![](https://capedge.com/proxy/DEF 14A/0001206774-04-000445/gymboreelogo.jpg)
May 4, 2004
Dear Stockholder:
(1) | election of two directors; |
(2) | advisory vote on the appointment of Deloitte & Touche LLP as independent auditors; |
![](https://capedge.com/proxy/DEF 14A/0001206774-04-000445/lharpersig.jpg)
Chairman of the Board and Chief Executive Officer
![](https://capedge.com/proxy/DEF 14A/0001206774-04-000445/gymboreelogo.jpg)
THE GYMBOREE CORPORATION
700 Airport Blvd. Suite 200
Burlingame, California 94010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 16, 2004
TO THE STOCKHOLDERS OF THE GYMBOREE CORPORATION:
1. | To elect two Class II directors, each to serve for a three-year term expiring upon the 2007 Annual Meeting of Stockholders or until her successor is elected. |
2. | To cast an advisory vote on the appointment of Deloitte & Touche LLP as independent auditors of the Company for the fiscal year ending January 29, 2005. |
3. | To approve our 2004 Equity Incentive Plan, which will replace our 2002 Amended and Restated Stock Incentive Plan. |
4. | To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
![](https://capedge.com/proxy/DEF 14A/0001206774-04-000445/mylesmccormicksig.jpg)
Secretary
TABLE OF CONTENTS
Notice of Annual Meeting of Stockholders | ||||||
Information Concerning Solicitation and Voting | 1 | |||||
Proposal One: Election of Directors | 2 | |||||
Board Membership and Director Independence | 5 | |||||
Board Meetings and Board Committees | 5 | |||||
Director Compensation | 6 | |||||
Security Ownership of Certain Beneficial Owners and Directors and Management | 6 | |||||
Section 16(a) Beneficial Ownership Reporting Compliance | 8 | |||||
Compensation Committee Report on Executive Compensation | 8 | |||||
Performance Graph | 10 | |||||
Executive Compensation | 11 | |||||
Certain Relationships and Related Party Transactions | 13 | |||||
Audit Committee Report | 14 | |||||
Independent Auditor Fees and Services | 15 | |||||
Proposal Two: Advisory Vote on Appointment of Independent Auditors | 16 | |||||
Proposal Three: Approval of the 2004 Equity Incentive Plan | 17 | |||||
Equity Compensation Plan Information | 23 | |||||
Other Information | 24 | |||||
Appendix A: The Gymboree Corporation 2004 Equity Incentive Plan | A-1 | |||||
Appendix B: Definitions | B-1 |
THE GYMBOREE CORPORATION
2004 PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
Record Date and Quorum
Vote Required
1
Revocability of Proxies
Proxy Solicitation
PROPOSAL ONE:
ELECTION OF DIRECTORS
THE COMPANY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING
“FOR” EACH NOMINEE.
2
Nominees for Class II Directors Whose Terms Expire in 2007
Name | | Principal Occupation or Employment/Other Business Affiliations | | Age | | Director Since | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Lisa M. Harper | Chairman and Chief Executive Officer, The Gymboree Corporation. Ms. Harper has served as Chairman of our Board of Directors since June 2002 and Chief Executive Officer since February 2001. She was Vice Chair of the Board from February 2001 through June 2002. Ms. Harper joined Gymboree in January 1999 as Vice President, Design. From December 1999 until February 2000, she served as our Senior Vice President, Merchandising and Design. From February 2000 until September 2000, Ms. Harper served as our General Merchandise Manager. From September 2000 until February 2001, she served as our President. Prior to that, Ms. Harper served as our Director of Design and Merchandising from 1993 to 1995. Ms. Harper has also held merchandising and design positions with several other clothing retailers, including Limited Too, Esprit de Corp., GapKids, Mervyn’s and Levi Strauss. | 44 | 2000 | |||||||||||
Barbara L. Rambo | Chief Executive Officer, Nitech Corporation. Ms. Rambo has served as the Chief Executive Officer of Nitech Corporation, a marketing services and payment processing company, since November 2002. From January 2000 through March 2002, Ms. Rambo was a director of OpenClose Technologies, a web-based mortgage services company. Ms. Rambo served as Chairman of the Board of OpenClose Technologies from July 2001 until December 2001, and served as their President and Chief Executive Officer from January 2000 until June 2001. From 1974 through 1998, Ms. Rambo held various positions at Bank of America, most recently serving as Group Executive Vice President and head of National Commercial Banking. | 51 | 1996 |
Continuing Class III Directors Whose Terms Expire in 2005
Name | | Principal Occupation or Employment/Other Business Affiliations | | Age | | Director Since | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Stuart G. Moldaw | Chairman Emeritus and Management Advisor, The Gymboree Corporation. Mr. Moldaw has been Chairman Emeritus of Gymboree since June 2002 and has served as Management Advisor since February 2002. He served as the Chairman of the Board of Directors of Gymboree from January 1994 through June 2002. Mr. Moldaw previously served as our Chief Executive Officer from February 2000 to February 2001 and our Chairman of the Board of Directors from January 1990 through January 1993. From 1982 through 1993, Mr. Moldaw was Chairman of Ross Stores, Inc., an off-price retailer, and was Chief Executive Officer of Ross Stores from February 1987 through January 1988. Since 1993, Mr. Moldaw has been a director and Chairman Emeritus of Ross Stores. | 77 | 1982 |
3
Name | | Principal Occupation or Employment/Other Business Affiliations | | Age | | Director Since | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
John C. Pound | President, Integrity Brands, Inc. Mr. Pound has served as President and a director of Integrity Brands, Inc., a firm that invests in specialty retail and branded consumer products companies, since July 1999. From February 1998 to February 1999, Mr. Pound was Chairman and Chief Executive Officer of CML Group, Inc. and Chairman of its wholly-owned subsidiaries, Nordic Track and Smith & Hawken. From 1995 to 1997, Mr. Pound was a limited partner in The Trinity Fund I, L.P., an investment partnership, and an advisor to Thomas M. Taylor & Co., its general partner. From 1987 to 1997, Mr. Pound taught corporate finance and corporate governance at Harvard University. | 49 | 2000 | |||||||||||
William U. Westerfield | Retired Partner, Price Waterhouse LLP. Mr. Westerfield retired as an audit partner of Price Waterhouse LLP (now PricewaterhouseCoopers LLP) in 1992, a firm he joined in 1956, becoming a partner in 1965. Mr. Westerfield is a director and chair of the audit committee of West Marine, Inc., a boating supplies retailer, and is also a director of TL Administration Corporation (formerly named Twinlab Corporation where he also served as chair of the audit committee). In addition, Mr. Westerfield also serves as a consultant in auditing disputes. | 72 | 1994 |
Continuing Class I Directors Whose Terms Expire in 2006
Name | | Principal Occupation or Employment/Other Business Affiliations | | Age | | Director Since | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Blair W. Lambert | Retail Consultant. Mr. Lambert has been a vineyard owner and a private consultant for specialty retail companies since October 2001. In August 2003, Mr. Lambert joined Illuminations.com, Inc., a candle and home decorating solution manufacturer, as the Chief Financial Officer. He was named to the Illuminations.com, Inc. board of directors in October 2003. Illuminations.com, Inc. filed for bankruptcy protection on January 9, 2004. Mr. Lambert served as the Chief Financial Officer of Bebe Stores, Inc. from June 1996 through October 2001. From 1988 to 1996, Mr. Lambert was employed by Esprit de Corp., a wholesaler and retailer of junior and children’s apparel, footwear and accessories, most recently serving as Corporate Vice President of Finance. | 46 | 2003 | |||||||||||
Gary M. Heil | Business and Retail Consultant. Mr. Heil has been a private consultant for retailers and other service sector companies on topics primarily related to customer loyalty and leadership development since 1987. He is a member of the board of directors of FrontRange Solutions, a computer software company. In 2002, Mr. Heil co-founded the National Pitching Association, an organization dedicated to helping young pitchers make better choices in baseball and in life. In 1987, he co-founded the Center for Innovative Leadership, for which he currently consults and lectures on topics including leadership, customer loyalty, quality management and effective organizational change processes. Hr. Heil is the author of many business-related books, includingLeadership and the Customer Revolution, One Size Fits One andThe Leader’s New Clothes. | 53 | 2003 |
4
BOARD MEMBERSHIP AND DIRECTOR INDEPENDENCE
BOARD MEETINGS AND BOARD COMMITTEES
5
the Internal Revenue Code of 1986, as amended, and “non-employee” directors as defined in Rule 16b-3(b)(3)(i) under the Securities Exchange Act of 1934, as amended. The Compensation Committee is responsible for reviewing and approving our compensation policies, including the compensation paid to executive officers. The Compensation Committee held four meetings during the last fiscal year.
DIRECTOR COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND DIRECTORS AND MANAGEMENT
More than 5% Beneficial Stockholders
Name and Address | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Franklin Resources, Inc. (1) | 4,083,400 | 13.4 | % | |||||||
One Franklin Parkway San Mateo, CA 94403 | ||||||||||
Barclays Global Investors, N.A. (2) | 2,500,250 | 8.2 | % | |||||||
45 Fremont Street San Francisco, CA 94105 | ||||||||||
Waddell & Reed Financial, Inc. (3) | 2,388,450 | 7.8 | % | |||||||
6300 Lamar Ave. Overland Park, KS 66202 | ||||||||||
Wells Fargo & Co. (4) | 1,825,355 | 6.0 | % | |||||||
420 Montgomery Street San Francisco, CA 94104 |
6
Directors and Nominees
Name | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Gary M. Heil | 0 | * | ||||||||
Blair W. Lambert | 0 | * | ||||||||
Stuart G. Moldaw (5) | 175,000 | * | ||||||||
John C. Pound (6) | 79,976 | * | ||||||||
Barbara L. Rambo (7) | 19,010 | * | ||||||||
William U. Westerfield (8) | 17,043 | * |
Named Executive Officers
Name | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Lisa M. Harper (9) | 654,930 | 2.1 | % | |||||||
Marina Armstrong (10) | 77,403 | * | ||||||||
Donald H. Hendricks (11) | 20,958 | * | ||||||||
Myles B. McCormick (12) | 91,815 | * | ||||||||
Deborah J. Nash (13) | 74,994 | * | ||||||||
Matthew K. McCauley (14) | 33,105 | * | ||||||||
All directors, director-nominees and executive officers as a group (12 persons) (15) | 1,479,324 | 4.8 | % |
* | Less than 1%. |
(1) | This information is derived from this stockholder’s Schedule 13G filed with the SEC on February 6, 2004. Franklin Resources, Inc. (“Franklin”) filed the Schedule 13G together with apparently affiliated persons and reported that, as of December 31, 2003, Franklin and the affiliated persons had sole voting and sole dispositive power over all shares. |
(2) | This information is derived from this stockholder’s Schedule 13G filed with the SEC on February 17, 2004. Barclays Global Investors, N.A. (“Barclays”) filed the Schedule 13G together with apparently affiliated companies and reported that, as of December 31, 2003, Barclays and the affiliated companies had sole voting and sole dispositive power over 2,326,796 shares. |
(3) | This information is derived from this stockholder’s Schedule 13G filed with the SEC on January 30, 2004. Waddell & Reed Financial, Inc. (“Waddell & Reed”) filed the Schedule 13G together with apparently affiliated companies and reported that, as of December 31, 2003, Waddell & Reed and the affiliated companies had sole voting and sole dispositive power over all shares. |
(4) | This information is derived from this stockholder’s Schedule 13G filed with the SEC on February 10, 2004. Wells Fargo & Co. reported that, as of December 31, 2003, it had sole voting power over 1,375,280 shares, sole dispositive power over 1,825,255 shares and shared dispositive power over 100 shares. |
(5) | Includes 175,000 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(6) | Includes 4,219 shares underlying options that are exercisable within 60 days of April 12, 2004. Also includes 75,757 shares held by Nettlestone, Ltd., a corporation for which Mr. Pound acts as an advisor by virtue of being the controlling stockholder of Integrity Partners, Inc. |
(7) | Includes 18,010 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(8) | Includes 17,043 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(9) | Includes 654,930 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(10) | Includes 73,325 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(11) | Includes 20,958 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(12) | Includes 89,625 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(13) | Includes 71,075 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(14) | Includes 33,105 shares underlying options that are exercisable within 60 days of April 12, 2004. |
(15) | Includes 1,157,290 shares underlying options that are exercisable within 60 days of April 12, 2004. |
7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
Compensation Structure
• | Base Salary |
• | Annual Bonus |
• | Performance-Based Cash Awards |
• | Stock Incentives |
Base Salary
Annual Bonus
8
Performance-Based Cash Incentive Awards
Stock Incentives
Compensation of the Chief Executive Officer
Tax Deductibility of Compensation
THE COMPENSATION COMMITTEE
Gary M. Heil,Chairman
John C. Pound
9
PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG GYMBOREE CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
![](https://capedge.com/proxy/DEF 14A/0001206774-04-000445/d14620line.jpg)
Cumulative Total Return | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1/30/99 | 1/29/00 | 2/3/01 | 2/2/02 | 2/1/03 | 1/31/04 | ||||||||||||||||||||||
Gymboree Corporation | 100.00 | 59.53 | 190.48 | 181.08 | 181.08 | 185.65 | |||||||||||||||||||||
Nasdaq Stock Market (U.S.) | 100.00 | 162.51 | 123.53 | 57.58 | 54.23 | 79.12 | |||||||||||||||||||||
Peer Group | 100.00 | 86.46 | 97.00 | 80.62 | 69.77 | 101.44 |
10
EXECUTIVE COMPENSATION
Summary Compensation Table
Long-Term Compensation Awards | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Annual Compensation | |||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Securities Underlying Options (#)(1) | All Other Compensation ($) | ||||||||||||||||||
Lisa M. Harper (2) | 2003 | 645,000 | 0 | 200,000 | 540 | ||||||||||||||||||
Chairman of the Board and | 2002 | 565,769 | 578,593 | 100,000 | 540 | ||||||||||||||||||
Chief Executive Officer | 2001 | 447,115 | 146,250 | 300,000 | 750 | ||||||||||||||||||
Marina Armstrong (3) | 2003 | 247,708 | 0 | 30,000 | 1,006 | ||||||||||||||||||
Vice President, Human Resources | 2002 | 220,289 | 147,452 | 50,000 | 1,055 | ||||||||||||||||||
and Assistant Secretary | 2001 | 186,635 | 23,750 | 31,252 | 798 | ||||||||||||||||||
Donald H. Hendricks (4) | 2003 | 223,654 | 0 | 30,000 | 916 | ||||||||||||||||||
Vice President, | 2002 | 198,077 | 145,982 | 20,000 | 897 | ||||||||||||||||||
Operations & Technology | 2001 | 173,654 | 21,875 | 20,000 | 951 | ||||||||||||||||||
Myles B. McCormick (5) | 2003 | 255,769 | 0 | 30,000 | 417 | ||||||||||||||||||
Chief Financial Officer, Vice | 2002 | 198,846 | 138,524 | 130,000 | 317 | ||||||||||||||||||
President, Finance and Secretary | 2001 | 106,730 | 33,750 | 40,000 | 138 | ||||||||||||||||||
Deborah J. Nash (6) | 2003 | 250,000 | 0 | 20,000 | 1,036 | ||||||||||||||||||
General Merchandise Manager | 2002 | 206,288 | 110,345 | 20,000 | 905 | ||||||||||||||||||
and Vice President | 2001 | 194,327 | 24,375 | 20,886 | 869 | ||||||||||||||||||
Matthew K. McCauley (7) | 2003 | 217,519 | 0 | 25,000 | 46,898 | ||||||||||||||||||
Vice President, Planning | 2002 | 142,442 | 48,960 | 50,000 | 25,481 | ||||||||||||||||||
and Allocation | 2001 | 62,500 | 12,500 | 6,000 | 570 |
(1) | Please refer to “Option Grants in Fiscal Year 2003” table below. |
(2) | Ms. Harper’s fiscal year 2002 bonus amount includes $60,000 to be paid at a future date. “All Other Compensation” with respect to Ms. Harper represents life insurance premiums paid by the Company for the benefit of the insured. |
(3) | “All Other Compensation” with respect to Ms. Armstrong represents $506 for life insurance premiums paid by the Company for the benefit of the insured and $500 for Company contributions to 401(k) plans of the Company. |
(4) | Mr. Hendricks ceased to be an executive officer in September 2003. “All Other Compensation” with respect to Mr. Hendricks represents $416 for insurance premiums paid by the Company for the benefit of the insured and $500 for Company contributions to 401(k) plans of the Company. |
(5) | “All Other Compensation” with respect to Mr. McCormick represents life insurance premiums paid by the Company for the benefit of the insured. |
(6) | “All Other Compensation” with respect to Ms. Nash represents $536 for life insurance premiums paid by the Company for the benefit of the insured and $500 for Company contributions to 401(k) plans of the Company. |
(7) | “All Other Compensation” in 2003 with respect to Mr. McCauley represents $46,584 for housing and moving expenses paid by the Company and $314 for life insurance premiums paid by the Company for the benefit of the insured. “All Other Compensation” in 2002 represents housing closing costs paid by the Company. |
11
Option Grants in Fiscal Year 2003
Individual Grants | Potential Realizable Value at Assumed Annual Rate of Stock Price Appreciation for Option Term ($)(3) | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Options Granted (#)(1) | Percent of Total Options Granted to Employees in Fiscal Year (%)(2) | Exercise or Base Price ($/Share) | Expiration Date | 5% | 10% | |||||||||||||||||||||
Lisa M. Harper | 50,000 | 3.53 | 15.76 | 9/18/2013 | 495,569 | 1,255,869 | |||||||||||||||||||||
150,000 | 10.58 | 15.76 | 9/18/2013 | 1,486,707 | 3,767,607 | ||||||||||||||||||||||
Marina Armstrong | 30,000 | 2.12 | 15.76 | 9/18/2013 | 297,341 | 753,521 | |||||||||||||||||||||
Donald H. Hendricks | 30,000 | 2.12 | 15.76 | 9/18/2013 | 297,341 | 753,521 | |||||||||||||||||||||
Myles B. McCormick | 30,000 | 2.12 | 15.76 | 9/18/2013 | 297,341 | 753,521 | |||||||||||||||||||||
Deborah J. Nash | 20,000 | 1.41 | 15.76 | 9/18/2013 | 198,228 | 502,348 | |||||||||||||||||||||
Matthew K. McCauley | 25,000 | 1.76 | 15.76 | 9/18/2013 | 247,784 | 627,935 |
(1) | The options granted to the Named Executive Officers during fiscal year 2003 have ten-year terms and will vest and become exercisable over a four-year period, with the exception of 150,000 of Ms. Harper’s options, which will vest in full on January 30, 2005. Option grants made on initial hiring typically vest 25% on the first anniversary and 1/48th per month thereafter. Grants to existing employees typically vest at a rate of 1/48th per month from the date of grant. In the event of a “Change of Control” as defined in our 2002 Amended and Restated Stock Incentive Plan and our 1993 Stock Option Plan, as amended, the options will vest 100% and will be settled for cash upon the occurrence of the Change of Control, according to a formula set forth under the 2002 Amended and Restated Stock Incentive Plan (the “2002 Plan”) and the 1993 Plan. |
(2) | Based on an aggregate of 1,417,200 options granted to employees of Gymboree under our 2002 Amended and Restated Stock Incentive Plan during the fiscal year ended January 31, 2004. |
(3) | In accordance with the rules of the SEC, the potential realizable value over the term of the option (the period from the grant date to the expiration date) is based on SEC-mandated assumed rates of stock appreciation from the option exercise price of 5% and 10%, compounded annually. These amounts are based on certain assumed rates of appreciation and do not represent our estimates of our future stock price. Actual gains, if any, on stock option exercises will be dependent on the future performance of our common stock. |
Aggregate Option Exercises in Fiscal Year 2003 and Year-End Option Values
Number of Securities Underlying Unexercised Options at January 31, 2004 | Value of Unexercised In-the-Money Options at January 31, 2004 (1) | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Shares Acquired on Exercise (#) | Value Realized ($) | Exercisable (#) | Unexercisable (#) | Exercisable ($) | Unexercisable ($) | |||||||||||||||||||||
Lisa M. Harper | 40,000 | 551,038 | 603,056 | 393,749 | 4,048,644 | 989,480 | |||||||||||||||||||||
Marina Armstrong | 26,984 | 267,758 | 58,075 | 78,125 | 205,312 | 155,833 | |||||||||||||||||||||
Donald H. Hendricks | 15,777 | 162,320 | 11,750 | 56,500 | 19,516 | 121,327 | |||||||||||||||||||||
Myles B. McCormick | 0 | 0 | 70,625 | 118,542 | 135,065 | 142,559 | |||||||||||||||||||||
Deborah J. Nash | 16,666 | 235,638 | 62,325 | 46,667 | 337,891 | 123,536 | |||||||||||||||||||||
Matthew K. McCauley | 0 | 0 | 23,334 | 57,666 | 30,011 | 20,839 |
(1) | Value is based on the $14.62 per share closing price of our common stock on the Nasdaq Stock Market on January 30, 2004, the last trading day of fiscal year 2003, less the exercise price. The last day of our fiscal year was Saturday, January 31, 2004. |
12
Employment Contracts and Termination of Employment and Change-of-Control Arrangements
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
13
to be a full-time employee or consultant of Gymboree prior to the date the note is fully repaid, the remaining balance of the principal sum will be immediately due and payable.
AUDIT COMMITTEE REPORT
1. | The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2003 with the Company’s management. |
2. | The Audit Committee has discussed with Deloitte & Touche, LLP, Gymboree’s independent auditors during the fiscal year 2003, the matters required to be discussed by the Statement on Auditing Standards No. 61,Communication with Audit Committees. |
3. | The Audit Committee has received the written disclosures and the letter from its independent accountants required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees, and has discussed with its independent accountants, the independent accountants’ independence. |
4. | Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in Gymboree’s Annual Report on Form 10-K for the year ended January 31, 2004 for filing with the Securities and Exchange Commission. |
Barbara L. Rambo
Blair W. Lambert
14
INDEPENDENT AUDITOR FEES AND SERVICES
Fiscal 2003 | Fiscal 2002 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Audit Fees (1) | $ | 376,000 | $ | 400,720 | ||||||
Audit-Related Fees (2) | $ | 101,141 | $ | 49,082 | ||||||
Tax Fees (3) | $ | 356,622 | $ | 289,670 | ||||||
All Other Fees (4) | $ | 47,208 | $ | 52,152 |
(1) | Audit Fees consist of fees billed for professional services rendered for the audit of Gymboree’s consolidated annual financial statements, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Gymboree’s independent auditors in connection with statutory and regulatory filings or engagements. |
(2) | Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Gymboree’s consolidated financial statements and are not reported under “Audit Fees.” In fiscal year 2002, these fees included fees for the audit of Gymboree’s 401(k) plan, fees for financial system conversion testing and various consultations. In fiscal year 2003, these fees included fees for merchandising system conversion testing, Sarbanes-Oxley readiness services, the audit of Gymboree’s 401(k) plan and various consultations. |
(3) | Tax Fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning. In fiscal year 2002, these fees included $158,828 for tax consultation and $130,842 for tax preparation. In fiscal year 2003, these fees included $159,629 for tax consultation and $196,993 for tax preparation. |
(4) | All Other Fees consist of fees for products and services other than the services reported above. In fiscal year 2002 and 2003, these included fees related to the purchase of tax software products. |
15
PROPOSAL TWO:
ADVISORY VOTE ON APPOINTMENT OF INDEPENDENT AUDITORS
THE COMPANY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 29, 2005
16
PROPOSAL THREE:
APPROVAL OF THE 2004 EQUITY INCENTIVE PLAN
Description of the 2004 Equity Incentive Plan
Purpose
Administration
Eligibility
Types of Awards
17
Shares Subject to the 2004 Plan
18
the 2002 Plan or the 1993 Plan that are not exercised or settled in shares will become available for grant under the 2004 Plan. Shares of common stock covered by an award granted under the 2004 Plan will not be counted as used unless and until they are actually issued and delivered to a participant. Shares relating to awards granted under the 2004 Plan that are forfeited, settled for cash or otherwise terminated and shares withheld by or tendered in connection with the exercise of an option or other award granted under the 2004 Plan or in connection with the satisfaction of tax withholding obligations relating to awards or exercises of options or other awards are available for grant under the 2004 Plan. Awards made or adjusted to assume or convert awards in connection with acquisition transactions will not reduce the number of shares authorized for issuance under the 2004 Plan. The shares of stock deliverable under the 2004 Plan will consist of authorized and unissued shares. The Compensation Committee may adjust the aggregate number of shares or the awards under the plan in the event of a change affecting shares of common stock, such as stock dividends, recapitalization, reorganization or mergers.
Nonassignability of Awards
Term, Termination and Amendment
Performance-Based Compensation under Section 162(m)
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any or all of the following or any combination: cash flows (including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); working capital; earnings per share; book value per share; operating income (including or excluding depreciation, amortization, extraordinary items, restructuring charges or other expenses); revenues; operating margins; return on assets; inventory turns; return on equity; debt; debt plus equity; market or economic value added; stock price appreciation; total stockholder return; cost control; strategic initiatives; store openings; growth and development of new concepts; market share; net income (including or excluding extraordinary items, restructuring charges or other expenses); return on invested capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, cash management or asset management metrics; any individual performance objective measured solely in terms of quantitative targets related to the Company, or its business; or any increase or decrease of one or more of the foregoing over a specified period. Performance goals may be stated in absolute terms or relative to comparison companies or indices to be achieved during a period of time. Performance goals may relate to the performance of the Company, any subsidiary, any portion of the business, product line or any combination, relative to a market index, a group of companies (or their subsidiaries, business units or product lines), or a combination, all as determined by the Compensation Committee. The Compensation Committee shall have absolute discretion to reduce the amount of the award payable to any participant for any period below the maximum award determined based on the attainment of performance goals. The Compensation Committee may decide not to pay any such award to a participant for a period, based on such criteria, factors and measures as the Compensation Committee in its sole discretion may determine, including but not limited to individual performance and the financial and other performance of the Company, a subsidiary or other business unit.
Company Transaction and Change in Control
• | An acquisition of beneficial ownership of 50% or more of either (a) the then outstanding shares of common stock of the Company or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (excluding any acquisition directly from the Company, any acquisition by the Company, any acquisition by any employee benefit plan of the Company, or a related party transaction). |
• | A change in the composition of our Board of Directors during any two-year period such that the incumbent board members cease to constitute at least a majority (not including directors whose election was approved by more than half of the incumbent board). |
• | Any options and stock appreciation rights shall become fully exercisable and vested to the full extent of the original grant. |
• | Any restrictions and deferral limitations applicable to any restricted stock or stock units shall lapse. |
• | All performance shares and performance units shall be considered to be earned and payable in full at target levels, and any deferral or other restriction shall lapse and such performance stock and performance units shall be immediately settled or distributed. |
• | Any restrictions and deferral limitations and other conditions applicable to any other awards shall lapse, and such other awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. |
• | The Compensation Committee can provide a cash-out right for awards in connection with a change in control. |
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• | a merger or consolidation of us with or into any other company or other entity; |
• | a sale in one transaction or a series of transactions undertaken with a common purpose of at least 50% of our outstanding voting securities; or |
• | a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of our assets. |
• | the beneficial ownership of us or the resulting company remains the same with respect to at least 50% of the voting power of the outstanding voting securities in substantially the same proportions as immediately prior to such company transaction; |
• | no entity (other than the Company or an affiliate) will beneficially own 50% or more of the outstanding shares of common stock of the resulting company or the voting power of the outstanding voting securities; and |
• | our incumbent board will after the company transaction constitute at least a majority of the board of the company resulting from such company transaction. |
• | All outstanding awards (other than performance awards) become fully and immediately exercisable, and any restrictions or forfeiture provisions lapse, immediately prior to the company transaction, unless such awards are converted, assumed, or replaced by the successor company. |
• | Performance awards earned and outstanding become payable in full at target levels and deferrals or other restrictions not waived by the Compensation Committee shall remain in effect. |
U.S. Federal Income Tax Consequences
Stock Options
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received over the option exercise price (or, if less, the excess of the amount realized on the sale of the shares over the option exercise price). Additionally, the participant will have long-term or short-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received upon disposition of the shares and the option exercise price increased by the amount of ordinary income, if any, the participant recognized.
Stock Appreciation Rights
Restricted Stock Awards
Performance Awards and Other Stock Unit Awards
Tax Consequences to Gymboree
Tax Withholding
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Other Information
THE COMPANY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE APPROVAL OF THE GYMBOREE CORPORATION 2004 EQUITY
INCENTIVE PLAN
EQUITY COMPENSATION PLAN INFORMATION
Plan Category | Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Shares Remaining Available for Issuance Under Equity Compensation Plans | |||||||||||
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Equity Compensation Plans Approved by Stockholders | 4,906,141 | (1) | $ | 13.15 | 718,790 | (2) | ||||||||
Equity Compensation Plans Not Approved by Stockholders | 0 | 0 | 0 | |||||||||||
Total (3) | 4,906,141 | $ | 13.15 | 718,790 |
(1) | Of these shares, options to purchase 2,556,948 shares of common stock were outstanding under our 1993 Stock Option Plan, and options to purchase 2,349,193 shares of common stock were outstanding under our 2002 Amended and Restated Stock Incentive Plan. |
(2) | Consists of 718,790 shares of common stock remaining available for issuance under our 2002 Stock Incentive Plan, which includes cancellations from our 1993 Stock Option Plan. |
(3) | Our outside directors receive automatic option grants pursuant to the terms of the 2002 Stock Incentive Plan as follows: (1) an initial grant to purchase 2,500 shares of common stock as of the date of the director’s initial election to the Board and (2) an annual grant to purchase 2,500 shares of our common stock on the annual anniversary of the date of the director’s initial election. In addition, each outside director appointed by the board to chair a committee receives an additional grant to purchase 500 shares of common stock on the date of board approval of that appointment. The initial stock options granted under this program will vest and become exercisable with respect to -1/4 of the shares on the first anniversary of the grant date and an additional 1/48 of the shares will vest and become exercisable each month thereafter (assuming continued Board service). The options granted annually will vest and become exercisable with respect to 1/48 of the shares each month after the date of grant (assuming continued Board service). The options granted for appointment as a committee chair will vest and become exercisable with respect to 1/48 of the shares each month after the date of grant unless the date of grant occurs before the first anniversary of the director’s initial election to the board. In this case no shares shall vest prior to the first anniversary of the director’s initial election to the board, but on that date the option will vest with respect to the portion that would have otherwise been vested and will continue to vest monthly. The Compensation Committee has approved, subject to stockholder approval of our 2004 Equity Incentive Plan, an increase in the award to 15,000 shares on initial election and on each anniversary thereafter. The option grants vest on the first anniversary of the grant date. |
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OTHER INFORMATION
Other Matters of Business
Annual Report
Householding Information
Deadline for Receipt of Stockholder Proposals for 2005 Annual Meeting
Company Consideration of Stockholder-Recommended Director Nominees
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Stockholder Communications with the Board of Directors
![](https://capedge.com/proxy/DEF 14A/0001206774-04-000445/mylesmccormicksig.jpg)
Secretary
Dated: May 4, 2004
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APPENDIX A
THE GYMBOREE CORPORATION
2004 EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE
SECTION 2. DEFINITIONS
SECTION 3. ADMINISTRATION
3.1 Administration of the Plan
3.2 Administration and Interpretation by Committee
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SECTION 4. SHARES SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
4.2 Share Usage
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Compensation Committee, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to holders of common stock of the entities that are parties to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of such preexisting plans, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Company prior to such acquisition or combination. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Committee without any further action by the Committee, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants.
4.3 Limitations
SECTION 5. ELIGIBILITY
SECTION 6. AWARDS
6.1 Form, Grant and Settlement of Awards
6.2 Evidence of Awards
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6.3 Deferrals
6.4 Dividends and Distributions
SECTION 7. OPTIONS
7.1 Grant of Options
7.2 Option Exercise Price
7.3 Term of Options
7.4 Exercise of Options
Period of Participant’s Continuous Employment or Service With the Company or Its Related Companies From the Vesting Commencement Date | Portion of Total Option That Is Vested and Exercisable | |||||
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After 1 year | 1/4th | |||||
Each additional one-month period of continuous service completed thereafter | An additional 1/48th | |||||
After 4 years | 100% |
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the Committee, accompanied by payment in full as described in Sections 7.5 and 13. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Committee.
7.5 Payment of Exercise Price
7.6 Effect of Termination of Service
(i) | if the Participant’s Termination of Service occurs for reasons other than Cause, Disability or death, the date that is three months after such Termination of Service; |
(ii) | if the Participant’s Termination of Service occurs by reason of Disability or death, the one-year anniversary of such Termination of Service; and |
(iii) | the last day of the maximum term of the Option (the“Option Expiration Date”). |
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constitute termination for Cause are discovered after a Participant’s Termination of Service, any Option then held by the Participant may be immediately terminated by the Committee, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
8.1 Dollar Limitation
8.2 Eligible Employees
8.3 Exercise Price
8.4 Option Term
8.5 Exercisability
8.6 Taxation of Incentive Stock Options
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8.7 Code Definitions
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights
9.2 Payment of SAR Amount
SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS
10.1 Grant of Stock Awards, Restricted Stock and Stock Units
10.2 Vesting of Restricted Stock and Stock Units
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10.3 Waiver of Restrictions
SECTION 11. PERFORMANCE AWARDS
11.1 Performance Shares
11.2 Performance Units
SECTION 12. OTHER STOCK OR CASH-BASED AWARDS
SECTION 13. WITHHOLDING
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SECTION 14. ASSIGNABILITY
SECTION 15. ADJUSTMENTS
15.1 Adjustment of Shares
15.2 Dissolution or Liquidation
15.3 Company Transaction; Change in Control
15.3.1 Effect of a Company Transaction That Is Not a Change in Control or a Related Party Transaction
(i) | All outstanding Awards, other than Performance Shares and Performance Units, shall become fully and immediately exercisable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, immediately prior to the Company Transaction and shall terminate effective at the effective time of the Company Transaction, unless such Awards are converted, assumed or replaced by the Successor Company. Notwithstanding the foregoing, with respect to Options or Stock Appreciation Rights, the Committee, in its sole discretion, may instead provide that a |
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Participant’s outstanding Options shall terminate upon consummation of such Company Transaction and that each such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options or SARs (whether or not then exercisable) exceeds (y) the respective aggregate exercise price for such Options or grant price for such SARs. |
(ii) | All Performance Shares or Performance Units earned and outstanding as of the date the Company Transaction is determined to have occurred shall be payable in full at the target level in accordance with the payout schedule pursuant to the Award agreement. Any remaining Performance Shares or Performance Units (including any applicable performance period) for which the payout level has not been determined shall be prorated at the target payout level up to and including the date of such Company Transaction and shall be payable in full at the target level in accordance with the payout schedule pursuant to the Award agreement. Any existing deferrals or other restrictions not waived by the Committee in its sole discretion shall remain in effect. |
15.3.2 Effect of a Change in Control
15.3.3 Change in Control Cash-Out
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to elect by giving notice to the Company within the Change in Control Exercise Period to surrender all or part of the Award to the Company and to receive cash, within 30 days of such notice:
15.4 Further Adjustment of Awards
15.5 No Limitations
15.6 Fractional Shares
SECTION 16. CODE SECTION 162(M) PROVISIONS
16.1 Performance Criteria
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capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, cash management or asset management metrics (together, the“Performance Criteria”). Such performance goals also may be based on the achievement of specified levels of Company performance (or performance of an applicable affiliate, division or business unit of the Company) under one or more of the Performance Criteria described above relative to the performance of other corporations. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder.
16.2 Adjustment of Awards
16.3 Limitations
SECTION 17. AMENDMENT AND TERMINATION
17.1 Amendment, Suspension or Termination
17.2 Term of the Plan
17.3 Consent of Participant
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SECTION 18. GENERAL
18.1 No Individual Rights
18.2 Issuance of Shares
18.3 Indemnification
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18.4 No Rights as a Stockholder
18.5 Compliance With Laws and Regulations
18.6 Participants in Other Countries or Jurisdictions
18.7 No Trust or Fund
18.8 Successors
18.9 Severability
18.10 Choice of Law
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18.11 Legal Requirements
SECTION 19. EFFECTIVE DATE
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APPENDIX B
DEFINITIONS
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relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Compensation Committee determines otherwise, a Termination of Service shall be deemed to occur if the Participant’s employment or service relationship is with an entity that has ceased to be a Related Company.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | GYMBR1 | KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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| The Board of Directors recommends a vote FOR the matters listed below. This Proxy, when properly executed, will be voted as specified below. If no specification is made, this Proxy will be voted FOR Proposals 1, 2 and 3. |
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| Please execute this Proxy whether or not you plan to attend in person, and return the Proxy promptly so that your stock will be represented in all events and so that we may have a quorum. Please sign your name exactly as it appears hereon. If acting as attorney, executor, guardian, or trustee, please give title as such. Joint owners should each sign. An authorized person should sign on behalf of corporations, partnerships, associations, etc. and give his or her title. |
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THE GYMBOREE CORPORATION |
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ANNUAL MEETING OF STOCKHOLDERS, JUNE 16, 2004 |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF |
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P | The undersigned revokes all previous proxies, acknowledges receipt of the notice of the Annual Meeting of Stockholders to be held June 16, 2004 and the Proxy Statement related thereto, and appoints Lisa M. Harper and Myles B. McCormick, and each of them (with full power to act alone), the proxy of the undersigned, with full power of substitution, to vote all shares of Common Stock of The Gymboree Corporation which the undersigned is entitled to vote, either on his or her own behalf or on behalf of an entity or entities, at the Annual Meeting of Stockholders of the Company to be held at the Embassy Suites Hotel located at 150 Anza Boulevard, Burlingame, California 94010 on Wednesday, June 16, 2004 at 9:00 a.m., or at any adjournments, continuations or postponements thereof, with the same force and effect as if the undersigned were personally present and voting. The proxies are authorized to vote upon the proposals on the reverse side and, in their discretion, upon all other matters that may properly come before the Annual Meeting of Stockholders. |
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The Board of Directors unanimously recommends a vote FOR the matters described on the reverse side. If no directions are given, the shares represented by this Proxy will be voted FOR Proposals 1, 2, and 3, and in accordance with the discretion of other persons named as proxies herein on any other matters that may properly come before the Annual Meeting of Stockholders. |
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