received a grant of 20,00010,000 performance-based restricted shares which arewere subject to vesting based on achievement of Company performance goals for 2013 and a target grant of 22,50015,000 performance-based restricted shares which are subject to vestingis based on achievement of Company performance goals for the cumulative three-year period of 2013, 2014 and 2015. For vesting ofTo receive restricted shares above target for the target amount of 15,000 shares, it is an additional requirement thatcumulative three-year grant, the TSR for the three-year period must be a positive number.positive. As the performance goals for 2013 were not attained, the restricted stock award relating solely to 2013 performance goals was forfeited.
On April 12, 2010,15, 2014, Mr. Byers was awarded a grant of 22,500 time-based restricted shares, all of which vest on April 15, 2017. In addition, Mr. Byers received a grant of 7,500 performance-based restricted shares which are subject to vesting based on achievement of Company performance goals for 2014 and a target grant of 15,000 performance-based restricted shares which is based on achievement of Company performance goals for the cumulative three-year period of 2014, 2015 and 2016. To receive restricted shares above target for the cumulative three-year grant, the TSR for the three-year period must be positive.
Pursuant to an employment agreement effective as of May 7, 2012, the HRCC granted Mr. Plowman anFernandez 10,000 shares of the Company's common stock and 10,000 shares of performance-based restricted shares of the Company's common stock, all of which were subject to vesting based on
achievement of Company performance goals for 2012. As the performance goals for 2012 were not attained, the restricted stock award relating to 2012 performance goals was forfeited.
On April 17, 2013, Mr. Fernandez was awarded a grant of 30,000 time-based restricted shares, 5,000all of which vestedvest on April 12, 201117, 2016. In addition, Mr. Fernandez received a grant of 10,000 performance-based restricted shares which were subject to vesting based on achievement of Company performance goals for 2013 and 25,000a target grant of 15,000 performance-based restricted shares which is based on achievement of Company performance goals for the cumulative three-year period of 2013, 2014 and 2015. To receive restricted shares above target for the cumulative three-year grant, the TSR for the three-year period must be positive. As the performance goals for 2013 were not attained, the restricted stock award relating solely to 2013 performance goals was forfeited.
On April 15, 2014, Mr. Fernandez was awarded a grant of 22,500 time-based restricted shares, all of which vestedvest on April 12, 2013.15, 2017. In addition, Mr. Fernandez received a grant of 7,500 performance-based restricted shares which are subject to vesting based on achievement of Company performance goals for 2014 and a target grant of 15,000 performance-based restricted shares which is based on achievement of Company performance goals for the cumulative three-year period of 2014, 2015 and 2016. To receive restricted shares above target for the cumulative three-year grant, the TSR for the three-year period must be positive.
On April 18, 2011, Mr. Plowman was awarded a grant of 12,000 time-based restricted shares which vestvested on April 18, 2014. In addition, Mr. Plowman received a grant of 50,000 performance-based restricted shares which were subject to vesting based on achievement of Company performance goals for 2011. As the performance goals for 2011 were not attained, the restricted stock award relating to 2011 performance goals was forfeited.
On April 17, 2012, Mr. Plowman was awarded a grant of 8,000 time-based restricted shares which vest on April 17, 2015. In addition, Mr. Plowman received a grant of 50,000 performance-based restricted shares which were subject to vesting based on achievement of Company performance goals for 2012. As the performance goals for 2012 were not attained, the restricted stock award relating to 2012 performance goals was forfeited.
On April 17, 2013, Mr. Plowman was awarded a grant of 15,000 time-based restricted shares, all of which vest on April 17, 2016. In addition, Mr. Plowman received a grant of 20,000 performance-based restricted shares which arewere subject to vesting based on achievement of Company performance goals for 2013 and a target grant of 60,00040,000 performance-based restricted shares which are subject to vestingis based on achievement of Company performance goals for the cumulative three-year period of 2013, 2014 and 2015. For vesting ofTo receive restricted shares above target for the target amount of 40,000 shares, it is an additional requirement thatcumulative three-year grant, the TSR for the three-year period must be positive. As the performance goals for 2013 were not attained, the restricted stock award relating solely to 2013 performance goals was forfeited.
On April 15, 2014, Mr. Plowman was awarded a positive number.grant of 35,000 time-based restricted shares, all of which vest on April 15, 2017. In addition, Mr. Plowman received a grant of 10,000 performance-based restricted shares which are subject to vesting based on achievement of Company performance goals for 2014 and a target grant of 25,000 performance-based restricted shares which is based on achievement of Company performance goals for the cumulative three-year period of 2014, 2015 and 2016. To receive restricted shares above target for the cumulative three-year grant, the TSR for the three-year period must be positive.
Awards of performance-based restricted stock reflect the HRCC's objectives to link an increasing portion of compensation to Company performance and to align the interests of key executives with those of shareholders.
The aforementioned awards are reflected in the "Grants of Plan-Based Awards" table on page 36.37.
Perquisites and Other Benefits
The Company provides the Named Executive Officers with perquisites and other benefits that the Company and the HRCC believe are reasonable and consistent with the Company's objective to motivate and retain superior executives for key positions. The HRCC periodically reviews the levels of perquisites and other benefits provided to Named Executive Officers. Perquisites primarily consist of supplemental medical benefits, automobile allowances, relocation benefits and reimbursement of legal fees incurred in connection with the negotiation of employment agreements. Perquisites traditionally have not constituted significant portions of an executive's compensation.
The Named Executive Officers also participate in benefit programs available to employees generally, such as health and dental insurance, life insurance and long-term disability insurance.
Retirement Benefits
The Named Executive Officers participate in The Bon-Ton Stores, Inc. Retirement Contribution Plan, a tax-qualified defined-contribution plan. Under this plan, employees are able to contribute a portion of their annual salaries on a pre-tax basis and the Company may make discretionary retirement
contributions to each eligible employee's account. Company matching contributions may consist of two parts: a match based on an employee's years of service and a profit sharing match. Company retirement contribution amounts are included in the Summary Compensation Table on page 34.
In connection with an acquisition in March 2006, the Company assumed the Carson Pirie Scott & Co. Pension Plan (the "Carson's Pension Plan"). The Carson's Pension Plan is a qualified defined-benefit cash-balance plan in which the only Named Executive Officer who participated was Anthony J. Buccina. The Carson's Pension Plan was frozen to new participants in 2002 and all future benefit accruals were frozen in May 2006.35.
Employment Agreements and Payments Upon Termination or Change in Control
As discussed more fully below, the Company has entered into employment agreements with Brendan L. Hoffman, Anthony J. Buccina and Stephen R. Byers.Byers and Luis Fernandez. The decisions to enter into employment agreements and the terms of those agreements were based on the Company's need to motivate and retain talent for the long-term growth of the Company. Beginning in 2013, the Company determined that, except with respect to the chief executive officer, it intends to no longer enter into employment agreements with executives but would establish an Executive Severance Pay Plan (the "Severance Plan") that provides prescribed benefits to participating executives of the Company upon termination of employment without cause or resignation for good reason. It is intended that when existing employment agreements with current executives expire, the Company will cover these executives under the Severance Plan. In order to participate in the Severance Plan, an executive must execute and deliver to the Company a confidentiality, non-competition and non-solicitation agreement. Mr. Byers is the first Named Executive Officer to be enrolled in the Severance Plan.
Effective February 7, 2012, the Company elected Mr. Hoffman as its President and Chief Executive Officer, and the Company determined that it would be in its interest to enter into an employment agreement to provide for an initial term of employment of three years in order to retain Mr. Hoffman as its President and Chief Executive Officer. Mr. Hoffman was selected as President and Chief Executive Officer due to his years of executive experience in the retail department store industry and for the long-term growth of the Company. As previously mentioned, Mr. Hoffman has announced that he will not renew his contract upon its expiration in February 2015.
With respect to Mr. Buccina, the HRCC and management of the Company determined his services and merchandising expertise would be critical to lead the development and execution of a comprehensive merchandising strategy. With respect to Mr. Byers, the HRCC and Company management determined it would be in the best interests of the Company to enter into an employment agreement to retain Mr. Byers due to his significant level of experience in retail and for the long-term growth of the Company. In January 2009, the Company entered into new employment agreements with both Mr. Buccina and Mr. Byers, extending the term of their respective employment relationships with the Company. In January 2011, the employment agreement of Mr. Buccina automatically renewed for an additional one-year period, and the Company elected not to renew the employment agreement of Mr. Byers. The Company and Mr. Byers entered into a new employment agreement dated May 1, 2011 that revised his duties and provided that the term shall be for one year and shall renew for successive one-year terms beginning May 1st of each year unless either party elects not to renew the agreement. In January 2012,As previously discussed, after the expiration of the term of his employment agreement on April 30, 2014, Mr. Byers became a participant in the Severance Plan.
With respect to Mr. Fernandez, Company management determined it would be in the best interests of the Company elected not to renew theenter into an employment agreement for an initial term of employment of three years to attract and retain Mr. Buccina.Fernandez due to his significant level of experience in retail marketing and ecommerce. The Company and Mr. BuccinaFernandez entered into a newan employment agreement dated April 30, 2012 that provided for employment through February 15, 2013, after which date Mr. Buccina chose to retire from the Company.on May 7, 2012.
The material terms of the employment agreements with the Named Executive Officers are described under the heading "Summary of Employment Agreements with Named Executive Officers" beginning on page 39.40.
Under the employment agreements and the Severance Plan, the Company has agreed to provide severance compensation in the event of a termination, change in control or other triggering events. In addition, Keith E. Plowman, with whom the Company does not have an employment agreement, is a participant incovered by the Company's severance plan.policy on severance. These arrangements are designed to promote stability and continuity of senior management through a change in control of the Company. Stock options and restricted stock will generally vest upon a change in control. The Company provides for vesting of equity awards to retain, focus and motivate executives during change in control discussions. However, any cash severance benefits require a "double trigger" (including the executive's separation from the Company under specified circumstances) for payment.
Information on these arrangements for the Named Executive Officers is provided under the heading "Potential Payments Upon Termination or Change in Control" on page 45.44.
Recoupment of Incentive-Based Compensation
In order to further align management's interests with those of shareholders and to support the Company's governance practices, in 2010 the Board adopted a recoupment policy applicable to annual cash incentive awards, performance-based restricted shares and other performance-based compensation toreceived by executive officers of the Company. The policy provides that if, as a result of a restatement of the Company's financial statements, an executive officer received more incentive compensation than the executive officer would have received absent the incorrect financial statements, the Company may take such action as it deems appropriate to address the impact of the restatement of financial statements. Compensation subject to recoupment will include equity or contingent income exercised, earned or distributed during the periods, not to exceed three years, which required restatement of financial statements.
Prohibition on Derivative Trading, Hedging and Short Selling
The Company prohibits derivative transactions and selling short in the Company's securities by officers, directors and their families. Specifically, they may not, at any time:
Tax Deductibility of Executive Compensation
Internal Revenue Code Section 162(m) limits the deductibility by the Company for tax purposes of compensation in excess of $1,000,000 paid to the Chief Executive Officer and certain executive officers unless specified criteria are satisfied. The HRCC reviews and considers the deductibility of executive compensation under Section 162(m), and has generally designed the Company's compensation program in a manner that permits compensation to be deductible. However, grants of restricted stock, when and if those grants vest for tax purposes, may create compensation for the grantee that is subject to the
limitations on deductibility under Section 162(m). The HRCC may award non-deductible compensation when it believes such action would be in the best interests of the Company.
Report of the Human Resources and Compensation Committee
The HRCC has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Company management and, based on such review and discussion, the HRCC recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.proxy statement.
The Human Resources and Compensation Committee
Marsha M. Everton, Chair
Todd C. McCarty, Chair
Jeffrey B. Sherman
Steven B. Silverstein
Risk Considerations in our Compensation Policies
Company management performs an annual risk assessment of the Company's compensation policies and plans. This risk assessment process includes a review of plan design and performance measures. Incentive compensation targets are reviewed annually and adjusted as necessary to align with the individual goals for executive officers. The HRCC reviews the risk assessment annually.
The HRCC has determined that the Company's compensation program does not encourage excessive and unnecessary risk-taking. The Company designs the individual components of its compensation programs to encourage appropriate risk-taking to maximize long-term business potential, while avoiding undue risk that does not align with short-andshort- and long-term shareholder objectives. This design encourages the Company's managers to remain focused on both the short- and long-term operational and financial goals of the Company. The following factors mitigate risk with respect to compensation programs: approval of executive compensation by a committee of independent directors, performance-based short-term and long-term incentive awards aligned with shareholder interests, caps on incentive payments, use of multiple financial goals including both top and bottom line measures, stock ownership guidelines and an incentive recoupment policy (described on page 32).
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total($) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brendan L. Hoffman, | 2012 | 976,923 | 1,000,000 | 1,789,750 | (8) | — | 500,000 | (9) | — | 148,983 | 4,415,656 | |||||||||||||||||
President and Chief Executive | 2011 | — | — | — | — | — | — | — | — | |||||||||||||||||||
Officer | 2010 | — | — | — | — | — | — | — | — | |||||||||||||||||||
Byron L. Bergren, | 2012 | 33,750 | — | 137,200 | (10) | — | — | — | 11,402 | 182,352 | ||||||||||||||||||
President and Chief Executive | 2011 | 1,000,000 | — | 1,410,300 | (11) | — | — | — | 89,185 | 2,499,485 | ||||||||||||||||||
Officer through February 6, 2012 | 2010 | 1,000,000 | — | 2,620,800 | (12) | — | 1,000,000 | — | 70,773 | 4,691,573 | ||||||||||||||||||
Anthony J. Buccina, | 2012 | 850,000 | — | 331,000 | (13) | — | — | 31,260 | 21,068 | 1,233,328 | ||||||||||||||||||
Vice Chairman, President— | 2011 | 842,500 | — | 1,659,600 | (14) | — | — | 30,922 | 15,138 | 2,548,160 | ||||||||||||||||||
Merchandising | 2010 | 812,950 | — | 859,030 | (15) | — | 779,000 | 22,677 | 14,367 | 2,488,024 | ||||||||||||||||||
Stephen R. Byers, | 2012 | 479,423 | — | 77,550 | (16) | — | — | — | 7,254 | 564,227 | ||||||||||||||||||
Executive Vice President, | 2011 | 520,000 | — | 287,664 | (17) | — | — | — | 6,593 | 814,257 | ||||||||||||||||||
Stores, Visual and Loss Prevention | 2010 | 545,875 | — | 540,130 | (18) | — | 522,500 | — | 10,516 | 1,619,021 | ||||||||||||||||||
Tim Grumbacher, | 2012 | 650,000 | — | — | — | — | — | 88,422 | 738,422 | |||||||||||||||||||
Strategic Initiatives | 2011 | 650,000 | — | — | — | — | — | 70,740 | 720,740 | |||||||||||||||||||
Officer | 2010 | 650,000 | — | — | — | 260,000 | — | 74,039 | 984,039 | |||||||||||||||||||
Keith E. Plowman, | 2012 | 510,000 | — | 232,650 | (19) | — | — | — | 8,005 | 750,655 | ||||||||||||||||||
Executive Vice President, | 2011 | 504,625 | — | 788,310 | (20) | — | — | — | 4,308 | 1,297,243 | ||||||||||||||||||
Chief Financial Officer and Principal Accounting Officer | 2010 | 478,875 | — | 745,275 | (21) | — | 366,375 | — | 9,769 | 1,600,294 |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brendan L. Hoffman, | 2013 | 1,000,000 | 1,000,000 | 6,330,500 | (8) | — | — | — | 125,087 | 8,455,587 | ||||||||||||||||||
President and Chief | 2012 | 976,923 | 1,000,000 | 1,789,750 | (9) | — | 500,000 | (10) | — | 148,983 | 4,415,656 | |||||||||||||||||
Executive Officer | 2011 | — | — | — | — | — | — | — | — | |||||||||||||||||||
Stephen R. Byers, | 2013 | 480,962 | — | 520,000 | (11) | — | — | — | 7,838 | 1,008,800 | ||||||||||||||||||
Executive Vice | 2012 | 479,423 | — | 77,550 | (12) | — | — | — | 7,254 | 564,227 | ||||||||||||||||||
President—Stores, | 2011 | 520,000 | — | 287,664 | (13) | — | — | — | 6,593 | 814,257 | ||||||||||||||||||
Visual and Loss Prevention | ||||||||||||||||||||||||||||
Luis Fernandez, | 2013 | 399,615 | — | 715,000 | (14) | — | — | — | 1,956 | 1,116,571 | ||||||||||||||||||
Executive Vice | 2012 | 270,385 | 60,000 | 89,250 | (15) | — | — | — | 26,889 | 446,524 | ||||||||||||||||||
President—Chief | 2011 | — | — | — | — | — | — | — | — | |||||||||||||||||||
Omnichannel Officer | ||||||||||||||||||||||||||||
Tim Grumbacher, | 2013 | 650,000 | — | — | — | — | — | 82,655 | 732,655 | |||||||||||||||||||
Strategic Initiatives | 2012 | 650,000 | — | — | — | — | — | 88,422 | 738,422 | |||||||||||||||||||
Officer | 2011 | 650,000 | — | — | — | — | — | 70,740 | 720,740 | |||||||||||||||||||
Keith E. Plowman, | 2013 | 530,769 | — | 975,000 | (16) | — | — | — | 6,026 | 1,511,795 | ||||||||||||||||||
Executive Vice | 2012 | 510,000 | — | 232,650 | (17) | — | — | — | 8,005 | 750,655 | ||||||||||||||||||
President—Chief | 2011 | 504,625 | — | 788,310 | (18) | — | — | — | 4,308 | 1,297,243 | ||||||||||||||||||
Financial Officer |
Name | Automobile Usage ($) | Supplemental Medical Benefits ($) | Insurance Consultation Expenses ($) | Tax Gross-Up of Certain Perquisites ($) | Life Insurance Premiums ($) | Legal Fees ($) | Commuting Expenses ($) | 401(k) Plan Company Match ($) | Total ($) | Automobile Usage ($) | Insurance Consultation Expenses ($) | Tax Gross-Up of Certain Perquisites ($) | Life Insurance Premiums ($) | Imputed Benefit of Storage Space ($) | Commuting Expenses ($) | 401(k) Plan Company Match ($) | Total ($) | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Brendan L. Hoffman | — | 3,320 | — | 67,190 | 808 | 20,000 | 57,665 | — | 148,983 | — | — | 62,654 | 2,421 | — | 58,839 | 1,173 | 125,087 | ||||||||||||||||||||||||||||||||||||
Byron L. Bergren | 946 | 308 | 5,000 | 3,961 | — | — | — | 1,187 | 11,402 | ||||||||||||||||||||||||||||||||||||||||||||
Anthony J. Buccina | — | — | — | — | 13,068 | 5,000 | — | 3,000 | 21,068 | ||||||||||||||||||||||||||||||||||||||||||||
Stephen R. Byers | — | — | — | — | 5,004 | — | — | 2,250 | 7,254 | — | — | — | 6,155 | — | — | 1,683 | 7,838 | ||||||||||||||||||||||||||||||||||||
Luis Fernandez | — | — | — | 850 | — | — | 1,106 | 1,956 | |||||||||||||||||||||||||||||||||||||||||||||
Tim Grumbacher | 6,056 | — | 35,010 | 23,929 | 19,677 | — | — | 3,750 | 88,422 | 2,055 | 29,400 | 25,135 | 19,012 | 4,605 | — | 2,448 | 82,655 | ||||||||||||||||||||||||||||||||||||
Keith E. Plowman | — | — | — | — | 5,005 | — | — | 3,000 | 8,005 | — | — | — | 4,037 | — | — | 1,989 | 6,026 |
The table below provides information regarding the Cash Bonus Plan and awards of restricted stock ("RS") made during 2013 to the Named Executive Officers under the Company's Stock Incentive Plan. Stock options and awards of restricted stock generally vest over a number of years. Any vested options are usually forfeited 90 days after termination of the recipient's employment, and any unvested shares of restricted stock and unvested options are usually forfeited upon termination of employment.
The table below provides information regarding grants of options and awards of restricted stock and RSUs made during 2012 to the Named Executive Officers under the Company's Stock Incentive Plan.
| | | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | | | | | ||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | All Other Stock Awards; Number of Shares of Stock or Units (#)(3) | All Other Option Awards; Number of Securities Underlying Options (#)(4) | | | | | | | | | | | All Other Stock Awards; Number of Shares of Stock or Units (#)(3) | | |||||||||||||||||||||||||||||||||||||||||
| | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Exercise or Base Price of Option Awards ($/share) | Grant Date Fair Value of Stock and Option Awards ($)(5) | | Grant Date for Equity- Based Awards | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | Grant Date Fair Value of Stock Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Award Type | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards; Number of Shares of Stock or Units (#)(3) | |||||||||||||||||||||||||||||||||||||||||||||
Brendan L. Hoffman | N/A | 500,000 | 1,000,000 | 2,000,000 | — | — | — | — | — | — | Cash Bonus Plan | n/a | 500,000 | 1,000,000 | 2,000,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
3/13/12 | — | — | — | 25,000 | 50,000 | (6) | — | — | — | 214,750 | Performance RS(5) | 3/19/13 | — | — | — | 62,500 | 125,000 | — | — | 1,670,000 | |||||||||||||||||||||||||||||||||||||||
2/7/12 | — | — | — | — | — | 300,000 | — | — | 1,575,000 | Performance RS—3-yr.(6) | 4/17/13 | — | — | — | 100,000 | 200,000 | 300,000 | — | 2,600,000 | ||||||||||||||||||||||||||||||||||||||||
Byron L. Bergren | 6/12/12 | — | — | — | — | — | 17,612 | — | — | 90,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
8/23/12 | — | — | — | — | — | 5,866 | — | — | 47,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony J. Buccina | N/A | 425,000 | 850,000 | 1,700,000 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
3/13/12 | — | — | — | 25,000 | 50,000 | (7) | — | — | — | 214,750 | Performance RS—2-yr.(7) | 5/6/13 | — | — | — | 25,000 | 50,000 | 75,000 | — | 760,500 | |||||||||||||||||||||||||||||||||||||||
4/30/12 | — | — | — | 18,750 | 37,500 | (8) | — | — | — | 116,250 | Time-based RS | 4/17/13 | — | — | — | — | — | — | 100,000 | 1,300,000 | |||||||||||||||||||||||||||||||||||||||
Stephen R. Byers | N/A | 117,500 | 235,000 | 470,000 | — | — | — | — | — | — | Cash Bonus Plan | n/a | 121,300 | 242,500 | 485,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
4/17/12 | — | — | — | 5,000 | 10,000 | (9) | — | — | — | 35,250 | Performance RS(5) | 4/17/13 | — | — | — | 5,000 | 10,000 | — | — | 130,000 | |||||||||||||||||||||||||||||||||||||||
4/17/12 | — | — | — | — | — | 6,000 | — | — | 42,300 | Performance RS—3-yr.(6) | 4/17/13 | — | — | — | 7,500 | 15,000 | 22,500 | — | 195,000 | ||||||||||||||||||||||||||||||||||||||||
Time-based RS | 4/17/13 | — | — | — | — | — | — | 15,000 | 195,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Luis Fernandez | Cash Bonus Plan | n/a | 100,000 | 200,000 | 400,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Performance RS(5) | 4/17/13 | — | — | — | 5,000 | 10,000 | — | — | 130,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Performance RS—3-yr.(6) | 4/17/13 | — | — | — | 7,500 | 15,000 | 22,500 | — | 195,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Time-based RS | 4/17/13 | — | — | — | — | — | — | 30,000 | 390,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Keith E. Plowman | N/A | 191,300 | 382,500 | 765,000 | — | — | — | — | — | — | Cash Bonus Plan | n/a | 198,800 | 397,500 | 795,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
4/17/12 | — | — | — | 25,000 | 50,000 | (10) | — | — | — | 176,250 | Performance RS(5) | 4/17/13 | — | — | — | 10,000 | 20,000 | — | — | 260,000 | |||||||||||||||||||||||||||||||||||||||
4/17/12 | — | — | — | — | — | 8,000 | — | — | 56,400 | Performance RS—3-yr.(6) | 4/17/13 | — | — | — | 20,000 | 40,000 | 60,000 | — | 520,000 | ||||||||||||||||||||||||||||||||||||||||
Time-based RS | 4/17/13 | — | — | — | — | — | — | 15,000 | 195,000 |
Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options— Exercisable (#) | Number of Securities Underlying Unexercised Options— Unexercisable (#) | 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 ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Number of Securities Underlying Unexercised Options— Exercisable (#) | Number of Securities Underlying Unexercised Options— Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | 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 ($)(1) | ||||||||||||||||||||||||||||||||||||||
Brendan L. Hoffman | — | — | — | — | — | 300,000 | (2) | 3,930,000 | — | — | — | — | — | — | — | 200,000 | (2) | 2,150,000 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 250,000 | (3) | 3,275,000 | — | — | — | — | — | 100,000 | (3) | 1,075,000 | — | — | |||||||||||||||||||||||||||||||||||||
Byron L. Bergren | 125,000 | — | — | 13.05 | 2/6/2013 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 23,478 | (4) | 307,600 | — | — | — | — | — | — | — | — | — | 125,000 | (4) | 1,343,750 | |||||||||||||||||||||||||||||||||||||
Anthony J. Buccina | 96,000 | — | — | 27.15 | 5/31/2013 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
11,019 | — | — | 55.85 | 3/26/2014 | — | — | — | — | — | — | — | — | — | — | — | 200,000 | (5) | 2,150,000 | ||||||||||||||||||||||||||||||||||||||
50,000 | — | — | 4.96 | 3/17/2015 | — | — | — | — | — | — | — | — | — | — | — | 100,000 | (6) | 1,075,000 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 10,000 | (5) | 131,000 | — | — | — | — | — | — | — | — | — | 50,000 | (7) | 537,500 | |||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 50,000 | (6) | 655,000 | — | — | — | — | — | — | — | 25,000 | (8) | 268,750 | |||||||||||||||||||||||||||||||||||||
Stephen R. Byers | 15,000 | — | — | 31.84 | 4/2/2013 | — | — | — | — | 11,019 | — | — | 55.85 | 3/26/2014 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
21,500 | — | — | 29.90 | 10/1/2013 | — | — | — | — | 50,000 | — | — | 4.96 | 3/17/2015 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
11,019 | — | — | 55.85 | 3/26/2014 | — | — | — | — | — | — | — | — | — | 15,000 | (3) | 161,250 | — | — | ||||||||||||||||||||||||||||||||||||||
50,000 | — | — | 4.96 | 3/17/2015 | — | — | — | — | — | — | — | — | — | 10,000 | (9) | 107,500 | — | — | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 5,000 | (7) | 65,500 | — | — | — | — | — | — | — | 6,000 | (10) | 64,500 | — | — | |||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 10,000 | (8) | 131,000 | — | — | — | — | — | — | — | — | — | 15,000 | (5) | 161,250 | |||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 6,000 | (9) | 78,600 | — | — | — | — | — | — | — | — | — | 7,500 | (6) | 80,625 | |||||||||||||||||||||||||||||||||||||
Luis Fernandez | — | — | — | — | — | 30,000 | (3) | 322,500 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 15,000 | (5) | 161,250 | |||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 7,500 | (6) | 80,625 | |||||||||||||||||||||||||||||||||||||||||||||||
Keith E. Plowman | 11,019 | — | — | 55.85 | 3/26/2014 | — | — | — | — | 11,019 | — | — | 55.85 | 3/26/2014 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
40,000 | — | — | 4.96 | 3/17/2015 | — | — | — | — | 40,000 | — | — | 4.96 | 3/17/2015 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 25,000 | (7) | 327,500 | — | — | — | — | — | — | — | 15,000 | (3) | 161,250 | — | — | |||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 12,000 | (8) | 157,200 | — | — | — | — | — | — | — | 12,000 | (9) | 129,000 | — | — | |||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 8,000 | (9) | 104,800 | — | — | — | — | — | — | — | 8,000 | (10) | 86,000 | — | — | |||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 40,000 | (5) | 430,000 | |||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 20,000 | (6) | 215,000 |
The Pension Benefits Table below shows the actuarial present value of accumulated benefits payable to each of our Named Executive Officers and the number of years credited to each Named Executive Officer under the Carson's Pension Plan, in which only Mr. Buccina was a participant.
The present value set forth has been calculated for Mr. Buccina assuming he remained in service until normal retirement age as defined under the Carson's Pension Plan. The assumptions set forth in Note 9 to our audited financial statements included in our Form 10-K filed with the SEC on April 17, 2013 were used to calculate the numbers below and are incorporated by reference.
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Anthony J. Buccina | Carson's Pension Plan | 13 | (1) | 316,328 | — |
Description of Plan Named in Pension Benefits Table
In connection with the acquisition of Carson's in March 2006, the Company assumed the Carson's Pension Plan. The Carson's Pension Plan is a qualified defined-benefit cash-balance plan in which the only Named Executive Officer participant was Anthony J. Buccina. The Carson's Pension Plan was frozen to new participants in 2002 and all future benefit accruals were frozen in May 2006. The Carson's Pension Plan was amended in 2007 in compliance with the Pension Protection Act of 2006.
Requirements for Retirement Benefits
Normal Retirement: Employees who terminate employment with three or more years of service and have attained age 65 qualify for normal retirement. Payment of the full benefit commences as soon as practicable following termination. Mr. Buccina was not eligible for normal retirement under the Carson's Pension Plan on the date of his retirement, February 15, 2013.
Early Retirement: Employees who have completed three or more years of service and are age 55 or older upon termination are eligible for early retirement. In addition, employees who participated in Carson's previous plan, which was merged into the Carson's Pension Plan, are eligible for early retirement after 30 years of service. Payment of pension benefits will commence at age 65, unless the employee elects to begin such payments earlier in which case the pension benefit amount may be reduced. Mr. Buccina was eligible for early retirement under the Carson's Pension Plan.
Form of Payment
For an unmarried employee, the normal form of payment is a life annuity. For a married employee, the normal form of payment is a qualified joint and surviving spouse annuity; however, the married employee may elect to receive payment in the form of a single life annuity. Any employee may elect to receive pension benefits in the form of an actuarially equivalent life annuity, joint and survivor annuity, life annuity with ten years guaranteed, ten-year annuity with specified monthly payments, or, under certain circumstances, a lump sum.
Calculation of Benefits
Effective May 1, 2002, the Carson's Pension Plan was amended and restated to convert the plan's benefit formula to a cash-balance design. Under this design, the pension benefit is expressed as a
cash-balance account. Employees with accrued pension benefits as of April 30, 2002, including Mr. Buccina, are considered continued participants under the current Carson's Pension Plan.
Effective May 20, 2006, future accruals in the Carson's Pension Plan were eliminated. Generally, the lump sum benefit payable under the Plan is the cash balance account value as of that date, with annual interest credits at the greater of 4.75% or the yield on three-year U.S. Treasury constant maturities as of the last day of the prior calendar year. However, the lump sum benefit is not less than the lump sum value of benefits accrued under prior Plan formulas as of May 20, 2006.
Option Exercises and Stock Vested During 20122013
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||
Brendan L. Hoffman | — | — | — | — | — | — | 100,000 | 1,162,000 | ||||||||||||||||||
Byron L. Bergren | — | — | 200,000 | 1,000,000 | ||||||||||||||||||||||
— | — | 20,259 | (2) | 144,000 | ||||||||||||||||||||||
Anthony J. Buccina | — | — | — | — | ||||||||||||||||||||||
Stephen R. Byers | — | — | — | — | — | — | 5,000 | 68,400 | ||||||||||||||||||
Tim Grumbacher | — | — | — | — | ||||||||||||||||||||||
Keith E. Plowman | — | — | 50,000 | 336,000 | — | — | 25,000 | 342,000 |
Table of a previously vested performance-based RSU grant.Contents
Summary of Employment Agreements with
Named Executive Officers
Brendan L. Hoffman, President and Chief Executive Officer
On January 23, 2012, the Company entered into an employment agreement (the "Hoffman Employment Agreement") with Mr. Hoffman providing that he would serve as President and Chief Executive Officer effective February 7, 2012, with a term running through February 7, 2015.
Mr. Hoffman's initial base salary under the Hoffman Employment Agreement is $1,000,000 per year and provides that Mr. Hoffman willwould be paid a signing bonus of $1,000,000 within thirty days following the effective date and $1,000,000 on the first anniversary of the effective date if he is still employed by the Company at that time. Mr. Hoffman subsequently received both signing bonuses.
The Hoffman Employment Agreement provides that Mr. Hoffman is eligible for a bonus under the Cash Bonus Plan under the following parameters: a target bonus of 100% of base salary, with a threshold bonus of 50% of base salary, and a maximum bonus of 200% of base salary. The performance measures to be utilized and the weighting of these performance measures will beare determined by the HRCC in its discretion. With respect to fiscal year2013, the Cash Bonus Plan net income threshold was not achieved, and, therefore, Mr. Hoffman did not receive any cash bonus, as is further detailed under "Performance-Based Annual Cash Incentive Compensation" beginning on page 27. With respect to 2012, the Hoffman Employment Agreement provided that Mr. Hoffman would receive a minimum cash bonus of $500,000.
The Hoffman Employment Agreement provides that Mr. Hoffman receive a grant of 300,000 restricted shares of the Company's common stock, of which 100,000 shares vested on each of February 7, 2013 and February 7, 2014 and 100,000 shares vest on each of February 7, 2014 and February 7, 2015, provided that Mr. Hoffman is still employed by the Company on each such date.Company. In addition, Mr. Hoffman received, as performance-based compensation, a grant of 300,000 restricted shares of the Company's common stock, 50,000 and 125,000 of which were subject to vesting based on achievement of Company performance goals for 2012
and 2013, respectively, and 125,000 of which are subject to vesting based on achievement of Company performance goals for each of 2013 and 2014. As the performance goals for 2012 and 2013 were not attained, the restricted stock awardawards relating to 2012 and 2013 performance goals waswere forfeited.
On April 17, 2013, Mr. Hoffman was awarded a grant of 100,000 time-based restricted shares, all of which vest on April 17, 2016. In addition, Mr. Hoffman received a grant of 300,000 performance-based restricted shares which are subject to vesting based on achievement of Company performance goals for the cumulative three-year period of 2013, 2014 and 2015. For vesting of restricted shares above the target amount of 200,000 shares, it is an additional requirement that the TSR be a positive number.
The Company has agreed to reimburse Mr. Hoffman for reasonable attorney's fees in connection with the negotiation of the Hoffman Employment Agreement provides that Mr. Hoffman is eligible to receive additional equity-based compensation as determined by the Board of upDirectors or the HRCC in line with the past practices of making equity awards to $20,000. In addition, the president and chief executive officer. The equity grants awarded to Mr. Hoffman are detailed on page 29.
The Company has agreed to reimburse Mr. Hoffman for all expenses related to Mr. Hoffman's relocation to Milwaukee, Wisconsin, in accordance with the Company's policy on relocation of senior executives, including additional amounts for the payment of related federal and state taxes. Pending Mr. Hoffman's relocation, the Company has agreed to reimburse Mr. Hoffman for his travel between New York, New York and the Company's offices, stores and facilities, including lodging, up to $75,000 per year. The Company has also agreed to gross up the payments made to Mr. Hoffman for these attorney's fees and travel and lodging expenses. Mr. Hoffman will also be eligible to participate in the Company's health plans and other plans and programs generally available to the Company's employees.
In the event of discharge without "Cause" or resignation for "Good Reason" (as such terms are defined in the Hoffman Employment Agreement) during the term of the Hoffman Employment Agreement, Mr. Hoffman will be entitled to receive (1) severance pay equal to the greater of his base salary for the remaining contract term or 200% of his base salary, (2) an amount equal to 24 times the monthly COBRA payment applicable to him as of the termination date, (3) an amount equal to the annual bonus Mr. Hoffman would have received with respect to the fiscal year of termination, prorated based on the number of days employed by the Company during that year, and (4) any unpaid signing
bonus amounts. The severance payment will be payable 50% in a lump sum as of the six month anniversary of Mr. Hoffman's termination of employment and 50% in a lump sum as of the one-year anniversary of Mr. Hoffman's termination of employment. The severance payment is contingent on Mr. Hoffman signing and not timely revoking a general release of claims. In addition, in the event of discharge without Cause or resignation for Good Reason, any unvested restricted stock issued pursuant to the Restricted Stock Agreements will automatically vest in full.
Upon a "Change ofin Control" (as such term is defined in the Hoffman Employment Agreement), the vesting of stock options and restricted shares held by Mr. Hoffman shall be governed by the terms of such stock options or restricted shares award. If following a Change ofin Control Mr. Hoffman is discharged without Cause or resigns for Good Reason within one year following the Change ofin Control, Mr. Hoffman will receive (1) a severance payment equal to two times his base salary, (2) an amount equal to two times the average annual bonus paid to him during the term of the Employment Agreement, (3) an amount equal to 24 times the monthly COBRA payment applicable to him as of the termination date, and (4) an amount equal to the annual bonus Mr. Hoffman would have received with respect to the fiscal year of termination, prorated based on the number of days employed by the Company during that year. The Change ofin Control severance payment will be payable 50% in a lump sum as of the six month anniversary of Mr. Hoffman's termination of employment and 50% in a lump sum as of the one-year anniversary of Mr. Hoffman's termination of employment. The Change ofin Control severance payment is contingent on Mr. Hoffman signing and not timely revoking a general release of claims. Pursuant to the Hoffman Employment Agreement, if the aggregate present value of the "parachute payments" determined under Section 280G of the Internal Revenue Code exceeds three times his "base amount," as defined in Section 280G, the payouts upon a Change in Control shall be reduced to be less than three times his base amount.
For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Hoffman may be entitled upon certain events and/or a Change in Control, see "Potential Payments Upon Termination or Change in Control" on page 45.44.
The Hoffman Employment Agreement contains a non-solicitation clause that, during Mr. Hoffman's employment and for a period of two years following termination of his employment, prohibits Mr. Hoffman from, directly or indirectly, soliciting, inducing, encouraging, influencing or otherwise causing any customer, employee, consultant, independent contractor or supplier of the Company to change his, her or its business relationship with or terminate employment with the Company.
The Hoffman Employment Agreement contains a non-competition clause that, during Mr. Hoffman's employment and for a period of one year following termination of his employment, prohibits Mr. Hoffman from engaging in or being financially interested in any competitor of the Company, as named in the Hoffman Employment Agreement, other than the passive ownership of less than 2% of any class of securities of a company. The Hoffman Employment Agreement also contains confidentiality provisions relating to the Company's confidential information.
Byron L. Bergren, President and Chief Executive Officer through February 6, 2012
Mr. Bergren's employment agreement with the Company was entered into on August 24, 2004 (the "2004 Agreement") and amended on May 1, 2005; May 23, 2006; July 19, 2007; March 18, 2009; January 21, 2011 and November 14, 2011. Mr. Bergren's employment agreement, as amended, provided for a minimum annual base salary of $1,000,000 and a bonus in accordance with the Cash Bonus Plan. In January 2011, the Company entered into an amendment of Mr. Bergren's employment agreement, which providedHoffman has announced that he would serve as President and Chief Executive Officer throughwill not renew his contract upon its expiration in February 5, 2012, with the term of the agreement extending automatically from year to year thereafter unless either party elected not to renew the agreement. If Mr. Bergren elected not to renew, the Board agreed to nominate Mr. Bergren as a member of the Board of Directors to serve until the annual meeting that was at least one year after expiration of the agreement. If the Company elected not to renew the agreement, the Board agreed to nominate Mr. Bergren as a member of the Board of Directors and to effect his appointment as the non-executive Chairman of the Board to serve until the annual meeting that was at least one year after expiration of the agreement. On November 14, 2011, the Company announced that Mr. Bergren would transition from his role as President and Chief Executive Officer to become Chairman of the Board and entered into a sixth amendment of Mr. Bergren's employment agreement. On February 6, 2012, Mr. Bergren retired as President and Chief Executive Office and was named Chairman of the Board.
Pursuant to the March 18, 2009 amendment to his employment agreement, Mr. Bergren was granted 200,000 time-based restricted shares of the Company's common stock of which 50% (100,000 shares) vested on February 1, 2010 and the remainder (100,000 shares) vested on February 1, 2011. He was also granted 200,000 performance-based restricted shares, 90% of which (180,000 shares) vested based upon the achievement of performance targets for 2009. This amendment also provided for two grants of shares of restricted stock in fiscal year 2010:
The employment agreement provided that in the event that Mr. Bergren was discharged without cause or resigned for good reason, Mr. Bergren would be appointed as non-executive Chairman of the Board and would also be entitled to payment of all accrued and unpaid Base Salary and accrued but unused vacation pay through the date of termination of employment as President and/or Chief Executive Officer, and a pro-rated bonus, if earned, based on the Company's full-year performance. The vesting of restricted stock and the payment of severance benefits were contingent on Mr. Bergren executing a general release consistent with certain terms of his employment agreement.
The employment agreement also provided that if Mr. Bergren was discharged without cause during the term of his employment agreement following a "Change in Control" (as defined in the employment agreement) or resigned from the Company with or without good reason during the term of his employment agreement after the expiration of three months following a Change in Control, Mr. Bergren would receive a payment equal to the lesser of 2.99 times his base salary (at the salary level immediately preceding the Change in Control plus his average bonus for the three immediately preceding fiscal years) or, if applicable, the "280G Permitted Payment" (as defined in the 2004 Agreement). The Change in Control severance payment was contingent on Mr. Bergren signing and not timely revoking a general release of claims.
Mr. Bergren's employment agreement contained a non-competition clause that, during Mr. Bergren's employment and for a period of one year after termination of his employment, prohibited Mr. Bergren from engaging in or being financially interested in the retail department stores business of any competitor of the Company identified in the employment agreement. Mr. Bergren's employment agreement also contained confidentiality provisions relating to the Company's confidential information.
Anthony J. Buccina, Vice Chairman, President—Merchandising
On April 30, 2012, Mr. Buccina announced his intention to retire on February 15, 2013. Also on that date, the Company entered into an employment agreement (the "Buccina Employment Agreement") to retain the services of Mr. Buccina through February 15, 2013. The Company and Mr. Buccina were party to an employment agreement dated as of February 1, 2009, as amended by Amendment No. 1 to Employment Agreement dated April 12, 2011, which expired on April 30, 2012.
Mr. Buccina's base salary under the Buccina Employment Agreement is $850,000 per year. The Buccina Employment Agreement provides that Mr. Buccina is eligible for a bonus under the Cash Bonus Plan under the following parameters: a target bonus of 100% of base salary in effect on the last day of the relevant fiscal year, with threshold and maximum bonuses as determined by the HRCC. The performance measures to be utilized, and the weighting of these performance measures, will be determined by the HRCC consistent with its determinations for other senior executives under the Cash Bonus Plan.
The Buccina Employment Agreement provides that Mr. Buccina will be paid a retention bonus of one times base salary ($850,000) provided that Mr. Buccina is employed by the Company at February 15, 2013. As Mr. Buccina completed the term of the Buccina Employment Agreement, he was eligible for and subsequently received the retention bonus.
The Buccina Employment Agreement provides that Mr. Buccina receive a grant of 37,500 performance-based restricted shares of the Company's common stock. In consideration for such grant of performance-based restricted stock, Mr. Buccina agreed to forfeit 75,000 unvested shares of time-based restricted stock granted pursuant to a restricted stock agreement dated April 18, 2011. As the performance goals for 2012 were not attainted, the restricted stock award relating to 2012 performance goals was forfeited.
Pursuant to a previous employment agreement dated February 1, 2009, the HRCC granted Mr. Buccina 100,000 time-based restricted shares of the Company's common stock. Such grant was awarded on February 2, 2009 and such restricted shares vested on April 30, 2011. On April 12, 2010, Mr. Buccina was awarded a grant of 20,000 shares of time-based restricted shares, 10,000 of which vested on April 12, 2011 and 10,000 of which would have vested on April 12, 2013 and were accelerated to vest on February 15, 2013 pursuant to the terms of the Buccina Employment Agreement.
On April 18, 2011, Mr. Buccina received a grant of 150,000 performance-based restricted shares, 50,000 of which were subject to vesting based on achievement of Company performance goals for each of 2011 and 2012, and 50,000 of which were subject to vesting based on achievement of Company performance goals for 2013. As the performance goals for 2011 and 2012 were not attained, the restricted stock awards relating to each of 2011 and 2012 performance goals were forfeited. As Mr. Buccina retired as of February 15, 2013, the restricted stock award relating to 2013 performance goals was forfeited.
The Buccina Employment Agreement provides that in the event of termination without cause or resignation for good reason during the term of the agreement, Mr. Buccina will receive a severance payment equal to two years of his base salary and will receive a stipend equal to the cost of COBRA premiums for medical and dental coverage for two years.
Upon a "Change in Control" (as defined in the Buccina Employment Agreement), Mr. Buccina's stock options and restricted shares shall vest according to the terms of the respective stock agreements. If following a Change in Control he is discharged without cause or resigns for good reason during the term of the Buccina Employment Agreement, Mr. Buccina will receive a severance payment equal to two times his average base pay for the most recently completed three years plus two times the average bonus paid to him for the most recently completed three years, or, if applicable, the "280G Permitted Payment" (as such term is defined in the Buccina Employment Agreement). The Change in Control severance payment is contingent on Mr. Buccina signing and not timely revoking a general release of claims.
For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Buccina may be entitled upon certain events and/or a Change in Control, see "Potential Payments Upon Termination or Change in Control" on page 45.
The Buccina Employment Agreement contains a non-competition clause that, during Mr. Buccina's employment and for a period equal to one-half of the period for which he receives severance payments after termination of his employment, prohibits Mr. Buccina from engaging in or being financially interested in the retail department stores business of any competitor of the Company named in the Buccina Employment Agreement. The Buccina Employment Agreement also contains confidentiality provisions relating to the Company's confidential information.2015.
Stephen R. Byers, Executive Vice President, President—Stores, Visual and Loss Prevention
On May 2, 2011, the Company and Stephen R. Byers entered into a newan employment agreement effective May 1, 2011 (the "Byers Employment Agreement"). The Company elected to allow the Byers Employment Agreement replaces an employment agreement dated as of February 1, 2009 (the "2009 Agreement"), which expiredto expire on April 30, 2011. The2014, and Mr. Byers Employment Agreement provides thatexecuted a confidentiality, non-compete and non-solicitation agreement which allowed him to participate in the term shall be for one year and shall renew for successive one-year terms beginning May 1stSeverance Plan.
Pursuant to the Byers Employment Agreement, Mr. Byers shall receive areceived an annual base salary effective May 1, 2011 through April 28, 2012 at an annual rate of $510,000, and, effective April 29, 2012, at an annual rate of $470,000. ThisMr. Byers's annual base salary is subject to review duringnow determined at the term of the Byers Employment Agreement and may be increased in the sole discretion of the Company.
Table of ContentsHRCC in accordance with the Company's compensation philosophy and objectives, as further detailed under "Compensation Discussion and Analysis" beginning on page 21.
The Byers Employment Agreement providesprovided that Mr. Byers iswas eligible for a bonus under the Cash Bonus Plan under the following parameters: beginning with fiscal year 2012, a target bonus of 50% of base salary in effect on the last day of the fiscal year, with threshold and maximum bonuses as determined by the HRCC, and for fiscal year 2011, a target bonus prorated between the 100% target established by the 2009 Agreement for the first three months of the fiscal year and a 50% target for the remaining nine months of the fiscal year.HRCC. The performance measures to be utilized and the weighting of these performance measures will bewere determined by the HRCC consistent with its determinations for other senior executives under the Cash Bonus Plan. With respect to 2013, the Cash Bonus Plan net income threshold was not achieved, and, therefore, Mr. Byers did not receive any cash bonus, as is further detailed under "Performance-Based Annual Cash Incentive Compensation" beginning on page 27. Mr. Byers is also eligible to participate in plans and programs that are generally made available to the other employees of the Company. The Severance Plan does not provide the terms of annual bonus eligibility.
On April 17, 2012,The equity grants awarded to Mr. Byers was awarded a grant of 6,000 time-based restricted shares which vestare detailed on April 17, 2015. In addition, Mr. Byers received a grant of 10,000 performance-based restricted shares where were subject to vesting based on achievement of Company performance goals for 2012. As the performance goals for 2012 were not attained, the restricted stock award relating to 2012 performance goals was forfeited.
On April 17, 2013, Mr. Byers was awarded a grant of 15,000 time-based restricted shares, all of which vest on April 17, 2016. In addition, Mr. Byers received a grant of 20,000 performance-based restricted shares which are subject to vesting based on achievement of Company performance goals for 2013 and a grant of 22,500 performance-based restricted shares which are subject to vesting based on achievement of Company performance goals for the cumulative three-year period of 2013, 2014 and 2015. For vesting of restricted shares above the target amount of 15,000 shares, it is an additional requirement that the TSR be a positive number.page 29.
The Byers Employment Agreement providesprovided that in the event of termination without cause or resignation for good reason, Mr. Byers willwould receive a severance payment equal to one and one-half years of his base salary and will receive a stipend equal to the cost of COBRA premiums for medical and dental coverage for one and one-half years. It also provides that if, prior to February 1, 2014, the Company exercises its right not to renew the Byers Employment Agreement and the Company and Mr. Byers do not enter into a new employment agreement and Mr. Byers is terminated without cause or resigns for good reason, he will be entitled to a severance payment equal to one year of his base salary. The severance payment iswas contingent on Mr. Byers signing and not timely revoking a general release of claims. The Severance Plan provides the same severance benefits for Mr. Byers.
Upon a "Change ofin Control" (as such term iswas defined in the Byers Employment Agreement), (1) stock options and restricted shares held by Mr. Byers shallwould vest if Mr. Byers ishad been discharged without cause or resignsresigned for good reason and (2) Mr. Byers iswas prohibited from resigning for good reason for a period of six months following the Change ofin Control. If following a Change ofin Control he iswas discharged without cause or resignsresigned for good reason within two years of the Change ofin Control, Mr. Byers will receivewould have received a severance payment equal to one and one-half times his average base pay for the most recently completed three years plus one and one-half times the average bonus paid to him for the most recently completed three years or, if applicable, the "280G Permitted Payment" (as such term iswas defined in the Byers Employment Agreement). The Change ofin Control severance payment iswas contingent on Mr. Byers signing and not timely revoking a general release of claims. The Severance Plan provides the same "Change in Control" benefits for Mr. Byers.
For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Byers may be entitled upon certain events and/or a Change in Control, see "Potential Payments Upon Termination or Change in Control" on page 45.44.
The Byers Employment Agreement containscontained a non-competition clause that, during Mr. Byers's employment and for a period equal to one-half of the period for which he receives severance payments after termination of his employment, prohibitsprohibited Mr. Byers from engaging in or being financially interested in the retail department stores business of any competitor of the Company named in the Byers Employment Agreement. The Byers Employment Agreement also containscontained confidentiality provisions relating to the Company's confidential information. The Confidentiality, Non-Competition and Non-Solicitation Agreement executed by Mr. Byers as a condition of participation in the Severance Plan provides the same restrictions, except that the period of non-competition is 12 months from the date of termination.
Luis Fernandez, Executive Vice President—Chief Omnichannel Officer
Effective May 7, 2012, the Company and Luis Fernandez entered into an employment agreement (the "Fernandez Employment Agreement"). The Fernandez Employment Agreement provides that the term shall be from May 7, 2012 until May 6, 2015, unless terminated by either party pursuant to the terms of the Fernandez Employment Agreement.
Pursuant to the Fernandez Employment Agreement, Mr. Fernandez shall receive a base salary at an annual rate of $370,000. This base salary is subject to review during the term of the Fernandez Employment Agreement and may be increased in the sole discretion of the Company. Mr. Fernandez's salary was increased to $400,000 in May 2013 and to $425,000 in October 2013 in recognition of his assumption of additional duties.
The Fernandez Employment Agreement provides that Mr. Fernandez is eligible for a bonus under the Cash Bonus Plan during the term of the Fernandez Employment Agreement under the following parameters: a target bonus of 50% of base salary in effect on the last day of the fiscal year, with threshold and maximum bonuses as determined by the HRCC. The performance measures to be utilized and the weighting of these performance measures will be determined by the HRCC consistent with its determinations for other senior executives under the Cash Bonus Plan. With respect to 2013, the Cash Bonus Plan net income threshold was not achieved, and, therefore, Mr. Fernandez did not receive any cash bonus, as is further detailed under "Performance-Based Annual Cash Incentive Compensation" beginning on page 27. Mr. Fernandez is also eligible to participate in plans and programs that are generally made available to the other employees of the Company.
Pursuant to the Fernandez Employment Agreement, Mr. Fernandez received 10,000 shares of the Company's common stock. In addition, Mr. Fernandez received a grant of 10,000 performance-based restricted shares which were subject to vesting based on achievement of Company performance goals for 2012. As the performance goals for 2012 were not attained, the restricted stock award relating to 2012 performance goals was forfeited.
The equity grants awarded to Mr. Fernandez are detailed on pages 29-30.
The Fernandez Employment Agreement provides that in the event of termination without cause or resignation for good reason, Mr. Fernandez will receive a severance payment equal to one year of his base salary and will receive a stipend equal to the cost of COBRA premiums for medical and dental coverage for one year. The severance payment is contingent on Mr. Fernandez signing and not timely revoking a general release of claims.
Upon a "Change in Control" (as such term is defined in the Fernandez Employment Agreement), (1) stock options and restricted shares held by Mr. Fernandez shall vest if Mr. Fernandez is discharged without cause or resigns for good reason and (2) Mr. Fernandez is prohibited from resigning for good reason for a period of six months following the Change in Control. If following a Change in Control he is discharged without cause or resigns for good reason within two years of the Change in Control, Mr. Fernandez will receive a severance payment equal to one and one-half times his average base pay for the most recently completed three years plus the average bonus paid to him for the most recently completed three years or, if applicable, the "280G Permitted Payment" (as such term is defined in the Fernandez Employment Agreement). The Change in Control severance payment is contingent on Mr. Fernandez signing and not timely revoking a general release of claims.
For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Fernandez may be entitled upon certain events and/or a Change in Control, see "Potential Payments Upon Termination or Change in Control" on page 44.
The Fernandez Employment Agreement contains a non-competition clause that, during Mr. Fernandez's employment and for a period of 18 months following the termination of his
employment, prohibits Mr. Fernandez from engaging in or being financially interested in the retail department stores business of any competitor of the Company named in the Fernandez Employment Agreement. The Fernandez Employment Agreement also contains confidentiality provisions relating to the Company's confidential information.
Potential Payments Upon Termination or Change in Control
The Company has entered into agreements and maintains plans that will require it to provide compensation to the Named Executive Officers (with the exception of Mr. Bergren, who retired as President and Chief Executive Officer on February 6, 2012) in the event of a termination of employment or a "Change in Control" of the Company, as such term is defined in the agreements and plans. The potential amount of compensation payable to each such Named Executive Officer in each situation is set forth in the tables below. The amounts shown in the tables assume that termination of the Named Executive Officer and/or a Change in Control occurred on February 2, 2013.1, 2014. The actual amounts to be paid will depend on the circumstances and time of the termination or Change in Control.
Brendan L. Hoffman—Hoffman, President and Chief Executive Officer
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination Without Good Reason | Involuntary Termination Without Cause or Resignation for Good Reason(1) | Change in Control Without Termination | Change in Control with Termination(2) | Retirement | Disability | Death | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance | — | — | $ | 2,000,000 | — | $ | 2,193,354 | (3) | — | — | — | ||||||||||||||
Pro-rated Non-Equity Incentive Compensation (Cash Bonus) | — | $ | 500,000 | 500,000 | $ | 500,000 | 500,000 | $ | 500,000 | $ | 500,000 | $ | 500,000 | ||||||||||||
Value of Accelerated Restricted Stock(4) | — | — | 7,205,000 | 7,205,000 | 7,205,000 | — | 7,205,000 | 7,205,000 | |||||||||||||||||
Continuing Health and Welfare Benefits | — | — | 30,430 | — | 30,430 | — | — | — | |||||||||||||||||
Life Insurance | — | — | — | — | — | — | — | 2,000,000 | |||||||||||||||||
Total | — | $ | 500,000 | $ | 9,735,430 | $ | 7,705,000 | $ | 9,928,784 | $ | 500,000 | $ | 7,705,000 | $ | 9,705,000 | ||||||||||
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination Without Good Reason | Involuntary Termination Without Cause or Resignation for Good Reason(1) | Change in Control Without Termination | Change in Control With Termination(2) | Retirement | Disability | Death | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance | — | — | $ | 2,000,000 | — | $ | 3,000,000 | (3) | — | — | — | ||||||||||||||
Value of Accelerated | |||||||||||||||||||||||||
Restricted Stock(4) | — | — | 8,600,000 | $ | 8,600,000 | 8,600,000 | — | $ | 8,600,000 | $ | 8,600,000 | ||||||||||||||
Continuing Health and | |||||||||||||||||||||||||
Welfare Benefits | — | — | 33,307 | — | 33,307 | — | — | — | |||||||||||||||||
Life Insurance | — | — | — | — | — | — | — | 2,000,000 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | — | $ | — | $ | 10,633,307 | $ | 8,600,000 | $ | 11,633,307 | $ | — | $ | 8,600,000 | $ | 10,600,000 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Anthony J. Buccina—Stephen R. Byers, Executive Vice Chairman, President—MerchandisingStores, Visual and Loss Prevention
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination without Good Reason | Involuntary Termination Without Cause or Resignation for Good Reason(1) | Change in Control Without Termination | Change in Control with Termination(2) | Retirement | Disability | Death | For Cause Termination | Voluntary Termination Without Good Reason | Involuntary Termination Without Cause or Resignation for Good Reason(1) | Change in Control Without Termination | Change in Control With Termination(2) | Retirement | Disability | Death | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance | — | — | $ | 1,700,000 | — | $ | 2,622,484 | (3) | — | — | — | — | — | $ | 727,500 | — | $ | 998,750 | (3) | — | — | — | ||||||||||||||||||||||||||||
Value of Accelerated Restricted Stock(4) | — | — | — | $ | 622,250 | 622,250 | — | $ | 786,000 | $ | 786,000 | |||||||||||||||||||||||||||||||||||||||
Carson's Pension Plan(5) | $ | 316,328 | $ | 316,328 | 316,328 | — | 316,328 | $ | 316,328 | 316,328 | 316,328 | |||||||||||||||||||||||||||||||||||||||
Continuing Health and Welfare Benefits | — | — | 36,884 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Value of Accelerated | ||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock(4) | — | — | — | $ | 575,125 | 575,125 | — | $ | 575,125 | $ | 575,125 | |||||||||||||||||||||||||||||||||||||||
Continuing Health and | ||||||||||||||||||||||||||||||||||||||||||||||||||
Welfare Benefits | — | — | 30,652 | — | 30,652 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Life Insurance | — | — | — | — | — | — | — | 1,700,000 | — | — | — | — | — | — | — | 970,000 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
Total | $ | 316,328 | $ | 316,328 | $ | 2,053,212 | $ | 622,250 | $ | 3,561,062 | $ | 316,328 | $ | 1,102,328 | $ | 2,802,328 | $ | — | $ | — | $ | 758,152 | $ | 575,125 | $ | 1,604,527 | $ | — | $ | 575,125 | $ | 1,545,125 | ||||||||||||||||||
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Luis Fernandez, Executive Vice President—Chief Omnichannel Officer
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination Without Good Reason | Involuntary Termination Without Cause or Resignation for Good Reason(1) | Change in Control Without Termination | Change in Control With Termination(2) | Retirement | Disability | Death | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance | — | — | $ | 400,000 | — | $ | 577,500 | (3) | — | — | — | ||||||||||||||
Value of Accelerated | |||||||||||||||||||||||||
Restricted Stock(4) | — | — | — | $ | 564,375 | 564,375 | — | $ | 564,375 | $ | 564,375 | ||||||||||||||
Continuing Health and | |||||||||||||||||||||||||
Welfare Benefits | — | — | 27,126 | — | — | — | — | — | |||||||||||||||||
Life Insurance | — | — | — | — | — | — | — | 800,000 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | — | $ | — | $ | 427,126 | $ | 564,375 | $ | 1,141,875 | $ | — | $ | 564,375 | $ | 1,364,375 | |||||||||
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Tim Grumbacher, Chairman of the accrued benefit.Board and Strategic Initiatives Officer
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination | Involuntary Termination Without Cause | Change in Control Without Termination | Change in Control With Termination | Retirement | Disability | Death | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Life Insurance | — | — | — | — | — | — | — | $ | 1,300,000 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,300,000 | |||||||||
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Stephen R. Byers—Keith E. Plowman, Executive Vice President, Stores, Visual and Loss PreventionPresident—Chief Financial Officer
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination Without Good Reason | Involuntary Termination Without Cause or Resignation for Good Reason(1) | Change in Control Without Termination | Change in Control with Termination(2) | Retirement | Disability | Death | For Cause Termination | Voluntary Termination | Involuntary Termination Without Cause | Change in Control Without Termination | Change in Control With Termination | Retirement | Disability | Death | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance | — | — | $ | 705,000 | — | $ | 1,237,253 | (3) | — | — | — | — | — | $ | 244,615 | (1) | — | $ | 244,615 | (1) | — | — | — | |||||||||||||||||||||||||||
Value of Accelerated Restricted Stock | — | — | — | $ | 275,100 | 275,100 | — | $ | 275,100 | $ | 275,100 | — | — | — | $ | 1,021,250 | (3) | 1,021,250 | (3) | — | $ | 1,021,250 | $ | 1,021,250 | ||||||||||||||||||||||||||
Continuing Health and Welfare Benefits | — | — | 27,986 | — | 27,986 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Life Insurance | — | — | — | — | — | — | — | 940,000 | — | — | — | — | — | — | — | 1,060,000 | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
Total | — | — | $ | 732,986 | $ | 275,100 | $ | 1,540,339 | — | $ | 275,100 | $ | 1,215,100 | $ | — | $ | — | $ | 244,615 | $ | 1,021,250 | $ | 1,265,865 | $ | — | $ | 1,021,250 | $ | 2,081,250 | |||||||||||||||||||||
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Tim Grumbacher—Strategic Initiatives Officer
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination | Involuntary Termination Without Cause | Change in Control Without Termination | Change in Control With Termination | Retirement | Disability | Death | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Life Insurance | — | — | — | — | — | — | — | $ | 923,000 | ||||||||||||||||
Total | — | — | — | — | — | — | — | $ | 923,000 | ||||||||||||||||
Keith E. Plowman—Executive Vice President, Chief Financial Officer and Principal Accounting Officer
Executive Benefits and Payments Upon Termination | For Cause Termination | Voluntary Termination | Involuntary Termination Without Cause | Change in Control Without Termination | Change in Control With Termination | Retirement | Disability | Death | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash Severance | — | — | $ | 220,673 | (1) | — | $ | 220,673 | (1) | — | — | — | |||||||||||||
Value of Accelerated Restricted Stock(3) | — | — | — | $ | 589,500 | (2) | 589,500 | (2) | — | $ | 589,500 | $ | 589,500 | ||||||||||||
Life Insurance | — | — | — | — | — | — | — | 1,010,000 | |||||||||||||||||
Total | — | — | $ | 220,673 | $ | 589,500 | $ | 810,173 | — | $ | 589,500 | $ | 1,599,500 | ||||||||||||
Equity Compensation Plan Information
At February 2, 2013,1, 2014, The Bon-Ton Stores, Inc. Amended and Restated 2009 Omnibus Incentive Plan and the Amended and Restated 2000 Stock Incentive and Performance-Based Award Plan were in effect. Each of these plans has been approved by the shareholders. There were no other equity compensation plans in effect. The following information concerning these plans is as of February 2, 2013:1, 2014:
| Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | Number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | ||||||||||||||||||||
Stock options | 694,230 | $ | 18.50 | — | (1) | 280,900 | $ | 18.36 | — | (1) | ||||||||||
Restricted shares | 1,684,500 | — | — | (1) | 1,577,500 | — | — | (1) | ||||||||||||
Restricted stock units | 362,274 | — | — | (1) | 347,888 | — | — | (1) | ||||||||||||
| | | | | | | | |||||||||||||
Subtotal | 2,741,004 | — | 2,510,042 | 2,206,288 | — | 2,016,773 | ||||||||||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||||||||
| | | | | | | | |||||||||||||
Total | 2,741,004 | — | 2,510,042 | 2,206,288 | — | 2,016,773 | ||||||||||||||
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers, directors and persons who own more than 10% of the Company's common stock are required to file reports of their holdings and transactions in Company stock with the SEC. To our knowledge, based solely on our review of copies of Section 16(a) forms furnished to us or upon written representations from these reporting persons that no other reports were required, all such filings in 20122013 were made in a timely manner.
The Company's Code of Ethical Standards and Business Conduct provides that no director or associate of the Company shall engage in any transactions with the Company unless approved by the Audit Committee. The Audit Committee Charter provides that the Audit Committee shall have the responsibility to review and approve all such related party transactions. All executive officers and directors are required to disclose any possible related party transaction in which such executive officer or director may participate and each such transaction must be approved by the Audit Committee.
The Company leases its Oil City, Pennsylvania store from the estate of Nancy T. Grumbacher, Trustee of the 2002 Indenture of Trust of M. Thomas Grumbacher, pursuant to a lease entered into on January 1, 1981. The Oil City lease terminates on July 31, 2021, and the Company has two five-year renewal options. The rental payments during 20122013 under this lease were $223,500. The aggregate amount of all payments due under the terms of the lease at the beginning of 20132014 through the
remainder of the current term, which includes a lease renewal determined to be reasonably assured, is
approximately $1,899,750.$1,676,250. The late Ms. Grumbacher was the wife of Tim Grumbacher, Chairman Emeritus of the Board and Strategic Initiatives Officer.
Michael L. Gleim, a non-employee Director,director, received a $50,000 supplemental retirement benefit during 20122013 from the Company which was paid pursuant to the terms of an employment agreement with Mr. Gleim with respect to his employment as Vice Chairman of the Company from 1995 to 2002.
Mr. Sherman is President of The Echo Design Group, Inc., which in 20122013 supplied certain products to the Company. Payments for purchases by the Company in 20122013 totaled $380,049.$336,047.
Shareholder proposals for the 20142015 Annual Meeting of Shareholders must be received by the Company by January 8, 20147, 2015 in order to be considered at the meeting and included in the Company's proxy statement and form of proxy relating to that meeting.
If notice of any proposal with respect to a matter to be addressed at the 20142015 Annual Meeting of Shareholders is received by the Company after March 18, 2014,17, 2015, the proposals with respect to such matter shall be deemed "untimely" for purposes of Rule 14a-4(c) under the Securities Exchange Act and, therefore, the Company will have the right to exercise discretionary voting authority with respect to such proposal.
HOUSEHOLDING OF PROXY MATERIALS
SEC regulations permit the Company to send a single set of proxy materials, which includes this proxy statement, the Annual Report to Shareholders and the Notice of Internet Availability of Proxy Materials, to two or more shareholders that share the same address. Each shareholder will continue to receive his or her own separate proxy card. Upon written or oral request, the Company will promptly deliver a separate set of proxy materials to a shareholder at a shared address that only received a single set of proxy materials for this year. If a shareholder would prefer to receive his or her own copy, please contact Mary Kerr, Vice President—Investor Relations, by telephone at (717) 757-7660, by U.S. mail at 2801 East Market Street, Building E, York, Pennsylvania 17402 or by e-mail at ir@bonton.com. Similarly, if a shareholder would like to receive his or her own set of the Company's proxy materials in future years or if a shareholder shares an address with another shareholder and both would like to receive only a single set of the Company's proxy materials in future years, please contact Ms. Kerr.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature (Joint Owners) Signature [PLEASE SIGN WITHIN BOX] Date Date To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. |
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