SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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The Gymboree Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) filing Proxy Statement, if other than Registrant)
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statement number, or the Form or Schedule and the date of its filing.
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[Gymboree Logo]
May 10, 2002
Dear Stockholder:
You are cordially invited to attend The Gymboree Corporation Annual
Meeting of Stockholders to be held at 9:00 a.m. on Tuesday, June 25, 2002, at
Gymboree's principal executive offices located at 700 Airport Boulevard, Suite
200, Burlingame, California 94010.
At the meeting, we will vote on the election of three directors, the
adoption of a new stock incentive plan, the adoption of an amendment to
increase the number of shares available for issuance under our 1993 Employee
Stock Purchase Plan, and the ratification of the appointment of our auditors.
We will also answer any related questions you may have at that time. Detailed
information as to the business to be transacted at the meeting is contained in
the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that
your shares be voted. Accordingly, we ask that you sign and return your proxy
card as soon as possible in the envelope provided.
Sincerely,
/s/ Stuart G. Moldaw
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Stuart G. Moldaw
Chairman of the Board
[Gymboree Logo]
THE GYMBOREE CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 25, 2002
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TO THE STOCKHOLDERS OF THE GYMBOREE CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
Gymboree Corporation, a Delaware corporation (the "Company"), will be held on
Tuesday, June 25, 2002, at 9:00 a.m., local time, at Gymboree's principal
executive offices located at 700 Airport Boulevard, Suite 200, Burlingame,
California 94010. The meeting will be held for the following purposes:
1. To elect three Class III directors, each to serve for a three-year
term expiring upon the 2005 Annual Meeting of Stockholders or until
his or her successor is elected.
2. To approve the adoption of the Company's 2002 Stock Incentive Plan.
3. To approve an amendment to the Company's 1993 Employee Stock Purchase
Plan reserving an additional 300,000 shares of common stock to be
available for purchase under the plan.
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending February 1, 2003.
5. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on May 3, 2002 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
For the Board of Directors
/s/ Myles McCormick
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Myles McCormick
Secretary
Burlingame, California
May 10, 2002
IMPORTANT: Whether or not you plan to attend the meeting, you are requested to
complete and promptly return the enclosed proxy in the envelope provided.
THE GYMBOREE CORPORATION
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of The
Gymboree Corporation (the "Company," "Gymboree," "us" or "we") for use at the
Annual Meeting of Stockholders to be held June 25, 2002 at 9:00 a.m., local
time, or at any adjournment or postponement thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at our principal executive offices located at 700
Airport Boulevard, Suite 200, Burlingame, California 94010.
These proxy solicitation materials and our Annual Report to Stockholders
for the fiscal year ended February 2, 2002, including financial statements,
were mailed on or about May 10, 2002 to all stockholders entitled to vote at
the meeting.
Record Date, Quorum and Voting of Securities
Stockholders of record at the close of business on May 3, 2002 (the
"record date") are entitled to notice of and to vote their shares at the
meeting. At the record date, 28,866,803 shares of our common stock, $0.001 par
value per share, were issued and outstanding. The common stock is listed for
trading on the Nasdaq National Market under the symbol GYMB. Each stockholder
is entitled to one vote for each share of common stock on all matters presented
at the Annual Meeting.
A plurality of the shares of common stock present in person or represented
by proxy at the meeting is required for the election of directors. Stockholders
do not have the right to cumulate votes in electing directors. The affirmative
vote of a majority of the shares of common stock present in person or
represented by proxy at the meeting is required for the adoption of our 2002
Stock Incentive Plan and for approval of the amendment to our 1993 Employee
Stock Purchase Plan. The presence in person or by proxy of the holders of
record of a majority of the outstanding shares of common stock entitled to vote
is required to constitute a quorum for the transaction of business at the
meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the inspectors of election appointed for the Annual Meeting. The inspectors
of election will determine whether or not a quorum is present at the Annual
Meeting. The inspectors of election will treat abstentions as shares of common
stock that are present and entitled to vote for purposes of determining the
presence of a quorum. Under certain circumstances, a broker or other nominee
may have discretionary authority to vote certain shares of common stock if
instructions have not been received from the beneficial owner or other person
entitled to vote. If a broker or other nominee indicates on the proxy that it
does not have instructions or discretionary authority to vote certain shares of
common stock on a particular matter, those shares will not be considered as
present for purposes of determining whether a quorum is present or whether a
matter has been approved.
Broker nonvotes and abstentions will have no effect on the election of
directors, but will have the effect of a vote "against" the adoption of the
2002 Stock Incentive Plan and the amendment to the 1993 Employee Stock Purchase
Plan. There will be no broker nonvotes on any of the issues to be presented to
the stockholders at the Annual Meeting because brokers have discretion to vote
on all proposals in this Proxy Statement.
Proxy Solicitation
The expense of preparing, printing and mailing this Proxy Statement and
the proxies solicited hereby will be borne by us. Proxies will be solicited by
mail and may also be solicited by our directors, officers
and other employees, without additional remuneration, in person or by telephone
or facsimile transmission. We will also request brokerage firms, banks,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares of common stock as of the record date and will
reimburse such persons for the cost of forwarding the proxy materials in
accordance with customary practice. We have retained Georgeson Shareholder
Communications, Inc. to aid in the solicitation of proxies. We estimate that
the fees to be paid to Georgeson Shareholder Communications, Inc. for their
role as proxy solicitors will be approximately $12,500 plus expenses. Your
cooperation in promptly voting your shares and submitting your proxy by
telephone or by completing and returning the enclosed proxy card will help to
avoid additional expense.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of Gymboree
at our principal offices as set forth above a written notice of revocation or a
duly executed proxy bearing a later date or by attending the meeting and voting
in person.
PROPOSAL ONE:
ELECTION OF DIRECTORS
Nominees
The number of directors authorized by our bylaws is seven; that number may
be changed by an amendment adopted by our Board of Directors or stockholders.
Our Restated Certificate of Incorporation and our bylaws each provide that the
directors will be divided into three classes, with the classes serving for
staggered, three-year terms. Currently there are two directors in Class I, two
directors in Class II and three directors in Class III.
Three Class III directors are to be elected at the Annual Meeting. The
term of each Class III director elected at the Annual Meeting will expire at
the Annual Meeting of Stockholders in 2005 or when his or her successor has
been duly elected and qualified. The term of each Class I director will expire
at the Annual Meeting of Stockholders in 2003. The term of each Class II
director will expire at the Annual Meeting of Stockholders in 2004.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for our three nominees named in the table below, each of whom
is currently a director of the Company. The nominees have consented to serve as
directors of Gymboree if elected. In the event that any nominee of the Company
becomes unable or declines to serve as a director at the time of the Annual
Meeting, the proxy holders will vote the proxies for any substitute nominee who
is designated by the current Board of Directors to fill the vacancy. It is not
expected that any of the nominees listed below will be unable or will decline
to serve as a director.
The names of the three Class III nominees for director and certain
information about each of them are set forth in the table below. The names of,
and certain information about, the current Class I and Class II directors with
unexpired terms are also set forth below.
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Name Age Principal Occupation
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NOMINEES FOR CLASS III DIRECTORS
Stuart G. Moldaw ............... 75 Chairman of the Board, The Gymboree Corporation
John C. Pound .................. 47 President, Integrity Partners, Inc.
William U. Westerfield ......... 70 Director, The Gymboree Corporation, Twinlab
Corporation and West Marine, Inc.
CONTINUING CLASS I DIRECTORS
Walter F. Loeb ................. 77 President, Loeb Associates, Inc.
Michael Steinberg .............. 73 Former Chief Executive Officer, Macy's West
CONTINUING CLASS II DIRECTORS
Lisa M. Harper ................. 42 Chief Executive Officer and Vice Chair of the Board,
The Gymboree Corporation
Barbara L. Rambo ............... 49 Director, OpenClose Technologies
Except as indicated below, each nominee or incumbent director has been
engaged in the principal occupation set forth above during the past five years.
There are no family relationships between any directors or executive officers
of Gymboree.
Stuart G. Moldaw has been the Chairman of the Board of Directors of
Gymboree since January 1994 and has been a director of the Company since May
1982. 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. Mr. Moldaw is a member of the board of directors of
iParty.com, an on-line party resource company. From 1980 through 1990, Mr.
Moldaw served as a general partner of U.S. Venture Partners, a venture capital
firm. 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.
John C. Pound has been a director of Gymboree since August 2000. Mr. Pound
has served as President and a director of Integrity Partners, 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, where he oversaw a review of
strategic alternatives and a workout process that included the liquidation of
CML and Nordic Track through voluntary Chapter 11 bankruptcy petitions filed
late in 1998. 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.
William U. Westerfield has been a director of Gymboree since August 1994.
Mr. Westerfield is a director and audit committee chairman of Twinlab
Corporation and West Marine, Inc.; he is also an audit committee member of
Meridian Health System, Inc., and from 1998 to 2000 chaired the audit committee
of World Duty Free America, Inc. Mr. Westerfield retired as an audit partner of
Price Waterhouse (now PricewaterhouseCoopers LLP) in 1992, a firm he joined in
1956, becoming a partner in 1965. In addition to serving on boards and audit
committees, Mr. Westerfield also serves as a consultant in auditing disputes.
Walter F. Loeb has been a director of Gymboree since March 1995. Mr. Loeb
is President of Loeb Associates, Inc., a retail consulting firm he founded in
February 1990. Mr. Loeb is the publisher of "Loeb Retail Letter," which
provides a monthly analysis of the retail industry. Mr. Loeb was employed by
Morgan Stanley & Company, Inc. from 1974 to 1990, serving as principal from
1984 to 1990. Mr. Loeb is also a director of Hudson's Bay Company, Wet Seal,
Inc., Federal Realty Investment Trust, a real estate investment trust, and
ProfitLogic, a private company engaged in profit optimization.
Michael Steinberg has been a director of Gymboree since September 2000.
From August 1993 to June 2000, Mr. Steinberg was the Chief Executive Officer of
Macy's West. Mr. Steinberg is a director and audit committee member of Fossil,
Inc., a retailer of fashion watches and accessories, and a director of DFS, a
private company engaged in the retail sale of duty-free merchandise.
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Lisa M. Harper has been Chief Executive Officer and Vice Chair of the
Board since February 2001 and has been a director of Gymboree since June 2000.
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. Ms. Harper previously 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, GapKids, Mervyn's and Levi Strauss.
Barbara L. Rambo has been a director of Gymboree since January 1996. Since
July 2001, Ms. Rambo has been a director of OpenClose Technologies, a web-based
mortgage services company. From July 2001 until December 2001 she served as
Chairman of the Board of OpenClose Technologies, and from January 2000 until
June 2001 she served as President and Chief Executive Officer. From 1974 to
1998, Ms. Rambo held various positions at Bank of America, most recently
serving as Group Executive Vice President and head of National Commercial
Banking.
Board Meetings and Board Committees
The Board of Directors of Gymboree held a total of five meetings during
the fiscal year ended February 2, 2002. No incumbent director attended fewer
than 75% of the meetings of the Board of Directors or the committees upon which
such director served that were held while he or she served.
The Board of Directors has an Audit Committee, a Nominating and Governance
Committee and a Compensation Committee.
The Audit Committee consists of Directors Westerfield, as Chairman, Pound
and Rambo. All members of the Audit Committee are "independent" within the
meaning of Rule 4200(a)(15) of the listing standards for the National
Association of Securities Dealers. The Audit Committee operates pursuant to a
written charter and principally reviews the scope and results of the annual
audit of the financial statements and other services provided by our
independent auditors. In addition, the Audit Committee reviews with management
and our independent auditors the financial information provided to stockholders
and the Company's systems of internal controls. The Audit Committee held ten
meetings during the last fiscal year.
The Nominating and Governance Committee consists of Directors Pound, as
Chairman, and Steinberg. Both members of the Nominating and Governance
Committee are "independent" within the meaning of the listing standards for the
National Association of Securities Dealers. The Nominating and Governance
Committee is responsible for monitoring the composition of the Board of
Directors and, when appropriate, seeking, screening and recommending for
nomination candidates for election to the Board of Directors. In so doing, the
Nominating and Governance Committee may evaluate a candidate's decision-making
abilities, business experience, relevant expertise, personal integrity and
reputation. The Nominating and Governance Committee is also responsible for
evaluating the structure and practices of, and, when appropriate, recommending
new policies to, the Board of Directors. Names of prospective candidates for
election to the Board of Directors may be submitted to the Secretary of the
Company for referral to the Nominating and Governance Committee. Any
stockholder who wishes to make a nomination for election to the Board of
Directors at an annual or special meeting for the election of directors must
comply with procedures set forth in our bylaws. The Nominating and Governance
Committee held one meeting during the last fiscal year.
The Compensation Committee consists of Directors Loeb, as Chairman, and
Steinberg. Both members of the Compensation Committee are "outside" directors
as that term is used in Section 162(m) of 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.
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Compensation of Directors
Each non-employee director of Gymboree receives an annual retainer of
$25,000 and an additional $1,000 for each Board meeting attended and $500 to
$750 for each Committee meeting attended (including telephonic meetings),
except for the Chairman of the Audit Committee, currently William Westerfield,
who receives $1,500 per meeting for that role. The Chairman of the Board,
currently Stuart Moldaw, receives an annual salary of $300,000 and, when deemed
appropriate by the Compensation Committee, an annual bonus for his services as
Chairman of the Board. Each non-employee director with greater than two years
of membership with the Board as of November 15, 2000 received a one time bonus
of $15,000. Each of our non-employee directors is entitled to receive automatic
grants of options to purchase common stock under our 1993 Stock Option Plan, as
amended, and this program will be continued under our 2002 Stock Incentive Plan
if that plan is adopted by the stockholders at the Annual Meeting. Currently,
each non-employee director is automatically granted an option to purchase 2,500
shares of common stock upon each anniversary of such director's initial
election to the Board. Committee chairpersons are also awarded annually an
option to purchase an additional 500 shares of common stock. In the event that
an additional non-employee director is elected to the Board, such person will
be entitled to receive an option to purchase 2,500 shares of common stock upon
election. All directors also receive discounts on Gymboree merchandise and on
participation in our Play & Music programs.
THE COMPANY'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE NOMINEES SET FORTH HEREIN.
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PROPOSAL TWO:
ADOPTION OF 2002 STOCK INCENTIVE PLAN
The Board of Directors is asking the stockholders to approve The Gymboree
Corporation 2002 Stock Incentive Plan (the "2002 Plan"). The 2002 Plan was
approved by our Board of Directors on March 14, 2002, but will become effective
only upon receipt of approval by the stockholders. The Board of Directors
recommends a vote FOR the adoption of the 2002 Plan.
We currently issue options and stock purchase rights to certain employees,
consultants and outside directors under our 1993 Stock Option Plan, as amended
(the "Prior Plan"). Upon approval by the stockholders of the adoption of the
2002 Plan, the Prior Plan will be suspended, at which time all shares available
for issuance under the Prior Plan that are not then subject to outstanding
awards under the Prior Plan and any shares that cease to be subject to an award
under the Prior Plan (generally because such award expires or terminates) will
become available for issuance under the 2002 Plan and no further awards will be
made under the Prior Plan.
A copy of the proposed 2002 Plan is attached to this Proxy Statement as
Annex A. The following description of the 2002 Plan is a summary and does not
purport to be a complete description. See Annex A for more detailed
information.
Purposes. The purposes of the 2002 Plan are to attract and retain the best
available personnel, to provide additional incentives to our employees,
consultants and outside directors and to promote the success of our business.
Stock Subject to the Plan. Subject to adjustment for stock splits, a
maximum of 1,100,000 shares of common stock will be available for issuance
under the 2002 Plan, plus any shares that remain available for issuance under
the Prior Plan on the date the Prior Plan is suspended and any shares made
subject to an award under the Prior Plan that cease to be subject to that award
(generally because such award expires or terminates), up to an aggregate
maximum of 4,231,075 shares. As of April 18, 2002, 319,468 shares remained
available for issuance under the Prior Plan, and there were outstanding options
for 3,911,607 shares. Any shares that have been made subject to an option under
the 2002 Plan that cease to
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be subject to that option (generally because that option expires or terminates)
will become available for future grants under the 2002 Plan. The shares issued
under the 2002 Plan will be from authorized but unissued shares of our common
stock or from shares subsequently acquired as treasury shares.
Administration. The 2002 Plan may be administered by our Board of
Directors or any Board appointed committee (the "plan administrator"). The plan
administrator, subject to the terms of the 2002 Plan, selects the individuals
to receive options, determines the terms and conditions of all options and
interprets the provisions of the 2002 Plan. The plan administrator is also
authorized to make such rules and regulations as it deems necessary to
administer the 2002 Plan. The plan administrator's decisions, determinations
and interpretations are binding on all holders of options granted under the
2002 Plan.
Awards. The plan administrator is authorized to grant incentive stock
options and nonstatutory stock options under the 2002 Plan. Options may consist
of one or more of these grant types.
Eligibility. Options may be granted to our employees, consultants and
outside directors and to the employees, consultants and outside directors of
any parent or subsidiary of us, except that only our employees and employees of
our subsidiaries may receive incentive stock options. Non-employee directors of
Gymboree will only receive automatic, nondiscretionary option grants under the
2002 Plan. Approximately 6,500 employees are eligible to participate in the
2002 Plan, although we typically grant options only to our corporate employees,
distribution center managers, regional managers and district managers, which
includes approximately 400 employees.
Stock Option Grants. Options granted under the 2002 Plan may be "incentive
stock options" (as defined in Section 423 of the Internal Revenue Code of 1986,
as amended (the "Code")) or nonstatutory stock options. The exercise price for
each option is determined by the plan administrator but may not be less than
100% of fair market value on the date of grant (or 110% of fair market value in
the case of incentive stock options granted to a more than 10% stockholder).
For purposes of the 2002 Plan, "fair market value" means the closing sales
price for our stock as reported by the Nasdaq National Market System for a
single trading day. As of April 18, 2002, the closing sales price for our
common stock on the Nasdaq National Market System was $17.60.
No employee may be granted an option to purchase more than 400,000 shares
in any fiscal year of Gymboree, except that an employee may receive an option
to purchase up to an additional 400,000 shares in connection with that
employee's initial hiring or promotion.
The exercise price for shares purchased under an option must be paid in a
form acceptable to the plan administrator, which forms may include cash, a
check, a promissory note bearing such interest and recourse terms as are
necessary to prevent a charge against our earnings, shares of already owned
common stock, a broker-assisted cashless exercise or such other consideration
as the plan administrator may permit.
Unless the plan administrator determines otherwise, the term of each
option will be ten years from the date of grant. Each option will vest and
become exercisable by the holder based on a vesting schedule set forth in the
individual optionee's grant notice. Options granted under the Prior Plan
generally become fully vested and exercisable four years from the date of
grant. Grants made to new employees typically vest 25% after the first year and
1/48th of the total option each month thereafter, and options granted to
existing employees typically vest at a rate of 1/48th of the total option
monthly from the date of grant. We intend to continue using this schedule for
most of our grants under the 2002 Plan. Unless the plan administrator
determines otherwise, options vested as of the date of termination of the
optionee's employment or service relationship with Gymboree by reason of death
or disability generally will be exercisable for one year after the date of
termination unless the option term expires as of an earlier date. In the event
of termination for a reason other than death or disability, the option will be
exercisable for a period of time determined by the plan administrator, but not
to exceed 90 days from the date of termination for incentive stock options, and
in no event may the option be exercisable after the expiration of its term. A
transfer of employment or service relationship between us, our subsidiaries and
any parent of Gymboree is not deemed a termination for purposes of the 2002
Plan.
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Transferability. Unless otherwise determined by the plan administrator, no
option granted under the 2002 Plan may be transferred or assigned except by
will or the laws of descent and distribution, and no option may be exercised by
anyone other than the holder during the holder's lifetime.
Adjustment of Shares. In the event of stock splits, stock dividends,
reclassification or similar changes in our capital structure, the Board of
Directors, in its sole discretion, will make equitable adjustments in (a) the
number of shares covered by each outstanding option, (b) the number of shares
authorized for issuance under the 2002 Plan but as to which no options have yet
been granted and (c) the purchase price of the common stock underlying each
option.
Change of Control. In the event of the acquisition by any person other
than Gymboree, a subsidiary of Gymboree or an employee benefit plan of Gymboree
of 50% or more of the voting power of our outstanding securities, a merger or
consolidation that would result in a change in ownership of at least 50% of the
voting securities, or a change in the Board of Directors such that the majority
of directors are no longer "incumbent directors" as that term is defined in the
2002 Plan, all outstanding options will become immediately vested and
exercisable on the date such change in control is determined to have occurred
and such options will then be terminated in exchange for cash payments
calculated by a formula under the 2002 Plan.
In the event of a merger or sale of all or substantially all of our assets
(other than a merger resulting in a change of control), each outstanding option
under the 2002 Plan will be assumed by the successor corporation or the
successor corporation will substitute an equivalent option. If the successor
corporation does not agree to assume or substitute for the options under the
2002 Plan, the plan administrator will accelerate all outstanding options such
that they become fully vested and exercisable prior to the consummation of the
merger or asset sale. In such case, the holder will have 15 days in which to
exercise the option, and at the end of such period the option will terminate.
Termination and Amendment. The Board of Directors may at any time suspend,
alter or terminate the 2002 Plan, and may amend the plan subject to stockholder
approval to the extent necessary to comply with applicable laws. The 2002 Plan
will terminate on March 14, 2012, unless earlier terminated by the Board. No
suspension, alteration, termination or amendment of the 2002 Plan may impair
the rights of holders of outstanding options without the holder's written
consent.
Federal Income Tax Consequences. The following is a summary of the
material United States federal income tax consequences to us and to
participants in the 2002 Plan. The summary is based on the Code and the United
States Treasury regulations promulgated thereunder in effect as of the date of
the proxy statement, all of which may change with retroactive effect. The
summary is not intended to be a complete analysis or discussion of all
potential tax consequences that may be important to participants in the 2002
Plan. Therefore, we strongly encourage participants to consult their own tax
advisors as to the specific federal income tax or other tax consequences of
their participation in the 2002 Plan.
Incentive Stock Options. The incentive stock options granted under the
2002 Plan are intended to qualify for the favorable federal income tax
treatment accorded "incentive stock options" under the Code. Generally, the
grant or exercise of an incentive stock option does not result in any federal
income tax consequences to the participant or to us. However, the exercise of
an incentive stock option will generally increase the participant's alternative
minimum tax liability, if any. In addition, the United States Treasury has
proposed regulations that would deem the exercise of an option under the 2002
Plan to be the payment of wages subject to withholding for FICA (Social
Security and Medicare) and FUTA employment tax purposes. These proposed
regulations are currently in a comment period and are subject to challenge.
However, barring a change in the proposed Treasury regulations, beginning in
2003 the exercise of an option under the 2002 Plan, including an incentive
stock option, will result in wages subject to withholding for FICA (Social
Security and Medicare) and FUTA employment tax purposes equal to the amount by
which the fair market value of the acquired stock on the exercise date exceeds
the exercise price of the option.
The federal income tax consequences of a disposition of stock acquired
through exercise of an incentive stock option will depend on the period such
stock is held prior to disposition. If a participant
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holds stock acquired through exercise of an incentive stock option for at least
two years from the date on which the option is granted and at least one year
from the date of exercise of the option, the participant will recognize
long-term capital gain or loss in the year of disposition, equal to the
difference between the amount realized on the disposition of the stock and the
amount paid for the stock on exercise of the option.
Generally, if the participant disposes of the stock before the expiration
of either of the statutory holding periods described above (a "disqualifying
disposition"), the participant will recognize ordinary income equal to the
lesser of (i) the excess of the fair market value of the stock on the date of
exercise over the exercise price and (ii) the excess of the amount realized on
the disposition of the stock over the exercise price. Subject to certain
limitations, to the extent the participant recognized ordinary income by reason
of a disqualifying disposition, we generally will be entitled to a
corresponding business expense deduction in the taxable year during which the
disqualifying disposition occurs.
Generally, in the taxable year of a disqualifying disposition, the
participant will also recognize capital gain or loss equal to the difference
between the amount realized on the disposition of such stock over the sum of
the amount paid for such stock plus any amount recognized as ordinary income by
reason of the disqualifying disposition. Such capital gain or loss will be
characterized as short-term or long-term, depending upon how long the stock was
held. Long-term capital gains generally are subject to lower tax rates than
ordinary income and short-term capital gains. Currently, the maximum long-term
capital gains rate for federal income tax purposes is 20% while the maximum
ordinary income rate is 38.6%. Slightly different rules may apply to optionees
who acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
Nonqualified Stock Options. Generally, the grant of a nonqualified stock
option will not result in any federal income tax consequences to the
participant or to us. Upon exercise of a nonqualified stock option, the
participant generally will recognize ordinary income equal to the excess of the
fair market value of the stock on the date of exercise over the amount paid for
the stock upon exercise of the option. Subject to certain limitations, we
generally will be entitled to a corresponding business expense deduction equal
to the ordinary income recognized by the participant.
Upon disposition of the stock, the participant will recognize capital gain
or loss equal to the difference between the amount realized on the disposition
of such stock over the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such capital gain or
loss will be characterized as short-term or long-term, depending on how long
the stock was held.
Slightly different rules may apply to optionees who are subject to Section
16(b) of the Exchange Act.
Potential Limitation on Our Deductions. Code Section 162(m) precludes a
deduction for compensation paid to our chief executive officer and our four
other highest compensated officers to the extent that such compensation exceeds
$1,000,000 for a taxable year per officer. If certain requirements are met,
qualified performance-based compensation is disregarded for purposes of the
$1,000,000 limitation. The 2002 Plan has been structured in a manner that is
intended to comply with Code Section 162(m). Therefore, assuming certain
requirements are met, payments made to such executive officers during the term
of the 2002 Plan generally will be deductible.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
GYMBOREE CORPORATION 2002 STOCK INCENTIVE PLAN.
---------------------
PROPOSAL THREE:
APPROVAL OF 1993 AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors is asking the stockholders to approve an amendment
to our 1993 Employee Stock Purchase Plan (the "ESPP"). The Board of Directors
voted to amend the ESPP on January 31,
8
2002, to increase the number of shares authorized for issuance under the ESPP
from 575,278 to 875,278, effective only upon receipt of approval by the
stockholders. All 575,287 shares previously authorized under the ESPP were
issued as of the purchase period ended December 31, 2001. A new offering and
purchase period was begun on January 1, 2002, with a purchase date of June 30,
2002. The effectiveness of the current purchase period, however, is contingent
on stockholder approval of this amendment. The Board of Directors recommends a
vote FOR the approval of the 1993 Amended and Restated Employee Stock Purchase
Plan.
A copy of the ESPP, as it is proposed to be amended and restated, is
attached to this Proxy Statement as Annex B. The following description of the
ESPP is a summary and does not purport to be a complete description. See Annex
B for more detailed information.
Description of the 1993 Amended and Restated Employee Stock Purchase Plan
Purpose. The purpose of the ESPP is to provide employees of Gymboree and
our designated subsidiaries with an opportunity to purchase our common stock
through accumulated payroll deductions pursuant to a plan that qualifies for
beneficial tax treatment under Code Section 423 as an "employee stock purchase
plan."
Administration. The ESPP may be administered by our Board of Directors or
any committee appointed by the Board, or by one or more executive officers
designated by the Board (the "plan administrator"). The plan administrator is
authorized to administer and interpret the ESPP, subject in all cases to the
limitations of Code Section 423, and such decisions and determinations shall be
binding on all participants.
Stock Subject to the ESPP. Under the ESPP, eligible employees may purchase
shares of common stock through payroll deductions at a discount from
market-price without incurring broker commissions. A maximum of 875,278 shares
of common stock, subject to adjustments for stock splits, will be available for
purchase under the ESPP, assuming we receive stockholder approval of the
proposed amendment. The common stock issued under the ESPP will be from
authorized but unissued shares of our common stock or from shares subsequently
acquired as treasury shares.
Eligibility. To be eligible to participate in the ESPP, an employee must
be employed by Gymboree at least 20 hours a week and may not own 5% or more of
the combined voting power or value of Gymboree's capital stock or that of any
related corporation. The eligibility criteria may be changed by the plan
administrator for future offering periods within the limits of Code Section 423
as described in the ESPP. Non-employee directors are not eligible to
participate in the ESPP. Approximately 2000 employees are eligible to
participate in the ESPP.
Under the ESPP, no employee may purchase more than $25,000 worth of common
stock (based on the fair market value of the common stock on the first day of
the offering period) during any calendar year, and the aggregate number of
shares purchased under the ESPP in any purchase period under all offering
periods ongoing at that time may not exceed 200,000 shares.
Offering Periods and Purchase Periods. The ESPP is divided into 12-month
offering periods with a new offering period beginning each January 1 and July 1
and ending on the next December 31 and June 30, respectively. Each offering
period is divided into two six-month purchase periods beginning on January 1
and July 1 and ending on June 30 and December 31, respectively. During the
offering periods, participating employees accumulate funds in an account used
to buy common stock through payroll deductions. Payroll deductions accrue at a
rate of not less than 1% and not more than 10% of an employee's base pay,
overtime, shift premiums and commissions paid during each payroll period in a
purchase period. At the end of each six-month purchase period, the purchase
price is determined and the participating employee's accumulated funds are used
to purchase the appropriate whole number of shares of common stock.
Purchase Price. The purchase price per share of common stock is 85% of the
lesser of (a) the fair market value of the common stock on the first day of the
offering period and (b) the fair market value
9
on the last trading day of the purchase period. "Fair market value" is defined
in the ESPP as the closing sales price for that day as reported by Nasdaq. On
April 18, 2002 the closing sales price for our common stock on the Nasdaq
National Market System was $17.60.
Automatic Transfer to New Offering Period. In the event that the fair
market value of our common stock on the last day of the purchase period is
lower than the fair market value on the first day of that offering period, all
participants in the offering period will be automatically withdrawn from that
offering period after the purchase of stock for that purchase period and will
be automatically re-enrolled in the immediately following offering period.
Effect of Termination. Employees who terminate their employment with us
for any reason prior to the last trading day of a purchase period will not be
allowed to acquire shares under the ESPP for that purchase period. Upon
termination of employment, we will pay the balance in the employee's account to
the employee or to his or her estate without interest.
Transferability. Neither payroll deductions credited to an employee's
account under the ESPP nor any rights with regard to the purchase of shares
under the ESPP may be assigned, transferred, pledged or otherwise disposed of
in any way by the employee, other than by will or the laws of descent and
distribution. However, a participant in the ESPP may designate a beneficiary to
receive any shares or cash remaining in such employee's account at the time of
his or her death by providing a written notice of such designation to us.
Change of Control. In the event of a merger or sale of all or
substantially all of our assets, each option to purchase shares during an
ongoing offering period will be assumed or substituted for by the successor
corporation unless the Board of Directors determines in its sole discretion to
shorten the offering period and set a new purchase date in lieu of such
assumption or substitution. In the event of a proposed liquidation or
dissolution, the offering period will terminate immediately prior to the
consummation of such proposed action.
Amendment, Suspension and Termination of the ESPP. The Board has the power
to amend, suspend or terminate the ESPP, except that the Board may not amend
the ESPP without stockholder approval if such approval is required under Code
Section 423. Unless sooner terminated, the ESPP will terminate on February 11,
2013.
Federal Income Tax Consequences. The Company intends that the ESPP qualify
as an "employee stock purchase plan" under Code Section 423. The following
discussion summarizes the material federal income tax consequences to the
Company and the participating employees in connection with the ESPP under
existing applicable provisions of the Code and the United States Treasury
regulations promulgated thereunder. The discussion is general in nature and
does not address issues relating to the income tax circumstances of any
individual employee. The discussion is based on federal income tax laws in
effect on the date of this Proxy Statement and is, therefore, subject to future
changes in the law, possibly with retroactive effect. The discussion does not
address the consequences of state, local or foreign tax laws. The summary is
not intended to be a complete analysis or discussion of all potential tax
consequences that may be important to participants in the ESPP. Therefore, we
strongly encourage participants to consult their own tax advisors as to the
specific federal income tax or other tax consequences of their participation in
the ESPP.
Under the Code, the Company is deemed to grant participants in the ESPP an
"option" on the first day of each offering period to purchase as many shares of
common stock as the employee will be able to purchase with the payroll
deductions credited to his or her account during the offering period at the end
of each purchase period. On the last day of each six-month purchase period
during the offering period, the purchase price is determined and the employee
is deemed to have exercised the "option" and purchased the number of shares of
common stock his or her accumulated payroll deductions will purchase at the
purchase price.
The required holding period for favorable federal income tax treatment
upon disposition of common stock acquired under the ESPP is the later of (1)
two years after the deemed "option" is granted (the first day of an offering
period) and (2) one year after the deemed "option" is exercised and the common
stock
10
is purchased (the last day of a purchase period). When the common stock is
disposed of after this period (a "qualifying disposition"), the employee
realizes ordinary income to the extent of the lesser of (a) the amount by which
the fair market value of the common stock at the time the deemed "option" was
granted exceeded the "option price" and (b) the amount by which the fair market
value of the common stock at the time of the disposition exceeded the "option
price." The "option price" is equal to 85% of the lesser of the fair market
value of the common stock on the first day of the offering period and the fair
market value of the common stock on the last day of the purchase period. Thus,
the maximum amount of gain taxable as ordinary income is the amount of the 15%
discount measured as of the last day of a purchase period. Any further gain
recognized on a qualifying disposition will be long-term capital gain. If the
sale price is less than the option price, there is no ordinary income and any
loss recognized generally will be a long-term capital loss.
When an employee sells the common stock before the expiration of the
required holding period (a "disqualifying disposition"), the employee
recognizes ordinary income to the extent of the difference between the price
actually paid for the common stock and the fair market value of the common
stock at the date the option was exercised (the last day of a purchase period),
regardless of the price at which the common stock is sold. Any additional gain
recognized upon the disqualifying disposition will be capital gain. The capital
gain will be long-term if the employee held the shares more than 12 months. If
the sale price is less than the fair market value of the common stock at the
date of exercise, then the employee will have a capital loss equal to such
difference.
Even though an employee must treat part of his or her gain on a qualifying
disposition of the common stock as ordinary income, the Company may not take a
business deduction for such amount. However, if an employee makes a
disqualifying disposition, the amount of income that the employee must report
as ordinary income qualifies as a business deduction for the Company for the
year of such disposition.
The United States Treasury has proposed regulations under which the
purchase of stock under the ESPP will result in wages subject to withholding
for FICA (Social Security and Medicare) and FUTA employment tax purposes. These
proposed regulations are currently in a comment period and are subject to
challenge. However, barring a change in the proposed treasury regulations,
beginning in 2003 a purchase made under the ESPP will result in wages subject
to withholding for FICA (Social Security and Medicare) and FUTA employment tax
purposes equal to the amount by which the fair market value of the acquired
stock on the purchase date exceeds the purchase price under the terms of the
ESPP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" APPROVAL OF THE GYMBOREE CORPORATION 1993
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN.
---------------------
PROPOSAL FOUR:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit our financial statements for the fiscal year ending February
1, 2003, and recommends that the stockholders vote for ratification of such
appointment.
Deloitte & Touche LLP has served as our independent auditors since 1987.
In the event of a negative vote on such ratification, the Board of Directors
will reconsider its selection. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting of Stockholders and will have the
opportunity to make a statement if they so desire. The representatives also are
expected to be available to respond to appropriate questions from stockholders.
The fees billed to us by Deloitte & Touche LLP for fiscal year 2001 are as
follows:
Audit Fees. The aggregate fees billed for the audit of our annual
financial statements for fiscal year 2001 and for the reviews of our quarterly
financial statements for fiscal year 2001 totaled approximately $335,171.
11
Financial Information Systems Design and Implementation Fees. No fees were
billed by Deloitte & Touche LLP for the design or implementation of the
Company's financial information systems, within the meaning of Rule
2-01(c)(4)(ii) of Regulation S-X, during fiscal year 2001.
All Other Fees. The aggregate fees billed for all other non-audit
services, including tax assistance, provided by Deloitte & Touche LLP during
fiscal year 2001 totaled approximately $379,677.
The Audit Committee has considered whether, and believes that, the
non-audit services provided by Deloitte & Touche LLP as described above are
compatible with maintaining Deloitte & Touche LLP's independence as our
principal accountants.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS VOTING "FOR" THE RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING FEBRUARY 1, 2003.
Audit Committee Report
The Audit Committee is responsible for the review of our auditing,
accounting, financial reporting and internal control functions and for
recommending to the Board of Directors and stockholders the selection of our
independent auditors. The Audit Committee is expected to review with management
and our independent auditors the quality of our accounting principles and
financial reporting, and the independence of our auditors. The Audit Committee:
o Considers in consultation with the independent auditors and management
the scope of the annual audit and the independent auditors fees and,
in the event that either an internal auditing staff is employed or any
third party is engaged to carry out the internal audit function, meets
independently with them as well as with our independent auditors.
o Reviews the general scope of our accounting, financial reporting,
annual audit and internal audit programs, matters relating to internal
control systems and results of the annual audit.
o Reviews written disclosures and the letter from our independent
auditors required by Independence Standards Board Standard No. 1,
discusses with the independent auditors their independence, and
reviews the non-audit fees and services provided by the independent
auditors.
The Audit Committee considers, in consultation with the independent
auditors and management, the financial reporting process, the system of
internal controls, and the audit process. Each of the Audit Committee members
satisfied the definition of independent director as established in Rule
4002(a)(15) of the National Association of Securities Dealers listing
standards. The Board of Directors has adopted a written charter for the Audit
Committee, which was attached to our 2001 Proxy Statement as Appendix A. The
Audit Committee met ten times during the fiscal year 2001.
The Audit Committee has reviewed our audited consolidated financial
statements and discussed such statements with management. The Audit Committee
has discussed with Deloitte & Touche, LLP, Gymboree's independent auditors
during the fiscal year 2001, the matters required to be discussed by Statement
of Auditing Standards No. 61 (Codification of Statements on Auditing
Standards). The Audit Committee received from Deloitte & Touche, LLP the
written disclosures and the letter required by Independent Standards Board
Standard No. 1 and discussed with them their independence. Based on the review
and discussions noted above, the Audit Committee recommended to the Board of
Directors that Gymboree's audited consolidated financial statements be included
in our Annual Report on Form 10-K and the Annual Report to Stockholders for the
year ended February 2, 2002, and be filed with the U.S. Securities and Exchange
Commission ("SEC").
THE AUDIT COMMITTEE
William U. Westerfield, Chairman
John C. Pound
Barbara L. Rambo
12
EXECUTIVE COMPENSATION
The following table shows the compensation earned during fiscal years
1999, 2000 and 2001 by (i) the Company's Chief Executive Officers during fiscal
year 2001, (ii) the two other executive officers during fiscal year 2001 who
were still serving as executive officers at the end of fiscal year 2001, and
(iii) one additional person who would have been among the most highly
compensated executive officers during fiscal year 2001 but for the fact that he
was not still serving as an executive officer at the end of fiscal year 2001
(collectively, the "Named Executive Officers"). Bonus compensation is reported
in the fiscal year the compensation is earned.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation Awards
-----------------------
Annual Compensation
-------------------------- Securities All Other
Name and Principal Position Year Salary ($) Bonus ($) Underlying Options (#) Compensation ($)
- --------------------------- ---- ---------- --------- ---------------------- ----------------
Stuart G. Moldaw (1) ............ 2001 $243,306 $ 56,032 0 $ 434(2)
Chairman of the Board and 2000 464,903 306,197 683,000
Former Chief Executive Officer
Lisa M. Harper (3) .............. 2001 447,115 146,250 300,000 750(2)
Chief Executive Officer and Vice 2000 326,346 170,288 450,000 495(2)
Chair of the Board 1999 200,865 52,709 60,000 375(2)
Alison L. May (4) ............... 2001 288,750 81,250 200,000 908(2)
Former Executive Vice President,
Chief Operating Officer,
Secretary and Acting Chief
Financial Officer
Myles McCormick (5) ............. 2001 106,730 33,750 40,000 138(2)
Chief Financial Officer and Vice
President, Finance
Lawrence H. Meyer (6) ........... 2001 163,081 0 0 330,109(7)
Former Chief Financial Officer, 2000 300,000 150,000 200,000 540(2)
Secretary and Management 1999 285,384 148,077 115,000 64,099(8)
Advisor
- ----------
(1) Mr. Moldaw was Chief Executive Officer from February 2000 until February
6, 2001. Mr. Moldaw has been a director since May 1982 and was the
Chairman of the Board from January 1990 through January 1993 and again
from January 1994 to the present time. All of Mr. Moldaw's salary in
fiscal year 2001 was earned as compensation for his role as Chairman of
the Board.
(2) Represents life insurance premiums paid by us on a term life insurance
policy where Gymboree is not the beneficiary of the policy.
(3) Ms. Harper was named Chief Executive Officer and Vice Chair of the Board
in February 2001 and has been a member of the Board of Directors since
June 2000. Ms. Harper joined Gymboree in January 1999 as Vice President,
Design. In December 1999, she was named Senior Vice President,
Merchandising and Design. In February 2000, she was named General
Merchandise Manager. In September 2000, she was named President.
(4) Ms. May joined Gymboree in March 2001 as Executive Vice President and
Chief Operating Officer and was appointed Secretary in May 2001. Upon Mr.
Meyer's resignation as Senior Vice President and Chief Financial Officer
in May 2001, Ms. May was also named Acting Chief Financial Officer, a
position she held until the appointment of Mr. McCormick as Chief
Financial Officer in February 2002. Ms. May terminated her employment
with us on April 7, 2002.
13
(5) Mr. McCormick joined Gymboree in May 2001 as Vice President, Finance. He
was appointed Chief Financial Officer in February 2002.
(6) Mr. Meyer served as Management Advisor from May 2001 through July 2001.
Mr. Meyer also served as our Senior Vice President and Chief Financial
Officer from September 1998 through May 2001 and as Secretary from March
2000 until May 2001. Mr. Meyer terminated his employment with us
effective July 2001.
(7) Represents (a) $270,000 paid to Mr. Meyer in connection with a severance
agreement between Gymboree and Mr. Meyer in July 2001, (b) $59,800 in
loan forgiveness on an outstanding promissory note cancelled in
connection with the severance agreement and (c) $309 in life insurance
premiums paid by us on a term life insurance policy where Gymboree is not
the beneficiary of the policy. For more information on the severance
agreement with Mr. Meyer, please see the section entitled "Certain
Relationships and Related Transactions" below.
(8) Represents $63,532 in moving expenses and $567 in life insurance premiums
paid by us on a term life insurance policy where Gymboree is not the
beneficiary of the policy.
Option Grants and Exercises
The following table sets forth certain information with respect to stock
option grants during the fiscal year ended February 2, 2002 to the Named
Executive Officers.
Option Grants in Fiscal 2001
Individual Grants
---------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rate of
Securities Granted to Stock Price Appreciation
Underlying Employees in Exercise or for Option Term($)(3)
Options Fiscal Year Base Price Expiration -------------------------
Name Granted (#)(1) (%)(2) ($/Share) Date 5% 10%
- ---- -------------- ------------ ----------- -------------- ------------ ------------
Stuart G. Moldaw .......... 0 0.0% $ 0 $ 0 $ 0
Lisa M. Harper ............ 150,000 12.8% 12.00 Feb. 8, 2011 1,132,010 2,868,736
150,000 12.8% 5.75 Sept. 25, 2011 542,422 1,374,603
Alison L. May ............. 100,000 8.5% 10.50 March 7, 2011 660,339 1,673,430
100,000 8.5% 5.75 Sept. 25, 2011 361,614 916,402
Myles McCormick ........... 20,000 1.7% 4.92 May 14, 2011 61,883 156,824
20,000 1.7% 5.75 Sept. 25, 2011 72,323 183,280
Lawrence H. Meyer ......... 0 0.0% 0 0 0
- ----------
(1) The options granted to the Named Executive Officers during fiscal year
2001 have ten-year terms and will vest and become exercisable over a
four-year period. 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 the
1993 Stock Option Plan, 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 1993 Plan.
(2) Based on an aggregate of 1,171,504 options granted to employees of
Gymboree under our 1993 Stock Option Plan, as amended, during the fiscal
year ended February 2, 2002.
(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 the common stock.
14
Aggregate Option Exercises in Fiscal 2001 and Year-end Values
The following table sets forth information regarding option exercises by
the Named Executive Officers in the fiscal year ended February 2, 2002 and
unexercised stock options held by the Named Executive Officers as of February
2, 2002.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at February 2, 2002 at February 2, 2002 (1)
Acquired Value ----------------------------------- -----------------------------------
Name on Exercise (#) Realized ($) Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
- ---- --------------- ------------ --------------- ----------------- --------------- -----------------
Stuart G. Moldaw ........ 13,825 $56,089 780,740 89,919 $5,890,370 $ 684,184
Lisa M. Harper .......... 25,000 177,773 207,636 549,169 1,532,523 4,847,201
Alison L. May(2) ........ 0 0 0 200,000 0 1,227,000
Myles McCormick ......... 0 0 0 40,000 0 357,000
Lawrence H. Meyer(3) 33,332 53,138 0 0 0 0
- ----------
(1) Value is based on the $14.26 per share closing price of our common stock
on the Nasdaq Stock Market on February 1, 2002, less the exercise price.
(2) Ms. May terminated employment with us on April 7, 2002. As of that date,
options to purchase 9,607 shares were vested and exercisable and any
unvested options terminated. Her vested options will expire 30 days after
termination to the extent that they are not exercised.
(3) Mr. Meyer terminated his employment with us in July 2001. All unexercised
options previously granted to Mr. Meyer have expired.
Plans Not Subject to Stockholder Action
The following table sets forth certain information with respect to the
shares of our common stock that were authorized for issuance under all of our
equity compensation plans in effect as of the end of our last fiscal year. The
table does not include shares that will be authorized pursuant to the 2002
Stock Incentive Plan or the 1993 Amended and Restated Employee Stock Purchase
Plan submitted to the stockholders for approval at the Annual Meeting. We do
not have any equity compensation plans that have not been approved by our
stockholders.
Number of Shares Weighted-Average Number of Shares
to be Issued Upon Exercise Price Remaining Available
Exercise of of Outstanding for Issuance
Outstanding Options, Options, Warrants Under Equity
Plan Category Warrants and Rights and Rights Compensation Plans
- ------------- ---------------------- ------------------- --------------------
Equity Compensation Plans Approved
by Stockholders .................. 4,073,187(1) $8.85 281,150(2)
Equity Compensation Plans Not
Approved by Stockholders ......... 0 0 0
Total ............................. 4,073,187 $8.85 281,150
- ----------
(1) Of these shares, options to purchase 4,072,373 shares of common stock
were outstanding under our 1993 Stock Option Plan and options to purchase
814 shares of common stock were outstanding under our 1982 Stock Option
Plan.
(2) Of these shares, a maximum of 200,000 per year were available for grant
as stock purchase rights under the 1993 Stock Option Plan. Assuming we
receive stockholder approval of the 2002 Plan proposed for adoption at
the Annual Meeting, we will suspend the 1993 Plan and such shares will no
longer be available for issuance as stock purchase rights. The 2002 Plan
does not allow for the grant of stock purchase rights.
Employment Contracts and Termination of Employment and Change-of-Control
Arrangements
Gymboree offers its executives certain benefits under its Management
Change of Control Plan, its Management Severance Plan for persons hired prior
to September 2000 (the "First Management
15
Severance Plan") and its Management Severance Plan for persons hired during or
after September 2000 (the "Second Management Severance Plan"). Under the
Management Change of Control Plan, executives who are participants in the plan
are eligible to receive certain lump-sum payments and continued benefits if
their employment terminates on an involuntary basis within 18 months following
a Change of Control of the Company (as defined below). Under the plan, an
employee will generally be deemed to have been involuntarily terminated upon
(i) a significant reduction in title, duties or responsibilities, (ii) a
reduction in annual base salary or in the annual maximum dollar amount of
potential cash bonuses, (iii) a material reduction in the kind or level of
employee benefits so that the overall benefits package is significantly
reduced, (iv) a relocation to a place of employment more than 25 miles from the
previous place of employment, (v) a purported termination other than for
disability or cause (as each is defined in the plan), or (vi) the failure of
the Company's successor to assume the obligations of the Company under the
plan.
Under the First Management Severance Plan, executives who are participants
in the plan are eligible to receive certain lump-sum payments if their
employment with the Company terminates on an involuntary basis unrelated to a
Change of Control of the Company. For purposes of the First Management
Severance Plan, an employee will generally be deemed to have been involuntarily
terminated upon any termination other than for disability or cause (as each is
defined in the plan) or the failure of the Company's successor to assume the
obligations of the Company under the plan. An involuntary termination will not
be deemed to have occurred solely by virtue of: (i) a reduction in title,
duties or responsibilities, (ii) a reduction in annual base salary or in the
annual maximum dollar amount of potential cash bonuses, or (iii) a reduction in
the kind or level of employee benefits.
Under the Second Management Severance Plan, executives who are
participants in the plan are eligible to receive certain payments over a
12-month period (subject to cessation or adjustment if the executives accept
offers of employment elsewhere) if their employment with the Company terminates
on an involuntary basis unrelated to a Change of Control of the Company. For
purposes of the Second Management Severance Plan, an employee will generally be
deemed to have been involuntarily terminated upon (i) a significant reduction
in title, duties or responsibilities, (ii) a reduction in annual base salary or
in the annual maximum dollar amount of potential cash bonuses, (iii) a material
reduction in the kind or level of employee benefits so that the overall
benefits package is significantly reduced, (iv) a relocation to a place of
employment more than 25 miles from the previous place of employment, (v) a
purported termination other than for disability or cause (as each is defined in
the plan), or (vi) the failure of the Company's successor to assume the
obligations of the Company under the plan.
For the purposes of the foregoing plans, a "Change of Control" of the
Company is generally defined as (1) an acquisition of 50% or more of the voting
power in the Company, (2) a change in the composition of the Board of Directors
of the Company in a two-year period, without the approval of the "Incumbent
Directors" (as defined in the plan), that results in fewer than a majority of
the Incumbent Directors remaining in office, (3) the completion of a merger
where the existing stockholders of the Company do not hold more than 50% of the
voting power of the surviving entity, or (4) the sale or disposition of all or
substantially all of the assets of the Company.
In the event of a Change of Control, all outstanding awards under the 1993
Stock Option Plan and the 2002 Stock Incentive Plan will become immediately
vested and exercisable on that date and will be terminated in exchange for cash
payments calculated by a formula under the appropriate plan. The 1993 Plan and
the 2002 Plan define a "Change of Control" as the acquisition by any person
other than Gymboree, a subsidiary of Gymboree or an employee benefit plan of
Gymboree of 50% or more of the voting power of our outstanding securities, a
merger or consolidation that would result in a change of ownership of at least
50% of the voting securities, or a change in the Board of Directors such that
the majority of directors are no longer "incumbent directors" as that term is
defined in the 1993 Plan and the 2002 Plan.
Under our 1993 Amended and Restated Employee Stock Purchase Plan, in the
event of merger or sale of all or substantially all of our assets, the option
to purchase shares granted under the ESPP will be assumed and substituted for
by the successor corporation unless the Board of Directors determines in its
sole discretion to shorten the offering period and set a new purchase date
prior to such merger or sale of assets.
16
Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for reviewing and approving our
compensation policies and the levels of compensation paid to executive
officers.
The following is the report of the Compensation Committee describing
compensation policies and philosophy applicable to our executive officers with
respect to compensation paid to such executive officers for the fiscal year
ended February 2, 2002.
Compensation Philosophy
The general philosophy of our compensation program is to offer executive
officers competitive compensation based both on Gymboree's performance and on
the individual's contribution and performance. Our compensation policies are
intended to motivate, reward and retain highly qualified executives for
long-term strategic management and the enhancement of stockholder value, to
support a performance-oriented environment that rewards achievement of specific
internal Company goals and to attract and retain executives whose abilities are
critical to our long-term success.
There are three main components of our executive compensation program:
o Base Salary
o Annual Bonus
o Stock Incentives
Base Salary
Executive officers' salaries have been targeted at a level that, when
combined with the annual bonus, is at or above the average rates offered by
competitive companies. The Compensation Committee believes that these rates are
necessary to retain key employees. The Compensation Committee reviews and
approves salaries for the Chief Executive Officer and the executive officers on
an annual basis, generally in the first fiscal quarter.
Annual Bonus
Annual incentive bonuses for executive officers are intended to reflect
the Compensation Committee's belief that a significant portion of the annual
compensation of each executive officer should be contingent upon our
performance, as well as the individual contribution of each officer.
To carry out this philosophy, we have implemented The Gymboree Corporation
Discretionary Bonus Plan (the "Discretionary Bonus Plan"), which provides
executive officers and other employees the opportunity to earn annual incentive
bonuses. The purpose of the Discretionary Bonus Plan is to attract, retain,
motivate and reward employees by directly linking the amount of any cash bonus
to specific corporate and/or divisional financial goals. To this end, specific
earnings measurements are defined each year and threshold, target and maximum
payout levels are established to reflect our objectives. These goals and the
potential amounts of bonuses are reviewed and approved by the Compensation
Committee in the first fiscal quarter of each year. The Compensation Committee
also takes into consideration the need to recruit and retain senior management
talent in a competitive employment environment. The Compensation Committee
believes that the Discretionary Bonus Plan provides an excellent link between
earnings performance and the incentives paid to executives.
Stock Incentives
We use stock options as long-term incentives to reward and retain
executive officers. The Compensation Committee believes that these programs
serve to link management interests with stockholder interests and to motivate
executive officers to make long-term decisions that are in our best interests
and that will, over the long-term, promote better returns to stockholders.
17
Stock options are granted to executive officers periodically. Generally,
stock options vest over four years following the grant date. Options cease
vesting upon termination of the holder's employment service relationship with
us. Under the terms of options that are currently outstanding, the holder will
have 30 days in which to exercise the vested portion of the option following
termination. However, we intend that future options granted by us will
typically have a 90-day post termination exercise period. The Compensation
Committee believes that stock option grants provide an incentive that focuses
the executives' attention on the Company from the perspective of an owner with
an equity stake in the business. Because options are typically granted with an
exercise price equal to the fair market value of the common stock on the date
of the grant, our stock options are tied to the future performance of our
common stock and will provide value to the recipient only when the price of our
common stock increases above the exercise price, that is, only to the extent
that stockholders as a whole have benefited.
Compensation of the Chief Executive Officers
The compensation paid to Lisa M. Harper and Stuart G. Moldaw during fiscal
year 2001 was established in accordance with the guidelines applicable to all
executive officers, set forth above. Based on the continued improvement of the
Company's financial position, including a return to profitability, and the
strengthening of our sales and marketing strategies under Ms. Harper's
leadership, the Compensation Committee determined that the compensation and
bonus amounts paid to Ms. Harper for her role as Chief Executive Officer in the
last fiscal year were in keeping with the contribution she made to the Company
during the year.
THE COMPENSATION COMMITTEE
Walter F. Loeb, Chairman
Michael Steinberg
18
Performance Graph
The following line graph compares the annual percentage change in the
cumulative total stockholder return for our common stock with the Nasdaq U.S.
Index and a SEC defined peer group of companies identified as SIC Code 5600 and
whose primary business is the operation of apparel and accessory retail stores
(the "Peer Group"). The graph assumes that $100 was invested in our common
stock on February 2, 1997. In accordance with the guidelines of the SEC, the
stockholder return for each entity in the Peer Group has been weighted on the
basis of market capitalization as of each measurement date set forth in the
graph. The information in the graph is provided in annual intervals. Historical
stock price performance should not be considered indicative of future stock
price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THE GYMBOREE CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
Cumulative Total Return
-------------------------------------------------------------------
2/2/97 1/31/98 1/30/99 1/29/00 2/3/01 2/2/02
THE GYMBOREE CORPORATION 100.00 114.67 34.24 20.38 65.22 62.00
NASDAQ STOCK MARKET (U.S.) 100.00 117.99 184.64 288.57 202.09 143.01
PEER GROUP 100.00 159.63 269.88 233.30 257.07 207.21
* $100 Invested on 2/2/97 in stock or on 1/31/97 in index-including
reinvestment of dividends.
19
Certain Relationships and Related Transactions
In July 2001, we entered into a promissory note with Lisa M. Harper, our
Chief Executive Officer, under which she is obligated to repay us a principal
sum of $115,000 at an interest rate of 5.50% per annum, compounded annually.
The principal amount and all accrued interest is payable in its entirety in
July 2005. As of April 18, 2002, the outstanding principal and interest due on
the promissory note was $119,644. If Ms. Harper voluntarily ceases 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.
In February 2002, we renegotiated a promissory note with Ms. Harper under
which she is obligated to repay us a principal sum of $85,000 at an interest
rate of 6.15% per annum due in installments ending March 2006. As of April 18,
2002, the outstanding principal and interest due on the promissory note was
$95,756. If Ms. Harper ceases to be a full-time employee of Gymboree prior to
the date the note is fully repaid, the remaining balance of the principal sum
will be immediately due and payable.
In July 2001, the Company entered into a Separation Agreement and Release
with Lawrence H. Meyer, our Management Advisor during part of 2001 and formerly
our Senior Vice President and Chief Financial Officer. Pursuant to the terms of
that Separation Agreement, we paid Mr. Meyer a lump-sum payment on termination
of $270,000 and forgave Mr. Meyer's debt to us in the amount of $59,800
representing the outstanding amount on a promissory note that Mr. Meyer was
obligated to repay in installments ending March 2004. In exchange for the
foregoing, Mr. Meyer agreed to release Gymboree from all claims, if any,
including any claims he may have had for payments under the First Management
Severance Plan.
In September 2001, Stuart G. Moldaw exercised warrants to purchase 252,525
shares of common stock of the Company at $2.97 per share. The fair market value
of our common stock on the date of exercise was $6.69. Mr. Moldaw acquired the
warrants in May 2000 in connection with Gymboree's issuance of 3,198,670 shares
of common stock at $2.97 per share and attached warrants to purchase 479,803
shares of common stock at $2.97 per share. A total of 252,525 warrants were
issued to Mr. Moldaw.
During fiscal year 2001, Gymboree sold $2.7 million of apparel and
accessories to Ross Stores, Inc., a retailer for which Stuart G. Moldaw serves
as a director and Chairman Emeritus.
In April 2002, the Company entered into a General Waiver and Release with
Alison L. May, our former Executive Vice President, Chief Operating Officer,
Secretary and Acting Chief Financial Officer. Pursuant to the terms of that
agreement, we paid Ms. May, upon termination of her employment, a severance
payment of $162,500. In exchange for the foregoing, Ms. May agreed to release
Gymboree from all claims, if any, she may have had for severance or otherwise
upon termination of her employment.
Security Ownership
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's common stock as of April
18, 2002 by (i) each beneficial owner of more than 5% of the Company's common
stock, (ii) each director and each nominee, (iii) each Named Executive Officer,
and (iv) all current directors and executive officers as a group. Except as
otherwise indicated, each person has sole voting and investment power with
respect to all shares shown as beneficially owned, subject to community
property laws where applicable.
Except as indicated below, the address for each listed director and
officer is c/o The Gymboree Corporation, 700 Airport Boulevard, Suite 200,
Burlingame, California 94010. The number of shares outstanding used in
calculating the percentages in the table below includes the shares underlying
options or warrants held by such person that are exercisable within 60 days of
April 18, 2002, but excludes shares underlying options or warrants held by any
other person. Percentage of beneficial ownership is based on 28,831,304 shares
outstanding as of April 18, 2002.
20
Amount and Nature of
Name and Address of Beneficial Owners Beneficial Ownership Percent of Class
- ------------------------------------- --------------------- ----------------
Stuart G. Moldaw (1) .................. 2,941,177 9.9%
Lord, Abbett & Co (2) ................. 1,629,295 5.7%
90 Hudson Street
Jersey City, NJ 07302
U.S. Bancorp (3) ...................... 1,465,576 5.1%
601 -- 2nd Avenue South
Minneapolis, MN 55402
Dimensional Fund Advisors (4) ......... 1,453,100 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Lisa M. Harper (5) .................... 248,882 *
Alison L. May (6) ..................... 7,395 *
Myles McCormick (7) ................... 11,654 *
Lawrence H. Meyer ..................... 0 *
Walter Loeb (8) ....................... 54,671 *
Barbara L. Rambo (9) .................. 12,500 *
William U. Westerfield (10) ........... 8,625 *
Michael Steinberg (11) ................ 625 *
John C. Pound (12) .................... 365,433 1.3%
All directors and officers as a group
(8 persons) (13) ..................... 3,643,567 12.1%
- ----------
* Less than 1%.
(1) Includes 839,992 shares underlying options that are exercisable within 60
days of April 18, 2002. Voting and/or dispositive power is shared for
certain of these shares with Stuart G. Moldaw and Phyllis I. Moldaw,
Trustees for the SGM and PIM Trust, a California living trust, and the
Moldaw Variable Fund.
(2) According to a 13F filed with the SEC on April 11, 2002, Lord, Abbett &
Co. beneficially owned 1,629,295 shares, or 5.7% of the Company's common
stock.
(3) According to a 13G filed with the SEC on February 13, 2002, U.S. Bancorp,
a holding company, beneficially owned 1,465,576 shares, or 5.1% of the
Company's common stock, of which dispositive power is shared for 1,875 of
those shares with U.S. Bancorp Asset Management Inc. The 13G indicates
that U.S. Bancorp has made the filing on behalf of certain of its
subsidiaries, U.S. Bank National Associates, U.S. Bancorp Piper Jaffray,
Inc. and U.S. Bancorp Asset Management, Inc. The filing further states
that U.S. Bancorp Asset Management, Inc., an investment advisory company,
beneficially owns 1,462,322 shares, of which dispositive power is shared
for 1,875 of those shares with U.S. Bancorp.
(4) According to a 13G filed with the SEC on February 12, 2002, Dimensional
Fund Advisors beneficially owns 1,453,100 shares, or 5.0% of the
Company's common stock.
(5) Includes 248,882 shares underlying options that are exercisable within 60
days of April 18, 2002.
(6) Includes 0 shares underlying options that are exercisable within 60 days
of April 18, 2002. Ms. May terminated her employment with us as of April
7, 2002. Any options that were vested as of that date will expire 30 days
after her termination to the extent that they are not exercised.
(7) Includes 11,654 shares underlying options that are exercisable within 60
days of April 18, 2002.
21
(8) Includes 14,750 shares underlying options and 5,051 shares underlying
warrants that are exercisable within 60 days of April 18, 2002.
(9) Includes 11,500 shares underlying options that are exercisable within 60
days of April 18, 2002.
(10) Includes 8,625 shares underlying options that are exercisable within 60
days of April 18, 2002.
(11) Includes 625 shares underlying options that are exercisable within 60
days of April 18, 2002.
(12) Includes 625 shares underlying options that are exercisable within 60
days of April 18, 2002. Also includes 89,050 shares and 75,758 shares
underlying warrants held by Asdale, Ltd., and 200,000 shares held by
Nettlestone, Ltd., corporations for which Mr. Pound acts as an advisor by
virtue of being the controlling stockholder in Integrity Partners, Inc.
(13) Includes 1,136,653 shares underlying options and 80,809 shares underlying
warrants that are exercisable within 60 days of April 18, 2002. Ms. May
and Mr. Meyer were not officers of Gymboree as of April 18, 2002 and
therefore are not included in this group.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors and persons who
own more than 10% of a registered class of our equity securities to file an
initial report of ownership on Form 3 and changes in ownership on Form 4 or 5
with the SEC and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than 10% stockholders are also required by SEC
rules to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons, we believe that, with
respect to fiscal year 2001, all filing requirements applicable to our
officers, directors and 10% stockholders were met.
Deadline for Receipt of Stockholder Proposals for 2003 Annual Meeting
Proposals of stockholders of Gymboree which are intended to be presented
by such stockholders at our 2003 Annual Meeting must be received by us no later
than January 10, 2003 in order that they may be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
In addition, our bylaws establish an advance notice procedure for
stockholder proposals, including nominations for the election of directors. A
copy of the full text of the bylaw provisions setting forth the advance notice
procedure may be obtained by writing to our Secretary. For proposals and
nominations to be properly brought before the 2003 Annual Meeting by a
stockholder, the stockholder must provide written notice delivered to or mailed
to and received by our Secretary at our principal executive offices no later
than January 10, 2003. Any notice of a proposal or nomination received by us
after that date will be considered untimely.
22
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting or any
adjournment or postponement thereof, it is the intention of the persons named
in the enclosed form of proxy to vote the shares they represent as the Board of
Directors may recommend.
Copies of The Gymboree Corporation Annual Report to Stockholders are being
mailed to stockholders, together with this Proxy Statement. Additional copies
may be obtained from the Secretary of Gymboree at 700 Airport Boulevard, Suite
200, Burlingame, California 94010.
The Annual Report of The Gymboree Corporation on Form 10-K for the fiscal
year ended February 2, 2002, as filed with the Securities and Exchange
Commission, is included in The Gymboree Corporation 2001 Annual Report to
Stockholders.
FOR THE BOARD OF DIRECTORS
/s/ Myles Mccormick
MYLES McCORMICK
Secretary
Dated: May 10, 2002
23
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ANNEX A
THE GYMBOREE CORPORATION
2002 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this 2002 Stock Incentive Plan
are:
o to attract and retain the best available personnel,
o to provide additional incentive to Employees, Consultants and Outside
Directors, and
o to promote the success of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
"Administrator" means the Board or any Committee as shall be administering
the Plan, in accordance with Section 4 of the Plan.
"Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans under state corporate and securities
laws and the Code.
"Board" means the Board of Directors of the Company.
"Cause" means, unless otherwise defined in the instrument evidencing the
Option or in a written employment or services agreement between the Company or
a Subsidiary or Parent and the Optionee, means dishonesty, fraud, misconduct,
unauthorized use, or disclosure of confidential information or trade secrets,
or conviction or confession of a crime punishable by law (except minor
violations), in each case as determined by the Plan Administrator, and its
determination shall be conclusive and binding.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee appointed by the Board in accordance with
Section 4 of the Plan.
"Common Stock" means the Common Stock of the Company.
"Company" means The Gymboree Corporation, a Delaware corporation.
"Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for
such services, so long as such Consultant (a) renders bona fide services that
are not in connection with the offer and sale of the Company's securities in a
capital-raising transaction and (b) does not directly or indirectly promote or
maintain a market for the Company's securities.
"Continuous Status as an Employee, Consultant or Outside Director" means
that the employment, consulting or Outside Director relationship is not
interrupted or terminated by the Company, any Parent or Subsidiary. Continuous
Status as an Employee, Consultant or Outside Director shall not be considered
interrupted in the case of: (i) change of status from an Employee to a
Consultant; (ii) change in status from a Consultant to an Employee; (iii) any
leave of absence approved by the Administrator, including sick leave, military
leave, or any other personal leave; provided, however, that for purposes of
Incentive Stock Options, any such leave may not exceed ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute; or (iv) transfers between
locations of the Company or between the Company, its Parent, its Subsidiaries
or its successor.
"Director" means a member of the Board.
"Disability" unless otherwise defined by the Administrator or in an
employment contract means total and permanent disability as defined in Section
22(e)(3) of the Code.
"Employee" means any person employed by the Company or any Parent or
Subsidiary of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the per share value of Common Stock determined
in good faith by the Administrator or, if the Common Stock is (a) listed on the
Nasdaq National Market, the closing sales price
A-1
for the Common Stock as reported by that market for regular session trading for
a single trading day (b) listed on the New York Stock Exchange or the American
Stock Exchange, the closing sales price for the Common Stock as such price is
officially quoted in the composite tape of transactions on such exchange for
regular session trading for a single trading day, (c) quoted on the Nasdaq
SmallCap Market, the last sales price as reported by that market for a single
trading day, or (d) quoted on the OTC Bulletin Board Service or by the National
Quotation Bureau, Inc., the average of the high bid and low asked prices
reported by such service for a single trading day. If there is no such reported
price for the Common Stock for the date in question, then such price on the
last preceding date for which such price exists shall be determinative of Fair
Market Value.
"Incentive Stock Option" means an Option granted with the intention to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
"Nonstatutory Stock Option" means an Option granted with the intention to
not qualify as an Incentive Stock Option.
"Notice of Grant" means a written notice evidencing certain terms and
conditions of an individual Option. The Notice of Grant is part of the Option
Agreement.
"Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
"Option" means the right to purchase Common Stock granted pursuant to the
Plan.
"Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option. The
Option Agreement is subject to the terms and conditions of the Plan.
"Optioned Stock" means the Common Stock subject to an Option.
"Optionee" means an Employee, Consultant or Outside Director who holds an
outstanding Option.
"Outside Director" means a member of the Board who is not an Employee or a
Consultant.
"Parent" means a "parent corporation," whether now or hereafter existing,
as defined in Section 424(e) of the Code.
"Plan" means The Gymboree Corporation 2002 Stock Incentive Plan, as
amended and restated from time to time.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the
Plan.
"Securities Act" means the Securities Act of 1933, as amended.
"Share" means a share of the Common Stock, as adjusted in accordance with
Section 12 of the Plan.
"Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be authorized for
issuance under the Plan is 1,100,000 Shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. However, should the
Company reacquire Shares that were issued pursuant to the exercise of an
Option, such Shares shall not become available for future grant under the Plan.
In addition, (a) any authorized shares not issued or subject to
outstanding awards under the Company's 1993 Stock Option Plan (the "Prior
Plan") on the date of stockholder approval of the Plan and (b) any shares
subject to outstanding awards under the Prior Plan on such date that cease to
be subject to such awards (other than by reason of exercise or settlement of
the awards to the extent they are exercised for or settled in Shares), up to an
aggregate maximum of 4,231,075 shares, subject to adjustment from time to time
as provided in Section 12, shall cease, as of such date, to be available for
grant and issuance under the Prior Plan, but shall be available for issuance
under the Plan.
A-2
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares that were subject thereto shall
become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to
different groups of persons providing services to the
Company.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted
hereunder as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the
Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a
Committee, which committee shall be constituted to satisfy
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i) to select the Consultants and Employees to whom Options may
be granted hereunder;
(ii) to determine whether and to what extent Options are granted
hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option;
(iv) to approve forms of agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option. Such terms and
conditions may include, but are not limited to, the
exercise price, the time or times when Options may be
exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or
the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole
discretion, shall determine;
(vi) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with
respect to an Option shall be deferred either automatically
or at the election of the participant (including providing
for and determining the amount (if any) of any deemed
earnings on any deferred amount during any deferral
period);
(vii) to construe and interpret the terms of the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(ix) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option
previously granted by the Administrator;
(x) to determine the terms and restrictions applicable to
Options; and
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and
binding on all Optionees.
A-3
(d) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing
particular forms of Options to one or more classes of grantees on
such terms and conditions as determined by the Administrator from
time to time.
5. Eligibility.
(a) Options may be granted to Employees, Consultants and Outside
Directors of the Company and any Subsidiary or Parent as the
Administrator from time to time selects, provided that (i)
Incentive Stock Options may only be granted to Employees and (ii)
only Nonstatutory Stock Options may be granted to Outside
Directors, and such grants may only be made in accordance with the
provisions of Section 5(b) hereof.
(b) All grants of Options to Outside Directors under this Plan shall
be automatic and non-discretionary and shall be made in accordance
with the following provisions:
(i) On the date first elected to the Board (the "Initial
Grant") and on each anniversary date of such election (the
"Annual Grant") thereafter during his or her term as an
Outside Director, each Outside Director shall automatically
receive an Option to purchase 2,500 Shares. In addition,
each Outside Director who is appointed the chairperson of a
committee of the Board shall receive an Option to purchase
500 Shares as of the date of Board approval of such
appointment (the "Committee Grant").
(ii) The terms of an Option granted to an Outside Director shall
be as follow:
(A) the term of the Option shall be ten (10) years;
(B) except as otherwise provided in Section 10 of the
Plan, the Option shall be exercisable only while the
Outside Director remains a Director;
(C) the exercise price shall be 100% of the Fair Market
Value on the date of grant of the Option;
(D) the Initial Grant shall vest and become exercisable
one-fourth (1/4th) on the one-year anniversary of
the date of grant, and an additional
one-forty-eighth (1/48th) shall vest at the end of
each one month period thereafter;
(E) the Annual Grant shall vest and become exercisable
one-forty-eighth (1/48th) at the end of each one
month period following the date of grant; and
(F) the Committee Grant shall vest and become
exercisable one-forty-eighth (1/48th) at the end of
each one month period following the date of grant;
provided, that if the date of grant occurs before
the first anniversary of an Outside Director's
initial election to the Board ("First Anniversary
Date"), no vesting shall occur prior to the First
Anniversary Date but on the First Anniversary Date,
vesting shall occur on a pro-rated basis for the
period from the date of grant to the First
Anniversary Date.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the
aggregate Fair Market Value on the date of grant: (i) of Shares
subject to an Optionee's Incentive Stock Options which (ii) become
exercisable for the first time during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory
Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be
determined as of the time of grant.
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(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's employment
relationship, consulting relationship or directorship with the
Company, nor shall they interfere in any way with the Optionee's
right or the Company's right to terminate such relationship at any
time, with or without Cause.
(c) The following limitations shall apply to grants of Options:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 400,000 Shares.
(ii) In connection with his or her initial service or promotion,
an Employee may be granted Options to purchase up to an
additional 400,000 Shares, which shall not count against
the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's
capitalization as described in Section 12.
7. Term of Plan. Subject to Section 20 of the Plan and any resolution of
the Board of Directors concerning effectiveness, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its
approval by the stockholders of the Company as described in Section 20 of the
Plan. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by
the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the
voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market
Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions that
must be satisfied before the Option may be exercised. In so doing,
the Administrator may specify that an Option may not be exercised
until the completion of a service period.
(c) Payment of Exercise Price. The exercise price for shares purchased
under an Option shall be paid in full to the Company by delivery
of the consideration equal to the product of the Option exercise
price and the number of shares purchased. Such consideration must
be paid before the Company will issue or cause to be issued the
Shares being purchased and must be in a form or combination of
forms acceptable to the Administrator for that purchase, which
forms may include:
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(i) cash;
(ii) check;
(iii) promissory note (which note shall bear a rate of interest
and contain such terms, including that such note shall be
full recourse, as necessary to avoid charges to the
Company's earnings for financial reporting purposes);
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender, and (B) have
a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) as long as the Common Stock is registered under Section
12(b) or 12(g) of the Exchange Act, delivery of a properly
executed exercise notice, together with irrevocable
instructions to a brokerage firm designated by the Company
to deliver promptly to the Company the aggregate amount of
sale or loan proceeds to pay the Option exercise price and
any withholding tax obligations that may arise in
connection with the exercise, all in accordance with the
regulations of the Federal Reserve Board; or
(vi) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable
Laws.
(d) Repricing of Options. Except as set forth in Section 12, the
exercise price of outstanding Options may not be changed without
stockholder approval of such change.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of
the Plan and at such times and under such conditions as determined
by the Administrator and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company (or a Company
designated representative) receives: (i) written notice of exercise (in
accordance with the Option Agreement) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option
is exercised. Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Option Agreement
and the Plan. Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan. Exercising
an Option in any manner shall decrease the number of Shares thereafter
available, both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
(b) Termination of Employment Relationship, Consulting Relationship or
Directorship. In the event that an Optionee's Continuous Status as
an Employee, Consultant or Outside Director terminates (other than
upon the Optionee's death or Disability), the Optionee may
exercise his or her Option, but only within such period of time as
is determined by the Administrator, and only to the extent that
the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant). In the case
of an Incentive Stock Option, the Administrator shall determine
such period of time (in no event to exceed ninety (90) days
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from the date of termination) when the Option is granted. If, at
the date of termination, the Optionee is not entitled to exercise
his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option
within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to
the Plan. An Optionee's transfer of employment or service
relationship between or among the Company or a Parent, or a
Subsidiary shall not be considered a termination of termination
for purposes of this Section 10.
(c) Disability of Optionee. In the event that an Optionee's Continuous
Status as an Employee, Consultant or Outside Director terminates
as a result of the Optionee's Disability, the Optionee may
exercise his or her Option at any time within twelve (12) months
from the date of such termination, but only to the extent that the
Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant). If, at the
date of termination, the Optionee is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option
within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the
expiration of the term of such Option as set forth in the Notice
of Grant), by the Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the
Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after death, the Optionee's estate
or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the
time specified herein, the Option shall terminate, and the Shares
covered by such Option shall immediately revert to the Plan.
11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. The number of shares of Common Stock
covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which
have been returned to the Plan upon cancellation or expiration of
an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration." Such adjustment
shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common
Stock subject to an Option.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an
Option has not been previously exercised, it will terminate
immediately prior to the consummation of such proposed action. The
Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date
fixed by the Board and give each Optionee the right to exercise
his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be
exercisable.
(c) Merger or Asset Sale. Subject to the provisions of paragraph (d)
hereof, in the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Option shall be assumed or
an equivalent option or right shall be substituted by the
successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent option
or right, the Administrator shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to
exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If the
Administrator makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of
assets, the Administrator shall notify the Optionee that the
Option shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option will terminate
upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following
the merger or sale of assets, the option or right confers the
right to purchase, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of
a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets was
not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor
corporation and the Optionee, provide for the consideration to be
received upon the exercise of the Option, for each Share of
Optioned Stock subject to the Option, to be solely common stock of
the successor corporation or its Parent equal in Fair Market Value
to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
(d) Change of Control. In the event of a "Change of Control" of the
Company, as defined in paragraph (e) below, the following
acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date on which such Change
of Control is determined to have occurred that are not yet
exercisable and vested on such date shall become fully
exercisable and vested;
(ii) To the extent that they are exercisable and vested, all
outstanding Options, unless otherwise determined by the
Board at or after grant, shall be terminated in exchange
for a cash payment at the Change of Control Price (defined
below), reduced by the exercise price applicable to such
Options. These cash proceeds shall be paid to the Optionee
or, in the event of death of an Optionee prior to payment,
to the estate of the Optionee or to a person who acquired
the right to exercise the Option by bequest or inheritance.
(e) Definition of "Change of Control." For purposes of this Section
12, a "Change of Control" means the happening of any of the
following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company employee benefit plan, including
any trustee of such plan acting as trustee) is or becomes
the "beneficial
A-8
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined
voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors; or
(ii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation,
or the stockholders of the Company approve an agreement for
the sale or disposition by the Company of all or
substantially all the Company's assets; or
(iii) A change in the composition of the Board of Directors of
the Company, as a result of which fewer than a majority of
the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are
directors of the Company as of the date the Plan is
approved by the stockholders, or (B) are elected, or
nominated for election, to the Board of Directors of the
Company with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose
election or nomination is in connection with an actual or
threatened proxy contest relating to the election of
directors to the Company).
(f) Change of Control Price. For purposes of this Section 12, "Change
of Control Price" shall be, as determined by the Board, (i) the
highest Fair Market Value of a Share within the 60-day period
immediately preceding the date of determination of the Change of
Control Price by the Board (the "60-Day Period"), or (ii) the
highest price paid per Share, as determined by the Board, in any
bona fide transaction related to the Change of Control of the
Company, at any time within the 60-Day Period, or (iii) such lower
price as the Board, in its discretion, determines to be a
reasonable estimate of the fair market value of a Share.
13. Withholding. The Company may require the Optionee to pay to the Company
the amount of any taxes that the Company is required by applicable federal,
state, local or foreign law to withhold with respect to the grant, vesting or
exercise of an Option. The Company shall not be required to issue any shares of
Common Stock under the Plan until such obligations are satisfied.
The Administrator may permit or require an Optionee to satisfy all or part
of his or her tax withholding obligations by (a) paying cash to the Company,
(b) having the Company withhold from any cash amounts otherwise due or to
become due from the Company to the Optionee, or (c) having the Company withhold
a number of shares of Common Stock that would otherwise be issued to the
Optionee having a value equal to the tax withholding obligations, or (d)
surrendering a number of shares of Common Stock the Optionee already owns
having a value equal to the tax withholding obligations. The value of the
Shares so withheld may not exceed the employer's minimum required tax
withholding rate, and the value of the Shares so tendered may not exceed such
rate to the extent the Optionee has owned the surrendered shares for less than
six months if such limitation is necessary to avoid a charge to the Company for
financial reporting purposes.
14. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
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15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of the Plan and any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws, including,
without limitation, the requirements of any exchange or quotation
system on which the Common Stock is listed or quoted.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the
Optionee and the Administrator, which agreement must be in writing
and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, and the requirements of
any stock exchange or quotation system upon which the Shares may
then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option
to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is
required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Choice of Law. The Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the laws of the United
States, shall be governed by the laws of the state of California without giving
effect to principles of conflicts of law.
20. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the manner and to the degree required under Applicable Law.
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ANNEX B
THE GYMBOREE CORPORATION
1993 AMENDED AND RESTATED EMPLOYEE STOCK
PURCHASE PLAN
The following constitute the provisions of the 1993 Amended and Restated
Employee Stock Purchase Plan of the Gymboree Corporation.
1. Purpose. The purpose of the Plan is to provide eligible employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that
section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean The Gymboree Corporation, a Delaware
corporation.
(e) "Designated Subsidiary" shall mean the Subsidiaries which have been
designated by the Board (or any committee acting as Plan
Administrator) from time to time in its sole discretion as eligible
to participate in the Plan.
(f) "Eligible Compensation" shall mean all base straight time gross
earnings plus payments of overtime, shift premiums and commissions,
but excluding incentive compensation, incentive payments, bonuses,
awards, severance pay, living and relocation bonuses, pay in lieu of
vacations, gain from stock option exercises, and other special
compensation.
(g) "Eligible Employee" shall mean any individual who is a regular
employee of the Company or a Designated Subsidiary for purposes of
tax withholding under the Code and, for purposes of the Plan, works
at least twenty (20) hours a week. Further, the employment
relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by
the Company. Where the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed
to have terminated on the 91st day of such leave. If the Company
permits any employee of a Designated Subsidiary to participate in
the Plan, then all employees of that Designated Subsidiary who meet
the requirements of this paragraph shall also be considered Eligible
Employees.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "ESPP Broker" shall have the meaning set forth in Section 13(c).
(j) "Exercise Date" shall mean the last day of each Purchase Period.
(k) "Fair Market Value" shall mean the per share value of Common Stock
determined in good faith by the Plan Administrator or, if the Common
Stock is (a) listed on the Nasdaq National Market, the closing sales
price for the Common Stock as reported by that market for regular
session trading for a single trading day, (b) listed on the New York
Stock Exchange or the American Stock Exchange, the closing sales
price for the Common Stock as such price is officially quoted in the
composite tape of transactions on such exchange for regular session
trading for a single trading day, (c) quoted on the Nasdaq SmallCap
Market, the last sales price as reported by that market for a single
trading day, or (d) quoted on the OTC Bulletin Board Service or by
the National Quotation Bureau, Inc., the average of the high bid and
B-1
low asked prices reported by such service for a single trading day.
If there is no such reported price for the Common Stock for the date
in question, then such price on the last preceding date for which
such price exists shall be determinative of Fair Market Value.
(l) "Offering Period" shall have the meaning set forth in Section 4.
(m) "Participant" shall mean any Eligible Employee who has elected to
participate in an Offering Period in accordance with the procedures
in Section 6 and who has not withdrawn from the Plan or whose
participation in the Plan is not otherwise terminated.
(n) "Plan" shall mean this Employee Stock Purchase Plan.
(o) "Plan Administrator" shall have the meaning set forth in Section 14.
(p) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or
the Exercise Date, whichever is lower.
(q) "Purchase Period" shall have the meaning set forth in Section 5.
(r) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
(s) "Trading Day" shall mean a day on which national stock exchanges and
the National Association of Securities Dealers Automated Quotation
(Nasdaq) System are open for trading.
3. Eligibility.
(a) Any Eligible Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Eligible Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Eligible Employee (or any other
person whose stock would be attributable to such Eligible Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%)
or more of the Company or of any Subsidiary of the Company, or (ii)
which permits his or her rights to purchase stock under all employee
stock purchase plans of the Company and its Subsidiaries to accrue
at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth
of stock (determined at the Fair Market Vvalue of the shares at the
time such option is granted) for each calendar year in which such
option is outstanding at any time.
(c) Notwithstanding paragraph (b) above, the maximum number of shares a
Participant may purchase during each Purchase Period of any Offering
Period shall be 2000 Shares (subject to adjustment pursuant to
Section 18), and provided further that such purchase shall be
subject to the limitations set forth in Section 13.
4. Offering Periods. The Plan shall be implemented by a series of
consecutive, overlapping offering periods that each last twelve (12) months
(each, an "Offering Period") with a new Offering Period commencing on the first
Trading Day on or after January 1 and July 1 each year, or on such other date
as the Plan Administrator shall determine, and continuing thereafter until
terminated in accordance with Section 19 hereof. Notwithstanding the foregoing,
the Plan Administrator shall have the power to change the duration of an
Offering Period (including the commencing and ending dates thereof) with
respect to future offerings; provided, however, that no Offering Period may
exceed five (5) years and, further, if the Purchase Price may be less than 85%
of the Fair Market Value of the Common Stock on the Exercise Date, the Offering
Period may not exceed 27 months. If the last day of an Offering Period is not a
regular business day, the last day of the Offering Period shall be deemed to be
the last preceding Trading Day.
5. Purchase Periods. Each Offering Period shall consist of one or more
consecutive purchase periods (each, a "Purchase Period"). The last day of each
Purchase Period shall be the Exercise Date for
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options issued at the commencement of such Purchase Period. A Purchase Period
shall commence on each January 1 and July 1 and shall end on the next June 30
and December 31, respectively. Notwithstanding the foregoing, the Plan
Administrator shall have the power to change the duration of Purchase Periods
(including the commencing and ending dates thereof) with respect to future
Purchase Periods. If the last day of a Purchase Period is not a regular
business day, the last day of the Purchase Period shall be deemed to be the
last preceding Trading Day.
6. Participation.
(a) An Eligible Employee may become a Participant in the Plan by
completing a subscription agreement in the form provided by the
Company and filing it with the Company's Human Resources Department
(as set forth in Section 20 below) at least five (5) business days
prior to the applicable Enrollment Date, unless a later time for
filing the subscription agreement is set by the Plan Administrator
for all eligible Employees with respect to a given Offering Period.
Such subscription agreement shall (a) indicate the Eligible
Employee's election to participate in the Plan, (b) authorize
payroll deductions and state the amount to be deducted regularly
from the Participant's Eligible Compensation and (c) authorize the
purchase of Common Stock for the Eligible Employee in each Purchase
Period.
(b) Payroll deductions for a Participant shall commence on the first
payroll period following the Enrollment Date and shall end on the
last payroll period in the Offering Period, unless sooner terminated
by the Participant as provided in Section 11 hereof.
(c) An Eligible Employee who does not deliver a subscription agreement
pursuant to Section 6(a) hereof shall not participate in the Plan
for that Offering Period or for any subsequent Offering Period
unless such Eligible Employee subsequently enrolls in the Plan by
filing a subscription agreement pursuant to Section 6(a) for such
subsequent Offering Period. The Company may, from time to time,
change the deadline for filing of subscription agreements for future
Offering Periods as deemed advisable by the Plan Administrator, in
its sole discretion, for the proper administration of the Plan.
(d) An employee who becomes eligible to participate in the Plan after an
Offering Period has commenced shall not be eligible to participate
in such Offering Period but may participate in any subsequent
Offering Period, provided that such employee is still an Eligible
Employee as of the commencement of such subsequent Offering Period.
(e) Eligible Employees may not participate in more than one Offering
Period at a time.
(f) A Participant who has elected to participate in an Offering Period
shall automatically participate in the next Offering Period until
such time as the Participant withdraws from the Plan or terminates
employment as provided in Section 11.
7. Payroll Deductions.
(a) At the time a Participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount not exceeding ten
percent (10%) of the Eligible Compensation which he or she receives
on each pay day during the Offering Period, and the aggregate of
such payroll deductions during the Offering Period shall not exceed
ten percent (10%) of the Participant's Eligible Compensation during
said Offering Period. Amounts shall be withheld in whole percentages
only.
(b) Individual accounts shall be maintained for each Participant for
memorandum purposes. All payroll deductions made for a Participant
shall be credited to his or her account under the Plan but shall be
deposited with the general funds of the Company. Subject to Section
7(e), Common Stock acquired pursuant to the exercise of all or any
portion of an option granted under the Plan may be paid for only by
means of payroll deductions from the Participant's Eligible
Compensation and a Participant may not make any additional payments
into such account. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.
B-3
(c) Unless the Plan Administrator establishes otherwise for a future
Offering Period, a Participant may discontinue his or her
participation in the Plan as provided in Section 11 hereof, or may
decrease the rate of his or her payroll deductions, including to 0%,
during the current Purchase Period by filing with the Company's
Human Resources Department (as set forth in Section 20 below) a new
subscription agreement authorizing a decrease in payroll deduction
rate. The decrease in rate shall be effective with the first full
payroll period following five (5) business days after the Company's
receipt of the new subscription agreement unless the Company elects
to process a given change in participation more quickly.
(d) A Participant may increase the rate of his or her payroll deductions
during a current Purchase Period by filing with the Company's Human
Resources Department, a new subscription agreement authorizing the
increase in payroll deduction rate. The increase in rate shall be
effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription
agreement unless the Company elects to process a given change in
participation more quickly. In addition, a Participant may increase
the rate of his or her payroll deductions for an upcoming Purchase
Period by filing with the Company's Human Resources Department (as
set forth in Section 20 below) a new subscription agreement
authorizing an increase in payroll deduction rate within five (5)
business days of the commencement of the upcoming Purchase Period. A
Participant's amended subscription agreement shall remain in effect
for successive Purchase Periods and Offering Periods unless the
Participant again changes such subscription agreement in accordance
with the terms of the Plan or the subscription agreement is
terminated as provided in Section 11. The Board shall be authorized
to limit the number of participation rate changes during any
Offering Period.
(e) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a
Participant's payroll deductions may be decreased to 0% at such time
during any Purchase Period that is scheduled to end during the
current calendar year (the "Current Purchase Period") as the
aggregate of all payroll deductions that were previously used to
purchase stock under the Plan in a prior Purchase Period that ended
during the current calendar year plus all payroll deductions
accumulated with respect to the Current Purchase Period equal
$21,250. Payroll deductions shall recommence at the rate provided in
such Participant's subscription agreement at the beginning of the
first Purchase Period scheduled to end in the following calendar
year, unless terminated by the Participant as provided in Section
11.
(f) During unpaid leaves of absence approved by the Company and meeting
the requirements of the applicable treasury regulations promulgated
under the Code, a Participant may elect to continue participation in
the Plan by continuing to accrue payroll deductions equal to such
amount as if the Participant had not taken a leave of absence.
Currently the treasury regulations provide that a Participant may
continue participation in the Plan only during the first 90 days of
a leave of absence unless the Participant's reemployment rights are
guaranteed by contract or statute.
(g) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan
is disposed of, the Participant must make adequate provision for the
Company's federal, state or other tax withholding obligations, if
any, that arise upon the exercise of the option or the disposition
of the Common Stock. At any time, the Company may, but will not be
obligated to, withhold from the Participant's compensation the
amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to
the Company any tax deductions or benefit attributable to sale or
early disposition of Common Stock by the employee.
8. Grant of Option. On the Enrollment Date of each Offering Period, each
Eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during
B-4
such Offering Period (at the applicable Purchase Price) up to a number of
shares of the Company's Common Stock determined by dividing such Eligible
Employee's payroll deductions accumulated prior to such Exercise Date and
credited to the Participant's memorandum account as of the Exercise Date by the
applicable Purchase Price; provided that such purchase shall be subject to the
limitations set forth in Sections 3(b), 3(c) and 13 hereof. Exercise of the
option shall occur as provided in Section 9, unless the Participant has
withdrawn pursuant to Section 11, and the option shall expire on the last day
of the Offering Period.
9. Exercise of Option. Unless a Participant withdraws from the Plan as
provided in Section 11 below, his or her option for the purchase of shares will
be exercised automatically on each Exercise Date, and the maximum number of
full shares subject to the option shall be purchased for such Participant at
the applicable Purchase Price with the accumulated payroll deductions in his or
her account. No fractional shares will be purchased (unless the Plan
Administrator has determined for a future Offering Period that fractional
shares may be issued under the Plan); any payroll deductions accumulated in a
Participant's account which are not sufficient to purchase a full share shall
remain credited to the Participant's account for the subsequent Purchase
Period, subject to earlier withdrawal by the Participant as provided in Section
11. Any other money left over in a Participant's account after the Exercise
Date shall be returned to the Participant without payment of interest. In the
event that the Participant does not participate in the next Purchase Period,
the entire remaining cash balance shall be refunded to the Participant as soon
as practicable after the Exercise Date without payment of interest. During a
Participant's lifetime, a Participant's option to purchase shares hereunder is
exercisable only by him or her.
10. Delivery. Unless the Plan Administrator has designated or approved an
ESPP Broker pursuant to Section 13(c), as promptly as practicable after each
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to each Participant, as appropriate, of a certificate representing
the shares purchased upon exercise of his or her option.
11. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not used to exercise
his or her option under the Plan at any time by giving written
notice to the Company's Human Resources Department (as set forth in
Section 20 below) in a form provided by the Company for such
purpose. All of the Participant's payroll deductions credited to his
or her account will be paid to such Participant promptly after
receipt of notice of withdrawal and such Participant's option for
the Offering Period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during
the Offering Period. If a Participant withdraws from an Offering
Period, payroll deductions will not resume at the beginning of the
succeeding Offering Period unless the Participant delivers to the
Company a new subscription agreement.
(b) Upon a Participant's ceasing to be an Eligible Employee for any
reason or upon termination of a Participant's employment
relationship (as described in Section 2(g)), the payroll deductions
credited to such Participant's account but not yet used to exercise
the option will be returned to such Participant or, in the case of
his or her death, to the person or persons entitled thereto under
Section 15, and such Participant's option will be automatically
terminated.
(c) No Common Stock shall be purchased on behalf of a Participant on an
Exercise Date if his or her participation in the current Offering
Period or the Plan has terminated on or before such Exercise Date or
if the Participant has otherwise terminated employment prior to such
Exercise Date.
12. Interest. No interest shall accrue on payroll deductions of a
Participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 875,278
shares, subject to adjustment upon changes
B-5
in capitalization of the Company as provided in Section 18. During
any Purchase Period under the Plan, the maximum number of shares of
the Company's Common Stock that shall be made available for sale
under the Plan during such Purchase Period shall be 200,000 shares,
which number of shares shall apply as a cumulative limit to the
number of shares which shall be made available for sale under all
Purchase Periods occurring simultaneously under separate Offering
Periods under the Plan, subject to adjustment upon changes in
capitalization as provided in Section 18. If on a given Exercise
Date the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the
Plan, the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable. Shares issued
under the Plan shall be drawn from authorized and unissued shares or
from shares subsequently acquired by the Company as treasury shares.
(b) The Participant shall not be deemed to be a stockholder of the
Company and will have no interest in or voting right with respect to
shares covered by his or her option until such option has been
exercised and a certificate or its equivalent has been issued to the
Participant for the shares following exercise.
(c) If the Plan Administrator designates or approves a stockbroker or
other financial services firm (the "ESPP Broker") to hold shares
purchased under the Plan for the accounts of Participants, the
following procedures shall apply. Promptly following each Exercise
Date, the number of shares of Common Stock purchased by each
Participant shall be deposited into an account established in the
name of the Participant with the ESPP Broker. Each Participant shall
be the beneficial owner of the Common Stock purchased under the Plan
and shall have all rights of beneficial ownership in such Common
Stock. A Participant shall be free to undertake a disposition of the
shares of Common Stock in his or her account at any time, but, in
the absence of such a disposition, the shares of Common Stock must
remain in the Participant's account at the ESPP Broker until the
holding period set forth in Code Section 423 has been satisfied.
With respect to shares of Common Stock for which the holding period
set forth above has been satisfied, the Participant may move those
shares of Common Stock to another brokerage account of the
Participant's choosing or request that a stock certificate be issued
and delivered to him or her. Dividends paid in the form of shares of
Common Stock with respect to Common Stock in a Participant's account
shall be credited to such account. A Participant who is not subject
to payment of U.S. income taxes may move his or her shares of Common
Stock to another brokerage account of his or her choosing or request
that a stock certificate be delivered to him or her at any time,
without regard to the Code Section 423 holding period.
(d) In the event that no ESPP Broker is designated or approved by the
Plan Administrator, the shares to be delivered to a Participant
under the Plan will be registered in the name of the Participant or
in the name of the Participant and his or her spouse.
(e) By enrolling in the Plan, each Participant agrees to promptly give
the Company notice of any Common Stock disposed of within the later
of one year from the Exercise Date and two years from the Offering
Date for such Common Stock, showing the number of such shares
disposed of and the Exercise Date for such Common Stock. This notice
shall not be required if and so long as the Company has a designated
ESPP Broker.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board or, if and to the
extent the Board or the committee appointed to administer the Plan designates
one or more executive officers to administer the Plan, by such executive
officer(s) (each, the "Plan Administrator"). The Plan Administrator shall have
full and exclusive discretionary authority to construe, interpret and apply the
terms of the Plan, to determine eligibility and to adjudicate all disputed
claims filed under the Plan. Every finding, decision and determination made by
the Plan Administrator shall, to the full extent permitted by law, be final and
binding upon all parties.
B-6
15. Designation of a Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the Participant's
account under the Plan in the event of such Participant's death
subsequent to the Exercise Date on which the option is exercised but
prior to delivery to such Participant of such shares and cash. In
addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant's
account under the Plan in the event of such Participant's death
prior to exercise of the option. If a Participant is married and the
designated beneficiary is not the spouse, spousal consent shall be
required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the Participant
(and his or her spouse, if any) at any time by written notice as
provided in Section 20 below. In the event of the death of a
Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant's
death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the Participant, or if no
such executor or administrator has been appointed (to the knowledge
of the Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative
is known to the Company, then to such other person as the Company
may designate.
16. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 11.
17. Reports. Individual memorandum accounts will be maintained for each
Participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the (i) the maximum number and kind of
shares of Common Stock subject to the Plan, (ii) the number and kind
of securities that are subject to any outstanding options and the
per share price of such securities and (iii) the maximum number of
shares of Common Stock that may be purchased by a Participant in a
Purchase Period shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of
stock of any class, or securities convertible into sales of stock of
any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common
Stock subject to an option. The Board may, if it so determines in
the exercise of its sole discretion, make provision for adjusting
the Reserves, as well as the price per share of Common Stock covered
by each outstanding option, in the event the Company effects one or
more reorganizations, recapitalizations, rights offerings or other
increases or reductions of shares of its outstanding Common Stock.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action,
unless otherwise terminated by the Board.
B-7
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan
shall be assumed or an equivalent option shall be substituted by
such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise
of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Periods then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board
shortens the Offering Periods then in progress in lieu of assumption
or substitution in the event of a merger or sale of assets, the
Board shall notify each Participant in writing, at least ten (10)
days prior to the New Exercise Date, that the Exercise Date for his
or her option has been changed to the New Exercise Date and that his
or her option will be exercised automatically on the New Exercise
Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 11. For purposes of this
Section 18, an option granted under the Plan shall be deemed to be
assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock
subject to the option immediately prior to the sale of assets or
merger, the consideration (whether stock, cash or other securities
or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice
of consideration, the type of consideration chosen by the holders of
a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets
or merger was not solely common stock of the successor corporation
or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the
Participant, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the sale
of assets or merger.
(d) The grant of options under the Plan shall in no way affect the
Company's right to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its
business or assets.
19. Amendment, Suspension or Termination.
(a) The Board may at any time and for any reason terminate, suspend or
amend the Plan. Except as provided in Section 18, no such
termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board on any Exercise Date
if the Board determines that the termination of the Plan is in the
best interests of the Company and its stockholders. During any
period of suspension or upon termination of the Plan, no options
shall be granted under the Plan. Except as provided in Section 18,
no amendment may make any change in any option theretofore granted
which adversely affects the rights of any Participant. To the extent
necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law or regulation), the
Company shall obtain stockholder approval for any amendment that
will (i) increase the total number of shares that may be issued
under the Plan, (ii) modify the class of employees eligible to
participate in the Plan, or (iii) otherwise require stockholder
approval under any applicable law or regulation in such a manner and
to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely
affected," the Plan Administrator shall be entitled to change the
Purchase Periods and/or Offering Periods, limit the frequency and/or
number of changes in the amount withheld during Purchase Periods
and/or Offering Periods, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a
Participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock
B-8
for each Participant properly correspond with amounts withheld from
the Participant's Eligible Compensation, and establish such other
limitations or procedures as the Plan Administrator determines in
its sole discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be given via overnight
courier, certified mail (return receipt requested), facsimile or such other
form as approved by the Plan Administrator, and shall be deemed to have been
duly given when received in the form specified by the Plan Administrator by the
Company's Human Resources Department at the Company's corporate headquarters.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without
any present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect until February 11,
2013, unless sooner terminated pursuant to Section 19.
23. Automatic Transfer to Low Price Offering Period. If the Fair Market
Value of the Common Stock on any Exercise Date in an Offering Period is lower
than the Fair Market Value of the Common Stock on the Enrollment Date of such
Offering Period, then all Participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the
exercise of their options on such Exercise Date and automatically re-enrolled
in the immediately following Offering Period as of the first day thereof.
24. No Rights as an Employee. Nothing in the Plan shall be construed to
give any person (including any Eligible Employee or Participant) the right to
remain in the employ of the Company or any Subsidiary or to affect the right of
the Company or any Subsidiary to terminate the employment of any person
(including any Eligible Employee or Participant) at any time with or without
cause.
25. Effect Upon Other Plans. Nothing in the Plan shall be construed to
limit the right of the Company or any Subsidiary to (a) establish other forms
of incentives or compensation for employees of the Company or any Subsidiary or
(b) grant or assume options otherwise than under the Plan in connection with
any proper corporate purpose, including, but not by way of limitation, the
grant or assumption of options in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, firm or association.
B-9
[GYMBOREE LOGO]
THE GYMBOREE CORPORATION
700 AIRPORT BLVD., SUITE 200
BURLINGAME, CA 94010
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to The Gymboree Corporation, c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: GYMBOREE KEEP THIS PORTION FOR YOUR RECORDS
- -----------------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
===================================================================================================================================
THE GYMBOREE CORPORATION
The Board of Directors recommends a vote FOR the matters
listed below. This Proxy, when properly executed, will be voted
as specified below. This Proxy will be voted FOR Proposals 1, For Withhold For All To withhold authority to vote, mark
2, 3 and 4 if no specification is made. All All Except "For All Except" and write the
nominee's number on the line below.
1. Proposal to elect two Class III directors. [ ] [ ] [ ]
Nominees: (a) Stuart G. Moldaw -----------------------------------
(b) John C. Pound
(c) William U. Westerfield
Vote on Proposal For Against Abstain
2. Proposal to approve the Gymboree Corporation 2002 Stock Incentive Plan. [ ] [ ] [ ]
3. Proposal to approve the amendment to the Gymboree Corporation 1993 Employee Stock Purchase [ ] [ ] [ ]
Plan increasing the number of shares available for issuance under the plan.
4. Proposal to ratify the appointment of Deloitte & Touche LLP as independent auditors for the [ ] [ ] [ ]
fiscal year ending February 1, 2003.
In their discretion, with respect to such other business as may properly come before the meeting
and any adjournment or postponement thereof.
Please sign your name exactly as it appears hereon. If acting as attorney, executor, trustee or
in other representative capacity, sign name and title.
---------------------------------------------------------- ----------------------------------------------------------
---------------------------------------------------------- ----------------------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
===================================================================================================================================
DETACH HERE
- --------------------------------------------------------------------------------
PROXY
THE GYMBOREE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, JUNE 25, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE GYMBOREE CORPORATION
P The undersigned revokes all previous proxies, acknowledges receipt of
the notice of the Annual Meeting of Stockholders to be held June 25, 2002
and the Proxy Statement related thereto and appoints Lisa M. Harper and
R Myles B. McCormick, and each of them, 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
O his or her own behalf of an entity or entities, at the Annual Meeting of
Stockholders of the Company to be held at Gymboree's principal executive
offices located at 700 Airport Boulevard, Burlingame, California 94010 on
X Tuesday, June 25, 2002 at 9:00 a.m., and at any adjournment or postponement
thereof, with the same force and effect as the undersigned might or could
do if personally present thereat. The shares represented by this proxy
Y statement shall be voted in the manner set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE SEE REVERSE SIDE